1995 (11) TMI 414 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to legality of order imposing penalty under section 13(5) of the Orissa Sales Tax Act, 1947 based on failure to produce evidence of payment within prescribed time. Consideration of nullification of assessments made under section 12(8) of the Act and under rule 5 of the Orissa Additional Sales Tax Rules, 1975. Interpretation of the third proviso to section 13(5) of the Act regarding refund or reduction of penalty in case of annulment or variation of assessment. Examination of the necessity to record reasons for imposition of penalty under section 13(5) of the Act and the discretionary nature of such imposition.

Analysis:

The petitioner challenged the legality of an order imposing a penalty under section 13(5) of the Orissa Sales Tax Act, 1947, for failure to produce evidence of payment within the prescribed time. The petitioner argued that assessments nullified under section 12(8) of the Act and rule 5 of the Orissa Additional Sales Tax Rules, 1975, rendered the penalty imposition unnecessary. The Full Bench of the Orissa Sales Tax Tribunal's order was cited in support of this argument. The petitioner contended that the penalty order did not consider their explanation adequately, nor did it provide reasons for deeming the explanation unsatisfactory.

The Revenue's Standing Counsel maintained that the petitioner's failure to pay certain amounts during the appeal process justified the penalty imposition. It was argued that the penalty imposition was warranted due to non-payment, and providing reasons for the penalty was unnecessary. Additionally, it was asserted that the impugned order was revisable under section 23(4)(a) of the Act.

The Court acknowledged the Revenue's argument that the petitioner should have sought revision before the penalty imposition. However, since the penalty was imposed before the Tribunal's order was issued to the petitioner, the Court entertained the writ application. The Court highlighted the third proviso to section 13(5) of the Act, which mandates refund or reduction of penalties when assessments are annulled or varied. Given the petitioner's claim of nullification, the Court directed the matter back to the Sales Tax Officer to consider the applicability of the third proviso in light of the Tribunal's order.

Regarding the necessity to record reasons for penalty imposition under section 13(5) of the Act, the Court emphasized that the imposition of penalties is discretionary, not mandatory. The Court underscored that this discretion must be exercised judiciously, guided by relevant considerations and not influenced by extraneous factors. The Court cited legal principles emphasizing the need for objective determination, consideration of circumstances, and the requirement to provide reasons for decisions to prevent arbitrariness. The Court concluded that failure to record reasons for penalty imposition renders the order vulnerable to challenge.

In conclusion, the Court disposed of the writ application, emphasizing the importance of recording reasons and the discretionary nature of penalty imposition under section 13(5) of the Orissa Sales Tax Act, 1947.

Judgment:
The High Court of Orissa addressed the challenge to the legality of a penalty imposition under section 13(5) of the Orissa Sales Tax Act, 1947. The Court considered the nullification of assessments, the interpretation of the third proviso to section 13(5) regarding penalty refund or reduction, and the necessity to record reasons for penalty imposition. The Court emphasized the discretionary nature of penalty imposition, the need for objective determination, and the requirement to provide reasons to prevent arbitrariness. The Court directed the matter back to the Sales Tax Officer for reconsideration in light of the Tribunal's order, ultimately disposing of the writ application.