2003 (7) TMI 655 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the review order imposing penalty under section 7(4) of the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1993, read with section 16(9) of the Bihar Finance Act, 1981.
2. Whether the review order was barred by limitation.
3. Validity of the review order based on the objection raised by the audit party of the Accountant-General, Bihar.
4. Discretion of the assessing authority in imposing penalties.
5. Requirement of prior sanction for review under rule 32 of the Bihar Sales Tax Rules, 1983.

Issue-wise Detailed Analysis:

1. Legality of the review order imposing penalty:

The petitioner challenged the imposition of penalties for not paying the admitted tax within the prescribed time. The court held that the review under section 47 of the Finance Act is permissible only for "mistake apparent from the record." The assessment orders for the years 1993-94 to 1996-97 were passed by considering the prolonged litigation and the status of the petitioner, leading to the conclusion that no penal provision was attracted. The court found that the review in this case amounted to reconsideration of the matter only on the ground that a different view could be taken upon rehearing, which is not permissible.

2. Whether the review order was barred by limitation:

The review proceedings were initiated under rule 32(3) of the Bihar Sales Tax Rules, which does not prescribe any period of limitation for reviewing orders passed by a predecessor in office. The court held that sub-rule (3) is applicable in this case and, therefore, the review application was not barred by limitation.

3. Validity of the review order based on the objection raised by the audit party:

The petitioner argued that the review proceedings initiated based on the audit party's objection were not maintainable. The court referred to the Supreme Court judgment in Indian & Eastern Newspapers Society v. Commissioner of Income-tax, which held that an audit party's opinion on a point of law is not "information" for initiating proceedings. However, the court noted that the audit report in this case merely drew attention to the mistake, and the review was initiated by the competent authority. Hence, the court found no merit in this submission.

4. Discretion of the assessing authority in imposing penalties:

The court emphasized that the imposition of penalties is quasi-judicial and involves judicial discretion. Even if a minimum penalty is prescribed, the authority must exercise discretion based on the circumstances. The court cited Hindustan Steel Ltd. v. State of Orissa, which established that penalties should not be imposed unless the party acted deliberately in defiance of the law or in conscious disregard of its obligations. The court concluded that the petitioner acted in good faith and bona fide, given the prolonged litigation and the immediate steps taken post the Supreme Court's judgment. Therefore, it was not a fit case for imposing penalties.

5. Requirement of prior sanction for review:

The court found that the competent authority had granted the necessary sanction on June 17, 2002, before passing the review order. Thus, the requirement under rule 32(3) of the Bihar Sales Tax Rules was fulfilled, and this point was devoid of substance.

Conclusion:

The court allowed the writ application in part, quashing the orders dated September 6, 2002, imposing penalties and the subsequent demand notices. The court held that the review was not permissible as there was no glaring mistake apparent on the record, and the petitioner had acted in good faith. The court also directed that any penalty amount paid should be adjusted towards the future liability of the petitioner under the Act.

Petition allowed in part.