2016 (4) TMI 1335 - HC - VAT and Sales Tax

Imposition of penalty u/s 54(1)(1) of the U.P. VAT Act - tax was deposited on 26.3.2009 i.e. with a delay of about six days - Held that - It is admitted on record that the tax was to be deposited on or before 20.3.2009. The revisionist got the draft of the entire amount of the tax prepared on 13.3.2009 at Mumbai which was to be deposited at Agra and probably on account of some postal delay it reached to the authorities with a delay of six days. There is no dispute that the draft was got prepared on 13.3.2009 i.e. well within time and, as such, there was no reason for the revisionist to have delayed the deposit except for the bonafide delay which may have occurred in transiting the same from Mumbai to Agra. The imposition of penalty on the revisionist is wholly illegal and arbitrary - revision allowed.

Summary

Issues:
Delay in payment of tax leading to imposition of penalty under Section 54(1)(1) of the U.P. VAT Act for the assessment year 2008-09.

Analysis:
The revisionist was required to pay a tax of &8377; 82,52,936/- on or before 20.3.2009 but deposited it on 26.3.2009, resulting in a delay of about six days. Despite depositing interest for the delayed period, a penalty of &8377; 16,50,000/- was imposed under Section 54(1)(1) of the U.P. VAT Act, which amounts to 20% of the tax determined. The revisionist's appeals were dismissed, leading to the current revision.

The argument presented was that there was no deliberate delay in depositing the tax, and hence, the penalty imposed was deemed illegal and excessive. It was acknowledged that the tax was to be deposited by 20.3.2009, and the draft for the entire amount was prepared on 13.3.2009 in Mumbai to be deposited in Agra. Due to a possible postal delay, the authorities received the draft six days late. The court noted that the draft was prepared well within time, and any delay was likely due to transit issues from Mumbai to Agra.

In a similar case regarding penalty imposition under Section 34(8) of the Act, the court had ruled in Sales/Trade Tax 335 of 2015 that if the assessee had deposited the entire amount with interest, and the department did not suffer any loss, the penalty deletion was justified. Similarly, in the current case, the revisionist had paid the full tax amount with interest, and there was no evidence of the department incurring any losses. Consequently, the court found the penalty imposition on the revisionist to be illegal and arbitrary.

As a result of the above facts and circumstances, the court set aside the penalty imposed in the impugned order dated 27.11.2015 and directed the refund of any penalty amount deposited by the revisionist. The revision was allowed, and the penalty was overturned in favor of the revisionist.