2024 (11) TMI 711 - HC - VAT / Sales Tax

Challenge to order of the Sales Tax Appellate Tribunal (STAT/Tribunal) - rate of tax - quantification of penalty under Section 23 of TNGST Act - HELD THAT - On the quantification itself, it is seen that it is an admitted position that the Circular is clarificatory and retrospective in nature. Thus, though it is dated 05.01.200,1 it would apply to all pending assessments, including the present assessment relating to the period 1998-99. The reason for issuance of the Circular appears to an incorrect thinking on the part of the assessing officers that the penalty under Section 23 of the Act must mandatorily of 150% only. What the Commissioner has sought to clarify that the provision allows for discretion to be exercised by the assessing officer under Section 23 to levy penalty of a sum 'not exceeding one and a half times the tax payable' . Hence, the authorities may impose penalty at any rate upto amount from one to 150%. Despite the officer used to as a matter of rote and mechanically levy penalty only 150%. The admitted position is that the levy of penalty is attracted qua the present proceedings. However, the officer has erred in not examining as to the quantification of the same and has proceed to automaticaly impose penalty at the rate of 150%. Hence, the matter stands remanded to the file of the assessing authority to determine only the quantification of penalty. Petition allowed in part.

Summary

Issues:
1. Challenge to Sales Tax Appellate Tribunal order regarding penalty under Section 23.
2. Disputes over the rate of tax and quantification of penalty.

Analysis:
The appellant contested a Sales Tax Appellate Tribunal order primarily focusing on the levy of penalty under Section 23. The tax component in question had been paid in full, leaving only the penalty issue unresolved. Two main disputes arose: one concerning the tax rate and the other regarding the calculation of the penalty. The court previously addressed the tax rate issue, noting that the rate applied was incorrect due to legislative changes, indicating that the correct rate should have been 13% instead of 16%. Additionally, a Circular dated 05.01.2001 was referenced, suggesting a different approach to penalty calculation under Section 23, emphasizing a discretionary aspect in penalty imposition.

Regarding the tax rate adjustment, the Government Advocate acknowledged the error in applying a 16% tax rate instead of 13%, leading to a consensus on this aspect. Moving to the penalty quantification matter, the court examined Circular No. 5 dated 05.01.2001, which clarified the discretionary nature of penalty imposition under Section 23. Despite objections raised by the Government Advocate, the court upheld the relevance of the Circular, emphasizing its retrospective and clarificatory nature, applicable to pending assessments like the present one from 1998-99.

The court highlighted the assessing officer's mechanical imposition of a 150% penalty without considering the discretionary range allowed under Section 23. Consequently, the court remanded the matter to the assessing authority to reevaluate and determine the appropriate quantification of the penalty. The court directed the assessee to appear before the Assistant Commissioner for further proceedings and ordered a decision within four weeks. Ultimately, the writ petition was partly allowed without costs, concluding the legal proceedings.