1974 (8) TMI 94 - HC - VAT and Sales Tax

Court annuls penalty under Orissa Sales Tax Act, emphasizes penalties for deliberate defiance

The court annulled the penalty imposed under section 9-B(3) of the Orissa Sales Tax Act on a registered dealer for sales tax on railway freight, ... - Issues:Challenge to the vires of section 9-B(3) of the Orissa Sales Tax Act and imposition of penalty under the Act.Analysis:The petitioner, a registered dealer under the Orissa Sales Tax Act, was assessed for sales tax on railway freight, leading to the imposition of a penalty under section 9-B(3) of the Act. The primary contentions revolved around the constitutionality of the provision and the justification for the penalty in the given circumstances. The court identified two key questions for determination: the legislative competence of the State Legislature in enacting section 9-B(3) and the justification for the penalty imposed.Regarding the imposition of penalty, the petitioner argued that the collection of sales tax on freight was done in good faith before legal clarity was established. The court considered the petitioner's conduct and intent, emphasizing that penalty imposition should be reserved for deliberate defiance or contumacious behavior. Citing relevant case law, the court found no justification for the penalty under section 9-B(3) and annulled the levy based on the circumstances presented.On the constitutional challenge, the petitioner contended that section 9-B(3) exceeded the legislative authority granted under the Constitution. Drawing parallels to previous judgments, the petitioner argued that the provision was arbitrary and confiscatory. Despite extensive arguments on both sides, the court refrained from delving into the constitutional validity due to the success of the petitioner in avoiding the penalty. Citing precedents, the court emphasized the need to confine decisions to the specific issues raised in the proceedings, leading to the declination of deciding on the constitutional validity of the provision.In conclusion, the court allowed the application, issuing a writ of certiorari to quash the penalty imposition. Each party was directed to bear their own costs, with both judges concurring on the decision.