2011 (2) TMI 1342 - HC - VAT and Sales Tax

Imposition of penalty under Section 16(9) of the Bihar Finance Act 1981 - Held that - It is an admitted position that even before the Assessing Officer could do the assessment proceeding for the period in question the Petitioner had deposited the entire admitted amount of tax. There is no finding in the order of the Assessing Authority that the delay in deposit of the tax by the Petitioner could be attributable to any deliberate wilful or contumacious conduct of the Petitioner. A mere delay in deposit of tax in given circumstances cannot be an item of suspicion that it was backed by a deliberate intention of the Assessee to avoid tax. The accompanying circumstances governing the present case does not in the least comes within such category of cases. The reasons attributed by the Assessing Authority for imposition of penalty as also noted in this judgment do not satisfy the pre-requisites to the imposition of penalty as envisaged under the provisions of Section 16(9) of the Act of 1981 and/or in the judgment of this Court and the Supreme Court on the issue. Thus imposition of penalty is quashed and set aside. Any deposit made by the Petitioner in pursuance of the order(s) aforesaid shall be refunded and/or adjusted towards the current/future liability of the Petitioner

Issues Involved:
1. Imposition of penalty under Section 16(9) of the Bihar Finance Act, 1981.
2. Refusal of the Commercial Taxes Tribunal to refer questions of law to the High Court.
3. Rejection of the prayer for review by the Tribunal.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 16(9) of the Bihar Finance Act, 1981:

The petitioner, a registered dealer under the Bihar Finance Act, 1981, and later under the Bihar Value Added Tax Act, 2005, faced an audit report indicating errors and omissions in tax deposits for the period 1999-2000. The petitioner deposited the additional tax based on the audit report before the statutory assessment exercise but after the deadline for filing revised returns. The Assistant Commissioner imposed a penalty under Section 16(9) of the Act of 1981, despite acknowledging that the entire tax was paid. The grounds for imposing the penalty included:
- No extension of time was requested by the petitioner for delayed tax payment.
- The difference in tax was not paid at the time of annual returns submission.
- The tax was deposited voluntarily without submitting revised returns.

The petitioner challenged the penalty, arguing that the prerequisites for imposing a penalty under Section 16(9) were not met as the tax was paid before the assessment proceedings. The petitioner cited the Supreme Court's decision in J.K. Synthetics Ltd. v. Commercial Taxes Officer, which emphasized that penalty should not be imposed unless the party acted deliberately in defiance of the law or was guilty of contumacious or dishonest conduct. The High Court agreed, noting that the delay was not due to any deliberate or willful conduct but rather due to the timing of the audit report. The Court referenced previous judgments, including Hindustan Steel Ltd. v. State of Orissa and decisions involving the Indian Oil Corporation Ltd., which supported the view that penalties should not be imposed for technical or venial breaches of the law.

2. Refusal of the Commercial Taxes Tribunal to Refer Questions of Law to the High Court:

The petitioner sought a reference from the Commercial Taxes Tribunal on the questions of law arising from the Tribunal's judgment, which was denied. The High Court deemed it appropriate to consider and dispose of the matter on its merits rather than directing a reference to the Tribunal. The Court found that the Tribunal's refusal was not justified given the legal issues at stake, particularly concerning the interpretation and application of Section 16(9) of the Act of 1981.

3. Rejection of the Prayer for Review by the Tribunal:

The Tribunal also rejected the petitioner's prayer for review of its order. The High Court found that the Tribunal's decision to uphold the penalty was flawed, as it did not adequately consider the circumstances under which the petitioner deposited the additional tax. The Court emphasized that the penalty provisions should be applied judiciously and not in a mechanical manner. The Tribunal's failure to recognize the bona fide nature of the petitioner's actions and the absence of any deliberate intent to evade tax warranted setting aside the penalty.

Conclusion:

The High Court quashed the penalty imposed under Section 16(9) of the Bihar Finance Act, 1981, and set aside the orders of the Commercial Taxes Tribunal and the Assistant Commissioner. The Court ordered that any deposit made by the petitioner in pursuance of the penalty be refunded or adjusted towards the petitioner's current or future tax liabilities. The Tax Case and Miscellaneous Appeal were disposed of without any order as to costs.

← Previous Next →