2010 (4) TMI 1011 - HC - VAT and Sales Tax

Whether the Deputy Commissioner of Sales Tax (Appeals) is justified in imposing the penalty of ₹ 82,000 on the applicant for filing some of the tax returns late under section 9(2A) of the Central Sales Tax Act, 1956 read with section 36(2)(c), Explanation (2) of the Bombay Sales Tax Act relevant for the period July 1, 1981 to April 30, 1987? Held that - In the facts and under the circumstances of the present case, and on the correct interpretation of section 36(2)(c) of the Bombay Sales Tax Act, 1959 the Tribunal was not justified in holding that the Deputy Commissioner of Sales Tax (Appeals) in exercise of appellate powers had jurisdiction to initiate action for imposition of penalty for the first time. The Tribunal was not justified in holding that the penalty under section 9(2A) of the Central Act read with section 36(2)(c) read with Explanation (2) can be levied in the present case for the months for which returns were in fact filed in time. The Appellate Deputy Commissioner had no power or jurisdiction to impose for the first time penalty that was never thought of nor imposed by the assessing authority. Hence questions (a) to (e) referred by the Sales Tax Tribunal by its order dated February 21, 2004 are answered accordingly in favour of the assessee/ appellant and against the Revenue. Decided in favour of the assessee/ appellant and against the Revenue.

Issues Involved:

(a) Jurisdiction of Deputy Commissioner (Appeals) to initiate penalty imposition.
(b) Jurisdiction of Deputy Commissioner (Appeals) to impose penalty under section 9(2A) of the Central Sales Tax Act.
(c) Imposition of penalty for months with timely filed returns.
(d) Imposition of penalty in appeal proceedings when no tax was found due.
(e) Original jurisdiction of appellate authority to impose penalty without concealment or tax determination.

Issue-wise Detailed Analysis:

(a) Jurisdiction of Deputy Commissioner (Appeals) to initiate penalty imposition:
The Tribunal was not justified in holding that the Deputy Commissioner of Sales Tax (Appeals) had the jurisdiction to initiate action for imposition of penalty for the first time. The Tribunal's interpretation of section 36(2)(c) of the Bombay Sales Tax Act was incorrect, as the power to impose penalties during the relevant period was conferred only upon the Commissioner and not on the appellate authority. The appellate authority did not have the power to impose a fresh penalty for the first time under section 55(6)(b).

(b) Jurisdiction of Deputy Commissioner (Appeals) to impose penalty under section 9(2A) of the Central Sales Tax Act:
The Tribunal was not correct in holding that the Deputy Commissioner (Appeals) had jurisdiction for imposition of penalty under section 9(2A) of the Central Sales Tax Act read with section 36(2)(c) of the Bombay Sales Tax Act. The appellate authority did not have the power to impose penalties for the first time in exercise of appellate powers, as per the correct interpretation of section 36(2)(c) Explanation (2).

(c) Imposition of penalty for months with timely filed returns:
The Tribunal was not justified in holding that the penalty under section 9(2A) of the Central Act read with section 36(2)(c) Explanation (2) could be levied for months where returns were filed on time. The penalty provisions could not be applied retrospectively to periods before the amendment on April 21, 1987. The returns, though filed late, were taken on record and considered in the assessment, negating the basis for penalty imposition.

(d) Imposition of penalty in appeal proceedings when no tax was found due:
The Tribunal erred in holding that penalty could be imposed for the first time in appeal proceedings even when no tax was found due. The appellate authority did not have the jurisdiction to impose penalties that were not initially determined by the assessing authority. The imposition of penalty in appeal proceedings was not supported by the statutory provisions in effect during the relevant period.

(e) Original jurisdiction of appellate authority to impose penalty without concealment or tax determination:
The Tribunal was incorrect in holding that the appellate authority had the original jurisdiction to impose penalties for the first time without any concealment or tax determination. The appellate authority's power was limited to confirming, canceling, or varying the existing penalty orders, not imposing new penalties.

Conclusion:
The High Court answered all the questions of law in favor of the applicant and against the Revenue. The Tribunal's interpretation and application of the relevant statutory provisions were found to be incorrect. The Deputy Commissioner (Appeals) did not have the jurisdiction to impose penalties for the first time in the appeal proceedings, and the penalties imposed were not justified under the circumstances and statutory framework applicable during the relevant period.

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