TaxTMI 
TaxTMI 
2023 (12) TMI 607
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...., it has also clearly erred in failing to bear in mind that sub-sections (10), (14) & (15) of Section 86 were not attracted in the facts of the present case. According to the appellant, in the absence of it having submitted a false, misleading or deceptive return or having submitted one with particulars which could be said to fall within the meaning of the expressions "false", "misleading" or "deceptive", the penalty itself was wholly unjustified. However, and before proceeding further we deem it appropriate to notice the following salient facts. 3. The dispute essentially emanates from assessment orders passed for Financial Year [FY] 2005-06 and FY 2008-09 raising a demand of tax and interest on the sale of repossessed vehicles. The issue of taxability was answered against the appellant and culminated in the Assessing Authority issuing notices of demand dated 20 January 2012 and 12 July 2012 under Section 33 of the Act. The record would reflect that the issue of tax being leviable on the sale of repossessed vehicles ultimately came to be settled insofar as this Court is concerned in terms of its decision rendered in Citi Bank vs Commissioner of Sales Tax 2015 SCC OnLine Del 14023....
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....sustainable; this court, at the same time, opines that it would not be appropriate to act as an adjudicating authority as to the proportionateness of the penalty to be imposed having regard to the fact that the issue was debatable. The matter is accordingly remitted to the Tribunal on the limited question of extent of penalty to be properly levied under these circumstances." 5. It becomes relevant to note that while framing the aforesaid order of remand, the Division Bench had pertinently observed that the imposition of 200% penalty was not justified and clearly disproportionate. It also noted that the question of whether the sale of repossessed cars could be subjected to a levy of tax under the Act was one which came to be answered decisively only in terms of the judgment rendered in Citi Bank. It was in the aforesaid context that it observed that the question of taxability being disputed and debatable, the levy of 200% penalty would not sustain. It, accordingly framed the directions of remand as extracted hereinabove. 6. Pursuant to the directions framed by this Court, the issue of penalty came to be raised for consideration before the Tribunal yet again and this time in terms ....
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....te Tribunal, while arguing the appeals challenging the penalty, it may be mentioned that Shri Shammi Kapoor, learned counsel then representing the appellant before this Appellate Tribunal, submitted as under: "Ld. Counsel for the appellant has submitted that the impugned order passed by the Ld. OHA is disproportionate in the given circumstances, and as such the impugned order deserves to be modified." Therefore, learned counsel for the Revenue has rightly submitted that Shri Shammi Kapoor, Advocate, earlier representing the appellant here argued only for modification of the impugned order on the ground that in the given circumstances the same was disproportionate. 16. In the given situation, this Appellate Tribunal proceeds to decide the appeals only on the scope of the orders of remand - which clearly limit the scope to the extent of penalty. Herein, while framing notice of assessment of penalty, learned Assessing Authority furnished reasons as explained in separate sheet i.e. Annexure 'P'. He specifically mentioned in the assessment that reasons being in the Annexure as software did not permit the Assessing Authority inclusion of lengthy note of reasons. Re....
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....n the income from commission/exchange & brokerage under schedule-14 (meant for other income). It required proper examination of all the transactions made on above accounts to know as to whether the tax has properly been charged/paid by the bank for the transactions covered under income from commission /exchange & brokerage under schedule-14 (meant for other income) as per the definition of sale? 4. Section 48 of DVAT Act, 2004 read with rule 42 of the DVAT rules, 2005 stipulates maintenance of certain records like a monthly account. Purchase records, showing details of purchases. Sales records, Record of inter-state sales; details of input tax calculations, Stock records etc, by the dealer at its principal place of business. The dealer bank has number of branches in Delhi, involved in the trading of gold and also in financing the vehicles and other moveable assets. It required examination as to how the DVAT 30 & 31 and other books of accounts required under DVAT Act & Rules are being maintained by the dealer? 5. The dealer had made heavy transactions of outward stock transfer and not submitted the complete F forms. It required examination as to whether the huge amount of stock....
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....re also sought on the report furnished by the auditors appointed by the Commissioner and the dealer has stated that:- 1- The bank has been issued a license by the Reserve Bank of India under sec 22 of the banking regulation Act, 1949 to carry out its activities of banking. On going through the object clauses of the bank as given in its Memorandum of Association, the bank is into the business of borrowing and lending money and such related activities. This borrowing and lending of money is carried out for various purposes including inter alia car loan, house loan etc. The bank is not into the business of sale and purchase of cars for any consideration whatsoever and hence, it cannot be said to be a dealer. The Auditor without proper application of mind has concluded that the bank is dealer in sale and purchase of cars and hence liable to pay tax on repossessed vehicles. The bank position is only acting as a facilitator for borrower to recover its loan amount. But he failed to prove. How he is a facilitator. ln fact he is selling the vehicles after taking possession. It would be, therefore, in appropriate to say that the bank is the dealer of cars and hence liable to pay VAT. Furth....
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....ler are incomplete, false and incorrect which attract penalty u/s 86 (10) of DVAT Act. The dealer has not paid due tax by reasons of concealment and has also failed to disclose fully material particulars of sales by not including the turnover of repossessed vehicle/ fixed assets in the returns filed in Form DVAT- 16. Further due to the reasons stated above, there is a tax deficiency which attract penalty u/s 86 (12) of DVAT Act. Moreover the dealer has prepared records and accounts in a manner that is false misleading or deceptive, so it attract penalty u/s 86 (15) of DVAT Act, 2004. Besides, the dealer has not deducted and deposited TDS, disclosed bullions sale very late and above all offered no plausible comments/ explanation on the auditors findings as to why default assessment be not carried out u/s 32 for furnishing deceptive, incorrect and false returns moreover the dealer has miserable failed to prove how he is a facilitator. In view of my findings above, the dealer has separately been assessed; u/s 32 for non-payment of tax @12.5% on turnover of sales amounting to Rs.2,30,02,959/- pertaining to repossessed vehicles & fixed assets during the month of Dec. 2005, which is an....
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....would itself indicate that that it had found the levy of penalty to be wholly unjustified bearing in mind the indubitable fact that the issue of the present transactions being subject to tax was itself one which was not free from doubt and had remained unsettled till this Court came to pronounce judgment in Citi Bank. According to learned counsel, the order of 26 September 2016 thus cannot possibly be interpreted as being confined to the quantification of penalty alone. Viewed in light of the above it was his submission that the order of the Tribunal impugned herein is liable to be set aside on this score alone. 12. Learned counsel has further assailed the imposition of penalty based on the provisions contained in Section 86 itself. We deem it apposite to extract sub-sections (10), (14) & (15) of Section 86 hereinbelow: "86. Penalties xxxx xxxx xxxx (10) Any person who- (a) furnishes a return under this Act which is false, misleading or deceptive in a material particular; or (b) omits from a return furnished under this Act any matter or thing without which the return is false, misleading or deceptive in a material particular; shall be liable to pay, by way of penalt....
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....on the earlier appeals would clearly indicate that the Tribunal was only obliged to evaluate whether the penalty as imposed could be said to be disproportionate. According to Mr. Aggarwal, this is evident not just from a reading of the first order of remand, but also from the order dated 31 May 2022, when the appeals were again disposed of and the matter remitted to the Tribunal with the Court observing that it would have to examine the issue afresh having regard to the directions and observations appearing in the earlier order of the Court. 16. Insofar as the issue of levy of penalty principally is concerned, Mr. Aggarwal sought to draw sustenance from the decision of the Supreme Court in State of Gujarat & Ors vs M/s Saw Pipes Ltd. [2023 INSC 376] where the following observations came to be rendered: "6.4 From the language of Section 45(6) of the Act, it can be seen that the penalty leviable under the said provision is a statutory penalty. The phrase used is "shall be levied." The moment it is found that a dealer is deemed to have failed to pay the tax to the extent mentioned in subsection (5) of Section 45, there shall be levied on such dealer a penalty not exceeding one and ....
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....ies under the SEBI Act and the Regulations and the proceedings under the said Act are not criminal/quasi-criminal proceedings. In paragraphs 34 and 35, it is observed and held as under: "34. The Tribunal has erroneously relied on the judgment in Hindustan Steel Ltd. v. State of Orissa [(1969) 2 SCC 627 : AIR 1970 SC 253] which pertained to criminal/quasi-criminal proceedings. That Section 25 of the Orissa Sales Tax Act which was in question in the said case imposed a punishment of imprisonment up to six months and fine for the offences under the Act. The said case has no application in the present case which relates to imposition of civil liabilities under the SEBI Act and the Regulations and is not a criminal/quasi-criminal proceeding. 35. In our considered opinion, penalty is attracted as soon as the contravention of the statutory obligation as contemplated by the Act and the Regulations is established and hence the intention of the parties committing such violation becomes wholly irrelevant. A breach of civil obligation which attracts penalty in the nature of fine under the provisions of the Act and the Regulations would immediately attract the levy of penalty irrespective o....
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....nds) Regulations, 1996. Under the said Regulations there was a restriction placed on the mutual fund on purchasing or selling shares through any broker associated with the sponsor of the mutual fund beyond a specified limit. It is in this context that the Division Bench of this Court held that mens rea was not an essential ingredient for contravention of the provisions of a civil act. The breach of a civil obligation which attracts penalty under the Act would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention. It was further held that unless the language of the provision intends the need to establish mens rea, it is generally sufficient to prove the default/contravention in complying with the statute. In the present case also the statute provides for a hearing. However, that hearing is only to find out whether the assessee has contravened Section 78(2) and not to find out evasion of tax which function is assigned not to the officer at the checkpost but to the AO in assessment proceedings. In the circumstances, we are of the view that mens rea is not an essential element in the matter of impo....
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....ates the need to establish the element of mens rea, it is generally sufficient to prove that a default in complying with the statute has occurred. ... the penalty has to follow and only the quantum of penalty is discretionary. 35. In our considered opinion, a penalty is attracted as soon as the contravention of the statutory obligation as contemplated by the Act and the Regulations is established and hence intention of the parties committing such violation becomes wholly irrelevant. ... We also further hold that unless the language of the statute indicates the need to establish the presence of mens rea, it is wholly unnecessary to ascertain whether such a violation was intentional or not. On a careful perusal of Section 15D(b) and Section 15E of the Act, there is nothing which requires that mens rea must be proved before a penalty can be imposed under these provisions. Hence once the contravention is established then the penalty is to follow." 37. The imposition of penalty under Section 43A is on account of breach of a civil obligation, and the proceedings are neither criminal nor quasi-criminal; the penalty has to follow. Only discretion in the provision under Section 43A is w....
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....ant Commissioner of Sales Tax, Indore and Ors.; 1980 (6) ELT 295 (S.C.) and Commissioner of Central Excise, Chandigarh (supra) in support of his above submissions to the effect that before levy of penalty and interest mens rea has to be proved by the department. xxxx xxxx xxxx 6. At the outset, it is required to be noted that the assessing officer levied the penalty and interest against the respondent - assessee under the provisions of Section 45(6) and Section 47(4A) of the Act, 1969, which levy came to be confirmed by the learned Tribunal. However, by the impugned judgment and order, the High Court has set aside the levy of penalty and interest, mainly on the grounds that the tax imposed had already been paid and that the assessee was under a bonafide opinion as to its tax liability and was following expert advice and therefore, paid the tax at the rate of 2%. Therefore, according to the High Court, though not specifically mentioned/opined, there was no mens rea on the part of the respondent - assessee in not paying the tax at the rate of 2% and in making the payment of the tax at 2%. Therefore, the short question which is posed for consideration of this Court is whether whi....
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....ed. (4) If a dealer fails without sufficient cause to furnish any declaration or any return [as required by proviso to sub-section (1) or sub section (2) of section 40], the Commissioner may impose upon the dealer by way of penalty, a sum not exceeding two thousand rupees. (5) Where in the case of a dealer the amount of tax (a) assessed for any period under section 41 or 50; or (b) reassessed for any period under section 44; exceeds the amount of tax already paid under sub-section (1), (2) or (3) of section 47 by the dealer in respect of such period by more than twenty five per cent of the amount of tax so paid, the dealer shall be deemed to have failed to pay the tax to the extent of the difference between the amount so assessed or reassessed as aforesaid and the amount paid. (6)[Where under subsection (5) a dealer is deemed to have failed to pay the tax to the extent mentioned in the said sub section, there shall be levied on such dealer a penalty not exceeding one and one-half times the difference referred to in sub section (5).]" xxxx xxxx xxxx "47. Payment of Tax and Deferred Payment of Tax, etc. (4A) (a) Where a dealer does not pay the amount of tax withi....
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....ered, we firstly take up for consideration the correctness of the view as expressed by the Tribunal and which had understood our earlier orders as confining the debate to the question of proportionality of the penalty alone. Having conferred our thoughtful consideration on the two orders which were passed on the earlier appeals preferred by the appellant, we find that the Tribunal has manifestly erred in construing our earlier orders as restricting the consideration to that of proportionality alone. 20. A reading of the order dated 26 September 2016 clearly establishes that the Court had not only accepted the contention of the appellant that the levy of penalty was unjustified since the question of taxability itself was contentious, but also that imposition of penalty at 200% was unjustified and disproportionate. It was in the aforesaid backdrop that it was pertinently observed that since the point had remained arguable, the levy of penalty at 200% would not sustain. It was on an overall conspectus of the aforesaid conclusions that the Court ultimately proceeded to remit the mater for the consideration of the Tribunal. We are thus of the firm opinion that the order of 26 September....
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.... return. As would be manifest from a close scrutiny of sub-sections (5), (6) and (9) of Section 86, those provisions envisage the levy of penalties consequent to a failure on the part of a registered dealer to discharge certain obligations or a failure on the part of an assessee to comply with statutory duties as imposed. In such situations, the Act envisages penalty to be imposed as a necessary corollary. The aforenoted provisions do not vest the Assessing Officer with any discretion in the matter of imposition of a penalty. 24. In contrast to the above, sub-sections (10), (14) & (15), and which as we had an occasion to note hereinbefore, envisage the levy of a penalty only in case an assessee is charged with "false, misleading or deceptive" conduct. The concept of penalty being founded on mens rea and misleading conduct is no longer a principle which can brook of any doubt. This is evident from the following passage as appearing in the decision of the Supreme Court in Hindustan Steel Ltd. and which the Tribunal itself had an occasion to notice: "8. ..... But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing p....
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.... imagination be construed or viewed as provisions pari materia to Sections 45(6) and 47(4A) of the 1969 Act, which formed the bedrock for the ultimate decision rendered by the Supreme Court in Saw Pipes Ltd. We, for reasons aforenoted, thus find ourselves unable to sustain the conclusion of the Tribunal to the contrary and when it proceeded to observe and interpret Sections 86(10), (14) & (15) of the Act as provisions embodying the principles of statutory penalty. 28. Turning then to the merits of the imposition of penalty itself, we find that the same is not based on any "false, misleading or deceptive" statement or disclosure made by the appellants. The appellants had while furnishing their returns proceeded on the bona fide belief that revenues generated from the sale of reprocessed vehicles would not be exigible to tax under the Act. That controversy has till date not been lent a quietus, since notwithstanding the judgment rendered by this Court in Citi Bank, the matter still appears to be at large before the Supreme Court and on the appeal of the appellant itself. In any case and since the respondents have not founded the levy of penalty on conduct of the appellant which may ....