Reasoned penalty orders are mandatory where fiscal penalty provisions require hearing and judicial discretion, not automatic levy.

A penal fiscal order under Section 45(5) of the Jharkhand Value Added Tax Act could not stand where the authority failed to consider the assessee's defence, gave no reasons, and treated the matter mechanically. The Court held that the proviso required a prior hearing and a reasoned decision, and that penalty was not automatic because the provision vested discretion as to both levy and quantum. It also noted that the revenue-neutral character of the tax component required proper examination before penalty could be imposed. The impugned assessment, demand and garnishee orders were quashed and the matter remitted for fresh decision after hearing.

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Issues: (i) Whether the assessment orders, demand notices and garnishee orders could stand when the authority did not deal with the assessee's defence and passed non-speaking orders while imposing penalty under Section 45(5) of the Jharkhand Value Added Tax Act, 2005; (ii) Whether penalty under Section 45(5) was automatic or required exercise of discretion after considering the surrounding circumstances, including the assessee's explanation and the nature of the default.

Issue (i): Whether the assessment orders, demand notices and garnishee orders could stand when the authority did not deal with the assessee's defence and passed non-speaking orders while imposing penalty under Section 45(5) of the Jharkhand Value Added Tax Act, 2005.

Analysis: The proviso to Section 45(5) required an opportunity of hearing before penalty could be imposed. The orders recorded only the fact of non-deduction of TDS and reproduced the statutory provision, but they did not disclose any consideration of the defence raised on behalf of the assessee or any reasons for rejecting it. The authority thus failed to pass a reasoned order in conformity with the statutory requirement of hearing and consideration of the explanation.

Conclusion: The assessment orders, demand notices and garnishee orders could not be sustained and were liable to be quashed.

Issue (ii): Whether penalty under Section 45(5) was automatic or required exercise of discretion after considering the surrounding circumstances, including the assessee's explanation and the nature of the default.

Analysis: Section 45(5) made contravention liable to penalty up to twice the tax deductible, which showed that the authority had discretion as to both imposition and quantum. The Court held that the fact that tax had already reached the State exchequer through the seller made the situation revenue neutral on the tax component, and that the authority was obliged to examine whether penalty was actually warranted and, if so, to determine the quantum judicially rather than mechanically.

Conclusion: Penalty under Section 45(5) was not to be imposed mechanically; the authority had to exercise discretion judicially after considering the assessee's case.

Final Conclusion: The writ applications were allowed, the impugned orders were quashed, and the matters were sent back for fresh decision after hearing the assessee and passing a reasoned order, including reconsideration of penalty and refund of any amount already recovered if penalty was found not leviable.

Ratio Decidendi: Where a penal fiscal provision requires prior hearing and vests discretion as to levy and quantum, the authority must pass a reasoned order considering the assessee's defence; penalty is not automatic merely because a contravention is established.

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