2014 (9) TMI 668 - HC - VAT and Sales Tax

Penalty under Section 45A - non-filing of return and non-payment of tax due - whether the offence alleged is technical in nature - Held that - As per Section 45A, if the authority is satisfied that the assessee had failed to submit any return as required under the provisions of the Act or the Rules or and had failed to comply with provisions of the Act or the Rules to make payment of the tax amount due, a penalty not exceeding twice the amount of tax or other amount sought to be evaded can be imposed. In the case at hand the specific allegation is that the petitioner had failed in submitting monthly returns for the periods in question and failed to remit the tax due for the said periods. Non-remittance of tax due under the Act and Rules is an offence coming within the purview of Section 45A. In such case the authority is entitled to impose penalty to the tune of twice the amount of tax evaded or sought to be evaded. Therefore I am of the opinion that the view taken by the authorities that non-payment of tax due is not a technical offence and imposition of penalty at twice the amount of tax is sustainable. First revisional authority had already taken a lenient view and reduced the quantum of penalty to equal the amount of tax. I do not think any further reduction of the quantum is warranted. However, considering the fact that the order imposing penalty was challenged all along and also considering the fact that this writ petition was pending adjudication before this court from the year 2008 onwards, I am inclined to order waiver of penal interest on the amount of penalty finalised, if the petitioner remits the amount of penalty determined by the assessing authority within a period of 3 months from the date of receipt of certified copy of this judgment. - Decided partly in favor of assessee.

Summary

Issues:
Challenge to penalty orders under Section 45A of KGST Act for non-filing of returns and non-payment of tax due.

Analysis:

1. The petitioner, running a Bar Hotel, was penalized under Section 45A of the KGST Act for failing to submit monthly returns and make tax payments for specific periods. The 2nd revisional authority reduced the penalty to an equal amount of tax due, considering the tax had been remitted subsequently. However, the 1st revisional authority upheld the double penalty, emphasizing non-payment of tax even after notice. The petitioner argued financial constraints and circumstances led to non-compliance.

2. The court deliberated on whether the offense was technical, citing Section 45A allowing penalties up to twice the tax amount evaded. Non-remittance of tax constitutes an offense under the Act, justifying the imposed penalty. The court referenced precedent where explanations for non-compliance due to specific circumstances were not accepted as valid excuses for tax evasion.

3. The petitioner's reliance on income tax cases regarding financial stringency as a valid reason for delayed payment was dismissed. The court distinguished between the provisions of the Income Tax Act and the KGST Act, highlighting that financial constraints cannot justify withholding tax collected from customers. The contention that non-payment was a technical offense or not purposeful evasion was rejected.

4. Despite the establishment's closure and attachment during the relevant period, the court deemed no further reduction in penalty necessary, as the 1st revisional authority had already shown leniency by reducing the penalty to the tax amount due. However, considering the prolonged legal process, the court ordered waiver of penal interest if the penalty amount was remitted within three months; failure would lead to coercive recovery actions by the respondents.