2020 (1) TMI 1688 - HC - VAT and Sales Tax

Penalty u/s 40(2) of the JVAT Act on petitioner company - alleged concealment of purchases made by the company - HELD THAT - The stand of the petitioner company has been ratified by the concerned authorities and it has been found that the petitioner company is engaged in the business of power transmission only, and whatever goods were purchased by the petitioner, were the capital goods for installation and transmission of the electricity in the State of Jharkhand. These goods were never sold by the petitioner company, and the Assessing Authority has found the tax liability of the petitioner, to be 'Nil'. As such, the very basis on which the penalty was imposed upon the petitioner company, does not exist anymore. The original order dated 29.1.2016, imposing penalty, shows that under Section 40(2) of the JVAT Act, the penalty equal to three times the amount of tax payable was imposed. In view of the fact that the tax liability has now been found to be 'Nil', we find that no penalty could be imposed upon the petitioner company for the simple reason that 'Nil' multiplied by three, shall also be 'Nil' only. Reliance placed in the decision of the Hon ble Apex Court in Mukerian Papers Ltd.'s case 1991 (2) TMI 348 - SUPREME COURT , laying down the law that once there was no tax liability, there could be no question of penalty or interest on the unpaid amount of tax. The impugned order imposing penalty upon the petitioner company, the order passed by the Appellate Authority as well as the Judgment passed by the Tribunal, in Revision Petition are hereby set aside - Application allowed.

Summary

Issues involved: The judgment deals with the imposition of penalty on a company under Section 40(2) of the JVAT Act for alleged concealment of purchases made by the company.

Summary:

Issue 1: Imposition of Penalty
The petitioner company was penalized for concealing purchases made for installation and transmission of electricity, which were mistakenly categorized as meant for sale. The penalty was imposed under Section 40(2) of the JVAT Act, based on the Assessing Authority's assessment of taxable purchases. Despite the company rectifying the mistake in filing returns and asserting no tax liability, the penalty was upheld by the Appellate Authority and the Tribunal.

Issue 2: Legal Arguments
The petitioner argued that the tax liability was calculated notionaly for penalty assessment purposes and relied on a Supreme Court decision stating no penalty should be imposed if there was no tax liability. The State sought time to verify the assessment order, which was eventually produced, leading to further scrutiny and intervention by the Advocate General.

Issue 3: Reassessment and Outcome
Following the court's intervention, a reassessment was conducted by the Assessing Authority, correcting the petitioner's registration under 'Power Transmission' and determining a tax liability of 'Nil'. The penalty was reduced to Rs. 640 due to a delay in filing returns. The court acknowledged the fresh developments and set aside the penalty order, Appellate Authority's decision, and Tribunal's judgment, as the basis for the penalty no longer existed.

Conclusion
The court ruled that with the tax liability now assessed as 'Nil', no penalty could be imposed on the petitioner company. Citing the Mukerian Papers Ltd. case, the court set aside the penalty order and directed the refund of the statutory amount deposited by the petitioner. The writ application was allowed, and the judgment favored the petitioner company.