2003 (1) TMI 709 - HC - VAT and Sales Tax

Summary

Issues:
1. Penalty under Section 15 (1) (a) of the U. P. Sales Tax Act for failure to deposit tax within the specified time.
2. Reasonable cause for not depositing tax within stipulated period.
3. Whether penalty justified in absence of malafide intentions.

Analysis:
1. The judgment involves two revisions under Section 11 of the U. P. Sales Tax Act, challenging penalty orders imposed by the Assessing Authority for failure to deposit tax within the specified time for the months of April and May 1990. The applicant, engaged in the business of food grains, admitted tax liabilities for both months but deposited the amounts late, citing shortage of funds as the reason. The penalty orders were upheld by the Assistant Commissioner (Judl.), Sales Tax, Bareilly and the Trade Tax Tribunal, Bareilly, leading to the present revisions before the High Court.

2. The applicant contended that the delay in tax deposit was due to a shortage of funds, which was a reasonable cause for not complying with the stipulated time frame. The applicant argued that there was no malafide intention in the delayed deposits. The High Court examined Section 15 A (1) (a) of the Act, which provides for penalties in cases of failure to deposit tax without reasonable cause. The court noted that the applicant's explanation of fund shortage was undisputed and held that the reasonable cause was established, especially since there was no evidence of malafide intentions.

3. In its analysis, the High Court referred to precedents such as the case of M/S Triveni Sheet Glass Works Limited, Allahabad, which emphasized that when tax is deposited along with interest, no penalty should be levied. Similarly, the case of M/S Commercial Auto Sales Pvt. Limited, Allahabad highlighted that penalties should not be imposed in cases of trifling delays where there is no loss to the state and where the taxpayer voluntarily pays the tax with interest. The court emphasized that the burden of proving the absence of a reasonable cause lies on the revenue authorities and that penalties should be imposed judiciously, considering all relevant circumstances.

In conclusion, the High Court allowed both revisions, deleting the penalties imposed for the months of April and May 1990, based on the established reasonable cause for the delayed tax deposits and the absence of malafide intentions on the part of the applicant. The order of the Tribunal dated 29.8.1991 was quashed, and the penalties under Section 15 (1) (a) were revoked.