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TMI Blog2021 (3) TMI 844X X X X Extracts X X X X X X X X Extracts X X X X ..... rm and he understates his liability to tax or overstates his entitlement to a tax credit by more than 5% of the actual liability to pay tax, he is liable to pay penalty equal to 10% of the amount of such tax under or overstated. However, the provision requires that before levy of penalty, the dealer has to be given an opportunity to show-cause in writing against the imposition of penalty. It is only after consideration of the cause shown by the dealer, the penalty can be imposed - It is graphically clear that the discretion is with the matter of imposition of penalty and not with regard to the rate of penalty. Thus, it is evident that the levy of penalty under Section 72(2) of the Act is neither automatic nor mandatory. In the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ALOK ARADHE J., This appeal under Section 66(1) of the Karnataka Value Added Tax Act, 2003 (hereinafter referred to as 'the Act') has been filed by the appellant against the order dated 31.03.2017 passed by the Additional Commissioner of Commercial Taxes under Section 64(1) of the Karnataka Value Added Tax Act, 2003, reviving the order dated 27.11.2012 passed by the Joint Commissioner of Commercial Taxes (hereinafter referred to as the 'First Appellate Authority') by which the appeal preferred by the appellant was allowed against levy of penalty under Section 72(2) of the Act. 2. Facts leading to filing of this appeal, briefly stated, are that the appellant is engaged in the business of manufacture and supply of auto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the First Appellate Authority, who, by an order dated 27.11.2012, quashed the order by which penalty was levied and allowed the appeal. The Additional Commissioner of Commercial Taxes initiated proceedings under Section 64 of the Act proposing to revise the aforesaid order dated 27.11.2012 passed by the First Appellate Authority. Despite detailed and elaborate objections filed by the appellant, the Additional Commissioner of Commercial Taxes passed an order dated 31.03.2017, by which the order of the First Appellate Authority was set aside and the order of the adjudicating Authority regarding levy of penalty under Section 72(2) of the Act, was confirmed. In the aforesaid factual background, this appeal has been filed. 4. Learned cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g revisional powers under Section 64 of the Act is that the order of the Authority should not just be erroneous but also be prejudicial to the interest of the Revenue. In the instant case, the order of the First Appellate Authority has been passed on the basis of meticulous appreciation of the evidence on record and it cannot be termed as erroneous and the tax is revenue neutral. It is further submitted that the levy of penalty under Section 72(2) of the Act is neither automatic nor mandatory. In support of the aforesaid submissions, reliance has been placed on ELECTRO OPTICS (P) LTD. VS. STATE OF TAMIL NADU [(2016) 89 VST 156 (SC)] and the decision of the Division Bench of this Court in FOSROC CHEMICALS (INDIA) PRIVATE LIMITED (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual liability to pay tax, he is liable to pay penalty equal to 10% of the amount of such tax under or overstated. However, the provision requires that before levy of penalty, the dealer has to be given an opportunity to show-cause in writing against the imposition of penalty. It is only after consideration of the cause shown by the dealer, the penalty can be imposed. Thus, it is axiomatic that the imposition of penalty under Section 72(2) of the Act is not automatic and a discretion has been conferred on the assessing Authority either to impose penalty or not to impose penalty and the rate of such penalty is statutorily provided. Therefore, it is graphically clear that the discretion is with the matter of imposition of penalty and not with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a scope for ambiguity and in any case, the transactions were revenue neutral and therefore no mala fide intention would be attributed to the dealer. The First Appellate Authority has placed reliance on HINDUSTAN STEEL LIMITED (supra) and has set aside the order imposing penalty under Section 72(2) of the Act. It is pertinent to note that NEW TAJ MAHAL CAFE PRIVATE LIMITED (supra) is distinguishable because the issue in the aforesaid decision is that the absence of mens rea is not material for levy of penalty in fiscal statutes. The aforesaid decision is not an authority for the proposition that levy of penalty under Section 72(2) of the Act is either automatic or mandatory. The decision rendered in NEW TAJ MAHAL CAFE PRIVATE LIM ..... X X X X Extracts X X X X X X X X Extracts X X X X
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