Pre-penalty notice and hearing are mandatory under VAT law; recovery before statutory procedure makes the penalty unlawful.

Penalty under the Karnataka Value Added Tax Act could not be sustained where it was levied and collected before issuance of a show cause notice and before giving an effective opportunity to explain the alleged contravention. Section 53(12) requires the officer to follow the statutory procedure, including notice and consideration of whether sufficient cause is shown, before imposing penalty. Recovery of the amount in advance rendered the levy unlawful, and the availability of an alternative appellate remedy did not cure the defect in procedure. The penalty order was quashed and the amount collected towards penalty was held refundable.

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Issues: Whether the penalty imposed under Section 53(12) of the Karnataka Value Added Tax Act, 2003 was sustainable when it was levied before a show cause notice and before affording an effective opportunity to explain the alleged contravention.

Analysis: Section 53(12) contemplates action by the officer only after notice and consideration of whether sufficient cause is shown for the alleged non-compliance. The record showed that the penalty was collected before the impugned order was passed, which meant that the amount was recovered without first following the statutory process. In those circumstances, the levy could not be sustained. The reference to an alternative appellate remedy did not cure the illegality in the manner in which the penalty was imposed.

Conclusion: The penalty order was illegal and liable to be quashed, and the amount collected towards penalty was refundable to the assessee.

Final Conclusion: The writ petition succeeded because the penalty was imposed in breach of the statutory procedure governing detention and penal action under the VAT law.

Ratio Decidendi: Where a statute requires notice and consideration of cause before penalty is imposed, recovery of penalty prior to completion of that procedure is unlawful.

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