Penalty discretion under the VAT document requirement must be reasoned; maximum levy reduced to the minimum prescribed level.

Transport of goods without the documents required under section 53(2) of the Karnataka Value Added Tax Act was treated as a valid contravention, because the invoice named the consignee at Madhya Pradesh and a later internal stock-transfer arrangement could not justify diversion to a different destination. However, where the penalty provision allowed a range from two times to three times the tax liability, the maximum penalty could be imposed only with recorded reasons. As the revisional authority and check-post officer gave no reasons for the higher quantum, the enhanced penalty was not sustained and was reduced to the minimum prescribed level.

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Issues: Whether penalty for transport of goods without the prescribed documents under section 53(2) of the Karnataka Value Added Tax Act, 2003 could be sustained at the maximum rate of three times the tax liability, or whether it had to be restricted to the minimum prescribed rate of two times the tax liability.

Analysis: The goods were intercepted while being transported without documents accompanying them in the manner required by section 53(2) of the Karnataka Value Added Tax Act, 2003. The invoice disclosed the consignee as the assessee at Madhya Pradesh, and the Court held that the subsequent internal stock-transfer arrangement could not justify diversion of the goods to a different destination than the one mentioned in the invoice. At the same time, the penalty provision prescribed a range from two times to three times the tax liability, and the choice to impose the maximum penalty was discretionary. The revisional authority and the check-post officer had not recorded reasons to justify the maximum quantum.

Conclusion: The contravention was upheld, but the levy of penalty at three times the tax liability was not sustained. The penalty was restricted to two times the tax liability.

Final Conclusion: The assessee remained liable for penalty for breach of the document requirement, but relief was granted on the quantum by deleting the enhanced portion of the penalty.

Ratio Decidendi: Where a statute prescribes a minimum and maximum penalty, imposition of the maximum penalty must be supported by reasons; in the absence of such reasons, the penalty may be reduced to the minimum prescribed level.

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