2013 (3) TMI 679 - HC - VAT and Sales Tax

Summary

Issues involved:
The judgment involves the deletion of penalty imposed by the petitioner-Department under section 25(1) read with section 61 of the Sales Tax Act, based on the respondent's failure to collect and deposit Central sales tax (CST) on the sale of "Naswar" (snuff) on an inter-State basis during a specific period.

Issue 1: Failure to Collect and Deposit CST:
The petitioner-Department imposed a penalty on the respondent for not collecting and depositing Central sales tax (CST) on the sale of "Naswar" during a specified period. The respondent argued that they were unaware of the legal amendment and promptly deposited the due tax upon becoming aware. The Tax Board, after considering submissions, deleted the penalty of &8377; 54,680 under section 61 of the Act in the order dated March 27, 2012.

Issue 2: Justification for Penalty Imposition:
The petitioner contended that the penalty was rightfully imposed due to the respondent's failure to collect and pay VAT, which they were legally obligated to do. It was argued that the respondent, being a reputable company, should have been aware of the legal changes and fulfilled their tax obligations. The petitioner claimed that the deletion of the penalty by the Tax Board was unjustified, alleging evasion of tax by the respondent.

Judgment Summary:
Upon review, the court noted that the legal amendment regarding the taxation of "bidi" was effective from April 1, 2007, and the respondent promptly deposited the due tax upon becoming aware of the change. The court emphasized that the respondent's actions did not indicate any ulterior motive for tax evasion, especially since the tax was paid before the penalty order. The complexity of tax laws and frequent amendments were highlighted, indicating that the respondent could not be faulted for lack of awareness. The court found that all transactions were properly recorded, and there was no substantial basis for imposing the penalty under section 25(1) read with section 61 of the Act. Consequently, the court upheld the Tax Board's decision to delete the penalty, dismissing the revision petition.