2000 (8) TMI 1129 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality and sustainability of the penalty of five times the tax due for suppressed turnover.
2. Exercise of discretion under Section 14(8) of the A.P. General Sales Tax Act.
3. Bona fide belief of the petitioner regarding tax liability on matches.
4. Wilfulness of the omission to disclose turnover.
5. Quantum of penalty imposed.

Issue-wise Detailed Analysis:

1. Legality and Sustainability of the Penalty:
The tax revision case was filed by the assessee-dealer against the order of the Sales Tax Appellate Tribunal, which confirmed a penalty of five times the tax for the assessment year 1979-80. The penalty was levied due to suppressed turnover relating to matches, discovered during an inspection by the Commercial Tax Officer. The petitioner contended that the penalty was imposed mechanically without considering the specific circumstances of the case.

2. Exercise of Discretion under Section 14(8) of the Act:
The petitioner argued that Section 14(8) of the Act confers discretion on authorities to levy a penalty not exceeding five times the tax due. The authorities, however, imposed the maximum penalty without considering whether a lesser penalty would be appropriate. The court noted that the authorities did not exercise their discretion judiciously, as required by the Act.

3. Bona Fide Belief of the Petitioner:
The petitioner's counsel claimed that the omission to disclose the turnover was due to a bona fide belief that the sales of matches were not liable to tax at multi-point. The court acknowledged this claim but emphasized that the authorities had found the omission to be wilful, which negates the bona fide belief argument.

4. Wilfulness of the Omission:
The authorities, including the Appellate Deputy Commissioner and the Sales Tax Appellate Tribunal, found that the omission to disclose the turnover was wilful. This finding was based on the fact that the turnover came to light only after an inspection by the Commercial Tax Officer. The court agreed with this finding and stated that it would not interfere with the factual determination made by the lower authorities.

5. Quantum of Penalty Imposed:
The court examined whether the penalty of five times the tax due was appropriate. It referred to precedents, including the Supreme Court's observations in Hindustan Steel Ltd. v. State of Orissa and Kemka and Company v. State of Maharashtra, which emphasize that penalty should not be imposed automatically but should be based on a judicial exercise of discretion. The court found that the authorities did not exercise their discretion properly and reduced the penalty from five times to three times the tax due, considering the overall circumstances and the petitioner's claim of a bona fide belief.

Conclusion:
The court modified the order under revision, reducing the penalty from five times the tax due to three times the tax due, and allowed the revision in part. No costs were imposed.