1989 (12) TMI 329 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to levy of penalty for default in payment of show tax under the Orissa Entertainments Tax Act, 1946.

Analysis:
The petitioner, the owner of a cinema hall, contested the penalty imposed for default in paying show tax at an enhanced rate. The petitioner argued that the non-payment was due to a bona fide belief that the State Government would address the issue, and there was no mens rea against the non-payment. Additionally, the petitioner contended that there was no "evasion of tax," and thus, the penalty should be Rs. 250 instead of double the unpaid amount. The Revenue, however, asserted that the liability to pay the tax existed, and the penalty was justified under the Act. The court examined the provisions of the statute to resolve the issue.

The court analyzed Section 14 of the Act, which outlines penalties for various defaults related to entertainment tax. It distinguishes between penalties for different types of defaults, with the penalty amount varying based on the nature of the default. The court emphasized that the liability to pay the tax was clear under the Act, and the petitioner's failure to pay the enhanced rate constituted a default without sufficient cause. Therefore, the court rejected the petitioner's argument regarding the bona fide belief as a defense against the penalty.

Regarding the second contention, the court delved into the interpretation of Section 14(2)(b) of the Act. It differentiated between cases of fraudulent evasion of tax and mere failure to pay tax without sufficient cause. The court held that in cases where there is no fraudulent evasion, the penalty should be Rs. 250, not double the amount of tax evaded. As the petitioner's case fell under the latter category, the court concluded that the penalty should be Rs. 250, not the higher amount levied by the authorities. Consequently, the court quashed the impugned orders and held the petitioner liable to pay only the penalty of Rs. 250.

In conclusion, the court allowed the writ application, ruling in favor of the petitioner on the penalty amount issue. The judgment was delivered by a bench comprising two judges, with both judges concurring on the decision to allow the writ application without any order as to costs.