Retrospective purchase-tax liability cannot justify penalty when no tax was due at the relevant time.

Penalty was not sustainable for the first and second quarters where the dealer's purchase-tax liability arose only after a retrospective amendment enhanced the rate. The text states that penalty under the Act is justified only on contumacious disregard of law, and non-deposit of advance tax cannot be treated as a penal default when the commodity was not exigible to purchase tax at the relevant time. It follows the earlier Division Bench view that absence of tax liability when the default occurred is sufficient cause against penalty, so the penalty demand for those quarters was rejected in favour of the assessee.

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Issues: Whether penalty could be imposed for the first and second quarters when the dealer's liability to purchase tax arose only after the statutory amendment enhancing the rate with retrospective effect.

Analysis: Penalty under the Act was held to be justified only where there was a contumacious disregard of law. At the relevant time, the purchased commodity was not exigible to purchase tax to the extent later demanded, and the liability arose only because of a retrospective amendment. In such circumstances, non-deposit of advance tax for the earlier quarters could not be treated as a penal default. The question was answered consistently with the earlier Division Bench view that absence of tax liability at the relevant time is sufficient cause against penalty.

Conclusion: Penalty could not be imposed for the first and second quarters; the issue was decided in favour of the assessee and against the revenue.

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