2010 (2) TMI 1088 - HC - VAT and Sales Tax

Imposition of penalty on the petitioner, a public limited company incorporated under the Companies Act, 1956, in respect of the assessment year 2003-04 Held that - The impugned directions, contained in the order, dated May 18, 2009, passed by respondent No. 3 imposing penalty of ₹ 35,03,793.10 on the petitioner, are not sustainable in law inasmuch as no notice, as is required under section 13(2) of the TST Act, was issued to, and served upon, the petitioner before the said penalty was imposed on the petitioner and the petitioner was, thus, denied the opportunity of having his say in the matter. Situated thus, this court cannot but be interfered with the impugned order, dated Match 18, 2009, to the extent that the same, as indicated hereinabove, imposes penalty on the petitioner.

Summary

Issues Involved:
1. Imposition of penalty without notice under Section 13(2) of the Tripura Sales Tax Act, 1976 (TST Act).
2. Validity and justification of the penalty imposed under the TST Act.

Issue-wise Detailed Analysis:

1. Imposition of Penalty without Notice under Section 13(2) of the TST Act:
The petitioner challenged the order dated May 18, 2009, issued by the Superintendent of Taxes, which imposed a penalty for the assessment year 2003-04. The petitioner contended that no notice to show cause was given before imposing the penalty, which is mandatory under Section 13(2) of the TST Act. The court noted that Section 13(2) requires that no order imposing a penalty shall be made unless the dealer has been given a reasonable opportunity of being heard. The court emphasized that granting an opportunity of hearing is a mandatory pre-condition for the imposition of penalty under Section 13.

2. Validity and Justification of the Penalty Imposed under the TST Act:
The court examined the provisions of Sections 8 and 9 of the TST Act, which relate to the filing of returns and the assessment process. It noted that while Section 8 deals with the filing of returns by a registered dealer, Section 9 empowers the prescribed authority to determine the tax payable based on the returns or evidence produced. The court also highlighted that Section 13(1) allows the imposition of a penalty if the dealer fails to furnish returns, comply with notices, conceals particulars of turnover, or evades tax without reasonable cause.

The court pointed out that the notice dated June 11, 2009, issued under Section 9(2) of the TST Act, was not sufficient compliance with the requirement of giving notice under Section 13(2) for the imposition of a penalty. The court held that a notice under Section 9(2) is a step towards making an assessment of tax and does not fulfill the requirement of informing the dealer about the specific grounds for imposing a penalty.

The court further noted that the imposition of a penalty is not a routine affair and must be based on a judicious application of mind. The authority must determine if the non-compliance was willful and how serious the non-compliance was. The proceedings for imposing a penalty are distinct from the assessment proceedings and must be conducted in accordance with the procedure prescribed by Section 13, which includes providing an effective opportunity of hearing.

The court referred to the Supreme Court's decision in Hindustan Steel Ltd. v. State of Orissa, which held that penalty will not ordinarily be imposed unless the party obliged acted deliberately in defiance of the law or was guilty of contumacious or dishonest conduct. The court concluded that the impugned order imposing a penalty on the petitioner was not sustainable in law as no notice under Section 13(2) was issued, and the petitioner was denied the opportunity to be heard.

Conclusion:
The court set aside and quashed the impugned order dated May 18, 2009, to the extent that it imposed a penalty on the petitioner. The respondents were left open to proceed with the matter in accordance with the law if they deemed it necessary to impose a penalty on the petitioner. The writ petition was disposed of with no order as to costs.