Penalty under OVAT Act Section 43(2) is discretionary, not automatic, unlike the mandatory regime in Section 42(5).

Section 43(2) of the Orissa Value Added Tax Act, 2004 confers discretion on the assessing authority to impose penalty only where escapement or under-assessment is found to be without reasonable cause, because the provision uses the word "may". By contrast, Section 42(5) provides for a mandatory penalty equal to twice the tax assessed in an audit assessment and leaves no discretion. The earlier observation treating penalty as automatic was therefore recalled to the limited extent that it suggested automatic penalty under Section 43(2), and the legal position was clarified as discretionary rather than mandatory under that provision.

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Issues: Whether the observation in the earlier judgment that penalty would be automatic was warranted, and whether penalty under Section 43(2) of the Orissa Value Added Tax Act, 2004 is mandatory or discretionary.

Analysis: Section 42(5) of the Orissa Value Added Tax Act, 2004 provides for penalty equal to twice the tax assessed in an audit assessment and leaves no discretion to the assessing authority. Section 43(2) is differently worded and applies where the assessing authority is satisfied that escapement or under-assessment is without reasonable cause. The use of the word "may" in Section 43(2) confers discretion on the assessing authority, so penalty is not automatic under that provision. The earlier observation referring to automatic penalty under Section 42(5) was not warranted in the context of the question actually arising under Section 43(2).

Conclusion: The earlier observation was recalled to the limited extent indicated, and the penalty question was clarified to be discretionary under Section 43(2), not automatic.

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