1974 (12) TMI 64 - HC - VAT and Sales Tax

Successor officer empowered to impose penalties independently of original officer in tax assessment orders.

Commissioner of Sales Tax Versus S. Gupta and Company

Commissioner of Sales Tax Versus S. Gupta and Company - [1975] 35 STC 427 (Bom) Issues Involved:1. Timing of penalty imposition relative to assessment order.2. Authority of the successor officer to impose penalty.3. Discretion exercised by the original officer regarding penalty versus prosecution.Detailed Analysis:1. Timing of Penalty Imposition Relative to Assessment Order:The respondents argued that a penalty order must be issued simultaneously with the assessment order. The Tribunal rejected this argument, referring to rule 36(2) of the Bombay Sales Tax Rules, 1959, which allows for a penalty order to be incorporated in the assessment order or issued separately or subsequently. The Tribunal held that the rule was directory rather than mandatory.2. Authority of the Successor Officer to Impose Penalty:The Tribunal initially ruled that only the officer who issued the assessment order could impose a penalty. However, upon review, it was determined that this interpretation was incorrect. The relevant provision, section 36(2) of the 1959 Act, does not stipulate that the same officer must impose the penalty. The term 'Commissioner' in the Act refers to the office, not the individual. The successor officer, therefore, has the authority to impose a penalty. This interpretation prevents absurd results, such as the termination of proceedings due to the transfer, death, or retirement of the original officer. The respondents' counsel conceded this point during the hearing.3. Discretion Exercised by the Original Officer Regarding Penalty Versus Prosecution:The Tribunal had found that the original Sales Tax Officer exercised discretion to prosecute rather than impose a penalty, thus precluding subsequent penalty imposition. This was based on the officer's recommendation for prosecution. However, the Act requires actual institution of prosecution, not merely a recommendation, to preclude penalty imposition. Since the Commissioner did not grant sanction for prosecution, neither remedy (penalty or prosecution) was availed. The notice for penalty was kept in abeyance pending the Commissioner's decision. Upon the Commissioner's refusal to sanction prosecution, the successor officer was within his rights to proceed with penalty imposition.Conclusion:The High Court concluded that the Tribunal's interpretation was incorrect. It was competent for the successor officer to levy a penalty even if the original officer had not done so in the assessment order. The respondents were ordered to pay the costs of the reference. The reference was answered in the negative, affirming the successor officer's authority to impose penalties.