Strict proof of unauthorised tax realisation required before penalty can stand under trade tax law.

Penalty under section 15A(1)(qq) of the U.P. Trade Tax Act requires strict proof that the dealer unauthorisedly realised tax, or an amount in the guise of tax, in contravention of section 8A(2)(b). Where the dealer collected amounts while an eligibility-certificate application under section 4A was pending, and the certificate was later granted with retrospective effect, the statutory breach was not clearly established and the quasi-criminal penalty could not stand. Alleged non-deposit of the realised amount did not cure the failure to prove the essential ingredients of the charge, so the penalty was unsustainable on the record.

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Issues: (i) Whether penalty under section 15A(1)(qq) of the U.P. Trade Tax Act, 1948 could be sustained where the dealer realised amounts during the pendency of its eligibility-certificate application under section 4A and before grant of the certificate with retrospective effect. (ii) Whether the alleged subsequent deposit of the realised amount, or the absence of proved contravention of section 8A(2)(b), barred levy of penalty.

Issue (i): Whether penalty under section 15A(1)(qq) of the U.P. Trade Tax Act, 1948 could be sustained where the dealer realised amounts during the pendency of its eligibility-certificate application under section 4A and before grant of the certificate with retrospective effect.

Analysis: The relevant inquiry was whether, on the date of the taxable event, the dealer had in fact contravened section 8A(2)(b) by unauthorisedly realising sales tax or purchase tax, or an amount in lieu thereof by a different name or colour. The certificate application had been filed long before, and the certificate was granted later with retrospective effect. The reasoning adopted was that until the eligibility certificate was actually granted, it could not be said with certainty that the dealer's collection of an amount equivalent to tax, pending the uncertain outcome of the application, constituted the statutory breach required for penalty. Penalty being quasi-criminal, the department had to establish the necessary ingredients of the charge.

Conclusion: Penalty under section 15A(1)(qq) was not justified on these facts.

Issue (ii): Whether the alleged subsequent deposit of the realised amount, or the absence of proved contravention of section 8A(2)(b), barred levy of penalty.

Analysis: The Tribunal had relied upon non-deposit under section 29A(1), but the present proceeding concerned only penalty under section 15A(1)(qq). The record did not conclusively establish that the realised amount had not been deposited, and in any event the department failed to prove that the statutory ingredients of unauthorised realisation by giving the amount a different name or colour were met. In the absence of clear proof of the breach, the penalty order could not stand.

Conclusion: The penalty could not be sustained on the basis of the materials on record.

Final Conclusion: The revisions succeeded and the penalty orders were set aside, leaving the department free to verify and recover any amount actually realised if the factual basis for such recovery is established.

Ratio Decidendi: For penalty under section 15A(1)(qq), the department must strictly prove unauthorised realisation of tax in contravention of section 8A(2)(b); where such contravention is not established, penalty cannot be imposed, particularly in a quasi-criminal proceeding.

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