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2025 (4) TMI 562 - HC - VAT / Sales TaxLevy of penalty under Section 34(8) of U.P. VAT Act 2008 - infraction of law - no reasons have been recorded in the penalty order regarding the explanation furnished by the Applicant and also the quantum of penalty - HELD THAT - The Tribunal while allowing the appeal and restoring the penalty order has recorded that the revisionist being a habitual defaulter and therefore justified the penalty order but the record shows that not only the amount of TDS was deposited but also the amount of interest were deposited. The penalty order as well as the order of the first appellate authority specifically records the stand of the revisionist that it is a Central Government Undertaking and for depositing any money sanction and budget is allocated and thereafter the amount is paid and deposited which took its own time but no weightage of the said fact has been given by the Tribunal in the impugned order. It is a matter of common knowledge that in Government Department some unintentional procedural delay occurs which takes its own time to which interest were paid by the applicant. This Court on an identical set of facts in the case of Sahayak Samagri Prabandhak (Astt. Material Manager) Charbagh 2019 (2) TMI 428 - ALLAHABAD HIGH COURT has reduced the penalty to the extent of 5%. The issue in hand is also covered by the said judgement. Conclusion - The record shows that pursuant to the order dated 18.12.2019 passed by this Court the revisionist has deposited 1/4th amount of payment under the impugned order before the Authority concerned - Considering the peculiar facts circumstances of the case the revisionist is liable for penalty to the extent of 1/4th which has already been deposited by the revisionist pursuant to the order of this Court dated 18.12.2019. The impugned orders passed by the Commercial Tax Tribunal Bench II Varanasi in all the revisions are modified - the revisions allowed in part.
ISSUES PRESENTED and CONSIDERED
The primary legal issue considered in this judgment is whether the imposition of a penalty under Section 34(8) of the U.P. VAT Act, 2008, is justified when there is a delay in depositing the tax deducted at source (TDS), despite the statute providing discretion to the assessing authority regarding the imposition and quantum of penalty. The specific question is whether such a penalty can be imposed merely due to a legal infraction without considering the reasons provided by the taxpayer and without recording reasons in the penalty order. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The case revolves around Section 34(8) of the U.P. VAT Act, 2008, which deals with the imposition of penalties for infractions related to the late deposit of taxes. The section grants discretion to the assessing authority regarding the imposition and quantum of penalties. The judgment also references a precedent set in the case of Sahayak Samagri Prabandhak (Astt. Material Manager), Charbagh, where the penalty was reduced to 5% under similar circumstances. Court's Interpretation and Reasoning The Court examined whether the penalty imposed was justified given the circumstances presented by the revisionist, a Central Government Department. The Court noted that procedural delays are common in government departments due to the need for sanction and budget allocation before payments can be made. The revisionist had already deposited the TDS amount and the interest for the delay. The Court emphasized that the Tribunal failed to consider these bona fide reasons and the procedural nature of the delay. Key Evidence and Findings The evidence indicated that the revisionist deducted TDS amounting to Rs. 20,19,370/- in January 2013 but deposited it with a short delay. The interest of Rs. 4,979/- was also paid. Despite this, a penalty of 200% was imposed by the Assessing Authority, which was initially quashed by the first appellate authority but later restored by the Tribunal. Application of Law to Facts The Court applied the legal framework of Section 34(8) of the U.P. VAT Act, 2008, to the facts, considering the procedural delays inherent in government operations. It recognized the revisionist's compliance in depositing the TDS and interest, albeit delayed, and found the imposition of a 200% penalty excessive and unjustified. Treatment of Competing Arguments The revisionist argued that the delay was due to procedural requirements and was not intentional. The opposing argument from the State supported the penalty's imposition. The Court sided with the revisionist, acknowledging the procedural nature of the delay and the subsequent compliance with tax obligations. Conclusions The Court concluded that the penalty should be reduced, considering the peculiar facts and circumstances of the case, including the procedural delays and the revisionist's compliance in depositing the TDS and interest. The penalty was modified to 1/4th of the original amount, which had already been deposited by the revisionist. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning The Court noted, "It is a matter of common knowledge that in Government Department, some unintentional procedural delay occurs, which takes its own time, to which interest were paid by the applicant." Core Principles Established The judgment establishes that penalties under tax statutes should consider the taxpayer's explanations and the nature of the delay, especially in cases involving government departments where procedural delays are common. The discretion granted to assessing authorities must be exercised judiciously, taking into account the bona fide reasons provided by the taxpayer. Final Determinations on Each Issue The Court determined that the penalty should be reduced to 1/4th of the original amount, aligning with the precedent of reducing penalties under similar circumstances. The revisions were partly allowed, and the question of law was answered in favor of the revisionist, modifying the impugned orders accordingly.
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