2016 (11) TMI 1264 - HC - VAT and Sales Tax

Jurisdiction of Single Judge Bench to reduce quantum of penalty - tax evasion - whether respondent was able to establish that his conduct was not fraudulent and that his omissions are not so grave so as to attract the maximum penalty then it would be permissible - Held that - The fact that the learned single Judge has only reduced the penalty and did not exonerate the respondent from it completely makes us to conclude that the learned single Judge found the respondent to have acted in culpability and that his action in attempting to prove a contract with Mr.Kumar by creating a document in a stamp paper subsequent to the interception has not been fully proved. It is therefore that the levy of penalty was upheld since in normal circumstances if there was no culpability on the part of the respondent no penalty ought to have been imposed. We have also examined all the documents on record and the statements given by the respondent and Mr.Kumar before the assessing authority. We see that the case of the respondent that he brought the vehicle to Kerala for executing a work under a contract/agreement with Mr.Kumar appears to be probable. However his conduct in creating a document in support of his contention on a stamp paper that was purchased subsequent to the interception would not give the benefit of exculpation. In such view of the matter it is therefore necessary that he be mulcted with penalty since he was only enjoying the benefit of doubt based on attendant circumstances. We see that it is in such circumstances the learned single Judge has also upheld the order of penalty but reduced it to 1, 00, 000/- based on the reasons and rationale recorded in the judgment which we are of the view are totally justifiable and with sufficient reason and cause. Appeal dismissed - decided against the revenue.

Summary

Issues Involved:
1. Jurisdiction of the learned single Judge in reducing the penalty.
2. Legal grounds for imposing maximum penalty under the Statute.
3. Evaluation of the respondent's conduct and its impact on penalty.
4. Procedural aspects and alternative remedies available under the Statute.

Issue-Wise Detailed Analysis:

1. Jurisdiction of the Learned Single Judge in Reducing the Penalty:
The appellants contended that the learned single Judge exceeded jurisdiction by reducing the penalty from ?7,08,470/- to ?1,00,000/-. The Court analyzed whether the single Judge had the authority to modify the penalty and concluded that the power to impose penalty is quasi-judicial and must be exercised with circumspection. The quantum of penalty should depend upon the gravity of the offense, and the learned single Judge had assessed all relevant factors, finding sufficient mitigating circumstances favoring the assessee.

2. Legal Grounds for Imposing Maximum Penalty Under the Statute:
The Court referred to previous judgments, specifically Sudhi v. Intelligence Officer and Gentle Joseph & Co. v. State of Kerala, to establish that penalty can only be levied if there is fraudulent or blameworthy conduct by the assessee. Section 47(6) of the Act authorizes the Officer to impose a penalty not exceeding twice the amount of tax attempted to be evaded. However, it does not mandate imposing the maximum penalty always. The discretion must be exercised fairly, based on the facts and circumstances of each case.

3. Evaluation of the Respondent's Conduct and Its Impact on Penalty:
The facts revealed that the respondent's vehicle was intercepted without requisite documents, leading to a penalty imposition. The respondent claimed the vehicle was brought for excavation work under an agreement with Mr. Kumar. Despite the agreement being dated before the interception, the stamp paper was purchased afterward, raising suspicion. The learned single Judge found the respondent's conduct in creating documents post-interception suspicious but considered other mitigating factors, such as the vehicle being new and the existing quarrying permit. The Judge concluded that reducing the penalty was justified given these circumstances.

4. Procedural Aspects and Alternative Remedies Available Under the Statute:
The State argued that the respondent should have sought alternative remedies under the Statute instead of filing a writ petition. However, the Court upheld the single Judge's decision to hear the petition, noting it had been pending for over two years and that relegating the petitioner to alternative remedies at this stage would be inappropriate. The Court found no infirmity in this procedural decision.

Conclusion:
The Court concluded that the learned single Judge acted within jurisdiction and appropriately exercised discretion in reducing the penalty. The judgment took into account all relevant factors, including mitigating circumstances and the respondent's conduct. The appeal was dismissed, and no costs were imposed on either party.