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Commissioner of Sales Tax Vs. Straw Board Manufacturing Company - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAllahabad High Court
Decided On
Case NumberS.T.R. No. 245 of 1981
Judge
Reported in[1982]50STC285(All)
AppellantCommissioner of Sales Tax
RespondentStraw Board Manufacturing Company
Appellant AdvocateStanding Counsel
Respondent Advocate Bharatji Agrawal, Adv.
DispositionPetition dismissed
Excerpt:
.....down in the earlier decision in cement marketing company of india v. be taken as well-settled that even where for some breach of any of the provisions penalty is leviable and the act provides the minimum, it is still in the discretion of the assessing authority to levy it at a lower figure than that. there could be no better proof of bona fide than in this case where the assessee had to pay additional demand along with interest from its own pocket. it was a fit case in which it could be held that failure was covered by the expression 'reasonable cause' used in sub-clause (a) of section 15-a(1). but the assessee having not filed any revision the only order that can be passed is to maintain the order passed by the tribunal......order both the assessee and the commissioner of sales tax filed appeals which were decided by the sales tax tribunal, bench (i), saharanpur. the tribunal held that the failure on the part of the assessee to deposit the tax due was not intentional; rather it was not aware that the rate of tax had been enhanced from 31/2 per cent to 7 per cent from 1st december, 1973. the tribunal further found that even on sales made by it the assessee did not realise the tax at the rate of 7 per cent. in view of these facts the tribunal agreed with the appellate authority that there was no mens rea. according to it non-payment of tax was due to reasonable cause. it, however, instead of discharging the notice held that as the assessee had already paid a very 'high amount of interest' it was a fit case.....
Judgment:

R.M. Sahai, J.

1. Aggrieved by the levy of penalty below the minimum limit provided under Section 15-A(1)(i) of the Act, the Commissioner of Sales Tax has filed this revision. Before deciding this question it is necessary to notice the facts and findings recorded by the revising authority. The assessee is a manufacturer of straw board and sand paper. In the assessment year 1974-75 on the sales effected by it, it realised tax at the rate of 3 1/2 per cent and deposited the same along with its quarterly return. When the assessment proceedings were finalised it was found that the correct rate of tax on straw board and sand paper was 7 per cent. Consequently the assessee was directed to pay the additional demand thus created. The assessee complied with it and paid the penal interest also at the rate of 2 per cent. On 19th December, 1977, the assessing authority imposed penalty for non-deposit of tax due under Section 15-A(1)(a) of the Act. The claim of the assessee that the payment at the rate of 7 per cent was not made due to bona fide mistake and ignorance of the notification enhancing the rate from 31/2 per cent to 7 per cent was not accepted. In appeal it was held that the assessee was not guilty of any mens rea or mala fide. Consequently the penalty was reduced to minimum, i. e., 10 per cent, provided in the Act. Against this order both the assessee and the Commissioner of Sales Tax filed appeals which were decided by the Sales Tax Tribunal, Bench (I), Saharanpur. The Tribunal held that the failure on the part of the assessee to deposit the tax due was not intentional; rather it was not aware that the rate of tax had been enhanced from 31/2 per cent to 7 per cent from 1st December, 1973. The Tribunal further found that even on sales made by it the assessee did not realise the tax at the rate of 7 per cent. In view of these facts the Tribunal agreed with the appellate authority that there was no mens rea. According to it non-payment of tax was due to reasonable cause. It, however, instead of discharging the notice held that as the assessee had already paid a very 'high amount of interest' it was a fit case where penalty should be fixed at Rs. 300 only. In other words a token penalty was levied instead of minimum provided under the law. For doing so the Tribunal relied on a decision given by this Court in Commissioner of Sales Tax v. Jullundur Motor Agency [1982] 50 STC 284; 1980 UPTC 1122.

2. The jurisdiction to impose penalty is derived from Section 15-A of the Act. Once an assessee is found guilty and the assessing authority is satisfied that the dealer has contravened any of the sub-clauses then it may impose penalty as provided in the Act. But it is not automatic. It is discretionary. The principle is now well-settled by the Honourable Supreme Court in Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211 (SC) which was followed by this Court in Jullundur Motor Agency's case [1982] 50 STC 284; 1980 UPTC 1122. The Honourable Court further endorsed the principle laid down in the earlier decision in Cement Marketing Company of India v. Assistant Commissioner of Sales Tax, Indore [1980] 45 STC 197 (SC); 1980 UPTC 85 (SC). It should, therefore.be taken as well-settled that even where for some breach of any of the provisions penalty is leviable and the Act provides the minimum, it is still in the discretion of the assessing authority to levy it at a lower figure than that. That, however, shall be in rare cases where it is found that the breach is technical and the conduct of the assessee is bona fide.

3. In this case it has been seen above that the finding of the appellate authority and the Tribunal is that the breach was not only bona fide but also in ignorance of law. There could be no better proof of bona fide than in this case where the assessee had to pay additional demand along with interest from its own pocket. In fact, on facts found the Tribunal should not have reduced the penalty but should have discharged the notice as the non-deposit of tax due was not without reasonable cause. It was a fit case in which it could be held that failure was covered by the expression 'reasonable cause' used in Sub-clause (a) of Section 15-A(1). But the assessee having not filed any revision the only order that can be passed is to maintain the order passed by the Tribunal.

4. In the result this revision fails and is dismissed with costs which is assessed at Rs. 200.


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