Penalty discretion under MVAT extends to quantum, and a reduced penalty was upheld for delayed audit report filing.

Section 61(2) of the Maharashtra Value Added Tax Act is construed as a discretionary penalty provision: the word "may" means penalty is not mandatory, and the discretion extends not only to whether penalty should be imposed but also to its quantum. The dealer's explanation must be considered after a reasonable opportunity of hearing, and mandatory-penalty authorities were distinguished because they used different statutory language. The interpretive rule favouring the assessee where two views are possible supported this reading. On the stated facts, the Tribunal found the filing delay was not deliberate and gave reasons for reducing the penalty, so the reduction was upheld.

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Issues: Whether Section 61(2) of the Maharashtra Value Added Tax Act, 2002 confers discretion only as to imposition of penalty or also as to the quantum of penalty, and whether the Tribunal was justified in reducing the penalty for delayed filing of the audit report.

Analysis: The expression "may" in Section 61(2) shows that imposition of penalty is not mandatory. The provision requires a reasonable opportunity of being heard, indicating that the dealer's explanation must be considered before penalty is imposed. The discretionary character of the provision is not confined to the decision whether to levy penalty at all; it extends to the amount to be imposed. Authorities dealing with mandatory penalty provisions, such as Section 11AC of the Central Excise Act, 1944 and Section 7(5) of the Rajasthan Sales Tax Act, 1994, were distinguished because those provisions operate with different statutory language. The rule that, where two interpretations are possible, the one favourable to the assessee should be adopted also supported this construction. On facts, the Tribunal recorded that the delay was not deliberate and gave reasons for reducing the penalty.

Conclusion: Section 61(2) confers discretion both as to whether penalty should be imposed and as to the quantum of penalty. The reduction of penalty by the Tribunal was justified, and the appeal failed.

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