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M/S Kitply Industries Limited v. Commissioner Of Trade Tax U.P. Lucknow - SALES/TRADE TAX REVISION No. 927 of 2006 [2006] RD-AH 14972 (31 August 2006)


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Court no.22


M/S Kitply Industries Limited, 14/76, Civil Lines, Kanpur.               Applicant


Commissioner, of Trade Tax, U.P. Lucknow.        Opp.Party.

Hon'ble Rajes Kumar, J.

Present revision under Section 11 of U.P. Trade Tax Act (hereinafter referred to as "Act") is directed against the order of Tribunal dated 18th May, 2006 relating to the assessment year, 1996-97.

Heard learned counsel for the parties.

With the consent of learned counsel for the parties, present revision is being disposed of at the admission stage.

Applicant is a public limited company incorporated under the Indian Companies Act and engaged in the business of manufacture and sale of plywood, laminated sheet and timber products. Applicant has a branch office at Kanpur and is registered under the U.P. Trade Tax Act. Under Rule 41read with Notification No.TT-2355/XI-9 (230)/95 U.P. Act-15-48, dated 24.10.1996, the applicant was required to deposit the tax for the month of October by 15th November and to furnish return by 20th November, 1996. However, the tax was deposited on 21st November, 1996 and the return was furnished on 23rd November, 1996 beyond the specified period. The amount deposited was Rs.4, 57, 817/-. Since the amount was deposited beyond the specified period, notice under section 15-A (1) (a) of the Act was issued asking the applicant to show cause why the penalty should not be levied. Applicant filed reply and submitted that the aforesaid notification dated 24.10.1996 came to the notice on 6th or 7th November, 1996 and from that date, applicant started arranging the funds. 9th and 10th December, 1996 was Deepawali and, therefore, the applicant find it difficult to arrange the funds. On 19th November,1996, there was  balance amount of Rs. 2, 84, 857/- in the bank account and, thus, there was a shortage of Rs. 1, 72, 960/- and as soon as the fund was arranged, the amount was deposited on 21st November, 1996. Applicant further submitted that prior to the notification dated 24.10.1996, applicant was required to deposit the amount of tax by the end of the commencing month.   For the month of October under the old procedure, the applicant was required to deposit by 30th November, 1996 but by the notification dated 24.10.1995, for the first time, provision has been made to deposit the tax by 15th of the commencing month. On these facts, applicant submitted that there was reasonable cause in depositing the tax beyond the specified period thus, penalty should not be levied. Assessing authority, however, has not accepted the plea of the applicant and levied the penalty at Rs. 1, 14, 500/-. First appeal filed by the applicant was dismissed. Applicant filed second appeal before the Tribunal. Tribunal by the impugned order, allowed the appeal in part. Tribunal has sustained the levy of penalty, but has reduced the quantum of penalty to Rs. 68,700/-. Being aggrieved by the order of the Tribunal, present revision has been filed.

Learned counsel for the applicant submitted that on the facts and circumstances, explanation given in the reply, was reasonable cause in depositing the tax beyond time. The applicant has acted bonafidely. Thus, levy of penalty is unjustified. Learned Standing Counsel relied upon the order of the Tribunal.

Having heard the learned counsel of the parties, I have perused the order of the Tribunal and the authorities below.

I find substance in the argument of the learned counsel for the applicant. Section 15-A (1) (a) of the Act reads as follows:

"15-A. Penalties in certain cases.- (1) If the assessing authority 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 alongwith the return as required under the provisions of this Act."

          From the perusal of the above provision, it is clear that unless a case is made out that the tax has not been deposited, without reasonable cause, within the time prescribed, penalty under section 15-A (1) (a) cannot be levied.

In the case of Krishna Arhat Kendra Versus Commissioner of Sales Tax reported in 2003 UPTC 522, paucity of fund has been held to be the sufficient cause and penalty has been deleted on the ground that no case of malafide intention has been made out.

In the case of M/S Triveni Sheet Glass Works Limited, Allahabad versus Commissioner of Trade Tax, U. P. reported in 1999 N.T. N. (Vol.14)-42 while dealing with the case relating to the penalty under Section 15 (1) (a) this court held as follows:-

"Under the provisions of the U. P. Trade Tax Act, a dealer has to pay interest @ 24%.  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 Sec. 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 175, Western India Match Co. Vs. CST 1989 UPTC 104; M/S Willard India Ltd. Vs. CST 1987 UPTC 466."

In the case of M/S Commercial Auto Sales Pvt. Limited, Allahabad vs. the 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%.  The interest @ 24% is very high and nobody would suffer that interest unless there are good reasons.  Penalty under Section15 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 is 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% interest.  Therefore, there was no justification for levying penalty for such a trifling default.  In Western India Match Co. Ltd. Vs. CST 1989 (2) UPTC 1074 and Eastern India Transformer & Switch Gear (P) Ltd. Vs. CST 1993 (1) UPTC 212, this court has held that penalty should not be levied in such circumstances.  The Hon'ble Supreme Court in Hindustan Steel Ltd. Vs. State of Orissa (1972( 83 ITR 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 present case, it is not disputed that prior to the notification dated 24.10.1996 as per Rule 41 (1), the applicant was required to furnish return for the month of October and to deposit the tax by the end of the commencing month and, therefore, in the absence of notification dated 24.10.1996, the applicant would have time to deposit the tax and furnish the return for the month of October by 30th November, 1996. By the Notification dated 24.10.1996 for the first time, the applicant was required to deposit the tax for the month of October by 15th November, 1996 curtailing the period to deposit the amount. However, applicant tried its best to arrange the money, and when money was arranged, the amount was deposited on 21st November, 1996.

On the entire facts and circumstances of the case, it cannot be said that there was no reasonable cause and the applicant has not acted bonafidely, thus, the levy of penalty is not justified.

In the result, revision is allowed. Order of the Tribunal is set aside and the penalty levied under section 15-A (1) (a) of the Act is quashed.




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