2017 (4) TMI 878 - HC - VAT and Sales Tax

Penalty u/s 34 (8) of the UPVAT Act - late deposit of TDS - Revenue contends that liability to pay penalty consequent upon delayed deposit of tax deducted at source is a necessary corollary of delayed deposit of tax deducted at source and considerations like intent or malafide etc. are not material - Held that - reliance was placed in the case of Price Waterhouse Coopers Pvt. Ltd. Vs. commissioner of Income Tax and another 2012 (9) TMI 775 - SUPREME COURT for coming to the conclusion that where interest over delayed deposit of tax deducted at source is paid the levy of penalty may not be imposed. The requirement of deposit of interest is an independent provision which has no relevance so far as imposition of penalty is concerned. Under the statutory scheme once it is found that tax deducted at source was not deposited within time as was warranted under sub-section 6 payment of interest follows as a consequence and has to be paid. Imposition of penalty is a distinct provision imposing liability of penalty to the extent permitted in law. Tribunal was not justified in deleting the penalty levied under Section 34 (8) - matter is remitted back for a fresh consideration on the quantum of penalty to be imposed - appeal allowed by way of remand.

Issues Involved:
1. Legality of penalty imposition for late deposit of tax deducted at source under Section 34(8) of the U.P. Value Added Tax Act.
2. Consideration of interest payment on delayed tax deposit as a mitigating factor for penalty imposition.
3. Interpretation of statutory provisions related to penalty and interest under the U.P. Value Added Tax Act.
4. Reliance on previous judgments and their applicability to the present case.

Detailed Analysis:

1. Legality of Penalty Imposition for Late Deposit of Tax Deducted at Source
The primary issue revolves around the legality of imposing a penalty on the assessee for the late deposit of tax deducted at source under Section 34(8) of the U.P. Value Added Tax Act. The Tribunal had set aside the penalty imposed by the First Appellate Authority, noting that the revenue was not adversely affected as the interest on the delayed amount had been deposited. However, the High Court found that the Tribunal erred in its judgment. The Court emphasized that the statutory scheme mandates the imposition of a penalty once it is established that the tax deducted at source was not deposited within the stipulated time.

2. Consideration of Interest Payment on Delayed Tax Deposit
The Tribunal had considered the payment of interest on the delayed tax deposit as a mitigating factor for not imposing a penalty. It relied on the fact that the revenue did not suffer any loss and even gained interest from the delayed payment. However, the High Court clarified that the requirement to pay interest under sub-section (9) of Section 34 is an independent provision and does not influence the imposition of penalty under sub-section (8). The Court stated that while determining the penalty, the authorities might consider the payment of interest, but it alone is insufficient to negate the penalty.

3. Interpretation of Statutory Provisions Related to Penalty and Interest
The High Court analyzed the statutory provisions of Section 34 of the U.P. Value Added Tax Act. It noted that sub-section (1) mandates tax deduction at source, sub-section (6) specifies the timeline for depositing the deducted tax, sub-section (8) provides for the imposition of a penalty for failure to deposit the deducted tax, and sub-section (9) imposes interest for delayed deposits. The Court highlighted that the imposition of a penalty under sub-section (8) is mandatory upon failure to deposit the tax within the prescribed time, irrespective of the intent or malafide of the assessee.

4. Reliance on Previous Judgments and Their Applicability
The Tribunal had relied on previous judgments, including the decision of the Lucknow Bench of the High Court in the case of "Commissioner of Commercial Tax versus Hindustan Petroleum Corporation Ltd." and the Supreme Court's judgment in "Price Waterhouse Coopers Pvt. Ltd. Vs. Commissioner of Income Tax." The High Court distinguished these cases, noting that the facts of the present case were different. In "Price Waterhouse Coopers," the Supreme Court dealt with the concealment of income under the Income Tax Act, where intent played a crucial role. However, in the present case, the issue was the late deposit of tax deducted at source, where the statutory provisions under the U.P. Value Added Tax Act did not consider intent but mandated penalty upon failure to deposit within the prescribed time.

Conclusion
The High Court concluded that the Tribunal was not justified in deleting the penalty imposed under Section 34(8) of the U.P. Value Added Tax Act. It remitted the matter back for fresh consideration on the quantum of penalty to be imposed, emphasizing that the payment of interest on the delayed deposit does not negate the statutory requirement of penalty imposition. The Court underscored the legislative intent behind the provisions, ensuring compliance with tax deposit timelines to maintain fiscal discipline.

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