Penalty notice under APVAT law failed for lack of fraud allegation and effective hearing opportunity.

Penalty under Section 53(3) of the APVAT Act was unsustainable where the show-cause notice did not plead fraud or wilful neglect and merely repeated the statutory wording. The provision permits penalty only when under-declaration is accompanied by fraud or wilful neglect, and its proviso requires a reasonable opportunity of hearing before levy. Because the notice failed to state the factual basis of the allegation, it did not inform the dealer of the real charge or allow an effective reply. The penalty proceedings and notice were therefore invalid and liable to be quashed.

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Issues: Whether the penalty imposed under Section 53(3) of the APVAT Act, 2005 was sustainable when the show-cause notice did not specifically allege fraud or willful neglect and did not afford a proper opportunity of hearing.

Analysis: Section 53(3) permits penalty for under-declaration of tax only where fraud or willful neglect is established, and its proviso requires that the dealer be given a reasonable opportunity of being heard before penalty is levied. The notice in question merely reproduced the statutory language without indicating the factual basis for alleging fraud or willful neglect. Such a laconic notice failed to inform the assessee of the real charge and thereby deprived him of an effective opportunity to answer the proposed penalty.

Conclusion: The penalty proceedings and the show-cause notice were invalid and liable to be quashed. The decision is in favour of the assessee.

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