1990 (10) TMI 357 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity and sustainability of the penalty levied under section 12-B(3) of the Karnataka Sales Tax Act.
2. Whether there was a clear contravention of section 12-B(1) of the Act.
3. Confirmation of the penalty quantified at 36% per annum of the tax amounts.
4. Overall validity and sustainability of the impugned orders.

Issue-wise Detailed Analysis:

1. Validity and sustainability of the penalty levied under section 12-B(3) of the Karnataka Sales Tax Act:
The primary issue for consideration was whether the assessing authority and the Tribunal properly exercised their discretionary power under section 12-B(3) before imposing the penalty. The petitioner-assessee argued that the hardship pleaded should have been taken into account to absolve them from the penalty. The court referenced the decision in Elestone Estates and Industries Ltd. v. State of Karnataka [1983] 54 STC 341, which stated that the authority must exercise its power judicially, considering all circumstances. The court emphasized that there must be implicit evidence that all relevant materials were considered before imposing the penalty. The court found that for the assessment year 1977-78, the explanation offered by the petitioner was rejected without proper consideration, and the petitioner was not invited to substantiate the cause shown. Therefore, the court set aside the orders of the Tribunal, the first appellate authority, and the assessing authority, remitting the matter back to the assessing authority to give the petitioner further opportunity to produce supporting material.

2. Whether there was a clear contravention of section 12-B(1) of the Act:
The court noted that questions (ii), (iii), and (iv) did not require consideration as there was no dispute that the petitioner-assessee complied with the requirements of sub-section (1) of section 12-B. The focus was on whether the discretionary power under section 12-B(3) was exercised appropriately.

3. Confirmation of the penalty quantified at 36% per annum of the tax amounts:
The court did not specifically address this issue in detail as it was encompassed within the broader question of whether the penalty levied under section 12-B(3) was valid and sustainable.

4. Overall validity and sustainability of the impugned orders:
The court reiterated that the orders must be speaking orders, with reasons disclosed for exercising discretion one way or the other. The court found that the assessing authority failed to provide reasons for rejecting the petitioner's explanation for the assessment year 1977-78. Consequently, the court allowed Revision Petition No. 8 of 1985, setting aside the impugned orders and remitting the matter for reconsideration. However, for S.T.R.P. No. 9 of 1985, the court found that the appellate authority had given appropriate relief, and thus, dismissed the petition.

Conclusion:
The court allowed Petition No. 8 of 1985, remitting the matter to the assessing authority for reconsideration, and dismissed Petition No. 9 of 1985, upholding the appellate authority's relief. The court emphasized the necessity of proper consideration and application of mind by the authorities when exercising discretionary power under section 12-B(3).