Separate penalty for delayed TDS deposit survives even after tax and interest are paid under the VAT scheme.

Delayed deposit of tax deducted at source under the U.P. VAT Act triggers a separate statutory penalty regime distinct from the interest liability. Section 34 treats time-bound deposit, compensatory interest for delay, and penalty for non-deposit within time as independent consequences. Payment of the deducted tax with interest may be relevant to the quantum of penalty, but it does not by itself cure the breach or bar penalty under section 34(8). The Tribunal's deletion of penalty was therefore unsustainable, and the levy was upheld in principle with the matter remitted only for fresh consideration on quantum.

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Issues: Whether penalty under section 34(8) of the U.P. Value Added Tax Act, 2008 could be deleted merely because the tax deducted at source was ultimately deposited with interest.

Analysis: Section 34 creates a separate scheme for deduction, deposit, interest and penalty. Sub-section (6) fixes the time for deposit of the tax deducted at source, sub-section (9) fastens liability to interest on delayed deposit, and sub-section (8) authorises penalty where the amount deducted is not deposited within time. The payment of interest is a consequence of delay and does not exhaust or neutralise the separate statutory power to impose penalty. While surrounding circumstances may be considered in quantifying penalty, deposit of the tax along with interest by itself does not negate the breach or bar penalty.

Conclusion: The deletion of penalty by the Tribunal was held to be unsustainable, and the issue was answered in favour of the Revenue.

Final Conclusion: The matter was sent back for fresh consideration only on the quantum of penalty, while the levy of penalty under section 34(8) was upheld in principle.

Ratio Decidendi: Under the statutory scheme of section 34, delayed deposit of tax deducted at source attracts a separate penalty liability, and subsequent payment of the tax with interest does not by itself preclude imposition of penalty.

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