1. Heard Mr. Rao, Advocate for Petitioner and Mr. Tapare, Advocate for Respondents.
2. Rule. Rule made returnable forthwith and heard by consent of the parties.
3. By Maharashtra Act No. 3 of 1996 Bombay Provincial Municipal Corporation Act, 1949 (hereinafter referred to as B.P.M.C. Act, 1949) was amended and various amendments were made providing for levy and recovery of cess provided in lieu of octroi. Sections 152-A to 152-O were added to the principal Act. Schedule -A and Schedule C were added to the principal Act.
4. Thereafter in exercise of powers conferred by Section 456A(1) of the B.P.M.C. Act, the Government of Maharashtra framed the B.P.M.C. (Cess On Entry Of Goods) Rules, 1996. The Rules provide for registration of dealer, assessment and levy of cess, penalty, interest etc. Rule 25 provides for assessment of cess and Sub-Rule 7 of Rule 25 reads thus:
'25(7) If the Commissioner has reason to believe that a dealer is liable to pay cess in respect of any period, but has failed to apply for registration or failed to apply for registration within time as required by rule 13, the Commissioner shall at any time within three years from the end of the year in which such period occurs, after giving the dealer a reasonable opportunity of being heard, proceed to assess, to the best of his judgment, the amount of cess, if any, due from the dealer in respect of that period and any period or periods subsequent thereto.'
Rule 41 provides for imposition of penalty and interest in certain cases.
Rule 41(2) and 41(3)(a)(i) and (ii) read thus:
(2) If, while assessing or re-assessing the amount of cess due from a dealer or person under any provisions of the Act and the rules or while passing any order in any appeal or revision or rectification proceedings it appears to the Commissioner that such dealer or, as the case may be, person -
(a) has failed to apply for registration as required and has carried on business as a dealer without being registered in contravention of provisions of the Act and the rules;
(b) has failed to comply with any notice in respect of the proceedings in respect of assessment, re-assessment, production and inspection of accounts and documents and search of premises and revision;
(c) has failed to disclose any entry of goods on which cess is leviable in the City for consumption, use or sale therein or has failed to show in the return the appropriate liability to pay cess or has claimed inaccurate deduction, refund or has failed to disclose fully and truly all material facts necessary for the proper and correct quantification of the cess liability, the Commissioner may after giving the dealer or person a reasonable opportunity of being heard, by order in writing, impose upon the dealer or, as the case may be, person by way of penalty in addition to any cess assessed or re-assessed or found due in the appeal or revision or rectification proceedings, as the case may be,-
(i) in the case covered by clause (a), a sum not exceeding ten times of the amount of the cess payable by the dealer for the period during which he carried on business as a dealer without being registered in contravention of the provisions of the Act and the Rules;
(ii) in the case covered by clause (b), a sum not exceeding Rs. 10,000/-;
(iii) in the case covered by clause (c), a sum not exceeding five times the amount of the cess found payable under the said clause.
(3)(a) If a dealer or a person does not pay the cess within the time he is reuired by or under the provisions of these rules to pay it, then he shall without prejudice to any other action taken or proposed to be taken under other provisions of the Act and these rules for the recovery of cess due, be liable to pay by way of simple interest, in addition to the amount of such cess, a sum equal to,-
(i) two per cent. per month of such cess for the first twelve months after the last date by which he should have paid such cess; and
(ii) three per cent. per month of such cess – or each month thereafter, during the time the dealer or person continues to make default in the payment of cess.'
Sub-Rule 6 of Rule 41 reads thus:
'41(6) If a dealer or a person fails without sufficient cause to file within the prescribed time a return for any period, the Commissioner may, after giving the dealer or the person a reasonable opportunity of being heard, impose upon him by way of penalty a sum not exceeding two thousand rupees. Such penalty shall be without prejudice to any penalty leviable under clause (c) of sub-rule (2):
Provided that this sub-rule shall not apply to such class or classes of dealers or persons as the Commissioner may, from time to time, by order specify.
BRIEF RESUME OF FACTS:
5. In the present case, it is not in dispute that the relevant period for which assessment is done is 1/4/2000 to 31/3/2001 i.e. the financial year 2000-2001. It is not in dispute that the Petitioner had made self assessment and paid a cess of Rs. 1,48,870/- on 24th April, 2002. This payment was delayed.
6. Thereafter a notice in form-H was issued for the purpose of assessment under Rule 25(3), (10) and (11) of the aforesaid Rules on 4/7/2003 to the Petitioner Dealer. Nobody attended the hearing. However, nothing further was done till year 2008 when reminder was issued on 21/6/2008. The representative of the Petitioner attended on 8/7/2008 and ultimately representative was called on 13/8/2008. Again nothing happened for a period of 2 years from August, 2008 to October, 2010 and ultimately the balance sheet and relevant documents were produced on 2/11/2010. Thereafter an ex-parte proposal dated 7/12/2010 was served on the Petitioner but the Petitioner failed to attend assessment proceeding. In view of this, the Cess Officer of Navi Mumbai Municipal Corporation passed an Order of Assessment on 23/2/2011 and the relevant portion of the said order reads thus:
'Total turnover of purchase is determined at Rs. 21220956/-. No deductions under any provision of rules under B.P.M.C. (Cess on entry of goods) Rules, 1996 are granted for want of evidence and proof. Hence purchase of Rs. 21220956/- have been tax @ 1% is Rs.212210/-. Hence cess payable at Rs.212210/-. The dealer has paid cess at Rs.148870/-. Thus the balance cess payable is Rs. 63340/-. The interest under rule 41(3) (a) is levied at Rs. 72691/- on late payments. The interest under rule 41 (3) is levied at Rs. 152428/- on balance amount of cess found payable. The dealer was also found liable to pay penalty u/r 41(2) (a) (i) of the BPMC Rules 1996 as the dealer failed to obtain registration though found liable to pay cess. The dealer preferred to remain unregistered though found liable to pay cess and thus rendered himself liable to pay penalty u/r 41 (2) (a) (i) of the BPMC (Cess on entry of goods) Rules 1996. The penalty is imposed at 05 times of the cess amount found payable as provided under the u/r 41 (2) (a) (i) itself. The penalty is imposed at Rs.316700/-. The penalty U/R 41(6) is imposed at Rs. 24000/- as the assessor is failed to file the return within the prescribed time limit. The penalty U/R 41(2)(c)(iii) is imposed at Rs. 190020/- as the assessor is failed to disclosed true and correct liability in return.
The total amount payable is Rs.819179/- for which demand notice is issued.
Place : Navi Mumbai Vandana Satghare
Date : 23/02/2011 Cess Officer
NaviMumbai Municipal Corpn.'
7. Aggrieved by this Order, the Petitioner filed an appeal under Section 406(6)(ii) of the B.P.M.C. Act, 1949 before the Commissioner. By the impugned Order dated 11/8/2011 the Deputy Municipal Commissioner (Cess) M.M.C has dismissed the Appeal, giving rise to the present Writ Petition.
SUBMISSIONS OF ADVOCATES:
8. Mr. Rao, learned Advocate for the Petitioner submitted that there was an enormous delay in making assessment from the year 2003 to 2010; as a result of which the Petitioner has already been exposed to the liability of payment of substantial interest which is 24% per annum in the first year and 36% per annum for the subsequent years. He therefore submitted that there was no justification in levy of huge penalty particularly when the Petitioner had done self assessment and had deposited a cess of Rs. 1,48,870/-. Relying on Sub-Rule 7 of Rule 25 he submitted that said provision empowers the Commissioner to make, to the best of his judgment, assessment which could have been done in the year 2003 itself and the delay made by the Cess Officer cannot be allowed to work to the prejudice of the Petitioner.
9. On the other hand Mr. Tapare, the learned Advocate for the Respondents supported the impugned orders. He submitted that there was no justification for the Petitioner not to register within the prescribed time and, hence, penalty for non-registration was rightly levied. He further submitted that the Petitioner was responsible for the delay in the assessment process and, hence, the Petitioner cannot take advantage of his own wrong. He also submitted that the penalty upto 10 times the deficit payment of cess could have been levied under Rule 41(2) (c)(i), but the Cess Officer has taken lenient view and has levied the penalty of 5 times. He reiterated that only that penalty can be reduced by pursuant to the without prejudice offer given by the Respondents in case the Petitioner accepts the other order as it is.
10. Without prejudice offer made by the Respondents for reduction in the penalty was not acceptable to the Petitioner and therefore, I have heard the parties on merits.
CONSIDERATION OF SUBMISSIONS:
11. Considering the aforesaid facts and scheme of the aforesaid Rules, it is now necessary to determine whether various amounts levied by the Cess Officer are proper or not. There is no dispute about quantum of purchase which is determined at Rs. 2,12,20,956/-, and, consequently there is no dispute of quantum of cess being at 1% of the sales i.e. 2,12,210/-. It is also not in dispute that the Petitioner has already paid Rs. 1,48,870/- on 24th July, 2002 which a delayed payment. Thus balance cess payable is Rs. 63,340/- and there is no dispute about this quantum. The Cess Officer has levied the following amounts towards interest and penalty:
(a) Interest of Rs.72691/- on late payments is levied under Rule 41(3)(a). This is on account of delayed payment of the amount paid on 24th April, 2002.
(b) Rs. 1,52,428/- being the interest levied under Rule 41(3)(b). This is the interest payable @ 2% on the deficient amount of Rs. 63,340/-.
(c) Penalty of Rs. 3,16,700/- is levied under Rule 41(2)(a)(i). This penalty is 5 times the deficit cess amount of Rs. 63,340/-. Mr. Tapare submits that in fact under Rule 41(2)(a)(i) penalty could have been upto 10 times the total amount of cess payable i.e. upto 10 times of Rs. 2,10,210/- but a very lenient view is taken.
(d) Rs.24,000/- has been imposed as penalty under Rule 41(6).
(e) Rs. 1,90,020/- has been imposed as penalty under Rule 41(2) (c)(iii).
12. Now in so far as the quantum of interest is concerned, there is no discretion left with the Assessing Officer as well as the Appellate Authority and, hence, no fault can be found in respect of levy of Rs. 72,691/- as also levy of Rs.1,52,428/-. Consequently, the aforesaid 2 levies at Sr. No. (a) and (b) are upheld and confirmed.
13. In so far as penalty under Rule 41(6) is concerned, perusal of Sub- Rule 6 of Rule 41 shows that the penalty cannot exceed a sum of Rs. 2000/-. Levy of Rs. 24,000/- as penalty is an error apparent on the face of record. Hence that levy will have to be reduced from Rs. 24,000/- to Rs. 2000/- and it is ordered accordingly.
14. In so far as penalty of Rs. 3,16,700/- is concerned, the same is under Rule 41(2)(a)(i). It is not in dispute that this penalty is for failure to apply for registration as required and carrying on business as dealer without being registered in contravention of the provisions of the Act and Rules. It is not in dispute that the Petitioner has applied for registration on 28th March, 2002 and has been duly registered. We are concerned with the period from 1/4/2000 to 31/3/2001. Thus at t
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he highest the Petitioner was carrying on business without registration for a period of 2 years. He is already liable to pay cess and interest for that period. For his failure to carry on business without registration, penalty of 5 times the amount of deficit cess is substantially harsh. In my opinion, considering short tenure of 2 years for which the Petitioner carried on business without registration, a penalty of 25% of the total amount of cess payable being Rs. 2,12,210/- quantified at Rs. 53052/- would be a sufficient deterrent penalty for the Petitioner, particularly when substantial amount is being paid as interest. Consequently, the penalty of Rs. 3,16,700/- will stand reduced to Rs. 53,052/-. 15 In so far as penalty of Rs. 1,90,020/- under Rule 41(2)(c)(iii) is concerned, the said amount of penalty is 3 times the deficit payment of cess of Rs. 63,340/-. In my opinion, considering the fact that the Petitioner has already been made liable to pay substantial interest for the entire period, one time the amount of deficit would be just and reasonable penalty. Consequently amount of penalty payable under Rule 41(2)(c)(iii) will stand reduced from Rs. 1,90,020/- to Rs. 63,340/-. 16. As a result of the aforesaid discussion, the Writ Petition partly succeeds. Rule is made partly absolute and the impugned Orders are modified to the extent indicated hereinabove.