Tax penalty requires wilful default or mens rea; prompt payment and lack of hearing made the levy unsustainable.

Penalty under the entry tax regime could not be sustained where the orders recorded no finding of wilful non-disclosure or mens rea, and the assessee had promptly paid the tax when pointed out. The court treated the penalty as penal in nature and held that it cannot be imposed mechanically merely because returns were not filed. The absence of a proper personal hearing, together with the long delay in starting penalty proceedings, further weakened the basis for levy. The penalty orders were therefore quashed and the writ petitions were allowed.

---

---

Issues: Whether penalty under the entry tax regime could be sustained when the assessee had paid the tax demanded, no finding of wilful non-disclosure or mens rea was recorded, and the assessment orders were passed without proper hearing.

Analysis: Penalty under the relevant entry tax provisions operates in a penal field and cannot be imposed mechanically merely because returns were not filed. The orders did not record any satisfaction that the escapement or non-declaration was wilful. The assessee had promptly remitted the tax when pointed out, had not disputed the demand at the relevant time, and the proceedings were concluded without affording a personal hearing. In these circumstances, the long delay in initiating the penalty proceedings and the absence of a culpable finding weakened the basis for penalty.

Conclusion: The penalty orders were unsustainable and were quashed; the writ petitions were allowed.

Ratio Decidendi: Penalty under a tax statute with penal consequences cannot be imposed in the absence of a recorded finding of wilful default or mens rea, particularly where the tax has been promptly paid and reasonable opportunity is not afforded.

---