1989 (8) TMI 314 - HC - VAT and Sales Tax

Issues Involved:
1. Legality and justification of penalty imposition under section 13(5) of the Orissa Sales Tax Act, 1947.
2. Impact of the stay order on the penalty imposition.
3. Consideration of relevant statutory provisions and judicial precedents.

Detailed Analysis:

1. Legality and Justification of Penalty Imposition under Section 13(5) of the Orissa Sales Tax Act, 1947:

The petitioner, an unregistered dealer, was assessed to tax amounting to Rs. 1,450 for the year 1977-78 under section 12(5) of the Act. The tax order was communicated on February 9, 1980, and the petitioner failed to pay the tax within one month as required under section 13(4) of the Act. Consequently, the Sales Tax Officer imposed a penalty of Rs. 741, being fifty percent of the tax due, under section 13(5) of the Act on August 30, 1980. The petitioner challenged this penalty imposition through a revision petition, which was dismissed by the Additional Commissioner of Sales Tax on February 20, 1982. The petitioner also filed a second appeal and obtained a stay of tax realization on December 31, 1980. However, the second appeal was ultimately dismissed, finalizing the tax assessment.

2. Impact of the Stay Order on the Penalty Imposition:

The petitioner argued that the stay order on tax realization should negate the penalty for non-payment. However, the court found that the stay order was granted on December 31, 1980, long after the penalty imposition on August 30, 1980. Therefore, at the time of penalty imposition, there was no stay order in effect. The stay order only postponed the realization of tax by coercive measures and did not alter the due date for tax payment or the authority of the Sales Tax Officer to impose a penalty under section 13(5). Thus, the petitioner's failure to pay the tax within the stipulated period justified the penalty imposition.

3. Consideration of Relevant Statutory Provisions and Judicial Precedents:

The court reviewed the relevant statutory provisions under section 13 of the Act, which outlines the payment and recovery of tax and penalty. Specifically, section 13(4) mandates tax payment within thirty days of notice, and section 13(5) allows for a penalty of up to fifty percent of the tax due for non-payment. The court highlighted that there is no provision for staying the realization of penalties under section 13(5).

The court also referenced the Gujarat High Court's decision in State of Gujarat v. Mukhi Stores, which held that penalties could be imposed despite stay orders on tax recovery, as "default" in the context of penalty provisions means non-payment. The stay orders only affect the coercive recovery process, not the imposition of penalties.

The petitioner cited cases such as Om Prakash Agarwal v. Income-tax Officer and Abdul Shakur Umar Sahigara & Co. v. Commercial Tax Officer, arguing that authorities must consider stay orders before imposing penalties. However, the court distinguished these cases based on differences in statutory provisions. The Orissa Sales Tax Act lacks provisions similar to section 220(6) of the Income-tax Act, which allows treating an assessee as not in default during an appeal.

Conclusion:

The court concluded that the petitioner was rightly held in default for non-payment of tax, and the penalty imposition was legal and justified. The stay order did not affect the penalty as it was granted after the penalty imposition. The writ petition was dismissed without any order for costs.

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