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Trimurti Metal Industries Pvt. Ltd. v/s State of M.P. & Others

    W.P. No. 1801 of 2013

    Decided On, 16 September 2013

    At, High Court of Madhya Pradesh

    By, THE HONOURABLE MR. JUSTICE S.K. GANGELE & THE HONOURABLE MR. JUSTICE ROHIT ARYA

    For the Petitioner: N.K. Gupta, Advocate. For the Respondent: Vivek Khedkar, Dy. Advocate General.



Judgment Text

1. Heard.

The petitioner has filed this petition against the orders dt.22.2.2013 and 20.4.2012 (Annexure P/1 and P/2 respectively).

2. The petitioner is a Private Limited Company incorporated under the Companies Act. The dispute involved in this petition is of assessment year 1.4.2005 to 31.3.2006. The petitioner was subjected to payment of tax vide order dt.27.12.2008 and accordingly the petitioner paid the tax and the liability of the petitioner was fixed in regard to payment of tax of Rs. 46,849/-. Because the petitioner had already paid the tax, hence, an amount of Rs. 3647/- was ordered to be refunded to the petitioner. Subsequently, on internal audit it was found that the petitioner had purchased aluminum scrape from unregistered dealers and this fact was escaped from the notice of tax authorities, hence, reassessment proceeding was initiated against the petitioner. Consequently, a show cause notice was issued to the petitioner, a copy of which has been filed along with the petition as Annexure P/6. In the show cause notice, it is mentioned that the petitioner purchased aluminum scrape from unregistered dealers, hence it is liable to pay tax @ 4.6 %. It is further mentioned in the show cause notice that the liability of the petitioner in regard to payment of tax is of Rs.1,10,919/-.

3. The Assistant Commercial Tax Officer, Gwalior vide order dt.20.4.2012 imposed a tax of Rs.1,10,919/- against the petitioner after holding that the petitioner purchased aluminum scrap of Rs.24,11,288/- during the assessment year, hence, the liability of the tax of the petitioner is 4.6%. The authority also held that because the petitioner committed mistake in regard to non-payment of tax, hence, in accordance with Section 28 (1) of the M.P. Commercial Tax Act, 1994 (hereinafter referred to the Act), penalty of equal to 100% tax of Rs.1,10,919/- is also imposed against the petitioner.

4. Against the aforesaid order, the petitioner preferred a revision before the Divisional Dy.Commissioner, Commercial Tax, Gwalior, that has been dismissed. Being aggrieved by the aforesaid order, the petitioner filed the present petition.

5. The respondents in the return have taken a preliminary objection that an appeal is maintainable before the appellate authority against the order passed by the revisional authority in accordance with the provisions of Section 62 (4) and (5) of the Act, hence, the petition is not maintainable. In the return it is further pleaded by the respondents that the petitioner purchased aluminum scrap from unregistered dealers and did not pay the tax, hence, the purchase tax @ 4.6 % has rightly been imposed. It is further pleaded that the penalty in accordance with Section 28 (1) of the Act has been imposed against the petitioner, hence, the orders passed by the authorities are in accordance with law.

6. In regard to preliminary objection, this court issued notice of the writ petition and thereafter the return has been filed. In the return, the department has pleaded that the tax and penalty has rightly been imposed against the petitioner and the learned counsel for the petitioner did not press the petition in regard to imposition of tax. He only press the petition against the order of imposition of penalty. In such circumstances, at this stage, it would not be just and proper to dismiss the petition on the the ground of alternative remedy.

7. Section 28 (1) of the Act prescribes provision in regard to imposition of penalty. The aforesaid section is as under :-

"28. Assessment of turnover escaping assessment - (1) Where an assessment has been made under this Act or the Act repealed by this Act and if for any reason any sale or purchase of goods chargeable to tax under this Act or the Act repealed by this Act during any period has been under assessed or has escaped assessment or assessed at a lower rate or any deduction has been wrongfully made therefrom or a set off has been wrongly allowed, the Commissioner may, at any time within five calender years from the date of order of assessment after giving the dealer a reasonable opportunity of being heard and after making such enquiry as he considers necessary, proceed in such manner as may be prescribed to reassess within a period of two calender years from the commencement of such proceedings the tax payable by such dealer and the Commissioner may, where the omission leading to such reassessment is attributable to the dealer, direct that the dealer shall pay by way of penalty in addition to the amount of tax so assessed, a sum not exceeding that amount."

8. The aforesaid Section itself prescribes that where the omission leading to such reassessment is attributable to the dealer, the authority can direct that the dealer shall pay by way of penalty a sum not exceeding the amount of tax or equal to the sum not exceeding the amount of tax so assessed. In the present case in the show cause notice, a copy of which has been filed along with the petition as Annexure P/6, it is mentioned that due to mistake the tax on aluminum scrap could not be imposed, although the petitioner was liable to pay the tax. No fact has been mentioned in the show cause notice in regard to penalty. Simply, it is mentioned that why the penalty be not imposed. The authority - Assistant Commercial Tax Officer, Gwalior in the impugned order dt.20.4.2012 (Annexure P/2) has also not mentioned the reasons in regard to imposition of penalty. It is simply mentioned that because the petitioner did not pay the tax, hence, he is liable to pay 100% penalty.

9. It is a fact that earlier the petitioner was assessed and the authority passed the order and a refund was also ordered in favour of the petitioner. This is not a case of evasion of tax.

10. Hon'ble Supreme Court in Uniflex Cables Limited v. Commissioner, Central Excise reported in (2011) 14 SCC 568 has held that when there is no allegation against the assessee that it knowingly did not pay the tax and the case is of interpretational nature, then no penalty could be imposed. The relevant findings are as under :-

"13. It is also evident from the said order that the Commissioner also found that except for the statement of the Excise Executive Director and Excise Clerk of the assessee Company there was no other evidence pointing out any accusing finger at them in dealing with offending goods knowingly. A clear finding has been recorded by the Commissioner that it was difficult to hold that the appellant knowingly dealt with excisable goods which were cleared without payment of duty. Nor the Department itself took it as a formal case of offence.

14. When we take into consideration the aforesaid facts and also the fact that the Commissioner himself found that it is only a case of interpretational nature, in our considered opinion, no penalty could be and is liable to be imposed on the appellant herein."

11. Hon'ble Supreme Court in Kesar Enterprises Limited v. State of Uttar Pradesh and others reported in (2011) 13 SCC 733 has considered the observance of rule of natural justice and issuance of show cause notice while interpreting Rule 633 (7) of the U. P. Excise Manual. The aforesaid rule reads as under :-

"(7) If certificate not received within time or or conditions of bond infringed, penalty to be realised. - If the certificate be not received within the time mentioned in the bond or pass, or if on receipt of the certificate it appears that any of the conditions of the bond have been infringed, the Collector of the exporting district or the Excise Inspector who granted the pass shall forthwith take necessary steps to recover from executant or his surety the penalty due under the bond."

In the aforesaid case, Hon'ble Supreme Court has held as under :-

"30. Having considered the issue, framed in para 16, on the touchstone of the aforenoted legal principles in regard to the applicability of the principles of natural justice, we are of the opinion that keeping in view the nature, scope and consequences of direction under sub-rule (7) of Rule 633 of the Excise Manual, the principles of natural justice demand that a show-cause notice should be issued and an opportunity of hearing should be afforded to the person concerned before an order under the said Rule is made, notwithstanding the fact that the said Rule does not contain any express provision for the affected party being given an opportunity of being heard.

31. Undoubtedly, action under the said Rule is a quasi-judicial function which involves due application of mind to the facts as well as to the requirements of law. Therefore, it is plain that before raising any demand and initiating any step to recover from the executant of the bond any amount by way of penalty, there has to be an adjudication as regards the breach of conditions (s) of the bond or the failure to produce the discharge certificate within the time mentioned in the bond on the basis of the explanation as also the material which may be adduced by the person concerned denying the liability to pay such penalty. Moreover, the penalty amount has also to be quantified before proceedings for recovery of the amount so determined are taken.

32. In our view, therefore, it the requirement of an opportunity show cause is not read into the said Rule, an action thereunder would be open to cha

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llenge as violative of Article 14 of the Constitution of India on the ground that the power conferred on the competent authority the provision is arbitrary." 12. From the aforesaid judgment of the Hon'ble Supreme Court, it is clear that imposition of penalty in taxing institute is quasi judicial in nature and it requires proper adjudication and the authority has to assign proper reasons. In the present case, reasons have not been assigned. Apart from this, in the show cause notice itself it was mentioned that due to mistake, the tax could not be imposed against the petitioner. In such circumstances, in our opinion, imposition of penalty against the petitioner is illegal. 13. Consequently, the petition is partly allowed. The orders dt.22.2.2013 and 20.4.2012 (Annexure P/1 & P/2) in regard to imposition of tax are upheld, however, the orders dt.22.2.2013 and 20.4.2012 (Annexure P/1 and P/2) in regard to imposition of penalty are hereby quashed. 14. No order as to costs. Petition partly allowed.
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