Discretionary sales tax penalty requires recorded reasons and reconsideration after appellate variation of assessment.

A discretionary penalty under section 13(5) of the Orissa Sales Tax Act must be based on objective, relevant considerations and supported by recorded reasons when the assessee's explanation is rejected. The authority cannot impose the penalty mechanically for non-payment within time. Where an appellate order later annuls or reduces the underlying assessment, the third proviso to section 13(5) requires the penalty to be refunded or proportionately reduced. The penalty order was therefore held unsustainable as passed and the matter had to be reconsidered afresh in light of the appellate order and the statutory proviso.

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Issues: (i) Whether the penalty imposed under section 13(5) of the Orissa Sales Tax Act, 1947 was liable to be reconsidered in the light of the appellate order nullifying or varying the assessment. (ii) Whether the authority was required to record reasons while exercising discretion to impose penalty for non-payment of demanded tax within the prescribed time.

Issue (i): Whether the penalty imposed under section 13(5) of the Orissa Sales Tax Act, 1947 was liable to be reconsidered in the light of the appellate order nullifying or varying the assessment.

Analysis: The third proviso to section 13(5) provides that where an assessment, penalty, or interest is annulled or reduced in appeal, revision, or reference, the penalty imposed under that sub-section must be refunded or proportionately reduced. Since the later order of the Tribunal had not been available to the assessing authority when the penalty was imposed, the authority had to examine the effect of that order and decide whether the proviso was attracted.

Conclusion: The matter required remand to the Sales Tax Officer for reconsideration of the penalty in the light of the Tribunal's order and the third proviso to section 13(5).

Issue (ii): Whether the authority was required to record reasons while exercising discretion to impose penalty for non-payment of demanded tax within the prescribed time.

Analysis: The power under section 13(5) is discretionary and not automatic. Such discretion must be exercised on relevant considerations, after objective assessment of the explanation offered by the assessee, and reasons must be assigned for rejecting that explanation. Recording reasons is a safeguard against arbitrariness and enables scrutiny of whether the discretion was exercised lawfully.

Conclusion: The penalty order was vulnerable because reasons were required to be recorded while deciding whether to impose penalty.

Final Conclusion: The writ petition succeeded to the extent that the penalty order could not stand as passed and the matter had to go back for fresh consideration in accordance with law.

Ratio Decidendi: A discretionary penalty under section 13(5) must be decided on objective and relevant considerations, with reasons recorded for accepting or rejecting the assessee's explanation, and the proviso governing annulment or variation of the underlying assessment must be applied when an appellate order so requires.

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