Discretionary penalty for statutory default cannot stand where tax and interest are paid and revenue suffers no loss.

Penalty for a statutory default is discretionary and cannot be sustained for a merely technical or venial breach absent deliberate or contumacious conduct. Where the TDS amount with interest was deposited before penalty proceedings and the revenue suffered no loss, penalty under Section 8 D(6) of the UP Trade Tax Act was held unjustified. The Tribunal was also found unjustified in ignoring the earlier remand direction requiring reconsideration on the effect of payment with interest and absence of revenue loss. The revision was allowed and the penalty order set aside.

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Issues: (i) Whether penalty under Section 8 D(6) of the UP Trade Tax Act was justified when the TDS amount with interest had been deposited before initiation of penalty proceedings and no loss of revenue remained. (ii) Whether the Tribunal was justified in ignoring the earlier remand direction of the Court.

Issue (i): Whether penalty under Section 8 D(6) of the UP Trade Tax Act was justified when the TDS amount with interest had been deposited before initiation of penalty proceedings and no loss of revenue remained.

Analysis: Penalty for breach of a statutory obligation is not automatic. It is discretionary and must be exercised judicially, with regard to the surrounding circumstances. Where the default is merely technical or venial, or where the assessee has acted without deliberate defiance, contumacious conduct, or conscious disregard of obligation, penalty is not ordinarily warranted. The Court also relied on the principle that where TDS and interest are deposited and the revenue suffers no loss, levy of penalty is not justified.

Conclusion: The penalty was not justified. The issue is decided in favour of the assessee.

Issue (ii): Whether the Tribunal was justified in ignoring the earlier remand direction of the Court.

Analysis: The earlier remand required reconsideration of the narrow question whether penalty should be imposed when there was no loss to the revenue and the amount had been paid with interest. The Tribunal proceeded on the basis of mere failure to comply with the statutory requirement and did not give effect to the governing direction that required reconsideration on the question of penalty in the light of deposit of tax and interest.

Conclusion: The Tribunal was not justified in upholding the penalty in disregard of the earlier remand direction. The issue is decided in favour of the assessee.

Final Conclusion: The revision was allowed and the penalty order was set aside, with the legal position reaffirmed that penalty cannot be sustained where the tax with interest has already been deposited and there is no loss to the revenue.

Ratio Decidendi: Penalty for a statutory default is discretionary and cannot be sustained merely on proof of breach when the assessee has deposited the tax with interest before penalty proceedings and the revenue has suffered no loss, absent deliberate or contumacious conduct.

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