1981 (9) TMI 257 - HC - VAT and Sales Tax

Summary

Issues:
Whether the Tribunal was justified in knocking off the penalty imposed on the assessee for dishonored cheque under section 11(3) of the Orissa Sales Tax Act, 1947.

Analysis:
The assessee, a registered dealer under the Orissa Sales Tax Act, 1947, submitted a return for the quarter ending 30th June, 1973, along with a cheque for the admitted tax. However, the cheque bounced due to insufficient funds in the assessee's account. The assessing officer imposed a penalty of Rs. 2,000 under section 11(3) of the Act for not filing the return. The Tribunal, relying on the Supreme Court's decision in Hindustan Steel Ltd. v. State of Orissa, held that unless contumacy of the assessee was found, the penalty need not be levied. The Tribunal did not consider the explanation to section 11(3) of the Act, which states that a return without a valid payment instrument shall not be deemed as a return. The Tribunal wrongly focused on the intention of the assessee at the time of issuing the cheque, rather than the legal requirement of having sufficient funds to honor the cheque.

The explanation to section 11(3) of the Act mandates that a return must be accompanied by a valid payment instrument. The Tribunal erred in not considering this provision and inappropriately referred to a Supreme Court decision that was not directly relevant to the case. The Tribunal's decision to waive the penalty based on insufficient evidence of the assessee's financial situation at the time of issuing the cheque was incorrect. Therefore, the High Court held that the Tribunal was not justified in canceling the penalty imposed on the assessee.

The counsel for the assessee argued that the Tribunal did not assess whether the quantum of penalty required any modification since it was completely waived. The High Court left this aspect for the Tribunal to review under section 24(5) of the Act. The High Court's decision was unanimous, with both judges concurring that the Tribunal's decision to remove the penalty was not legally sound. The reference was answered against the assessee, upholding the imposition of the penalty under section 11(3) of the Orissa Sales Tax Act, 1947.