2005 (5) TMI 627 - HC - VAT and Sales Tax

Summary

Issues:
Penalty waiver under section 12-B(4) of the Karnataka Sales Tax Act, 1957 for assessment year 1992-93.

Analysis:

The judgment of the court focused on the issue of whether the penalty levied under section 12-B(4) of the Karnataka Sales Tax Act, 1957 for the assessment year 1992-93 should be waived in accordance with Circular No. 3 of 1999-2000 issued by the Commissioner of Commercial Taxes. The respondent, a liquor dealer, had been penalized for late tax payment, and the penalty was sought to be waived under the circular. The circular aimed to provide relief by waiving penalties for certain tax arrears if paid before a specified date. The respondent's claim for penalty waiver was initially rejected by the department, leading to a legal challenge through a writ petition. The single Judge allowed the petition and directed the department to reconsider the penalty waiver claim. Subsequently, the department filed a writ appeal against this decision.

Upon hearing the arguments, the High Court found no merit in the writ appeal. The court examined Circular No. 3 of 1999-2000, which outlined the conditions for penalty waiver, specifically for tax assessments up to 1996-97 where arrears were cleared before June 30, 1999. The court noted that the respondent had paid the arrears for the assessment year 1992-93 before the specified date, making them eligible for penalty waiver as per the circular. The court emphasized that the department's argument requiring both original tax and penalty to be due before claiming waiver was not supported by the circular's language or the intent behind the relief measure.

The court highlighted the potential absurdity in the department's interpretation, where a dealer who had not paid taxes and penalties could claim waiver, while a dealer who had paid taxes but not penalties would be deprived of the benefit. Such a scenario was deemed unjust and contrary to the circular's purpose. Consequently, the court ruled in favor of the respondent, affirming their entitlement to the waiver of the penalty amount. As a result, the writ appeal was dismissed, upholding the respondent's right to penalty waiver as per the circular and the legal principles outlined in the judgment.