IS PENALTY A REVENUE DUE TO THE STATE?

[Sadanand Bulbule]

Dear Experts.

Navarathri Greetings.

Under VAT statute, there was an ambiguity regarding the levy of penalty even for petty violation of provisions of the Act particularly in respect of documents being accompanied with the goods under transportation, some times without the knowledge of another State law, despite binding rulings on the subject. Subsequently the provisions were challenged before the Karnataka High Court.The revision order levying penalty in respect of interstate transaction was set aside by the State High Court on the ground that those provisions apply only to the State of Karnataka and not in respect State interstate transactions. since the State did not enjoy such jurisdiction.

Some are facing charges of purported loss of revenue on the ground of incorrect adjudication of penalty proceedings which were initiated despite the said State High Court judgement. Therefore in terms of the said State High Court judgement when the provisions to levy penalty did not apply to interstate transactions, the question of revenue due to the State does not arise at all. Factual and legal position being so, the question of loss of revenue naturally shall not come into existence.

Therefore it is requested to clarify what is revenue due to the State? In other words, is penalty a revenue due to the State? Relevant rulings, if any, are solicited.

[KASTURI SETHI]

During the year 2012 (after March, 12) or 2013, I have read judgment of CESTAT wherein it was held that non-imposition of penalty is no revenue loss. I recall this very well but could not trace out. 

[Sadanand Bulbule]

Thank you so much Sethi Sir for your quick clarification.🙏

[Sadanand Bulbule]

Sir, I think it is reported in 2013 (9) TMI 417. Pl confirm.
with regards.

[KASTURI SETHI]

No. This citation is not correct.

[KASTURI SETHI]

Dear Sh.Sadanand Bulbule Ji,

If you get the case law, pl. post citation here. I also desperately need. Thanks.

[Sadanand Bulbule]

Gm Sir. Sure and my pleasure Sir.

[KASTURI SETHI]

Waiting eagerly. I am also trying. Thanks.

[Sadanand Bulbule]

Dear Sethi Sir.

In continuation of the discussion on the query, I have come across the following judgement dated 06/07/2005 rendered by the Hon'ble Gujarat High Court.Pl examine whether it would answer the query.

Commissioner of Income Tax Vs. Parmanand M.Patel (2005) 198 CTR Guj 641,2005 278 ITR 3 Guj. = 2005 (7) TMI 72 - GUJARAT HIGH COURT

In Para 33(h) of the said judgement, it is held as under:

(h) Even if it is lawful to impose penalty, that by itself would not be sufficient to entitle the Commissioner to treat the assessment order as erroneous and prejudicial to the interests of the revenue;

Regards.

[KASTURI SETHI]

That judgement pertains to Service Tax or Central Excise but not to any other Act.. I am subscriber to EXCUS also. I emailed CENTAX on this issue but no response was received.

[YAGAY and SUN]

This case was related to Excise Regime, I had also read but not able to recall or digout from my data base. Will try again.

[Sadanand Bulbule]

Thank you so much Sir for your continued efforts in this regard. Pl throw light on the issue.

[KASTURI SETHI]

M/s.Yagay and Sun,

Dear Sir, Your speed is really appreciable. I am overwhelmed. You have softened my burden. You have converted bane of lockdown into a boon. Lockdown has become blessing in disguise. I hope and wish you will keep this pace even after lockdown period. These are my spontaneous thoughts i.e from the core of my heart.

Regards,

K.L.SETHI

 

AI Summary

Penalty as revenue: statutory scope and territorial limits determine whether non imposition constitutes revenue loss.
Whether a penalty is revenue due to the State depends on the penalty provision's statutory scope and territorial application; where a court held the provision inapplicable to interstate transactions, penalty could not be treated as revenue due, and tribunal authority indicates non imposition of penalty does not automatically constitute revenue loss, while other authority holds lawful imposability of penalty alone is insufficient to deem an assessment order erroneous and prejudicial to revenue.