1991 (4) TMI 402 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of penalty orders despite the invocation of incorrect statutory provisions.
2. Impact of financial stringency as a reasonable cause for non-payment of sales tax.

Issue-wise Detailed Analysis:

1. Validity of Penalty Orders Despite Invocation of Incorrect Statutory Provisions:

The core issue revolved around whether the orders of penalty were unlawful due to the invocation of incorrect statutory provisions. The Tribunal upheld the penalty orders despite the mention of sub-section (3) instead of sub-section (3A) of section 36 of the Bombay Sales Tax Act, 1959, and sub-section (5) instead of sub-section (6) of section 45 of the Gujarat Sales Tax Act, 1969. The Court noted that section 36(3) of the Bombay Act is similar to section 45(5) of the Gujarat Act, and section 36(3A) of the Bombay Act is similar to section 45(6) of the Gujarat Act.

The Court emphasized that mere wrong mention of a statutory provision in the show cause notice does not vitiate the order if the authority has the power to pass the order under another provision. Citing precedents such as Municipal Corporation of the City of Ahmedabad v. Ben Hiraben Manilal, the Court reiterated that the exercise of power is valid if it can be justified under some other provision of law. The Court concluded that the penalty orders were not vitiated due to the wrong mention of sub-sections since the applicant was given an opportunity to show cause, and the applicant did respond by showing cause for the default in payment of tax.

2. Impact of Financial Stringency as a Reasonable Cause for Non-Payment of Sales Tax:

The second issue addressed whether financial stringency constituted a reasonable cause for non-payment of sales tax. The Tribunal found that financial stringency was not a reasonable cause to justify non-payment of tax within the stipulated time. The applicant had applied for extensions of time for payment, which were granted. However, the authorities found that the applicant defaulted in paying the tax even within the extended time. The Court noted that the applicant had collected sales tax from customers and thus could not claim financial stringency as a reasonable cause. The cause pleaded by the applicant was found to be not bona fide or genuine.

The Court emphasized that the extensions granted by the Sales Tax Officer specifically stipulated that the liability to pay penalty for late payment would continue. Therefore, the extension of time or grant of installments did not constitute a reasonable cause to claim immunity from the penalty under section 36(3) of the Bombay Act or section 45(5) of the Gujarat Act.

Conclusion:

The Court answered all three questions in the affirmative, in favor of the State and against the assessee. The penalty orders were upheld despite the invocation of incorrect statutory provisions, and financial stringency was not accepted as a reasonable cause for non-payment of sales tax. The reference was answered in the affirmative with no order as to costs.