2013 (5) TMI 316 - HC - VAT and Sales Tax

Penalty under Section 17(5A) - re-opening of the assessment - assessee contested against the penalty levy on the ground as it cannot be levied for any year prior to 1998-99 as it was introduced with effect from 1.4.1998 - Held that - Penalty as provided in the Section is attracted, when assessments completed under Section 17(4) are re-opened and on such re-opening it is found that the amount of tax already paid by the dealer is less than the amount of tax, which he is liable to pay on the fresh assessment. Therefore, as on 1.4.1998, when the Section was introduced by the Legislature, it talks about re-opening of the assessments already completed and Section is attracted in a situation when tax already paid is found to be inadequate. Such a situation can be attracted in respect of the assessment years prior to 1.4.1998 also and therefore the contention that the assessment year being 1996-1997, Section 17 (5)(A) introduced with effect from 1.4.1998 is not attracted is untenable. As the final assessment under Section 17(4) was completed on 12.1.2001 and the reopened assessment was completed still later. No material is available regarding the date on which the petitioner had opted for the assessment under Section 17(4) to hold that the option was not after 1.4.1998. In such circumstances, there is nothing illegal in the levy of penalty under Section 17(5) (A), as per Ext.P1 order, which has been confirmed by the Revisional Authorities concurrently - against assessee.

Summary

Issues:
1. Validity of penalty order under Section 17(5)(A) of the KGST Act for the assessment year 1996-1997.
2. Applicability of Section 17(5)(A) to assessments of years prior to 1.4.1998.
3. Allegation of arbitrariness and discrimination under Article 14 of the Constitution of India regarding penalty provisions.
4. Interpretation of the judgment in M.K. Pushparanjini case regarding penalty provisions.

Analysis:

Issue 1: Validity of penalty order under Section 17(5)(A)
The petitioner challenged the penalty order of Rs.3,21,198/- imposed under Section 17(5)(A) for the assessment year 1996-1997. The order was confirmed by Revisional Authorities. The contention raised was that since Section 17(5)(A) was introduced in 1998, it cannot be applied to assessments prior to 1.4.1998. However, the court held that the penalty provision is attracted when assessments completed under Section 17(4) are reopened and tax paid is found to be inadequate, which can apply to years before 1998 as well.

Issue 2: Applicability of Section 17(5)(A) to prior years
The court referred to a previous judgment to establish that the penalty provision under Section 17(5)(A) introduced in 1998 applies to assessments of earlier years if those assessments were pending and the assesses opted for assessment under Section 17(4) after 1.4.1998. The court emphasized that the penalty provision is an additional disincentive against filing untrue returns when opting for assessment under Section 17(4).

Issue 3: Allegation of arbitrariness and discrimination
The petitioners alleged that Section 17(5)(A) is arbitrary and discriminatory under Article 14 of the Constitution of India. However, the court rejected this argument, stating that assesses opting for assessment under Section 17(4) constitute a separate class, and the penalty provision acts as a deterrent against tax evasion in such cases where assessments are completed without scrutiny.

Issue 4: Interpretation of the M.K. Pushparanjini case
The court referred to the M.K. Pushparanjini case to highlight that the penalty provision under Section 17(5)(A) can be applied to assessments of earlier years if assesses opted for assessment under Section 17(4) after 1.4.1998. The court emphasized the distinction between assesses opting for Section 17(4) assessments and those undergoing normal assessment procedures.

In conclusion, the court dismissed the writ petition, upholding the validity of the penalty order under Section 17(5)(A) for the assessment year 1996-1997, as confirmed by the Revisional Authorities.