2011 (5) TMI 890 - HC - VAT and Sales Tax

Whether there was no omission on the part of the dealer in refunding the amount and it was in fact error on the part of the Commercial Tax Officer who directed for refund of the tax, then such penalty could not have been imposed? Held that - Though, learned counsel for the State tried to support the aforesaid order but in the facts of the present case, it is apparent that there was no omission, error or default on the part of the petitioner, on the contrary petitioner had deposited the entire amount of the entry tax and after the aforesaid assessment order, annexure P2 dated January 27, 2008, excess amount of entry tax was refunded to the petitioner. After reassessment under section 28(1) of the Commercial Tax Act, if the petitioner was found liable for payment of the tax, which was earlier deposited and refunded to him then no penalty could have been imposed on the petitioner. Thus the impugned order dated December 4, 2009, insofar as it relates to imposition of penalty, is hereby quashed.

Summary

Issues:
1. Reopening of assessment under section 28(1) of the Commercial Tax Act
2. Imposition of penalty on the petitioner for entry tax already paid and refunded

Analysis:
1. The judgment pertains to a petition challenging an order passed by the Commercial Tax Officer reopening the assessment for the assessment year April 1, 2004, to March 31, 2005, under section 28(1) of the Commercial Tax Act. The officer imposed liability of entry tax along with a penalty on the petitioner. The petitioner contended that the penalty was erroneously imposed as the tax had already been paid and refunded in a prior assessment order (annexure P2). The court examined the provisions of section 28(1) which allow reassessment if any sale or purchase of goods has been under-assessed or escaped assessment. However, for imposing a penalty, it must be attributable to the dealer's omission.

2. The petitioner argued that there was no mistake on their part, and the tax amount was already deposited and refunded based on the earlier assessment. The court noted that the dealer had paid the entire entry tax amount, which was acknowledged in the initial assessment leading to a refund. Subsequently, another officer reopened the assessment, determining the liability for entry tax and imposing a penalty. The court emphasized that if the petitioner had already paid and refunded the tax amount, no penalty should be imposed unless there was an error attributable to the dealer. The court found no omission or default on the petitioner's part, attributing the refund error to the Commercial Tax Officer.

3. The court held that in the absence of any mistake or omission by the dealer, the penalty imposed during reassessment was unjustified. Consequently, the court quashed the order dated December 4, 2009, regarding the imposition of the penalty. The petitioner was also awarded the cost of the petition, including a counsel fee. The judgment underscores the importance of ensuring that penalties are imposed judiciously, especially when the taxpayer has complied with tax obligations and any errors are attributable to tax authorities rather than the taxpayer.