1997 (6) TMI 340 - HC - VAT and Sales Tax

Summary

Issues:
Penalties under section 12B(3) of the Karnataka Sales Tax Act and section 18(2) of the Central Sales Tax Act imposed on a limited company for failure to deposit advance tax within the specified time limit for the assessment year 1986-87.

Analysis:
The High Court of Karnataka heard two revision petitions challenging a common order of the Appellate Tribunal sustaining penalties imposed on a limited company for failure to deposit advance tax within the prescribed time limit under the State and Central Sales Tax Acts. The penalties amounted to Rs. 50,000 under the State Act and Rs. 1,00,000 under the Central Act. The company, engaged in manufacturing machine tools, had failed to deposit advance tax resulting in penalties imposed by the assessing authority. Appeals to the Deputy Commissioner of Commercial Taxes were unsuccessful, leading to second appeals to the Tribunal, which partially allowed the appeals in question.

The Tribunal considered various circumstances presented by the petitioner, including delays in receiving payments for machine tools sold on credit, pending refund applications with the State Government due to power supply issues, and excess tax payments made by the petitioner. The Tribunal acknowledged that the defaults were due to circumstances beyond the company's control and not deliberate violations of the law. Citing legal precedents, the Tribunal recognized the company's entitlement to relief, yet still upheld the penalties, prompting the High Court to question the rationale behind the decision.

Referring to the Supreme Court's guidance on imposing penalties for statutory non-compliance, the High Court emphasized that penalties should not be imposed unless there is deliberate defiance of the law or dishonest conduct. The Court found it unjust to penalize the company when the defaults were not intentional and occurred due to uncontrollable circumstances. The Court criticized the sales tax authorities for imposing penalties without considering the pending refund application, highlighting the need for a fair and reasonable approach in tax assessments.

In light of the above considerations, the High Court set aside the penalties imposed by the Tribunal, concluding that the penalties were unwarranted given the circumstances. The revision petitions were allowed, and no costs were awarded.