Fiscal penalty for dishonoured tax cheques upheld where repeated default showed deliberate non-compliance despite claimed hardship.

A dealer's penalty under section 12B(3) of the Karnataka Sales Tax Act was justified where advance tax fell short and cheques were repeatedly issued without sufficient funds, because deliberate non-compliance could attract civil penalty even without mens rea. Financial hardship did not warrant deletion of the penalty absent material showing a genuine and reasonable cause for repeated default, especially where payment was made only after coercive recovery steps. The existence of a separate penalty under section 13(2) did not bar action under section 12B(3), as the two provisions operated in different fields. The Tribunal's interference with the reduced penalty was therefore unsustainable.

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Issues: (i) Whether penalty under section 12B(3) of the Karnataka Sales Tax Act, 1957 could be waived on the ground that the default was not wilful or mala fide and that mens rea was absent; (ii) Whether financial hardship and liquidity problems could justify deletion of penalty; (iii) Whether the existence of penalty under section 13(2) of the Karnataka Sales Tax Act, 1957 could be treated as a sufficient reason to avoid penalty under section 12B(3).

Issue (i): Whether penalty under section 12B(3) of the Karnataka Sales Tax Act, 1957 could be waived on the ground that the default was not wilful or mala fide and that mens rea was absent.

Analysis: The provision empowered levy of penalty where advance tax paid fell short beyond the statutory margin, and the authority had to exercise discretion on the facts of each case. The dealer had regularly filed monthly returns but issued cheques knowing that sufficient funds were not available, and the cheques were dishonoured throughout the year. On those facts, the default was not accidental or technical. In fiscal matters, absence of mens rea did not by itself defeat imposition of civil penalty where the conduct showed deliberate non-compliance.

Conclusion: Penalty under section 12B(3) could not be waived on the ground of absence of mens rea; the finding of deliberate default was justified.

Issue (ii): Whether financial hardship and liquidity problems could justify deletion of penalty.

Analysis: Financial difficulty may be a relevant circumstance only if it is supported by material and explains the default. Here, the assessee was a long-standing dealer, had issued cheques without adequate funds, and paid only after coercive recovery steps were taken. The record did not show a satisfactory or reasonable cause for the repeated default. The Tribunal's reliance on hardship to delete the penalty ignored the factual pattern of repeated dishonour and delayed payment.

Conclusion: Financial hardship did not furnish a valid basis to delete the penalty.

Issue (iii): Whether the existence of penalty under section 13(2) of the Karnataka Sales Tax Act, 1957 could be treated as a sufficient reason to avoid penalty under section 12B(3).

Analysis: Penalty under section 13(2) and penalty under section 12B(3) operated in different fields. The mere fact that one statutory consequence had already followed did not make the other provision otiose or require waiver of the latter. The appellate authority's reduction of penalty was an exercise of discretion on quantum and did not justify complete cancellation.

Conclusion: The existence of penalty under section 13(2) did not bar penalty under section 12B(3).

Final Conclusion: The Tribunal's interference with the reduced penalty was held unsustainable, and the order restoring the appellate authority's penalty was upheld.

Ratio Decidendi: Where a dealer knowingly tenders cheques towards admitted tax without sufficient funds and the cheques are repeatedly dishonoured, the default is deliberate for purposes of fiscal penalty, and hardship or an earlier statutory penalty does not by itself extinguish liability under a distinct penal provision.

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