Penalty for under-declared tax requires pleaded and proved fraud or wilful neglect; absence of such foundation invalidates the order.

Section 53(3) authorises a penalty equal to the tax under-declared only where the under-declaration is accompanied by established fraud or wilful neglect, and the show-cause notice must disclose those jurisdictional facts so the dealer has a reasonable opportunity to respond. Because neither the notice nor the penalty order alleged or found fraud or wilful neglect, the statutory foundation for invoking the higher penalty was absent. The HC therefore held the penalty order unsustainable and set it aside.

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Issues: Whether penalty equal to the tax under-declared under Section 53(3) could be sustained when the show cause notice and penalty order did not allege or establish fraud or wilful neglect.

Analysis: Section 53(3) applies only where under-declaration of tax is accompanied by established fraud or wilful neglect. The show cause notice must disclose the jurisdictional facts that justify invocation of that provision, and the dealer must be given a reasonable opportunity before penalty is levied. If the notice does not allege fraud or wilful neglect, the necessary foundation for the higher penalty is absent. On the facts, neither the notice nor the order contained such allegations or findings.

Conclusion: The penalty order under Section 53(3) was unsustainable and was set aside.

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