2016 (6) TMI 985 - HC - VAT and Sales Tax

Levy of penalty - bonafide belief - matter was related to interpretation of notification - levy of local entry tax on transformer oil - Held that - Hence, the appeals are partly allowed. The order of the Revisional Authority as well as Assessing Officer so far as it relates to payment of tax, interest is concerned, the same is maintained and not interfered with. However, the order of the Additional Commissioner and the Assessing Officer for the imposition of the penalty is set aside. The Assessing Officer is directed to issue fresh demand excluding penalty portion. - Decided partly in favor of assessee.

Summary

Issues Involved:
Appeals against order of Additional Commissioner under KTEG Act setting aside First Appellate Authority's decision and restoring tax demand with penalty. Interpretation of Notification leading to confusion on taxable liability and penalty imposition. Discretion in penalty imposition and need for judicial review. Comparison with earlier Division Bench decision on similar facts.

Analysis:

The judgment involves appeals challenging the order of the Additional Commissioner under the KTEG Act, where the First Appellate Authority's decision was set aside, and the tax demand with penalty imposed by the Assessing Officer was reinstated. The court considered the arguments presented by both parties regarding the interpretation of the Notification and the clarity of taxable liability and penalty imposition. The appellant relied on a previous decision of a Coordinate Bench, which set aside the penalty due to confusion in the provision. The Government Advocate argued for a different view, emphasizing the clarity of the Notification on taxable liability.

The court found the attempt to differ from the earlier Division Bench's decision as misconceived, given the similarity in facts. It noted that the confusion regarding taxable liability justified setting aside the penalty, as seen in the previous case. The court highlighted the distinction between tax demand, interest, and penalty, emphasizing the need for judicial discretion in penalty imposition. Considering the facts and circumstances, the court agreed with the earlier Division Bench's view on penalty imposition, leading to the maintenance of tax demand and interest while setting aside the penalty.

Referring to the observations of the earlier Division Bench, the court reiterated the taxable nature of transformer oil and upheld the liability for tax and interest. However, it emphasized that uncertainty in tax liability did not warrant penalty imposition. Consequently, the court partially allowed the appeals, maintaining tax demand and interest while setting aside the penalty, directing the Assessing Officer to issue a fresh demand excluding the penalty portion. The court concluded that the same results should apply in the present case due to identical facts and circumstances.

In conclusion, the appeals were partly allowed, upholding the orders related to tax and interest while setting aside the penalty imposition. The Assessing Officer was directed to issue a fresh demand without the penalty portion. No costs were awarded in the judgment.