Mandatory audit assessment penalty applies automatically under the Orissa VAT Act; surplus input tax credit does not defeat it.

Penalty under Section 42(5) of the Orissa VAT Act is mandatory where an audit assessment is completed under Section 42: once tax is determined under Section 42(3) or 42(4), the provision requires imposition of a penalty equal to twice the assessed tax. The assessing authority has no discretion to reduce or waive the penalty, unlike provisions that depend on satisfaction about evasion or reasonable cause. A plea based on surplus input tax credit does not prevent levy where tax payable has already been affirmed, and absence of mens rea is not a defence to the statutory penalty.

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Issues: Whether penalty under Section 42(5) of the Orissa Value Added Tax Act, 2004 is imposable on completion of an audit assessment under Section 42, and whether the availability of surplus input tax credit or absence of mens rea prevents such penalty.

Analysis: Section 42(5) provides that, without prejudice to any other penalty or interest, an amount equal to twice the tax assessed under Section 42(3) or Section 42(4) shall be imposed by way of penalty in respect of any assessment completed under those sub-sections. The provision was previously upheld as constitutionally valid, and the consistent view is that once tax is determined in an audit assessment, the penalty follows automatically. No discretion is left with the assessing authority to reduce or waive the penalty, unlike provisions where the authority must be satisfied about evasion or absence of reasonable cause. The argument based on surplus input tax credit was not accepted because the assessment of tax payable had already been affirmed, and the question framed did not reopen that aspect.

Conclusion: Penalty under Section 42(5) is mandatory on completion of an audit assessment under Section 42, and the plea based on surplus input tax credit or absence of mens rea does not defeat its levy.

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