1997 (8) TMI 252 - SC - VAT and Sales Tax

Penalty amount not mandatory but only the maximum - Offence - Penalty - Mandatory penalty - Entry tax

Summary

Issues:
Validity of Section 7(5) of The Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (Entry Tax Act)

Detailed Analysis:

Issue: Validity of Section 7(5) of the Entry Tax Act

The judgment addresses the challenge to the validity of Section 7(5) of the Entry Tax Act before the Supreme Court. The provision in question imposes a penalty equal to ten times the entry tax payable on goods if a registered dealer fails to make a statement indicating that no entry tax has been paid on local goods sold to other dealers. The High Court had held the provision ultra vires, primarily due to the non-rebuttable nature of the presumption and the fixed penalty amount.

The appellant argued that the provision should be construed as containing a rebuttable presumption. The Supreme Court agreed, emphasizing that the burden of proof lies on the registered dealer to show that the non-submission of the statement was not to facilitate tax evasion. The Court cited a similar provision in the U.P. Sales Tax Act, noting that such presumptions are rebuttable and common in judicial processes.

Moreover, the Court clarified that the penalty of ten times the entry tax is not fixed but rather a maximum limit. The authorities have discretion to impose a lesser penalty based on individual case circumstances. This approach prevents the provision from being considered confiscatory. The Court held that the High Court's conclusion that Section 7(5) was ultra vires was based on a misconstruction of the provision.

Therefore, the Supreme Court allowed the appeals, setting aside the High Court's judgment. The assessing authority was directed to determine the penalty amount afresh, ensuring a fair opportunity for the respondents to be heard. The Court emphasized that Section 7(5) should be construed to allow for a rebuttable presumption and discretionary imposition of penalties, rendering the High Court's decision unsustainable.

This detailed analysis provides a comprehensive overview of the judgment, focusing on the key issue of the validity of Section 7(5) of the Entry Tax Act as interpreted by the Supreme Court.