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TMI Blog1992 (6) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... 1982, treating the goods as falling under section 5(1). The petitioner filed an appeal contending that the goods in question came under entry 2 of the Fourth Schedule to the Act. This was accepted by the appellate authority and hence he remanded the matter for fresh assessment. The goods enumerated in the Fourth Schedule are the declared goods in respect of which a single point tax is levied under section 5(4) of the Act at the rate specified in the Fourth Schedule. The rate of tax under Fourth Schedule was lower than the rate of tax under section 5(1) of the Act. After the remand order the assessing authority made a fresh order even in respect of assessment year 1981-82 treating the goods under the Fourth Schedule. Since the petitioner had collected excess amount from the customers the assessing authority ordered forfeiture of the said excess amount purporting to act under section 18A of the Act. Similar order of forfeiture was made in respect of the year 1982-83 also. The assessing authority observed that these excess collections of tax were in contravention of the provisions of section 18 and therefore the petitioner was liable for penalty under section 18A at one and a half ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the provision which was the subject-matter of the decision by the Supreme Court in Joshi's case [1977] 40 STC 497 was quite different from section 18A with which we are concerned in the instant case. The learned counsel argued that under section 18A of the Act the authority was empowered to levy a penalty having regard to the circumstances of the case. Unlike the Bombay Act referred in Joshi's case [1977] 40 STC 497 (SC) wherein the excess collection was to be forfeited automatically without any discretion to the assessing authority, under section 18A of the Act the levy of penalty is a discretionary power and therefore section 18A of the Act does not envisage the forfeiture of the excess amount collected by a dealer, as a matter of course; section 18A is a penal provision and should be construed in the same manner as any other penal provision is to be construed. The learned Government Advocate on the other hand contended that the decision of the Supreme Court applies to the instant case under section 18A of the Act and that the bona fides of the dealer in collecting the amount by way of tax when legally such a tax is not leviable, is entirely irrelevant; irrespective of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... travened articles 14 and 19 of the Constitution. The Supreme Court pointed out at page 504 thus: "..............the trader by casting a no-fault or absolute liability to 'cough up to the State the total 'unjust' takings snapped up and retained by him 'by way of tax' where tax is not so due from him, apart from other punitive impositions to deter and to sober the merchants whose arts of dealing with customers may include 'many a little makes a mickle'. If these steps in reasoning have the necessary nexus with the power to tax under entry 54, List II, it passes one's comprehension how the impugned legislation can be denounced as exceeding legislative competence or as a 'colourable device' or as 'supplementary, not complementary'." At page 506 it was observed that: "In the present case, the narrow issue is as to whether the forfeiture clause in section 37(1) is bad because of the besetting sin of colourability." It is in this context the Supreme Court posed the question as to the true character of a forfeiture and answered that the word "forfeiture" must bear the same meaning of a penalty for breach of a prohibitory direction. The Supreme Court rejected the notion that a penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impose upon him by way of penalty a sum not exceeding one and a half times such amount: Provided further that no prosecution for an offence under section 29 shall be instituted in respect of the same facts on which a penalty has been imposed under this section." A reading of the above provision shows that the levy of penalty is not automatic. No absolute liability is fastened on the dealer who contravenes the provisions of section 18, unlike section 37 of the Bombay Act. Section 18A of the Act empowers the assessing authority to impose a penalty. The exercise of the power is entirely discretionary because phraseology is that, "the assessing authority may...........impose...........by way of penalty". The proviso to the section indicates that the imposition of penalty is a substitute for prosecution under section 29. The section does not make it obligatory on the part of the assessing authority to impose any minimum penalty though it prescribes the maximum penalty that may be imposed. From this it is clear that the State Legislature while enacting section 18A did not intend to forfeit any excess amount collected by the dealer unlawfully, as a matter of course; a discretion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute." Even though the levy of penalty is a discretionary power, it has been held that an unreasonable exercise of such a discretion may be quashed for error of law, if the court regards the penalty as excessive in the circumstances (vide Judicial Review of Administrative Action by De SmithIV Edition-page 407). Having regard to the difference between the provisions of the Bombay Act which was the subject-matter of Joshi's case [1977] 40 STC 497 (SC) and section 18A of the Act with which we are concerned here, we are clearly of the view that under section 18A of the Act imposition of penalty cannot be an automatic function by the assessing aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax from the customers. These are circumstances which the authority exercising powers under section 18 has to take into consideration before levying penalty. What is the amount of penalty that should be levied would also depend upon the facts and circumstances of each case. Without considering the circumstances under which the collection was made, the assessing authority could not have straightaway levied penalty under section 18A equal to the excess amount collected by it." We are in respectful agreement with the above observation of this Court. Mr. S.P. Bhat, learned counsel for the petitioner, pointed out that similar view taken by the Madras High Court was not interfered with by the Supreme Court and the special leave petition filed by the State was dismissed, as reported in [1988] 69 STC FRSC, page 2, item 6. Recently another Bench of this Court, of which one of us was a member, also took the same view in State of Karnataka v. Subramanian [1992] 84 STC 230. It is necessary to note that the contravention alleged against the petitioner herein is that he has "collected" by way of tax an amount which could not have been collected. In Joshi's case [1977] 40 STC 497, the Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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