2020 (9) TMI 647 - HC - VAT and Sales Tax

Levy of penalty - Failure to pay Entry Tax in time due to bonafide opinion - import of three heavy road laying vehicles - HELD THAT - The law, as on date, is to the effect that the imported vehicles brought into the State of Tamil Nadu for use or for sale would be subjected to payment of Entry Tax. Previously, the Hon'ble Division Bench of the Kerala High Court in the case of FR. WILLIAM FERNANDEZ VERSUS STATE OF KERALA AND OTHERS 1998 (1) TMI 501 - KERALA HIGH COURT had held, in the year 1998, that entry of vehicles from abroad, is outside the scope of Entry Tax Act and therefore not liable for payment of Entry Tax. There are no fault with the petitioner when they had not paid the Entry Tax at the time of import. Furthermore, when the Enforcement Wing of the respondents had insisted for payment of the Entry Tax, the petitioner had immediately paid the Entry Tax of ₹ 22,59,619/- on 26.10.2005 itself. However for such omission, the second respondent herein had now invoked Section 15(1) of the Entry Tax Act and proposed a penalty, at twice the amount of the Tax. It is no doubt true that the second respondent is empowered to levy such a penalty. However, this is the case where the Entry Tax was not paid by the petitioner on the first instance, in view of the prevailing law at that point of time - In such circumstances, when there are bona-fides on the part of the importer in refraining from paying the tax, the Hon'ble Apex Court in EID. PARRY (I) LTD. OTHERS VERSUS ASSISTANT COMMISSIONER OF COMMERCIAL TAXES AND ANOTHER 1999 (12) TMI 708 - SUPREME COURT had held that the levy of penalty was not justified. This Court is of the affirmed view that the proposed levy of penalty is unjustifiable - Petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Import of vehicles without paying Entry Tax
2. Proposal to levy penalty under Entry Tax Act, 1990
3. Bona fide belief of importer regarding Entry Tax exemption
4. Legal precedent on penalty imposition for failure to pay statutory obligations

Analysis:

Issue 1: Import of vehicles without paying Entry Tax
The petitioner, a company engaged in road laying and construction, imported three heavy road laying vehicles without paying the Entry Tax initially due to the prevailing law exempting them from such payment. However, following a verification by the Enforcement Wing, the petitioner admitted the omission and paid the Entry Tax amount of ?22,59,619 on the same day.

Issue 2: Proposal to levy penalty under Entry Tax Act, 1990
The impugned notice proposed to levy a penalty at twice the amount of tax under Section 15(1) of the Entry Tax Act, 1990, on the grounds of non-payment of Entry Tax initially. The Additional Government Pleader argued in favor of upholding the penalty citing a Division Bench decision requiring payment of Entry Tax on imported vehicles in Tamil Nadu.

Issue 3: Bona fide belief of importer regarding Entry Tax exemption
The petitioner contended that they believed in good faith that they were exempt from paying Entry Tax at the time of import due to the prevailing laws. They argued that the penalty proposal should be waived considering their immediate payment of Entry Tax upon being informed of the omission. Legal counsel cited relevant judgments by the Hon'ble Apex Court supporting the waiver of penalties in cases of bona fide belief.

Issue 4: Legal precedent on penalty imposition for failure to pay statutory obligations
The Court reviewed past judgments, including E.I.D. Parry (India) Ltd. and Hindustan Steel Ltd., emphasizing that penalties for failure to fulfill statutory obligations should be imposed only in cases of deliberate defiance of the law or contumacious conduct. The Court found that the petitioner acted in good faith, and the proposed penalty was unjustifiable based on the established legal principles.

In conclusion, the Court set aside the impugned notice proposing the penalty, ruling in favor of the petitioner based on the bona fide belief in the exemption from Entry Tax at the time of import and the immediate payment upon realization of the omission. The judgment aligned with the principles laid down by the Hon'ble Apex Court regarding penalty imposition for statutory non-compliance.