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2019 (12) TMI 539 - HC - VAT and Sales TaxDeduction of tax at source - production, supply and sale of electricity, and for the purpose of production of the electricity - deduction of 2% on account of VAT - Section 45(1) of the Jharkhand Value Added Tax Act, 2005 - HELD THAT - A plain reading of section 45(1), shows that the deduction of the TDS from the bills raised by the CCL for supply of coal, was mandatory on the part of the petitioner Company, which the Company had not carried out, though the fact remains that the State has not been put to any loss thereby, and this is a case of revenue neutral, so far as the tax liability is concerned, as admittedly, the State has already realised its due tax from CCL. However, the fact remains that the wordings of sub-Section (5) of Section 45 of the J.V.A.T. Act shows that the penalty was required to be realised from the petitioner Company. The Proviso also makes it clear that before imposing the penalty the petitioner Company was required to be heard in the matter, meaning thereby, that the Company could make out a case, that it was not liable to pay any penalty what so ever, which the authority concerned was required to record in the assessment order, with his reasons to differ, in case the authority disagreed. A plain reading of the impugned assessment orders clearly show that the mandate of Proviso to Section 45(5) of the J.V.A.T. Act, has not been followed by the Assessing Authority. There is no discussion at all about the defence of the Company and without stating anything about the reasons that might have been shown before the Assessing Authority by the counsel for the Company, the assessment orders / demand notices have been passed. The assessment orders can safely be termed as absolutely non-speaking orders, sans giving the facts only about the functioning of the Company and quoting the provision of law - the impugned orders / demand notices cannot be sustained in the eyes of law. Matter remanded back to the Assessing Authority to pass the reasoned order afresh, after giving proper hearing to the petitioner Company, positively within a period of six months from the date of communication of a copy of this order - appeal allowed by way of remand.
Issues Involved:
1. Obligation of the petitioner company to deduct Tax Deducted at Source (TDS) under the Jharkhand Value Added Tax Act, 2005 (J.V.A.T. Act). 2. Imposition of penalty for non-deduction of TDS. 3. Legality of demand notices and garnishee orders issued by the Assessing Authority. 4. Applicability of precedent cases regarding penalty imposition. 5. Remand for fresh assessment and hearing. Detailed Analysis: 1. Obligation to Deduct TDS: The petitioner company, engaged in the production and sale of electricity, was required to deduct TDS at 2% from the bills raised by Central Coalfields Limited (CCL) for coal supply, as per Section 45(1) of the J.V.A.T. Act. This deducted amount was to be deposited in the Government Treasury as mandated by Section 45(3). Failure to comply would result in a penalty under Section 45(5). 2. Imposition of Penalty: The petitioner company did not deduct TDS, leading the Assessing Authority to impose penalties and additional tax. The petitioner argued that since the VAT on coal was already paid to CCL, which in turn paid the tax to the State, there was no revenue loss to the State. They contended that imposing both the 2% TDS and penalty amounted to double taxation and was unjustified. The petitioner cited: - M/s. Hindustan Steel Ltd. Vs. State of Orissa: Penalty should not be imposed unless there was deliberate defiance of law or contumacious conduct. - Employees' State Insurance Corporation Vs. HMT Ltd. & Anr.: Penal provisions should be construed strictly and not imposed in all situations. - Nirlon Ltd. Vs. Commissioner of Central Excise, Mumbai: Set aside penalty where the exercise was revenue neutral and there was no mala fide intention. 3. Legality of Demand Notices and Garnishee Orders: The demand notices and garnishee orders were issued following the assessment orders. The petitioner argued these were unsustainable since the VAT was already paid, and the demand for 2% TDS would result in double taxation. The State countered that Section 45(5) was mandatory, leaving no discretion but to impose a penalty for non-deduction of TDS. They cited: - Guljag Industries Vs. Commercial Taxes Officer: Penalty for statutory offence does not require proving intention or mens rea. - Commissioner Of Customs (Import), Mumbai Vs. Dilip Kumar & Company & Ors.: Tax statutes must be interpreted strictly without equitable considerations. 4. Applicability of Precedent Cases: The State argued that the cited cases were not applicable as they dealt with non-mandatory statutes, whereas Section 45(5) of the J.V.A.T. Act is mandatory. The petitioner, however, maintained that the Proviso to Section 45(5) indicated discretion in imposing penalties. 5. Remand for Fresh Assessment and Hearing: The Court found that the assessment orders did not comply with the Proviso to Section 45(5), which requires a hearing and consideration of the petitioner's defense. The orders were non-speaking and lacked reasoning. Conclusion: The Court quashed the impugned assessment orders, demand notices, and garnishee orders, remanding the matter back to the Assessing Authority for a fresh reasoned order after proper hearing. The Assessing Authority was directed to consider the petitioner's case for non-payment of penalty and exercise discretion regarding the quantum of penalty, if applicable, in accordance with the law and relevant judicial precedents. If no penalty is found leviable, the deposited amounts should be refunded with statutory interest. All three writ applications were allowed with these directions.
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