1989 (6) TMI 272 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Imposition of penalty without issuing a show cause notice.
2. Mechanical imposition of penalty without application of mind.
3. Levy of maximum penalty without justification.

Issue-wise Detailed Analysis:

1. Imposition of Penalty Without Issuing a Show Cause Notice:
The petitioner challenged the penalty imposed under section 26(2) of the Tripura Sales Tax Act, 1976, on the grounds that no show cause notice was issued. The court emphasized that before levying any penalty, the authority must issue a notice to the affected dealer to give a reasonable opportunity of hearing. This notice should be issued after the dealer has been treated as a defaulter, which can only occur after the due date of payment is over. The court held that any notice issued prior to the expiry of the due date cannot be treated as a notice to show cause against the imposition of penalty. In this case, the notice informing the petitioner that penalty would be levied if payment was not made by April 30, 1981, could not be considered a valid show cause notice. Therefore, the imposition of penalty without a proper show cause notice was deemed unsustainable.

2. Mechanical Imposition of Penalty Without Application of Mind:
The court observed that the imposition of penalty cannot be an automatic consequence of a default in payment of tax. The authority must consider all relevant circumstances and exercise discretion judiciously. The court cited various precedents, emphasizing that the discretionary power not to treat the assessee as a defaulter must be exercised if the circumstances demand. The authority must consider factors such as the dealer's financial condition, the prospects of success in an appeal, and any extenuating circumstances explaining the default. In this case, the Superintendent of Taxes did not consider the petitioner's request for an extension of time and mechanically imposed the penalty without examining the facts and circumstances. This lack of application of mind rendered the penalty order invalid.

3. Levy of Maximum Penalty Without Justification:
The court noted that section 26(2) of the Act allows for a maximum penalty equal to the amount due but does not mandate the imposition of the maximum penalty in all cases. The authority must consider factors such as the period of delay, the conduct of the dealer, and other relevant considerations. The penalty order must be a speaking order, showing that the authority has applied its mind to the facts and circumstances of the case. In this instance, the penalty order did not provide any reasons for imposing the maximum penalty, nor did it demonstrate that the authority had considered the petitioner's explanation. The court found that the order was a non-speaking order and thus unsustainable in law.

Conclusion:
The court quashed the impugned penalty order dated May 2, 1981, passed by the Superintendent of Taxes, Agartala, and allowed the petition with costs of Rs. 250. The judgment emphasized the necessity of issuing a show cause notice, the importance of considering all relevant circumstances before imposing a penalty, and the requirement for a reasoned order when levying penalties.