2016 (12) TMI 370 - HC - VAT and Sales Tax

Imposition of penalty u/s 45(6) of GVAT Act - exemption u/s 49(2) of the Act - the department could not have levied the penalty after lapse of 9 years is concerned, at the outset, it is required to be noted that as such there is no time limit prescribed under the statute - Held that - by the delay in initiation of the proceedings and / or imposing the penalty belatedly the assessee is benefited to the extent that the appellant will make the payment of penalty subsequently which otherwise the assessee was required to pay at the time of passing of the assessment order. It is required to be noted that the authority imposed the penalty of 90%, which came to be reduced by the learned Tribunal to 50%. Therefore, even interest of the assessee has also been protected to the aforesaid extent. However, at the same time the appellant may not be saddled with liability to pay the interest on the penalty for the interregnum period and the liability to pay interest on the penalty, if any, shall commence from the date of penalty i.e. in the present case 11.4.2001. To the aforesaid extent, present appeal is required to be partly allowed and the impugned judgment and order passed by the learned Tribunal is required to be modified to the aforesaid extent. The order passed by the competent authority imposing penalty under Section 45(6) of the Act is hereby confirmed, subject to modification of the same to the extent that in the peculiar facts and circumstances of the case, liability to pay interest on the amount of penalty, if any, shall commence from the date of order of penalty i.e. 11.04.2001 only - appeal disposed off

Summary

Issues:
Levy of penalty after a significant lapse of time without a prescribed time limit under the statute.
Confirmation of penalty under Section 45(6) of the Act subject to modification regarding the liability to pay interest on the penalty.

Issue 1: Levy of Penalty After a Significant Lapse of Time
The appellant challenged the imposition of penalty under Section 45(6) by the Tribunal after a substantial delay of 9 years from the end of the assessment period. The appellant contended that such a delay was unreasonable, illegal, and without jurisdiction. The court noted that while there is no specific time limit prescribed under the statute for imposing penalties, it is generally expected that penalties are imposed at the time of passing the assessment order. The court highlighted that if there is a delay in initiating penalty proceedings, it should not be allowed to continue if it causes prejudice. However, in this case, no prejudice was demonstrated, and the delay actually benefited the appellant as they were able to defer payment of the penalty. The Tribunal had initially imposed a penalty of 90%, which was reduced to 50%. The court ruled that the appellant should not be liable to pay interest on the penalty for the interim period, and any interest would commence from the date of the penalty order, i.e., 11.04.2001. Consequently, the court partially allowed the appeal and modified the Tribunal's order accordingly.

Issue 2: Confirmation of Penalty under Section 45(6) of the Act
The court confirmed the order passed by the competent authority imposing a penalty under Section 45(6) of the Act. However, the court made a specific modification regarding the liability to pay interest on the penalty amount. It was clarified that the liability to pay interest on the penalty, if any, would start from the date of the penalty order, i.e., 11.04.2001. The court disposed of the present appeal based on these findings and modifications, thereby upholding the penalty under Section 45(6) of the Act while adjusting the liability for interest on the penalty amount.

This comprehensive analysis of the judgment from the Gujarat High Court addresses the issues related to the levy of penalty after a significant lapse of time and the confirmation of the penalty under Section 45(6) of the Act. The court's detailed reasoning and modifications provide clarity on the legal aspects of the case and the implications for the appellant regarding the penalty and interest payment obligations.