1983 (7) TMI 279 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of the appellate authority under section 38(5) to impose penalty for the first time.
2. Justification of penalty imposed under section 43(1) read with section 9(2) of the Central Act.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Appellate Authority under Section 38(5) to Impose Penalty for the First Time:
The primary question was whether the appellate authority, under section 38(5) of the State Act, could impose a penalty where it had not been imposed by the assessing authority. The facts of the case reveal that the assessee, M/s. Food Corporation of India, Bhopal, was assessed to tax for the financial year 1967-68 and a penalty of Rs. 4,000 was imposed for delayed returns. The Deputy Commissioner, while maintaining the assessment, found that Rs. 5,68,790 in taxes had not been paid and considered the returns false, initiating penalty proceedings under section 43.

The Tribunal dismissed the appeal, leading to a reference to the High Court. The High Court held that section 38(5) does not confer the power to impose a penalty for the first time, as it only allows the appellate authority to confirm, reduce, enhance, or annul penalties already imposed by the assessing authority. The Court emphasized that the terms "confirm, reduce, enhance or annul" imply that some order of penalty must exist for these actions to be applicable.

2. Justification of Penalty Imposed under Section 43(1) Read with Section 9(2) of the Central Act:
The second issue was whether the penalty imposed under section 43(1) read with section 9(2) of the Central Act was justified. The assessee argued that the penalty was unjustified due to the absence of mens rea and the lapse of the five-year limitation period under section 18(8). The Court clarified that section 43 allows the appellate authority to impose a penalty if it is satisfied that the dealer has furnished a false return, provided the dealer is given a reasonable opportunity to be heard.

The Court found that the appellate authority had jurisdiction under section 43 to impose the penalty during the pendency of the appeal and that section 18(8) did not apply to the appellate proceedings. The appellate authority had issued a notice under section 43 and provided the assessee an opportunity to be heard, fulfilling the procedural requirements.

The Court also noted that while the Deputy Commissioner did not explicitly state that the dealer deliberately concealed turnover, there was a positive finding that the assessee furnished a false return. This finding justified the imposition of the penalty under section 43.

Conclusion:
The High Court concluded that the appellate authority under section 38(5) does not have the jurisdiction to impose a penalty for the first time. However, the penalty imposed under section 43 read with section 9(2) of the Central Act was justified, as the appellate authority acted within its jurisdiction and followed due process. The answers to the questions were:
1. Negative, regarding the jurisdiction under section 38(5).
2. Affirmative, regarding the justification of the penalty under section 43.