2017 (12) TMI 635 - HC - VAT and Sales Tax

Penalty - whether in the facts and circumstances of the case, the revisional authority was justified in levying penalty under section 34(7) of the GVAT Act? - Held that - The revisional authority in the order passed under section 75 of the GVAT Act has imposed penalty under section 34(7) of the said Act. Sub-section (7) of section 34 of the GVAT Act provides for imposing penalty after affording the dealer an opportunity of being heard - Evidently, therefore, the statute contemplates issuance of notice indicating the default and the penalty proposed to be levied prior to passing any order under sub-section (7) of section 34 of the Act. In the facts of the present case, it is an admitted position that no notice in Form 309 as prescribed under sub-rule (1) of rule 46 of the rules has been issued to the respondent dealer. Consequently, it cannot be said that the respondent was afforded any opportunity of being heard as contemplated under sub-section (7) of section 34 of the GVAT Act. Levy of penalty was in breach of the provisions of sub-section (7) of section 34 of the GVAT Act - petition dismissed - decided against petitioner-Revenue.

Summary

Issues:
Challenge to order deleting penalty under section 34(7) of GVAT Act by State of Gujarat.

Analysis:
The petitioner-State of Gujarat challenged an order passed by the Gujarat Value Added Tax Tribunal deleting the penalty levied under section 34(7) of the GVAT Act. The respondent, engaged in trading edible oil, was assessed under section 34(2) of the GVAT Act. The revisional authority disallowed input tax credit on purchases from a canceled registration, levying penalty and interest. The Tribunal set aside the penalty, leading to the current petition.

The Assistant Government Pleader argued that the Tribunal erred in deleting the penalty considering the respondent's illegalities in purchases. The main issue was whether the revisional authority was justified in levying the penalty under section 34(7) of the GVAT Act. The Tribunal accepted the respondent's argument that no show cause notice was issued before the penalty, hence deleting it.

Section 34(7) of the GVAT Act allows penalty imposition for tax evasion. Rule 46 mandates notice issuance before penalty imposition, specifying grounds. In this case, no Form 309 notice was issued to the respondent, violating the requirement for an opportunity to be heard. The penalty imposition without proper notice was deemed unsustainable in law, justifying the Tribunal's decision to delete it.

The petition was summarily dismissed as the penalty imposition was found to be in breach of statutory provisions.