2018 (5) TMI 1333 - HC - VAT and Sales Tax

Input tax credit - penalty u/s 12(7) of GVAT Act - the assessee had deliberately claimed excess tax credit, which exhibited the malafide intentions on the part of the assessee - assessee was of the opinion that it was discretionary upon the assessing authority whether to levy penalty or not and if he desired to levy penalty, then at a rate not exceeding 200% of the wrongly claimed tax credit - Held that - merely because a breach is established, it would not be compulsory for the Commissioner to impose the penalty. After giving an opportunity to the dealer of being heard, if the Commissioner is satisfied that it is not a fit case for imposition of penalty, then he may express such an opinion in his order by citing reasons. The discretion of the Commissioner in the matter of imposing penalty would extend even on the choice of the penalty to be imposed, of course, up to a maximum of twice the value of the wrongly claimed tax credit. The Statute has neither made it compulsory for the Commissioner to impose penalty once the breach is established nor has made the quantum of penalty mandatory. As is well-known, various fiscal penal statutes, either prescribe a range of penalty from which the competent authority may chose or may provide a minimum penalty below which the competent authority cannot travel. Petition dismissed.

Summary

Issues:
Challenge to judgment of Gujarat Value Added Tax Tribunal regarding imposition of penalty under Section 12(7) of the Gujarat Value Added Tax Act.

Analysis:
The case involved a challenge by the State Government against a judgment of the Gujarat Value Added Tax Tribunal regarding the imposition of a penalty under Section 12(7) of the Gujarat Value Added Tax Act. The respondent, a registered dealer, had claimed tax credit under a transitional provision of the Act. The Commissioner revised the penalty imposed, increasing it to 200% of the excess tax credit claimed, citing deliberate excess claims by the assessee. The Tribunal reversed this revisional order, leading to the State Government's petition.

The key contention revolved around the interpretation of Section 12(7) of the Act. The State Government argued that once the necessary facts for imposing a penalty were established, the assessing authority had no discretion to reduce the penalty below 200% of the wrongly claimed tax credit. On the other hand, the respondent contended that the assessing authority retained discretion on whether to impose a penalty and, if so, the percentage of penalty, up to a maximum of 200% of the excess tax credit. The court analyzed the language of the provision, emphasizing the discretionary powers vested in the Commissioner regarding the imposition and level of penalties.

The court highlighted that the statute did not mandate the imposition of a penalty once a breach was established, nor did it specify a minimum penalty. Drawing parallels with a similar provision under the Maharashtra Value Added Tax Act, the court emphasized the discretionary nature of penalty imposition. Citing judgments from the Bombay High Court, the court reinforced the interpretation that the Commissioner's discretion extended to determining the penalty amount, within the statutory limit of twice the wrongly claimed tax credit.

Ultimately, the court dismissed the petition, upholding the Tribunal's decision and discharging the rule. The judgment underscored the Commissioner's discretionary powers in imposing penalties under Section 12(7) of the Act, clarifying that the discretion extended to both the decision to impose a penalty and the determination of the penalty amount, subject to the statutory maximum.