2018 (2) TMI 610 - HC - VAT and Sales Tax

Penalty u/s 54(1)(1) of the U.P. VAT Act - delayed deposit of tax - Held that - It is admitted that the assessee has deposited tax late by two days. It is also not in dispute that on the relevant date when the admitted tax was to be deposited the assessee had no funds available in its bank account. It is, however, not disputed that revisionist had overdraft facilities available and the amount of admitted tax could have been paid from it. The amount of interest payable upon the delayed deposit of admitted tax has been deposited by the revisionist and the interest of State is adequately protected. This Court finds that the assessee was not having liquid funds available in its bank account when the admitted tax was to be deposited. This explanation submitted by the assessee was accepted by the assessing authority and four days time was allowed for the purpose. The assessee in fact had deposited the amount of admitted tax alongwith interest but by a delay of two days. Once the statute itself confers discretion upon the authority concerned and the imposition of penalty is not automatic, the authority concerned is expected to take into consideration relevant facts and circumstances that are placed before it. The exercise of jurisdiction to levy penalty in the facts and circumstances is not proper - revision allowed.

Summary

Issues:
Challenge to tribunal's order affirming penalty under section 54(1)(1) of U.P. VAT Act for delayed tax deposit.

Analysis:
1. The tribunal affirmed a penalty on the assessee for delayed tax deposit, despite the explanation provided for the delay. The assessee, engaged in trading automobiles, requested an extension to deposit VAT due by 20.12.2009, which was granted until 24.12.2009. However, the tax was deposited late on 26.12.2009. The penalty of 20% of the admitted tax amounting to ?6,92,540 was imposed, which the tribunal upheld. The reason given for the penalty was the availability of overdraft facilities, although the lack of liquid funds in the bank account was not disputed.

2. The assessee relied on a previous court decision involving similar provisions under U.P. Trade Tax Act, emphasizing the need for a reasonable cause for penalty imposition. The court in that case held that penalties should not be levied without proving the absence of a reasonable cause. The court emphasized that penalties should not be imposed for trifling defaults, especially when the tax along with interest had been paid, and a reasonable cause for the delay was shown.

3. The revisionist contended that a reasonable cause was presented for the two-day delay in tax deposit, challenging the tribunal's decision to impose a 20% penalty. However, the Standing Counsel argued for strict interpretation of taxing statutes, emphasizing that the tribunal's finding of an unexplained reasonable cause justified the penalty imposition.

4. The court considered the facts undisputed, acknowledging the late tax deposit and lack of funds in the bank account on the due date. It noted that the revisionist had overdraft facilities but accepted the explanation for the delay. The court emphasized that the penalty imposition was not automatic and required a lack of reasonable cause for the delay, which was not the case here.

5. Ultimately, the court found that the revisionist had provided a reasonable cause for the delayed tax deposit, which was accepted by the assessing authority initially. As the State had been compensated with interest for the delay, the court held that the penalty imposition was unjustified. The court allowed the revision in favor of the assessee, emphasizing the discretionary nature of penalty imposition and the need to consider all relevant circumstances before levying penalties.