Penalty under sales tax reassessment rules requires recorded satisfaction of escapement without reasonable cause before levy is sustained.

Penalty under Rule 12(4)(c) of the Central Sales Tax (Odisha) Rules, 1957 depends on a prior recorded satisfaction that the escapement was without reasonable cause, and the penal power must be exercised only when the statutory preconditions for reassessment and penalty are met. The text notes that the disputed turnover came from the dealer's disclosed returns and from adjustment of excess tax paid under the Odisha VAT regime, without any suppression, fraud, or deliberate evasion. Because the assessment order did not record the mandatory satisfaction on absence of reasonable cause, the penalty was treated as unsustainable and liable to be deleted.

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Issues: Whether penalty under Rule 12(4)(c) of the Central Sales Tax (Odisha) Rules, 1957 could be sustained when the assessment order did not record satisfaction that the escapement was without reasonable cause and the turnover in question arose from the dealer's disclosed returns.

Analysis: Rule 12(4) authorises reassessment only where the Assessing Authority forms an opinion, on the basis of information in its possession, that turnover has escaped assessment, been under-assessed, been assessed at a lower rate, or that an improper deduction, exemption, or excess input tax credit has been allowed. Clause (c) further requires satisfaction that the escapement is without reasonable cause before penalty equal to twice the additionally assessed tax may be directed. The assessment record showed that the disputed amount arose from the dealer's disclosed turnover and from adjustment of excess tax paid under the Odisha VAT regime, not from any suppression, fraud, or deliberate evasion. The order also did not record the mandatory satisfaction regarding absence of reasonable cause. In such circumstances, the discretionary power to levy penalty could not be exercised mechanically or arbitrarily. The provision, being penal in nature, had to be strictly construed and applied only on fulfilment of the statutory preconditions.

Conclusion: Penalty under Rule 12(4)(c) was not sustainable and was liable to be deleted. The finding is in favour of the assessee.

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