2004 (8) TMI 719 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to penalty order imposed by Sales Tax Officer under Section 15-A (1) (c) of the U.P. Sales Tax Act for alleged sales outside books of account.

Analysis:
The petitioner, a registered dealer under the U.P. Sales Tax Act, challenged the penalty order dated 31st March, 1993, imposed by the Sales Tax Officer for alleged sales of paper outside books of account. The petitioner contended that no re-assessment proceedings were initiated for the relevant Assessment Year, and the penalty was imposed after an unreasonable delay of about nine years. The petitioner argued that penalty proceedings should have been initiated within a reasonable period, citing relevant case law to support the claim.

The Sales Tax Officer defended the penalty imposition, stating that there was no requirement for the assessment order to precede the penalty proceedings. The Officer argued that the penalty and assessment proceedings are distinct, and there is no limitation on initiating penalty proceedings. Additionally, it was asserted that the petitioner, having made sales outside the books of account, should not benefit from their non-compliance.

Upon hearing both parties, the Court found that no re-assessment proceedings were initiated for the alleged sales outside books of account. The Court noted that the information regarding these sales was received in 1990, and no action was taken until 1993, well beyond the period for maintaining books of account as per the U.P. Trade Tax Rules. Citing relevant case law, the Court emphasized the need for penalty proceedings to be initiated within a reasonable time, and in this case, the delay was deemed unreasonable, leading to the quashing of the penalty order.

Furthermore, the Court referred to previous decisions regarding the imposition of penalties for concealment of turnover, emphasizing that penalties should be imposed in accordance with statutory provisions and not after unreasonable delays. The Court ultimately ruled in favor of the petitioner, setting aside the penalty order dated 31st March, 1993, while directing each party to bear their own costs.