1990 (7) TMI 345 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to penalty imposition under section 45-B of M.P. General Sales Tax Act, 1958 for the period 1983-84.

Analysis:
The petitioner, a wholesale business dealing in various products, challenged the penalty imposed under section 45-B of the M.P. General Sales Tax Act, 1958. The penalty was levied by the Additional Assistant Commissioner of Sales Tax, Indore, amounting to Rs. 65,000. The petitioner contended that the penalty was unjust as they had followed the trade practice of providing incentive bonuses to stockists and dealers based on achieved targets. The petitioner had also deposited tax amounts exceeding the assessed tax, resulting in a refund demand. Despite the petitioner's arguments, the penalty was only reduced to Rs. 46,000 by a subsequent authority.

The petitioner appealed this decision to the Board of Revenue, Gwalior, asserting that they had collected tax lawfully as per the Act's provisions and being a registered dealer. The central issue revolved around whether the petitioner's tax collection contravened any Act provisions or rules to warrant penalty under section 45-B. The Board relied on its past orders and emphasized the petitioner's awareness of potential over-recovery due to their incentive scheme.

The Court highlighted the strict interpretation principle of taxing laws, especially concerning penalties. Section 45-B prohibits unauthorized tax collection, imposing penalties for contravention. The Court examined the petitioner's compliance with Schedule II tax rates and the respondents' acknowledgment of the same. Referring to a similar case precedent, the Court emphasized that penalties under section 45-B apply only when collections are not in accordance with prescribed conditions or in excess. The Court rejected the respondents' argument based on a different case's facts and held that the penalty in this case lacked justification.

Additionally, the Court addressed the respondents' reliance on a Supreme Court decision regarding refunds, distinguishing the facts from the present case. Given the respondents' admission of the petitioner's compliance with tax collection rules, the Court found no grounds for the penalty imposition. Consequently, the Court allowed the petition, quashed the penalty orders, and directed the refund of the penalty amount to the petitioner.