2019 (9) TMI 1103 - HC - VAT and Sales Tax

Imposition of penalties u/s 15-A(1)(a) of the U.P. Trade Tax Act, 1948 - voluntary delayed deposit of entry tax - HELD THAT - Revisionist have stated that a huge amount was spent in paying the statutory liability to the Cane Growers and also that during the said period they had purchased new machinery which had incurred huge liability and therefore they deposited the amount of tax, but there was some delay and therefore they are fully covered with the provisions contained in Section 15-A (1)(a) of the Trade Tax Act - Therefore, I am of the considered view that a reasonable cause has been shown for not depositing the tax within the prescribed time. The order of the Commercial Tax Tribunal dated 25.05.2005 in this regard is therefore, set-aside. Revision allowed.

Summary

Issues:
- Challenge to order of Commercial Tax Tribunal regarding entry tax collection and deposit
- Interpretation of Section 15-A(1)(a) of the U.P. Trade Tax Act, 1948
- Justification for delay in tax deposit and imposition of penalty

Challenge to Commercial Tax Tribunal Order:
The case involved a Public Limited Company engaged in the sale and manufacture of white crystal sugar, collecting entry tax from purchasers. The company challenged the Commercial Tax Tribunal's order, which upheld the entry tax collection by the Revenue, despite delays in depositing the tax. The High Court noted the company's voluntary deposit of entry tax with interest due to financial constraints, indicating no intention to evade tax.

Interpretation of Section 15-A(1)(a):
The High Court analyzed Section 15-A(1)(a) of the U.P. Trade Tax Act, emphasizing the requirement for a finding that there was no reasonable cause for tax deposit delay to impose a penalty. The company cited financial crisis, liability to pay Cane Growers, and machinery procurement as reasons for delayed tax deposit. The Tribunal acknowledged financial crisis as a reason but failed to assess its reasonableness, leading to the imposition of a penalty without proper justification.

Justification for Delay and Penalty Imposition:
Considering the company's explanations for the delay, including statutory payments to Cane Growers and machinery procurement costs, the High Court found a reasonable cause for the delay in tax deposit. The Court set aside the Tribunal's order imposing a penalty of ?5 lakh under Section 15-A. Additionally, the Court directed the Revenue to refund the penalty amount of ?1 lakh deposited by the company as per the Court's order.

In conclusion, the High Court allowed the revision, emphasizing the company's valid justifications for the tax deposit delay, overturning the Tribunal's penalty imposition, and ordering the refund of the penalty amount deposited in compliance with the Court's directive.