1983 (7) TMI 278 - HC - VAT and Sales Tax

Summary

Issues:
1. Levying penalty for default in payment of advance tax under the Karnataka Sales Tax Act.
2. Exercise of judicial discretion by the assessing officer in imposing the penalty.
3. Applicability of section 12-B(3) of the Act in determining the penalty.
4. Consideration of relevant circumstances in imposing penalties under the Act.

Analysis:

1. The petitioner-company, a registered dealer under the Karnataka Sales Tax Act, was required to submit monthly returns with advance tax payments for the assessment year 1980-81. However, there were delays in payments each month, leading to a penalty notice of Rs. 22,346 issued by the assessing officer for default in tax payment.

2. The company requested time to file objections but failed to do so, resulting in the confirmation of the penalty. The company appealed to the Deputy Commissioner and later to the Karnataka Appellate Tribunal, which reduced the penalty to Rs. 15,000 considering the company's loss in the tea industry due to depression.

3. The company then approached the High Court with a revision petition under section 23(1) of the Act, challenging the penalty imposed under section 12-B(3) (previously 12-B(2)). The Court noted that the assessing officer must exercise judicial discretion in levying penalties, as observed in previous judgments.

4. Referring to the Narasimha Bhandary case, the Court emphasized that penalties should not be imposed solely for default in tax payments but based on deliberate defiance of the law or contumacious conduct. The authority must consider all relevant circumstances before imposing penalties under section 12-B(3).

5. The Court highlighted that the power to levy penalties under section 12-B(3) is penal in nature and must be exercised judiciously. Each case requires a thorough examination to determine if there was a valid reason for the default or deliberate defiance of the law. The amount of penalty should be decided based on the specific circumstances of the case.

6. In this case, the Tribunal's reasoning for the penalty reduction was the company's inability to pay due to the tea market slump, indicating no deliberate delay or dishonest conduct. Therefore, the Court found the penalty unjustified and illegal, setting aside the orders of all authorities below.

7. The High Court allowed the revision petition, emphasizing the need for a judicial exercise of power in imposing penalties under the Act and considering the individual circumstances of each case before levying penalties for default in tax payments.