2012 (4) TMI 547 - HC - VAT and Sales Tax

Penalty levy - revision application - Held that - Tribunal has not given any reason in its order as to why for the first default the penalty would be of ten per cent of the tax deducted and why such penalty will increase by five per cent for every subsequent default committed in every subsequent months. Furthermore there is no pronouncement as to whether penalty is at all leviable in respect of deduction made but deposited beyond the time specified. In the circumstances we interfere with the judgments and orders of the Tribunal under revisions and set aside the same and remit back the matter to the Tribunal for consideration whether penalty is at all leviable in case where deductions made have been deposited but belatedly and if so whether penalty imposable for such a crime can be equated with the crime of not deducting or with not depositing after deduction; as well as what should be the rational penalty to be imposed for delay in depositing deducted tax with reasons in support thereof

Summary

Issues:
1. Interpretation of penalty provisions under Uttaranchal Trade Tax Act and Uttarakhand VAT Act.
2. Application of penalty for delayed deposit of deducted tax.
3. Assessment of penalty quantum for delayed deposit.

Analysis:
1. The judgment dealt with the interpretation of penalty provisions under the Uttaranchal Trade Tax Act and Uttarakhand Value Added Tax Act. Both Acts mandated the deduction of a specific percentage of payment to contractors for works contracts and the subsequent deposit of the deducted amount with the Government Treasury within a specified time frame. Failure to comply with these obligations attracted penalties under the respective Acts. The revisionists in the case had deducted and deposited the tax but did so beyond the stipulated time, leading to the imposition of penalties by the assessing authority.

2. The appellate authority reduced the penalty imposed by the assessing authority, prompting both the Revenue and the revisionists to approach the Tribunal. The Tribunal, in its decision, highlighted instances where the revisionists had deposited the tax with delays ranging from a few days to several months. The Tribunal considered this delay as negligent default on the part of the revisionists, especially since the tax was deposited regularly but after the prescribed period each month. Consequently, the Tribunal imposed penalties based on a percentage of the approved TDS amount for each month with delays, as outlined in a detailed table.

3. The revisionists raised three principal questions in their revision applications. Firstly, they argued that penalty should not be levied when tax is deducted and deposited, even if done beyond the due date, as separate provisions for interest deposit exist. They contended that the penalty for delayed deposits should be proportional to the delay and not increase for subsequent defaults. The Tribunal's failure to address these aspects led the High Court to set aside the Tribunal's judgments and orders. The matter was remitted back to the Tribunal for a reconsideration of whether penalties should be imposed for delayed deposits of deducted tax and, if so, what rational penalty quantum should be applied based on the delay, with supporting reasons.

In conclusion, the High Court's judgment focused on the interpretation and application of penalty provisions under the relevant tax Acts, emphasizing the importance of considering the circumstances of delayed tax deposits and rationalizing penalty amounts based on the nature of the default.