Reasonable cause limits sales tax penalty, and validating legislation cannot shield an otherwise unsustainable penalty order.

Section 15-A(1)(a) of the U.P. Sales Tax Act was held to require absence of reasonable cause before penalty can be imposed for failure to deposit tax with the return. The court treated the phrase "without reasonable cause" as applying to the default of non-deposit as well as other specified defaults, and a bona fide belief supported a factual finding of reasonable cause. The validating Act of 1976 did not cure a penalty order that remained unsustainable under the State penalty provision, nor did it bar appellate or revisional scrutiny of whether the statutory precondition for penalty was met.

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Issues: (i) Whether the expression "without reasonable cause" in section 15-A(1)(a) of the U.P. Sales Tax Act governs the failure to deposit tax along with the return so that penalty can be imposed only where no reasonable cause is shown. (ii) Whether the validating provision in section 9(2A) read with section 9 of the Validating Act, 1976 cures an otherwise unjustified penalty order and excludes appellate or revisional scrutiny.

Issue (i): Whether the expression "without reasonable cause" in section 15-A(1)(a) of the U.P. Sales Tax Act governs the failure to deposit tax along with the return so that penalty can be imposed only where no reasonable cause is shown.

Analysis: Section 15-A(1)(a) is penal in character and the words "without reasonable cause" appear in the opening part of the clause before the different defaults are set out. The language does not justify confining the requirement of reasonable cause only to the first limb dealing with failure to furnish the return. A dealer who fails to deposit tax along with the return is liable to penalty only if that failure is without reasonable cause. The finding that the assessee acted under a bona fide belief and had a reasonable cause was a finding of fact and could not be branded arbitrary.

Conclusion: The requirement of reasonable cause applies to non-deposit of tax along with the return, and the penalty could not be sustained where reasonable cause was found.

Issue (ii): Whether the validating provision in section 9(2A) read with section 9 of the Validating Act, 1976 cures an otherwise unjustified penalty order and excludes appellate or revisional scrutiny.

Analysis: The validating legislation only introduced the penalty provision into the Central Act and validated earlier penalty orders passed on the footing that the State law penalty was attracted. It did not validate orders that were unsustainable even under the State penalty provision itself. Nor did section 9(2) take away the assessee's right of appeal or revision or restrict the jurisdiction of the appellate and revisional authorities to test whether the penalty was legally justified. The revisional authority was therefore entitled to examine the validity of the penalty and set it aside where the statutory precondition of absence of reasonable cause was not met.

Conclusion: The validating provision did not cure the defect in the penalty order and did not bar appellate or revisional interference.

Final Conclusion: The penalty order was invalid on the facts found, and the revision challenging its annulment failed.

Ratio Decidendi: In a penal tax provision requiring absence of reasonable cause, penalty for failure to deposit tax cannot be sustained where reasonable cause is found, and a validating enactment does not protect an order that remains unjustified under the governing State penalty law or oust appellate and revisional jurisdiction.

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