2013 (11) TMI 260 - HC - VAT and Sales Tax

Penalty u/s 15A(1)(a) of the Trade Tax Act - Held that - It has to be kept in mind that payment of interest on the delayed amount of tax flows from statutory provision i.e. Section 8(1) of the Trade Tax Act while penalty proceedings are taken for delayed payment of tax under Section 15A (1) (a) of the Trade Tax Act. Both interest and penalty are two different concepts. Interest flows from the retention of the money, which was legally payable, while penalty is inflicted for violation of statutory provisions and the time scheduled prescribed - it is no concern of the department as to whether the purchaser had made payment of price of the goods purchased to the revisionist-assessee dealer or not and it is also immaterial as to whether the purchaser is a Government Company or a private buyer - amount of penalty is reduced to 15% subject to the conditions that the assessee deposits the reduced penalty in terms of the order of this Court within one month - Decided partly in favour of assessee.

Summary

Issues:
Penalty under Section 15A (1) (a) of the Trade Tax Act for default in tax payment within the permissible time period.

Analysis:
The judgment by the Allahabad High Court dealt with six trade tax revisions filed by an assessee regarding the imposition of penalty for default in depositing the admitted amount of tax within the specified time frame. The first appellate authority had initially set aside the penalty, deeming the explanation provided by the assessee for the delay in tax payment as bona fide and satisfactory. However, the department filed second appeals against this decision, which were later decided by the Tribunal in a common judgment. The Tribunal found the explanation furnished by the assessee regarding the non-recovery of tax from a Government Company, namely Railways, as unreasonable for the delay in tax deposit. The Tribunal emphasized that the liability to pay tax is admitted by the assessee, irrespective of recovering the tax from the purchaser. The Court upheld the Tribunal's decision, distinguishing between interest on delayed tax payment and penalty under statutory provisions.

The Court clarified that interest and penalty are distinct concepts, with interest arising from the retention of legally payable money, while penalty is imposed for violating statutory provisions and prescribed timelines. The Court emphasized that it is irrelevant whether the purchaser, even if a Government Company, paid the price of goods along with tax to the assessee. The judgment cited previous cases but noted that they did not establish any new legal principles. Consequently, the Court modified the penalty rate from 20% to 15%, subject to the condition that the reduced penalty is deposited within a month. Failure to comply would result in the assessee losing the benefit of the order. The Court's decision modified the Tribunal's order only in terms of penalty reduction.

In conclusion, the High Court's judgment upheld the imposition of penalty under Section 15A (1) (a) of the Trade Tax Act on the assessee for default in tax payment within the permissible time frame. The Court clarified the distinction between interest and penalty, emphasizing the assessee's liability to pay tax regardless of recovering it from the purchaser. The penalty rate was reduced to 15% with specific conditions for compliance within a stipulated timeframe.