2009 (7) TMI 1191 - HC - VAT and Sales Tax

Penalty for noncompliance with the requirements of sub-sections (2), (3), (3A), (3B) of section 28A of the Karnataka Sales Tax Act, 1957 Held that - In the present case, there is no dispute that the document in question has been produced the next day and it has also been accepted by the check-post officer himself. If so, a levy will be justified only if the assessing officer was of the view that the dealer had failed to come up with sufficient cause for non-furnishing when it was demanded. We do not find any recording of such nature by the assessing officer. On the other hand, there is absolutely no awareness bestowed by the assessing officer to the explanation offered by the dealer for non-production when it was demanded to be produced by the check-post officer. Whether it was justified or not is not an aspect which we are required to go into in this appeal as the question is only about the legality of the levy of penalty and in the absence of a finding that the dealer had not come up with sufficient cause for non-furnishing of the documents at the time of the check, the penalty is not sustainable. Appeal allowed.

Summary

Issues:
Appeal against the levy of penalty under the Karnataka Sales Tax Act, 1957.

Analysis:
The appeal involved a dispute regarding the levy of penalty under section 28A(4)(a) of the Karnataka Sales Tax Act, 1957. The case originated when a goods vehicle carrying taxable goods was intercepted and checked by a mobile check-post. The assessing authority levied a penalty of Rs. 83,324 for the dealer's failure to produce supporting books of accounts and Form No. 3, despite the dealer providing the required invoice. The first appellate authority set aside the penalty, noting that the initial proposition notice did not request the production of books of accounts or Form No. 3. However, the revisional authority reversed this decision, contending that revenue had escaped assessment. The dealer appealed to the High Court, challenging the justification for the penalty.

The High Court analyzed the provisions of section 28A(4) of the Act, which allows penalties for noncompliance with specified requirements. The Court emphasized that a penalty can only be justified if the dealer failed to provide a sufficient cause for non-production of documents when demanded. In this case, the document in question was produced the next day and accepted by the check-post officer. The Court observed that the assessing officer did not provide any reasoning or acknowledgment of the dealer's explanation for the delay in producing the documents. As a result, without a finding that the dealer lacked a sufficient cause for non-furnishing the documents at the time of the check, the penalty was deemed unsustainable.

Consequently, the High Court held that the appellate authority was correct in setting aside the penalty, while the revisional authority erred in reinstating it. The Court allowed the appeal, thereby overturning the orders of the revisional and assessing authorities that imposed the penalty.