2019 (2) TMI 428 - HC - VAT and Sales Tax

Court reduces penalty for delayed TDS deposit under U.P. VAT Act, emphasizing fair discretion

Sahayak Samagri Prabandhak (Astt. Material Manager) Charbagh Versus The Commissioner U.P. Commercial Tax Lucknow

Sahayak Samagri Prabandhak (Astt. Material Manager) Charbagh Versus The Commissioner U.P. Commercial Tax Lucknow - [2019] 63 G S.T.R. 36 (All) Issues:1. Imposition of penalty under Section 34(8) of the U.P. VAT Act, 2008.2. Interpretation of the provisions of Section 34(8) regarding the liability to pay interest and penalty.3. Consideration of mitigating factors and bonafide reasons for delayed deposit of TDS.4. Reduction of penalty by the Tribunal and justification for the same.Analysis:1. The case involved the imposition of a penalty under Section 34(8) of the U.P. VAT Act, 2008 on an Assistant Material Manager of Rail Electrification for delayed deposit of TDS, totaling to &8377; 30,82,964.00. The Assessing Authority imposed a penalty of 200% of the TDS amount, which was later reduced by the Tribunal to 10% after considering the facts and circumstances of the case and the payment of interest on delayed deposit.2. The Court analyzed Section 34(8) of the Act, which provides for the imposition of a penalty not exceeding twice the amount deductible if the TDS is not deposited as required. It was clarified that the liability to pay interest under Sub-section 9 is separate from the penalty under Sub-section 8. The imposition of penalty is discretionary, subject to a prior opportunity of hearing, and the extent of the penalty is within the discretion of the Assessing Authority.3. The Court considered the absence of deliberate defiance of law, dishonest conduct, or conscious disregard of obligations as factors for imposing penalties. While mens rea is not a prerequisite for penalty under Section 34(8), bonafide reasons and mitigating factors for delayed deposit should be taken into account. In this case, the delay ranged from 24 to 94 days, and the Railways' statutory obligations were emphasized.4. The Tribunal's decision to reduce the penalty to 10% of the TDS amount was justified considering the procedural delays common in government departments. The penalty was further reduced to 5% as a deterrent for future compliance. The judgment referred to relevant Supreme Court decisions emphasizing fair consideration and discretion in penalty imposition.In conclusion, the Court upheld the reduction of penalty by the Tribunal, emphasizing the importance of considering mitigating factors and statutory obligations in penalty imposition under Section 34(8) of the U.P. VAT Act, 2008.