Appellate penalty power under sales tax law requires express statutory authority; fresh penalty orders in appeal remain appealable.

An appellate authority under the Bombay Sales Tax Act, 1959 cannot impose penalty for the first time in second appeal unless the statute expressly authorises that power. Provisions allowing confirmation, cancellation, enhancement or reduction of penalty presuppose an existing penalty order and do not permit creation of a fresh penalty where none was imposed at assessment. A fresh penalty order made for the first time in appeal is nevertheless an appealable order under the statutory scheme, so a challenge to it is maintainable and cannot be rejected as a barred third appeal.

---

---

Issues: (i) Whether the appellate authority under the Bombay Sales Tax Act, 1959 could levy penalty for the first time while deciding a second appeal; (ii) Whether an appeal lay against an order imposing penalty for the first time in appellate proceedings.

Issue (i): Whether the appellate authority under the Bombay Sales Tax Act, 1959 could levy penalty for the first time while deciding a second appeal.

Analysis: Section 55(6)(b) of the Bombay Sales Tax Act, 1959 permits the appellate authority, in an appeal against an order imposing penalty, to confirm, cancel, enhance or reduce an existing penalty. The provision does not confer an express power to impose penalty where none had been levied in the original assessment order. The Court applied the principle that appellate jurisdiction in tax matters is wide, but a penalty for the first time can be imposed only when the statute specifically authorises such action. In the absence of such specific authority, the appellate authority exceeded its jurisdiction by substituting the deleted interest with a fresh penalty under section 9(2) of the Central Sales Tax Act, 1956 read with section 36(3)(d) of the Bombay Sales Tax Act, 1959.

Conclusion: The levy of penalty for the first time in appeal was without authority of law and was invalid.

Issue (ii): Whether an appeal lay against an order imposing penalty for the first time in appellate proceedings.

Analysis: Once the appellate authority itself passed a fresh order levying penalty, that order was an appealable order under the statutory scheme. The Tribunal was therefore not justified in treating the matter as a third appeal barred by maintainability, because the challenge was directed against a distinct penalty order made for the first time in appeal.

Conclusion: The appeal against the penalty order was maintainable.

Final Conclusion: The reference was answered against the Revenue on the substantive penalty issue and in favour of the assessee on maintainability, with the appellate penalty set aside as ultra vires.

Ratio Decidendi: An appellate authority cannot impose penalty for the first time in appeal unless the statute expressly confers that power; appellate powers to confirm, reduce or enhance a penalty presuppose an existing penalty order.

---