Penalty Provision U/S 16(7) HP VAT Act Cannot Be Invoked Without First Ascertaining Applicability Of S.16(4): Himachal Pradesh High Court

The Himachal Pradesh High Court has held that the penalty provision couched in Section 16(7) of the HP Value Added Tax Act, 2005 cannot be invoked until the statutory authority is satisfied regarding the applicability of Section 16(4) of the Act.Section 16(4) requires a registered dealer to pay the full amount of tax due from him into a Government Treasury before it furnishes the return. Failure to do so attracts a penalty under Section 16(7).A division bench of Justices Tarlok Singh Chauhan and Rakesh Kainthla observed, “None of the authorities below has satisfied itself with regard to the applicability of provisions of Section 16(4) of HP VAT Act, 2005 before invoking sub-section (7) thereof. Obviously, in such circumstances, without there being a specific finding with regard to applicability of subsection (4) of Section 16, the orders passed by the authorities below cannot sustain.”The Petitioner dealt in wire rods, tor steel, etc. It had caused a delay of one day and five months respectively, before complying with Section 16(4) for the relevant periods, due to financial crunch.In this backdrop, the Revenue had imposed a penalty on the Petitioner under Section 16(7). Contesting the same, the Petitioner contended that though the tax was paid late however, there was no breach of Section 16(4) insofar as the returns were filed only after payment of tax.The Court noted that the Revenue had not satisfied itself regarding breach of Section 16(4). Thus, it remitted the matter back to the assessing authority.In doing so, the Court referred to Dayle De'Souza v. Union of India, (2021) where the Supreme Court had held that whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances.“The intent, objective and purpose of the enactment should guide the exercise of discretion, as the presumption is that the makers did not anticipate anomalous or unworkable consequences. The intention should not be to target and penalise an unintentional defaulter who is in essence law-abiding,” it was held.Appearance: Mr. Vishal Mohan, Senior Advocate, with M/s Aditya Sood & Varun Gupta, Advocates for Petitioner; Mr. I.N. Mehta, Senior Additional Advocate General, with Ms. Sharmila Patial, Additional Advocate General for RespondentCase title: M/s Bhushan Power & Steel Ltd. v. Assistant Excise & Taxation Commissioner and anotherCase no.: Civil Revision No. 267 of 2017Click here to read order

Penalty Provision U/S 16(7) HP VAT Act Cannot Be Invoked Without First Ascertaining Applicability Of S.16(4): Himachal Pradesh High Court

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