2019 (5) TMI 1560 - HC - VAT and Sales Tax

Restoration of penalty u/s 15-A(1)(c) of Sales Tax Act - restoration of penalty merely on the basis of difference in the turnover as per books and returns which was explained and accepted by the assessing officer in the assessment order - HELD THAT - The perusal of record reveals that the applicant has submitted its revise return duly showing the sale of mustard oil of ₹ 15,53,515/- and also deposited the tax along with interest. Bare perusal of Section 15(A)(1)(c) of the Act shows that if any revisionist has concealed the particulars of his turnover or has furnished inaccurate particulars of such turnover then only penalty can be imposed under the Act. The case in hand, the revisionist has not only filed the revise return, but, also has deposited the tax along with interest before passing of the original assessment order or any penalty proceedings has been initiated against the revisionist. Once the revisionist has submitted the revise return which has been accepted by the Assessing Authority then it cannot be said that the revisionist had violated the provision of Section 15- A(1)(c) of the Act - Moreover, the revisionist has produced its books of account in which the sale of mustard oil value of ₹ 15,53,513/- was duly shown, therefore, levy of penalty under the said provision is not justified and is set aside. The question of law is answered in favour of the revisionist and against the Revenue - revision allowed.

Issues:
1. Legality of restoring penalty order based on turnover differences
2. Justification of restoring penalty without reversing appellate authority's finding
3. Requirement of establishing mens rea for penalty imposition
4. Legality of penalty imposition against judicial pronouncement

Analysis:

Issue 1: Legality of restoring penalty order based on turnover differences
The case involved a limited company engaged in the sale of edible oil, registered under the U.P. Sales Tax Act. The assessing authority initiated penalty proceedings under Section 15-A(1)(c) due to a discrepancy in turnover related to the sale of mustard oil. The company argued that the tax responsibility lay with the Commission Selling Agent, and the turnover was later rectified with tax and interest deposited before the penalty order. The Deputy Commissioner Appeals quashed the penalty, noting the turnover was accounted for. However, the Trade Tax Tribunal restored the penalty. The High Court found that the company had rectified the turnover discrepancy before the penalty order, thus no concealment or furnishing of inaccurate particulars existed, leading to the penalty being set aside.

Issue 2: Justification of restoring penalty without reversing appellate authority's finding
The Trade Tax Tribunal's decision to restore the penalty despite the appellate authority's ruling in favor of the company raised questions. The High Court emphasized that the company had rectified the turnover discrepancy before the penalty order, as evidenced by the revised return and tax deposit. The Court held that once the revised return was accepted by the Assessing Authority, the penalty under Section 15-A(1)(c) could not be justified. Therefore, the Tribunal's decision to restore the penalty was deemed unjustified and set aside.

Issue 3: Requirement of establishing mens rea for penalty imposition
The company argued that there was no mens rea involved in concealing turnover particulars or furnishing inaccurate details, as the discrepancy was rectified promptly. The High Court analyzed Section 15-A(1)(c), which requires concealment or deliberate furnishing of inaccurate particulars for penalty imposition. Since the company rectified the turnover before penalty initiation and provided evidence of the correct turnover, the Court found no basis for establishing mens rea. Consequently, the penalty was deemed unjustified and set aside.

Issue 4: Legality of penalty imposition against judicial pronouncement
The High Court addressed the legality of imposing the penalty under Section 15-A(1)(c) against the backdrop of judicial pronouncements. By highlighting the company's corrective actions and compliance with tax regulations, the Court concluded that the penalty imposition was not in line with legal requirements. The Court ruled in favor of the company, setting aside the penalty and emphasizing the importance of rectifying discrepancies promptly to avoid penalty implications.

Overall, the High Court's judgment favored the company, emphasizing compliance, rectification of discrepancies, and the absence of mens rea in justifying the setting aside of the penalty imposed under Section 15-A(1)(c) of the U.P. Sales Tax Act.

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