2013 (4) TMI 170 - HC - VAT and Sales Tax

Penalty imposing 6 per cent ad valorem on the imported Dharamkanta not shown as a part of plant and machinery in the registration of the assessee - Held that - Tribunal has concluded that 16 years after importation was made, such penalty proceeding ought not to have been initiated. Penalty can only be imposed, when there is a finding to the effect that the importation itself was invalid and the same could only be done by opening the original assessment and converting the liability to pay 4 per cent ad valorem tax to 10 per cent ad valorem tax. That having not been done, the penalty proceeding, in the instant case, could not be initiated.

Summary

Issues:
1. Inclusion of Dharamkanta in the registration of the assessee.
2. Penalty proceeding initiated against the assessee for importation of Dharamkanta under Form 'C'.
3. Imposition of penalty on the imported Dharamkanta.
4. Validity of penalty proceeding after 16 years of importation.

Analysis:
1. The respondent, a registered dealer under the U.P. Trade Tax Act and the Central Sales Tax Act, applied for the inclusion of Dharamkanta in its registration, which was initially rejected by the Assessing Officer. The subsequent appeal to include Dharamkanta was also dismissed. The Tribunal later concluded that the penalty proceeding initiated against the assessee, due to the absence of Dharamkanta in the registration, should not have been initiated after 16 years of importation. However, the Court emphasized that for the penalty to be imposed, there must be a finding that the importation itself was invalid, requiring the original assessment to be reopened and the tax liability adjusted from 4% to 10% ad valorem tax. As this step was not taken, the penalty proceeding was deemed invalid, leading to the dismissal of the revision.

2. The penalty proceeding was based on the belief that the importation of Dharamkanta under Form 'C' was not valid due to its absence in the registration of the assessee. The Assessing Authority did not reopen the assessment to impose tax at 10% ad valorem but initiated the penalty proceeding instead. The Tribunal concurred that after 16 years, the penalty proceeding should not have been initiated without establishing the invalidity of the importation. The Court held that without converting the tax liability from 4% to 10% ad valorem through a revised assessment, the penalty proceeding lacked a valid basis, resulting in the dismissal of the revision.

3. The penalty on the imported Dharamkanta was calculated at 6% ad valorem by the Assessing Authority. The Tribunal, while agreeing that the penalty proceeding should not have been initiated after 16 years, emphasized the necessity of first establishing the invalidity of the importation through a revised assessment. As this crucial step was skipped, the penalty imposition was deemed unjustified. The Court upheld the Tribunal's decision, emphasizing the importance of a valid assessment before imposing penalties, ultimately leading to the dismissal of the revision.

4. The Court's decision to refuse interference in the matter was based on the absence of a valid finding regarding the invalidity of the importation of Dharamkanta and the subsequent failure to convert the tax liability from 4% to 10% ad valorem through a revised assessment. Despite agreeing with the Tribunal that the penalty proceeding initiated after 16 years was unwarranted, the Court highlighted the procedural requirement of establishing the importation's invalidity before imposing penalties. Consequently, the revision was dismissed, affirming the Tribunal's decision and emphasizing the need for proper assessment procedures in penalty proceedings.