1997 (2) TMI 513 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Delay in filing monthly and annual returns under the Kerala General Sales Tax Act (K.G.S.T. Act) and Central Sales Tax Act (C.S.T. Act).
2. Imposition of penalty under Section 45A of the K.G.S.T. Act.
3. Quantum of penalty imposed.

Issue-wise Detailed Analysis:

1. Delay in Filing Monthly and Annual Returns:
The petitioner, a proprietor of a business concern, failed to file monthly returns as required under the K.G.S.T. Act for the months of June 1985 to March 1986, and April 1986 to November 1986. Similarly, annual returns for the assessment years 1985-86 and 1986-87 were not filed within the prescribed time. The tax as per the returns was paid only on March 18, 1987, and March 19, 1987, respectively. For the assessment year 1986-87 under the C.S.T. Act, monthly returns for April 1986 to November 1986 were also filed late, and the tax was remitted only on March 19, 1987. The petitioner attributed the delay to financial difficulties and non-receipt of credit sale proceeds from customers.

2. Imposition of Penalty under Section 45A of the K.G.S.T. Act:
The assessing authority issued notices under Section 45A of the K.G.S.T. Act proposing to levy penalties for the delay in filing returns and payment of tax. Despite the petitioner's explanation regarding his financial difficulties, the authority imposed penalties of Rs. 40,000 and Rs. 20,000 for the assessment years 1985-86 and 1986-87 under the K.G.S.T. Act, and Rs. 14,000 for the assessment year 1986-87 under the C.S.T. Act. The Deputy Commissioner reduced these amounts to Rs. 20,000, Rs. 10,000, and Rs. 7,500, respectively. The Board of Revenue upheld the penalties.

3. Quantum of Penalty Imposed:
The court examined whether the authorities were justified in imposing penalties and the appropriate quantum. Section 45A(1) of the K.G.S.T. Act allows for penalties if the assessing authority is satisfied that there has been a failure to submit returns or other contraventions. The court noted that the petitioner had indeed violated Section 17 of the Act read with Rule 21(7) by not filing returns and remitting tax within the stipulated time. However, the court also considered that the petitioner had eventually filed the returns and paid the tax along with penal interest, compensating the state for any loss due to the delay.

The court reviewed the principles laid down by the Supreme Court in Hindustan Steel Ltd. v. State of Orissa and the guidelines from St. Michael's Oil Mills v. State of Kerala, emphasizing that penalties should be imposed judicially and not arbitrarily. The court concluded that while the petitioner's actions were not merely technical or venial, the maximum penalty of Rs. 5,000 for each year was appropriate given the circumstances.

Conclusion:
The court modified the penalties to Rs. 5,000 each for the assessment years 1985-86 and 1986-87 under the K.G.S.T. Act, and for 1986-87 under the C.S.T. Act. The original penalties as modified by the first revisional authority and affirmed by the Board of Revenue were thus adjusted. The petition was allowed to this extent, with no order as to costs.