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2015 (2) TMI 1060 - GAUHATI HIGH COURTImposition of penalty - Default in payment of tax - According to the petitioner, there was no wilful evasion of tax. The default in payment of ₹ 10,09,712.00 was on account of mistake in application of rates of tax, which was a bonafide error, the said figure being the differential amount. Subsequently, petitioner deposited the said amount of ₹ 10,09,712.00 to the State respondents - Held that:- A careful reading of the Section 90 would indicate that in case of contravention or failure to comply with any provision of the VAT Act or the Rules framed thereunder, if no other penalty is provided under the VAT Act for such contravention or failure, penalty of an amount not exceeding twice the amount of tax evaded or sought to be evaded or involved, may be imposed. As per the proviso, no penalty under the said section shall be imposed unless the person concerned is given a reasonable opportunity of being heard. Therefore, in the event of any contravention or failure to comply with any provision of the VAT Act or any order or direction made thereunder, penalty may be imposed which may extend to an amount not exceeding twice the amount involved or tax evaded or sought to be evaded. However, before imposition of penalty, the affected person is required to be given a reasonable opportunity of being heard. The fact that the section itself mandates providing of reasonable opportunity of hearing before imposition of penalty is a clear pointer to the legislative intent that imposition of penalty in the event of any contravention or failure to comply in terms of section 90 would not be automatic. Discretion is vested in the authority whether to impose penalty at all or not or in the event of the need to impose penalty, the quantum of penalty that should be imposed. This would require application of mind to all the relevant factors including the response of the affected person. Imposition of penalty is a coercive measure and, therefore, the order of penalty should be a speaking order. Therefore, from the order imposing penalty, the reasons for imposition of penalty as well as the quantum of penalty must be discernible. This will reflect application of mind by the authority imposing the penalty and also allow the higher authorities to examine the reasons assigned for imposition of penalty in the event of appeal or revision. The order of penalty must indicate that all relevant factors were taken into consideration before imposing penalty. The discretionary power to impose penalty must be exercised in a reasonable and rational manner, otherwise it would be arbitrary and capricious. - it has been stated by respondent No. 2 in his affidavit that demand notice has been issued not under section 75 (12) (b) (v) of the VAT Act, but under section 90 thereof. A bare perusal of the impugned demand notice would indicate that no reasons have been assigned as to why the penalty of ₹ 10,00,000.00 has been imposed on the petitioner. The order clearly reflects non-application of mind, firstly, either to the justification for imposition of penalty or not and secondly, the quantum of the penalty. Impugned demand notice is, therefore, clearly arbitrary and cannot be sustained in the eye of law. It is, accordingly set aside and quashed. Since penalty has been quashed, it goes without saying that the bakijai proceeding for recovery of the penalty cannot also survive. - Following decision of HINDUSTAN STEEL LTD. VS. STATE OF ORISSA [1969 (8) TMI 31 - SUPREME Court] - Decided in favour of assessee.
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