1997 (3) TMI 597 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Imposition of penalty under section 13(5) of the Orissa Sales Tax Act, 1947.
2. Alleged violation of principles of natural justice.
3. Requirement of mens rea for penalty imposition.
4. Opportunity to be heard before penalty imposition.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 13(5) of the Orissa Sales Tax Act, 1947:
The petitioner, a registered dealer under the Act, defaulted in paying the admitted tax for several periods, including August 1992 to March 1993. The Sales Tax Officer imposed a penalty at the rate of 50% of the amount in arrears under section 13(5) of the Act. This penalty was confirmed by the Additional Commissioner of Sales Tax, Orissa. The relevant provision, section 13(5) of the Act, allows the Commissioner to direct the dealer to pay a penalty not exceeding one-half of the total amount due if the amount is not paid by the due date.

2. Alleged Violation of Principles of Natural Justice:
The petitioner contended that the penalty was levied without granting any opportunity to be heard, thereby violating the principles of natural justice. The court emphasized that natural justice is a fundamental principle ingrained in the conscience of men, ensuring fair play and justice. It mandates that no one should be condemned unheard (audi alteram partem rule). The court noted that even if the statute does not explicitly require a notice, principles of natural justice necessitate it.

3. Requirement of Mens Rea for Penalty Imposition:
The petitioner argued that there was no mens rea (intention or knowledge of wrongdoing) involved in the default of tax payment. The court, however, did not delve deeply into this argument, focusing instead on the procedural aspect of natural justice.

4. Opportunity to be Heard Before Penalty Imposition:
The court found that the penalty was imposed without granting the petitioner an opportunity to be heard. The records revealed that a demand was raised on February 18, 1993, and a show cause notice was issued on June 30, 1993, but the penalty was levied without adequate opportunity for the petitioner to present their case. The court reiterated that the essence of justice requires that all parties should have an opportunity to submit their considerations before any adverse order is passed.

Conclusion:
The court concluded that the levy of penalty under section 13(5) of the Act without granting an opportunity to be heard cannot be maintained and is indefensible. The revisional authority failed to consider this aspect in its order dated March 25, 1994. Consequently, the writ application was allowed, and the orders imposing the penalty and the revisional order were quashed. There was no order as to costs.