Judicial exercise of tax penalty discretion fails where no mala fide intention exists and revenue loss is only speculative.

Penalty under the West Bengal Sales Tax Act, 1994 was held unsustainable where the permit had been obtained before the consignment reached the check-post and the authorities accepted there was no mala fide intention or deliberate evasion. The Court held that a penal discretion under a taxing statute must be exercised judicially on relevant facts and reasoned satisfaction, not on whim, conjecture, or a speculative possibility of revenue loss. On that basis, the penalty orders and the Tribunal's affirmance could not stand, and the assessee succeeded.

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Issues: Whether penalty under section 71 of the West Bengal Sales Tax Act, 1994 was sustainable in the absence of mala fide intention or deliberate evasion, and whether the penalty orders suffered from arbitrariness and lack of reasoning.

Analysis: The permit had been obtained well before the consignment entered the check-post, and the authorities themselves accepted that there was no mala fide motive and that the failure to produce the permit at the check-post resulted from a communication gap. Even so, penalty was imposed and later reduced on a speculative view that there was a chance of loss of revenue. The Court held that the discretion to impose penalty under the penal provision had to be exercised judicially, on relevant circumstances, and could not rest on whim, conjecture, or an unreasoned assumption of possible revenue loss. In these circumstances, the penalty orders and the Tribunal's affirmance could not be sustained.

Conclusion: The penalty was unsustainable and liable to be set aside; the decision was in favour of the assessee.

Ratio Decidendi: Where a penal power under a taxing statute is discretionary, it must be exercised judicially on relevant facts and reasoned satisfaction, and penalty cannot be sustained on a mere speculative possibility of evasion when mala fide intention is absent.

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