2016 (3) TMI 1155 - HC - VAT and Sales Tax

High Court overturns tax penalty order, stresses need for thorough assessment and proportionality in tax penalties

The High Court set aside the order of the Additional Commissioner of Commercial Tax for failing to consider essential aspects of the case regarding a ... Imposition of penalty - goods imported coming from Mangalore Port to Bangalore - E-Sugam was generated on September 18, 2012 at 6.34 p.m. and the period of three days was over - penalty of three times the tax was imposed on the suspicion that E- Sugam might have been recycled to avoid tax - Held that: - it was necessary for the respondent-Commissioner to examine the facts of the present case and thereafter to reach the conclusion as to whether the explanation so given could be said as sufficient reason for the so-called breach or non-compliance of the requisite provision or not - when the aspects are not considered which goes to the root of the matter, the order passed can be said to be a non-speaking, since the grounds germane to exercise the power are not considered, though the respondent-Commissioner has considered only the question of law without considering the facts of the present case. Under the circumstances, we find that the order cannot be sustained in the eye of law and it would be just and proper to remand the matter to the authority for reconsideration of the revision - appeal allowed by way of remand. Issues:Appeal against order of Additional Commissioner of Commercial Tax setting aside penalty imposed for suspected tax evasion based on recycled E-Sugam; Failure of revisional authority to consider facts of the case and proportionality of penalty; Non-speaking order leading to remand for reconsideration.Analysis:The judgment involves an appeal against the order of the Additional Commissioner of Commercial Tax, setting aside a penalty imposed under section 53(12) of the Karnataka Value Added Tax Act, 2003. The penalty was imposed on the suspicion that E-Sugam might have been recycled to avoid tax by transporting more than one consignment. The first appellate authority had initially set aside the penalty, but the revisional authority, the Commissioner, set aside the order of the first appellate authority and restored the penalty. The High Court noted that the revisional authority failed to consider the facts of the case and the proportionality of the penalty. The court emphasized that the revisional authority did not address whether the explanation provided by the appellant was sufficient to avoid the penalty. The court found the order to be non-speaking as crucial aspects were not considered, leading to the order being unsustainable in the eye of the law.The High Court concluded that the order passed by the Additional Commissioner of Commercial Tax could not be sustained due to the failure to consider essential aspects of the case. Therefore, the court set aside the impugned order and directed the revisional authority to reconsider the matter, taking into account the observations made in the judgment. The court instructed that a fresh order should be passed within three months from the date of receipt of the court's order, after giving an opportunity of hearing to the affected parties. The appeal was allowed to the extent of setting aside the impugned order, with no order as to costs.In summary, the High Court's judgment highlighted the importance of considering all relevant facts, explanations provided, and the proportionality of penalties in tax matters. The failure to address these crucial aspects led to the order being deemed non-speaking and unsustainable in the eyes of the law, necessitating a remand for reconsideration by the revisional authority.