2000 (10) TMI 935 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of section 8-D(1) of the U.P. Trade Tax Act, 1948.
2. Imposition of penalty under section 8-D(6) of the Act.
3. Justification for the quantum of penalty imposed.
4. Authority's obligation to deduct tax at source.

Issue-wise Detailed Analysis:

1. Validity of Section 8-D(1) of the U.P. Trade Tax Act, 1948:
The applicant contended that section 8-D(1) is beyond the purview of the State Legislature, referencing Supreme Court decisions in Steel Authority of India Ltd. v. State of Orissa and Nathpa Jhakri Jt. Venture v. State of Himachal Pradesh, which declared similar provisions in other state acts as ultra vires. However, it was noted that a division bench of the Allahabad High Court in V.K. Singhal v. State of U.P. had upheld the validity of section 8-D(1). Furthermore, the court emphasized that an authority created by a statute cannot question the vires of that statute, as held by the Supreme Court in K.S. Venkataraman and Co. (P) Ltd. v. State of Madras. The High Court, while exercising jurisdiction under section 11 of the Act, cannot examine the vires of any provision of the Act in revisional proceedings, as reiterated in Alpha Chem v. State of U.P.

2. Imposition of Penalty under Section 8-D(6) of the Act:
The applicant argued that no penalty could be imposed under section 8-D(6) as there was no deliberate intention to flout the provisions. However, the court noted that the applicant had repeatedly failed to heed the Sales Tax Officer's directions to deduct tax at source, and no explanation was provided for this failure. Thus, the authorities were justified in invoking section 8-D(6) and imposing the penalty.

3. Justification for the Quantum of Penalty Imposed:
The Tribunal had reduced the penalty to 100% of the tax liable to be deducted, assuming the Sales Tax Officer had imposed twice the amount. However, the penalty imposed was only equal to the tax amount. The court found that while the authorities were justified in imposing the penalty, they failed to provide reasons for imposing an amount equal to the tax deductible. Section 8-D(6) allows for a penalty not exceeding twice the deductible amount, but justification for the specific amount imposed is required.

4. Authority's Obligation to Deduct Tax at Source:
The applicant, a Development Authority constituted under the U.P. Urban Planning and Development Act, 1973, argued it was not engaged in the business of buying and selling goods and thus not a dealer under the Act. Despite this, under section 8-D(1), it was liable to deduct tax at 4% from payments to contractors. The court held that failure to deduct tax as mandated attracted the penal provisions of section 8-D(6).

Conclusion:
The court set aside the Tribunal's order due to the lack of justification for the penalty amount and directed the Tribunal to decide the appeals afresh in accordance with the law. The revisions were allowed in part, emphasizing the need for authorities to provide reasons for the quantum of penalties imposed.