2015 (10) TMI 216 - HC - VAT and Sales Tax

Levy of penalty under section 15A(1)(a) of the U.P. Trade Tax Act, 1948 - delayed deposit of trade tax/Central sales tax - Whether, on the facts of the case, the Tribunal is legally justified in confirming the penalty under section 15A(1)(a) of the Act - Held that - specific grounds were taken by the applicant with complete disclosure of facts before the appellate authority that the bank draft/pay order for the tax amount was deposited well within time in the SBI which was collected by the SBI after two or three days which allegedly caused delay of two or three days as evident from the facts mentioned in the grounds of appeal as well as in the written submission filed before the first appellate authority and before the Tribunal - payment of cheque is a recognised mode of payment of sales tax dues. Now question arises that what is the date of payment, when the cheque was given to the Department or the date on which it was encashed. Payment by cheque realised subsequently on the cheque being honoured and encashed relates back to the date of the receipt of the cheque, and in law the date of payment is the date of delivery of the cheque. Applicants have clearly mentioned the date of respective bank draft/pay order/cheque and the date of deposit thereof along with challan form in the SBI which facts have not been disputed or denied by the assessing authority. It cannot be said that there was any delay. Even according to the respondents, there was delay of only two or three days. The same was properly explained by the applicant. There was no occasion before the assessing authority to levy penalty for alleged delay in deposit of tax for the relevant months - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 15A(1)(a) of the U.P. Trade Tax Act, 1948 for delayed deposit of trade tax/Central sales tax in specific months.

Analysis:
The judgment involved a dispute regarding the imposition of penalties under section 15A(1)(a) of the U.P. Trade Tax Act, 1948 for delayed tax deposits. The primary question was whether the Tribunal was justified in confirming the penalties. The petitioner argued that any delays were due to the time taken by the bank to collect the deposited cheques, which should not be considered actual delays. The petitioner cited legal precedents to support their position, emphasizing that penalties should not be levied for minor delays, especially when payments were made on time but collected late by the bank.

The court examined Rule 48 of the U.P. Trade Tax Rules, which allows for payment by cheque along with a challan. Citing legal precedents, including a Supreme Court judgment, the court established that the date of payment through a cheque is the date of presentation, provided the cheque is subsequently encashed. The court highlighted that the law considers the date of cheque delivery as the date of payment, even if the encashment occurs later. The court also referenced cases where delays of a few days were not deemed significant enough to warrant penalties.

The judgment emphasized that penalties under section 15A(1)(a) are discretionary and should be imposed judiciously. The court reiterated that penalties for minor delays should not be mechanically imposed and that authorities must exercise discretion reasonably. Considering the facts and legal principles, the court concluded that the penalties imposed for the specific months in question were unwarranted. Consequently, the court allowed all seven revisions, setting aside the penalty orders and the Tribunal's decision. The judgment favored the assessee, holding that penalties for the specified months should not have been levied, and awarded costs in favor of the petitioner.