Ultra vires penalty rule under sales tax law cannot create penal liability without clear statutory authority.

Rule 16(2) of the Central Sales Tax (Orissa) Rules was considered invalid to the extent it imposed penalty for non-payment of tax demanded under the Central Sales Tax Act. The Act enabled State sales tax authorities to assess, collect and enforce tax and penalty payable under it, but it did not expressly or by necessary implication authorise a separate penalty for default in payment of demanded tax. The rule-making power under the Act could not be used to create new penal liability beyond the parent statute. The penalty imposed under rule 16(2) was therefore beyond delegated authority and without jurisdiction.

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Issues: Whether rule 16(2) of the Central Sales Tax (Orissa) Rules validly authorised levy of penalty for non-payment of tax demanded under the Central Sales Tax Act, and whether the penalty imposed under that rule was without jurisdiction.

Analysis: Section 9 of the Central Sales Tax Act, 1956 enables State sales tax authorities to assess, collect and enforce payment of tax and penalty payable under the Act, but the Act itself contains no specific provision creating a penalty for default in payment of tax demanded. Section 13 empowers rule-making, yet the rule-making power must remain within the confines of the Act and cannot be used to create a new penal liability unless the statute expressly or by necessary implication authorises it. The Court held that neither section 9 nor section 13 contains any clear authority for a rule imposing penalty for non-payment of demanded tax, and therefore rule 16(2), to that extent, travelled beyond the delegated power.

Conclusion: Rule 16(2) of the Central Sales Tax (Orissa) Rules was held to be ultra vires the Act insofar as it authorised penalty for non-payment of tax demanded, and the penalty imposed on that basis was without jurisdiction.

Ratio Decidendi: A rule-making authority cannot create a penal liability in the absence of express statutory authority or necessary implication from the parent Act, especially in a taxing statute which must be strictly construed.

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