2014 (3) TMI 81 - HC - VAT and Sales Tax

Penalty under section 43(3A) of the Gujarat Sales Tax Act, 1969 - Mandatory or Directory - Default of filing declaration or late return - Whether on the facts and in the circumstances of the case, the Tribunal has rightly held that the provision of penalty under section 43(3A) of the Gujarat Sales Tax Act, 1969 is not mandatory to levy penalty per default of filing declaration or late return - Held that - If a penalty is not mandatory, for variety of reasons, the authority may chose not to impose the penalty. However, whether mandatory or otherwise, the authority for valid reasons decides to impose penalty, the question would be could such penalty be reduced below the minimum prescribed under the law - we are informed that the total effect of reduction of penalty in all three appeals puttogether is less than ₹ 35,000/ . Under the circumstances, keeping this question open to enable the State to urge the same in future in appropriate case, only on the ground of smallness of the claim amount in these appeals - Decided against Revenue.

Summary

Issues:
1. Whether the Tribunal correctly held that the penalty under section 43(3A) of the Gujarat Sales Tax Act, 1969 is not mandatory for default in filing declaration or late return?
2. Can the authority reduce the penalty below the minimum prescribed under the statute once it decides to impose a penalty?

Analysis:
1. The High Court was presented with appeals challenging orders by the Gujarat Value Added Tax Tribunal regarding the imposition of penalties under the Gujarat Sales Tax Act, 1969. The Tribunal had held that the penalty under section 43(3A) of the Act was not mandatory for default in filing declaration or late return. The Tribunal interpreted the provisions of the Act and concluded that the word "shall" in section 45(3A) should be read as "may," making the penalty not mandatory. The Tribunal, considering the facts of the case, reduced the penalty imposed by the competent authority. The State, represented by Mr. Jaimin Gandhi, relied on Supreme Court decisions to argue that the penalty was mandatory. However, the High Court refrained from making a conclusion on this issue in the present appeals.

2. The High Court delved into the question of whether, once the authority decides to impose a penalty, it can reduce the penalty below the minimum prescribed under the statute. The Court emphasized that whether a penalty is mandatory or discretionary, if the authority decides to impose a penalty for valid reasons, the question arises whether it can be reduced below the statutory minimum. The Court agreed with the Tribunal's view that the penalty under section 45(3A) of the Act is not mandatory. Referring to a Supreme Court decision, the Court highlighted that the imposition of a penalty is a matter of discretion to be exercised judicially by the authority, considering all relevant circumstances. The Court noted that the question of reducing the penalty below the minimum prescribed required closer scrutiny, but due to the small amount involved in the appeals, the Court disposed of the appeals, leaving the question open for future consideration by the State in appropriate cases.