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TMI Blog2017 (7) TMI 973X X X X Extracts X X X X X X X X Extracts X X X X ..... A focused glance of Section 17 (3) (b) of the Act, 1958 would show that if a registered dealer fails without sufficient cause to pay the amount of tax in the manner prescribed under subsection (2) of Section 22 or fails to furnish his return under sub- section (1) or revised return under sub-section (2) for any period in the manner and by the date prescribed thereunder, the Commissioner may, after giving such dealer a reasonable opportunity of being heard, impose a penalty provided under Section 17 (3) (c) (ii), a sum equal to one percent of the tax for every month or part thereof. Therefore, the condition precedent for levy of penalty is that dealer must have failed without sufficient cause to comply with the provisions of Section 22 (2) or Section 17 (1) or Section 17 (2) of the Act, 1958 and further that a reasonable opportunity of hearing has to be granted to the dealer before imposing penalty. It is settled law that an order imposing a penalty for failure to carry out a statutory obligation is the result of quasi-criminal proceedings and penalty will not ordinarily be imposed unless the party obliged has either acted deliberately in defiance of law or was guilty of contuma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and registered under the provisions of the Indian Companies Act, 1956. It is a Government company within the meaning of Section 617 of the Companies Act, 1956. It has an integrated steel plant at Bhilai where iron and steel are manufactured. For manufacture of iron and steel, various raw materials including iron ore, coking coal, lime stone etc., are used as raw materials. These goods are specified as raw materials in the registration certificate of the petitioner. 2.2) It is the case of the petitioner that in conformity with the policy to tax raw materials at a lower rate under the Sales Tax Act and also under the Act, 1976, general rate of entry tax on raw material was 7% under Section 4 of the said Act. The State Government could specify local area or areas and the goods for levy of entry tax at a rate not exceeding 10% by notification under Section 4A of the Act, 1976. The petitioner Company purchased low silica lime stone as one of its raw materials for production of steel and they were paying entry tax regularly on it on the entry of low silica lime stone into the local area of Bhilai up to December, 1990. For the month of January, 1991, tax was due on 10-2-1991, but th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year i.e. 1990-91 by issuing notice of assessment and the case was fixed for hearing on 23-3-1999 and in which sufficient cause was shown for not clearing the tax liability on account of the judgment of the M.P. High Court in Makers Development Service (supra), as there is an order of stay in their favour and tax was subsequently deposited based on the condition of MOU between the Government of Madhya Pradesh and Bhilai Steel Plant. 2.4) It is the further case of the petitioner that despite showing sufficient cause under Section 17 (3) (b) (ii) of the Act, 1958, penalty to the extent of 4,09,09,903/- ₹ was imposed holding that Section 17 (3) (b) is automatic and mandatory though the petitioner had sufficient cause for not paying balance of tax that was assessed, whereas the admitted tax as per the return had already been paid and the returns filed are late only by three days. Misconstruing and misunderstanding the provisions of the Act, 1958, the impugned order imposing penalty has been passed. On revision being filed, the revisional authority also did not properly consider the petitioner's plea that they are not liable for payment of penalty and passed the impugned or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. Section 17 of the Act, 1958 deals with returns to be filed by the dealer. Under Section 17 (1) every dealer is required to furnish returns in such form and in such manner for such period by such dates and to such authority, as may be prescribed. Consequence of non-furnishing returns as enumerated in Section 17 (1) is provided in Section 17 (3) (b) which reads as under: - 17. RETURNS (3) If- (a) a dealer fails without sufficient cause to comply with the requirements of a notice issued under subsection (1); or (b) a registered dealer fails without sufficient cause to pay the amount of tax in the manner prescribed under sub-section (2) of section 22 or to furnish his return under sub-section (1) or revised return under sub-section (2) for any period in the manner and by the date prescribed thereunder or while furnishing the return fails to furnish along with the return, the proof of payment as required by sub-section (1-A); or (c) a registered dealer fails to furnish return, the commissioner may, after giving such dealer a reasonable opportunity of being heard, direct him to pay, by way of penalty- (i) in the case referred to in clause (a), in ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 22 (2) or Section 17 (1) or Section 17 (2) of the Act, 1958 and further that a reasonable opportunity of hearing has to be granted to the dealer before imposing penalty. 10. The word reasonable opportunity used in Article 311 of the Constitution of India has been defined by Their Lordships of the Supreme Court in the matter of Khem Chand v. Union of India and others AIR 1958 SC 300 and it has been held as under: - (19) To summarise: the reasonable opportunity envisaged by the provision under consideration includes: (a) An opportunity to deny his guilt and establish his innocence, which he can only do if he is told what the charges levelled against him are and the allegations on which such charges are based; (b) an opportunity to defend himself by cross-examining the witnesses produced against him and by examining himself or any other witnesses in support of his defence; and finally (c) an opportunity to make his representation as to why the proposed punishment should not be inflicted on him, which he can only do if the competent authority, after the enquiry is over and after applying his mind to the gravity or otherwise of the charges proved ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. The penal provision as contained in Section 17 (3) (b) of the Act, 1958 has been considered by a Division Bench of the M.P. High Court in the matter of Commissioner of Sales Tax, M.P. v. M/s Eastern Air Products (P) Ltd., Bhopal 2006(3) M.P.L.J. 184 in which Their Lordships have held that if assessee has not been given opportunity to show cause for the defaults committed by the dealer, penalty is not justified and it has been held as under: - 4. ... It will be clear from the aforesaid provisions that if a registered dealer fails without sufficient cause to furnish a return under sub-section (1) of section 17 for any period in a manner and by the date prescribed thereunder or while furnishing a return fails to furnish proof of payment as required by sub-section (1-A) of section 17, the Commissioner may, after giving him a reasonable opportunity of being heard, direct him to pay by way of penalty the amount stipulated in clause (ii) of section 17(3). It is thus clear that where sufficient cause is shown by the registered dealer for not filing the return within the prescribed date or for not furnishing along with the return proof of payment of tax due, such penalty cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the period from 1-4-1991 to 31-3-1994, which constitutes sufficient cause within the meaning of Section 17 (3) (b) of the Act, 1958. 19. The assessing authority in its order dated 22-10-2001 has noted the case of the petitioner only to the extent that it relies upon the notification dated 22-3-1994, but it omits to consider other pleas that on account of the decision in Makers Development Service (supra), tax liability was not cleared and as soon as the matter was settled by MOU, all petitions were withdrawn and tax liability was cleared by making payment of an amount to the extent of ₹ 47 crores which is only on account of taking plea that they are not liable to pay entry tax pursuant to the decision of the High Court, they did not make payment, but when the settlement was arrived at all the tax liability was cleared. It appears that the assessing authority after assessing tax liability simply proceeded to levy penalty in exercise of power conferred under Section 17 (3) (b) (ii) of the Act, 1958 and has not considered the reason assigned by the petitioner Company whether it constitutes sufficient cause or not. Apart from the fact that there is nothing on record to sho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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