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Issues: (i) whether the petitioner incurred liability to penalty for contravention of the tax deduction and deposit requirements under section 13AA of the Orissa Sales Tax Act, 1947; (ii) whether the maximum penalty under section 13AA(6) had to be imposed or the authority was required to exercise discretion in fixing the quantum of penalty.
Issue (i): whether the petitioner incurred liability to penalty for contravention of the tax deduction and deposit requirements under section 13AA of the Orissa Sales Tax Act, 1947.
Analysis: Sub-section (1) of section 13AA required deduction of tax at source from payments made to contractors in works contracts, and sub-section (3) required deposit of the deducted amount in the Government treasury within the prescribed time. The facts showed that payments were made to contractors on several dates in 1998 and 1999, but deduction at source was not made in respect of those payments and the deducted tax was not deposited as required. The statutory requirements were therefore breached.
Conclusion: The petitioner was liable to penalty under section 13AA(6) of the Orissa Sales Tax Act, 1947.
Issue (ii): whether the maximum penalty under section 13AA(6) had to be imposed or the authority was required to exercise discretion in fixing the quantum of penalty.
Analysis: Section 13AA(6) prescribes only an outer limit by using the expression "not exceeding twice the amount" required to be deducted and deposited. The power to impose penalty is a judicial discretion and cannot be exercised arbitrarily. The order imposing the maximum penalty did not record reasons for choosing that extent, and the revisional order also did not supply specific reasons for the reduced quantum. In the absence of reasoned consideration of the degree of penalty, the matter required reconsideration.
Conclusion: The authority was not bound to impose the maximum penalty and was required to determine the quantum by a reasoned exercise of discretion.
Final Conclusion: The liability to penalty was sustained, but the question of the proper quantum of penalty was remitted to the sales tax authority for fresh consideration confined to that issue alone.
Ratio Decidendi: Where a penalty provision prescribes only a ceiling, the authority must exercise a reasoned judicial discretion in fixing the amount and cannot automatically impose the maximum penalty.
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