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M/S Venus Cement Limited v. Commissioner Trade Tax, U.P. Lucknow - SALES/TRADE TAX REVISION DEFECTIVE No. 74 of 2003  RD-AH 6903 (5 December 2005)
TRADE TAX REVISION NO. (74) OF 2003
TRADE TAX REVISION NO. (80) OF 2003
TRADE TAX REVISION NO. (81) OF 2003
TRADE TAX REVISION NO. (82) OF 2003
TRADE TAX REVISION NO. (83) OF 2003
TRADE TAX REVISION NO. (85) OF 2003
M/S Venus Cement Limited, Meerut. ... Applicant.
The Commissioner, Trade Tax, U.P. Lucknow ... Opp. Party
Hon'ble Rajes Kumar, J.
These six revisions under Section 11 of U.P. Trade Tax Act (hereinafter referred to as "Act") are directed against the order of Tribunal dated 21.03.2003 relating to the months of September, October, November, 1996 and February, March and April, 1997 under the U. P. Trade Tax Act.
For the aforesaid months, Assessing Authority levied penalty under Section 15-A (1) (a) of the Act for non-deposit of admitted tax within the specified period. Applicant filed appeals before the Deputy Commissioner (Appeals), which were allowed, and the penalty levied under Section 15-A (1) (a) were cancelled. Against the order of Deputy Commissioner (Appeals), dealer filed appeals before the Tribunal. Tribunal vide impugned orders, allowed the appeals and restored the penalty orders passed by the Assessing Authority.
Heard learned Counsel for the parties.
With the consent of both the parties, the aforesaid revisions are being disposed of at the admission stage.
Learned Counsel for the applicant submitted that the amount of tax could not be deposited within the specified time due to financial crisis. He submitted that the sales were on credit and there was a huge outstanding demand towards the electricity charges, which could not be deposited due to the financial crisis, therefore, electric connection was disconnected on 28.3.1997 and Unit was finally closed on 06.10.1997. He submitted that the statement of accounts were also furnished for the period of 1.12.1996 to 26.2.1997, in which, credit balance was very nominal for Rs.2,263.99 on 09.12.1996 and 10.1.1997 and during the aforesaid period, a sum of Rs.4 Lacs was paid to the Escorts Finance Services on 06.1.1997 and 07.1.1997 which resulted financial crisis. However, he submitted that the entire tax alongwith the interest were deposited subsequently in the year 1999. He submitted that looking to the aforesaid facts, First Appellate Authority deleted the penalty and the Tribunal has erred in setting aside the order of First Appellate Authority and restored the penalty order passed by the Assessing Authority. He submitted that the Assessing Authority had not disputed the explanation regarding financial condition and had not made out any case that there was no reasonable cause in depositing the tax beyond time. He submitted that since the tax has been deposited alongwith the interest, penalty is not leviable. In support of his contention, he relied upon the decisions of this Court in the cases of M/S Willard India Ltd. Vs. Commissioner of Sales Tax reported in 1987 UPTC page 466, M/S Commercial Auto Sales Pvt. Limited, Allahabad Vs. Commissioner of Trade Tax, U. P. Lucknow, reported in 2000 NTN (Vol.17) page 714, M/S Eastern India Transformer and Switch Gear (P) Ltd. Vs. Commissioner of Sales Tax, 1993 UPTC page 212, M/S Krishna Arhat Kendra Vs. Commissioner of Sales Tax reported in 2003 UPTC page 522 and M/S Triveni Sheet Glass Works Ltd. Vs. Commissioner of Trade Tax reported in 1999 NTN (14) page 42. Learned Standing Counsel relied upon the order of Tribunal.
I have perused the order of Tribunal and the authorities below.
In the present case, it is not in dispute that the entire admitted tax relating to the aforesaid period have been deposited alongwith the interest and there are no dues. There appears to be no material to dispute the explanation of the applicant for late deposit of tax due to the financial crisis. Statement of accounts for the year 1996-97 which is referred in the order of Tribunal shows that there was a credit balance of Rs.2, 263.99 on 9.12.1996 and 10.1.1997 and there was nominal amount in credit during the period 1.12.1996 to 27.6.1997. It has not been disputed that on 06.1.1997 and 07.1.1997, applicant paid a sum of Rs.4 Lacs to Escorts Finance Services and due to the outstanding dues of electricity charges, electric connection was disconnected on 28.3.1999 and the Unit was finally closed on 16.10.1997. No businessman can afford the closure of production unless he is compelled to do so. Electric disconnection on 23.8.1997 due to the non-deposit of electricity bills establishes the financial crisis of the applicant. No case has been made out that the applicant has deliberately avoided to make payment within the specified period. In view of the fact that the tax has been deposited alongwith the interest, in my opinion, orders of penalty are not sustainable. Section 15-A (1) (a) reads as follows:-
Section 15-A (1) (a)-Penalties in certain cases-(1) If the Assessing Authorities is satisfied that any dealer or other person-
(a) has, without reasonable cause, failed to furnish the return of his turnover or to furnish it within the time allowed and in the manner prescribed or to deposit the tax due under this Act, before furnishing the return or along with the return as required under the provisions of this Act, or;
In the case of M/S Triveni Sheet Glass Works Limited, Allahabad Vs. Commissioner of Trade Tax, U. P. reported in 1999 NTN (Vo.14) 42, while dealing with the case relating to the penalty under Section 15-A (1) (a), this Court held as follows:-
"Under the provisions of the U. P. Trade Tax Act, a dealer has to pay interest @ 24 per cent. This is virtually an usurious rate of interest and no dealer would subject himself such heavy burden unless it is really hard pressed for money. Penalty under Section 15-A (1) (a) can be levied if, there is absence of reasonable cause which has to be established by the revenue. In the present case, the dealer had established that it had no sufficient fund to enable it to deposit the money within the time prescribed. It has been repeatedly held by this Court that when the tax has been deposited alongwith the interest, no penalty can be levied. See Commissioner of Sales Tax Vs. M/S Wire Cond Delhi Pvt. Ltd., 1986 UPTC page 175, Western India Match Co. Vs. Commissioner of Sales Tax, 1989 UPTC 1074, M/S Willard India Ltd. Vs. Commissioner of Sales Tax, 1987 UPTC 466. "
In the case of M/S Commercial Auto Sales Pvt. Limited, Allahabad Vs. Commissioner of Trade Tax, U. P. Lucknow reported in 2000 NTN (Vol. 17), 714, this Court held as follows:-
As is evident, there was only trifling delay of 9 days and 15 days in the payment of tax and the dealer voluntarily without any action on the part of the Assessing Officer filed the return, as well as, paid the tax alongwith the interest @ 24 per cent. The interest @ 24 per cent is very high and nobody would suffer that interest unless there are good reason. Penalty under Section 15-A (1) (a) is leviable if there is no reasonable cause and the burden to prove the absence of a reasonable cause lies on the revenue. Apart from rejecting the dealer's explanation, it has brought no material on record to establish the absence of a reasonable cause. The approach of the Assessing Officer that there might be other bank accounts or over draft facilities merely shows that the approach his merely conjectural."
As is evident the default was trifling and the State has not suffered any loss. On the other hand it has gained by earning 24 per cent interest. Therefore, there was no justification for levying penalty for such a trifling default. In Western India Match Co. Ltd. Vs. Commissioner of Sales Tax, 1989 UPTC, 1074 and Eastern India Transformer and Switch Gear (P) Ltd. Vs. Commissioner of Sales Tax, 1993, UPTC 212, this Court has held that penalty should not be levied in such circumstances. The Hon'ble Su0reme Court in Hindustan Steel Ltd. Vs. State of Orissa, (1972), 83, I. T. R. 26 has; held that penalty will not be imposed merely because, it is lawful to be so and whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances."
In the similar circumstances, penalty under Section 15-A (1) (a) was quashed, in the case of M/S Krishna Arhat Kendra Vs. Commissioner of Sales Tax reported in 2003 UPTC page 522. In the aforesaid case the amount of tax could not be deposited within time due to the paucity of fund and in the absence of any malafide intention on the part of the dealer, penalty was held not sustainable.
For the reasons stated above, order of Tribunal is set aside.
In the result, all the above six revisions are allowed. Order of Tribunal is set aside.
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