2001 (2) TMI 998 - HC - VAT and Sales Tax

Summary

Issues:
1. Obligation to impose maximum penalty under section 13AA of the Orissa Sales Tax Act, 1947.

Analysis:
The writ petition raised the issue of whether the Sales Tax Officer is mandated to impose the maximum penalty as prescribed under sub-section (6) of section 13AA of the Orissa Sales Tax Act, 1947. The petitioner, an Executive Engineer, was called upon to explain the wilful withholding of deposit of tax deducted at source amounting to Rs. 86,997. Despite being served notice, the petitioner did not respond, leading to the imposition of a penalty of Rs. 1,73,994 by the Sales Tax Officer. The petitioner then appealed to the Commissioner of Commercial Taxes, who upheld the penalty but reduced it to Rs. 1,00,000.

The counsel for the petitioner argued that the delay in depositing the tax was due to inadequate fund allocation by the State Government to the petitioner's division for the year 1998-99. However, it was found that while payments were made to contractors on various dates, only the payment on March 30, 1999 had the required deduction at source deposited in the form of a banker's cheque. The petitioner failed to deduct sales tax from payments made in previous months, contravening the provisions of sub-sections (1) and (3) of section 13AA.

The court noted that while sub-section (6) of section 13AA sets an outer limit for penalty imposition, the Sales Tax Officer has the discretion to decide the actual penalty based on circumstances. In this case, the Officer did not provide any reason for imposing the maximum penalty, and the Commissioner did not justify the reduced penalty amount either. Therefore, the court upheld the petitioner's liability for penalty but remitted the matter back to the Sales Tax Officer for reconsideration of the penalty amount, emphasizing that the discretion in imposing penalties should be exercised judiciously.

In conclusion, the court allowed the writ petition, directing the petitioner to appear before the Sales Tax Officer for further proceedings solely related to determining the quantum of penalty. The judgment was delivered by R.K. Patra, AG. C.J., and Ch. P.K. Misra, J.