2022 (2) TMI 1327 - HC - VAT and Sales Tax

Levy of penalty U/s 8 D(6) of the UP Trade Tax Act - payments were made but T.D.S. could not be deducted as required under Section 8 D (1) of the Act - it is submitted that T.D.S. amount along with interest was deposited prior to initiation of penalty proceeding under Section 8 D (6) of the Act and there was no loss of revenue - Whether the Tribunal justified in not considering the specific remand direction of this Hon ble Court? HELD THAT - Admittedly it is not in dispute that the payment of T.D.S. amount along with interest of upto date has been deposited and this fact has also been noticed in the order passed by this Court in the earlier round of litigation i.e. in T.T.R. No. 358 of 2010 vide order dated 12.2.2015 by which the matter was remanded to the Tribunal for reconsideration. The Tribunal has upheld the levy of penalty under Section 8 D(6) holding that once there was failure to comply with the order the levy of penalty is justified. Hon ble the Supreme Court in the case of HINDUSTAN STEEL LIMITED VERSUS STATE OF ORISSA 1969 (8) TMI 31 - SUPREME COURT clearly shows that the penalty could not be levied merely on the basis of failure to carry out statutory obligation. This Court has specifically held that once the amount of T.D.S. along with interest has been deposited there is no loss to the revenue - In the present case the revisionist has deposited the amount along with interest even before initiation of penalty proceedings under Section 8 D (6) of the Act. Once the T.D.S. amount along with interest has been deposited before initiation of penalty proceeding under Section 8 D (6) of the Act the penalty proceeding could not be justified as there was no loss of revenue. The revision is allowed with cost of Rs. 5000/- which shall be deposited within a month. The revenue is at liberty to recover the said amount from the erring officer.

Summary

Issues:
1. Levy of penalty under Section 8 D(6) of UP Trade Tax Act.
2. Tribunal's consideration of specific remand direction and relevant legal precedents.

Issue 1: Levy of Penalty under Section 8 D(6) of UP Trade Tax Act:
The revisionist challenged the penalty imposed under Section 8 D(6) of the UP Trade Tax Act, contending that the T.D.S. amount along with interest was deposited before the initiation of penalty proceedings, and there was no loss of revenue. The Tribunal upheld the penalty, citing failure to comply with the order as justification. However, the Court observed that the mere failure to carry out a statutory obligation does not automatically warrant a penalty. Referring to the Supreme Court's decision in Hindustan Steel Ltd. v. State of Orrisa, it was emphasized that penalties should be imposed judiciously, considering the circumstances and intent of the party involved. The Court highlighted that penalties are not to be imposed solely because they are permissible by law. The Tribunal's decision to levy the penalty was deemed unjustified in light of the facts that the T.D.S. amount was deposited timely and there was no loss to the revenue.

Issue 2: Tribunal's Consideration of Specific Remand Direction and Legal Precedents:
The revisionist argued that the Tribunal disregarded the specific remand direction provided by the Court in a previous case and failed to consider relevant legal precedents, such as Commissioner of Commercial Tax v. M/s Hindustan Petroleum Corp. Ltd. and B.S.N. through Executive Engineer v. Commissioner of Trade Tax. These cases emphasized that when T.D.S. amounts are deposited along with interest and there is no loss to the revenue, the imposition of penalties is not justified. The Court reiterated that in the present case, the revisionist had deposited the T.D.S. amount with interest before the penalty proceedings commenced, indicating no revenue loss. Consequently, the Court allowed the revision, directing the payment of costs and granting the revenue the authority to recover the amount from the responsible officer. The questions of law were answered in favor of the revisionist, emphasizing the importance of considering legal principles and specific directions in such matters.

---