1986 (2) TMI 301 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of levying penalty under section 36(2)(c) of the Bombay Sales Tax Act, 1959, for a part of the year.
2. Interpretation of the term "year" under section 36(2)(c) and its Explanation (1).
3. Legislative intent behind the Explanation (1) of section 36(2)(c).

Issue-wise Analysis:

1. Validity of levying penalty under section 36(2)(c) of the Bombay Sales Tax Act, 1959, for a part of the year:
The core issue was whether the Tribunal was justified in holding that the penalty under section 36(2)(c) read with Explanation (1) of the Act can be levied for a part of the year when the assessment is for a part of the year. The court noted that the Explanation to section 36(2)(c) refers to the total tax paid during the year. The plain language of the Explanation does not cover a part of the year. The court concluded that penalty can only be levied after considering the tax paid and the tax assessed for the entire year. Therefore, the Tribunal's decision to levy penalty for a part of the year was not justified.

2. Interpretation of the term "year" under section 36(2)(c) and its Explanation (1):
The term "year" is defined under section 2(37) of the Act to mean the financial year or the accounting year of the registered dealer. The court examined various sections of the Act, such as sections 32, 33, and 35, which allow for assessment or reassessment for a part of the year. However, the court emphasized that the Explanation to section 36(2)(c) specifically refers to the total tax paid during the year. Therefore, the term "year" in the context of levying penalty should be interpreted to mean the entire year, not a part of it.

3. Legislative intent behind the Explanation (1) of section 36(2)(c):
The respondents argued that the Explanation should be interpreted to further legislative intent, which would be achieved by allowing penalty for a part of the year if the tax paid is less than 80% of the tax assessed for that part. The court, however, found no basis for this interpretation. It stated that the legislative intent is not furthered by deviating from the plain language of the Explanation. The court clarified that even if assessment is made for a part of the year, penalty proceedings should consider the tax paid and assessed for the entire year. This ensures that the legislative intent of levying penalty is not defeated.

Conclusion:
The court answered the question in the negative, stating that penalty under section 36(2)(c) read with Explanation (1) cannot be levied for a part of the year when the assessment is for a part of the year. The court directed the Tribunal to decide the matter in accordance with law, allowing it to institute or direct fresh penalty proceedings if deemed appropriate. The respondents were ordered to pay the applicants' costs of the reference, and the deposit of Rs. 100 made before the Tribunal was to be refunded to the applicants.

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