2011 (9) TMI 471 - HC - VAT and Sales Tax

Penalty - Failure of a dealer to furnish an audit report within the prescribed period - Tribunal reduced the the quantum of penalty - Commissioner argued there is discretion whether penalty to be imposed or not but not on the quantum of penalty - Held That - There are two views to the interpretation of Section 61 (2),the Court would be justified in adopting that construction which favours the assessee. (Supreme court in Commissioner of Income Tax V. Vegetable Product Ltd.10 and Mauri Yeast India Pvt. Ltd. V. State of U.P). Action of Tribunal was up held.

Summary

Issues Involved:
1. Interpretation of Section 61(2) of the Maharashtra Value Added Tax Act, 2002 (MVAT Act).
2. Discretion of the Commissioner regarding the imposition and quantum of penalty under Section 61(2).
3. Justification of the reduction in penalty from Rs. 83,013/- to Rs. 25,000/- by the Tribunal.

Issue-wise Detailed Analysis:

1. Interpretation of Section 61(2) of the MVAT Act:
The core issue revolves around the interpretation of Section 61(2) of the MVAT Act, which deals with the imposition of penalties for the belated filing of an audit report. The Revenue contends that once the Commissioner decides to impose a penalty, it must be equal to one tenth per cent of the total sales. The Respondent argues that the Commissioner has the discretion not only to decide whether to impose a penalty but also to determine the quantum of the penalty.

2. Discretion of the Commissioner regarding the imposition and quantum of penalty under Section 61(2):
The court examined whether the Commissioner's discretion extends to both the imposition and the quantum of the penalty. It was noted that the word "may" in Section 61(2) suggests that the imposition of a penalty is discretionary. The court emphasized that the legislative intent was to provide the Commissioner with discretion, which includes both the decision to impose a penalty and the quantum of the penalty. This interpretation aligns with the principle that penalties are not automatically imposed but are subject to judicial discretion, considering all relevant circumstances.

3. Justification of the reduction in penalty from Rs. 83,013/- to Rs. 25,000/- by the Tribunal:
The Tribunal reduced the penalty based on the finding that the delay in filing the audit report was not deliberate. The Tribunal accepted the Respondent's explanation that the delay was due to the auditor taking up employment elsewhere, which was beyond the Respondent's control. The court upheld the Tribunal's decision, stating that the Tribunal provided adequate reasons for the reduction and that the finding of non-deliberate delay warranted no interference.

Conclusion:
The court concluded that Section 61(2) of the MVAT Act confers discretion on the Commissioner regarding both the imposition and the quantum of penalty. The reduction in penalty by the Tribunal was justified based on the circumstances of the case. The appeal was disposed of, affirming the Tribunal's decision, with no order as to costs.