1984 (12) TMI 277 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Applicability of amended penalty rates under Section 36(3) of the Bombay Sales Tax Act, 1959.
2. Nature of the penalty under Section 36(3) - whether compensatory or penal.
3. Continuous default vs. single completed default.
4. Retrospective application of penalty provisions.
5. Discrimination under Article 14 of the Constitution.

Detailed Analysis:

1. Applicability of Amended Penalty Rates:
The primary issue was whether the amended rates of penalty under Section 36(3) of the Bombay Sales Tax Act, 1959, effective from 11th May 1973, applied to the respondent's default, which occurred before this date but continued thereafter. The Tribunal held that the old rates should apply, as the default occurred before the amendment. The court agreed, stating that the penalty should be calculated based on the rates in effect at the time of the default, which was on 23rd April 1973.

2. Nature of the Penalty - Compensatory or Penal:
The Revenue argued that the penalty was compensatory, intended to make up for the loss of interest due to delayed payment, and thus should be calculated at the amended rates for the period after 11th May 1973. Conversely, the respondent contended that the penalty was penal in character, and the liability was fixed at the time of default. The court sided with the respondent, emphasizing that the penalty was indeed penal and should be calculated based on the rates at the time of default.

3. Continuous Default vs. Single Completed Default:
The Revenue's submission was that the default was continuous, and thus the amended rates should apply for the period after 11th May 1973. The court, however, determined that the default was a single completed act on 23rd April 1973. The continuous nature of the default only affected the calculation of the penalty duration, not the applicable rates.

4. Retrospective Application of Penalty Provisions:
The court referenced the Supreme Court's decision in Commissioner of Wealth-tax, Amritsar v. Suresh Seth, which established that penalties should be computed based on the law in force at the time of the default. The court found no indication in Section 36(3) that the amended penalty rates were intended to apply retrospectively. Therefore, the amended rates could not apply to defaults occurring before 11th May 1973.

5. Discrimination under Article 14:
The Revenue argued that applying different penalty rates based on the timing of the notice could lead to discrimination, violating Article 14 of the Constitution. The court dismissed this argument, noting that differences in timing do not constitute discrimination, as the circumstances of each case are inherently different.

Conclusion:
The court concluded that the penalty for the respondent's default should be calculated at the rates in effect on 23rd April 1973, before the amendment. The question was answered in the affirmative, favoring the dealer, and the Revenue was ordered to pay the costs of the reference to the respondent.