Penalty under Karnataka sales tax law not sustainable where prior payment was ignored and an omitted proviso was applied.

Penalty under section 12B(4) of the Karnataka Sales Tax Act was analysed in a case where the assessee had already paid a substantial amount by cheque before service of the assessment order, but that payment was ignored while computing the balance demand and penalty. The revisional authority also relied on non-filing of form 32B under section 6A(2), even though the proviso supporting that reasoning had been omitted from 01.04.2002 and did not apply to assessment year 2003-04. The note states that, on these facts, the penalty was not sustainable and the revisional order was liable to be set aside in favour of the assessee.

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Issues: Whether penalty under section 12B(4) of the Karnataka Sales Tax Act, 1957 was sustainable when the assessee had paid a substantial amount before service of the assessment order and the revisional authority relied on a proviso that had already been omitted.

Analysis: The turnover for the relevant year was assessed by applying tax at 1.5% under section 6B of the Karnataka Sales Tax Act, 1957, although the assessee relied on the Government notification dated 28.08.2002 prescribing a lower rate for iron and steel. The record showed that, apart from advance tax, the assessee had paid Rs. 85,000 by cheque before service of the assessment order, but this payment was ignored while computing the balance demand and the resulting penalty. The revisional authority upset the appellate order mainly on the ground that form 32B had not been filed under section 6A(2), but the proviso on which that reasoning rested had already been omitted with effect from 01.04.2002 and could not govern the assessment year 2003-04.

Conclusion: The penalty could not be sustained, and the revisional order was liable to be set aside in favour of the assessee.

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