Gujarat High Court
State Of Gujarat vs Jain Marbo India Private Limited on 9 March, 2018
Author: Akil Kureshi
Bench: Akil Kureshi, B.N. Karia
C/SCA/7463/2017 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 7463 of 2017
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STATE OF GUJARAT
Versus
JAIN MARBO INDIA PRIVATE LIMITED
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Appearance:
MR CHINTAN DAVE ASST. GOVERNMENT PLEADER(1) for the
PETITIONER(s) No. 1
RULE NOT RECD BACK(63) for the RESPONDENT(s) No. 1
TAPAN N PATEL(9185) for the RESPONDENT(s) No. 1
TRUPESH C KATHIRIYA(8347) for the RESPONDENT(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE B.N. KARIA
Date : 09/03/2018
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. The State Government has filed this petition challenging the judgment of the Gujarat Value Added Tax Tribunal ("the Tribunal", for short) dated 23.09.2015.
2. The facts are as under;
The respondent is a dealer registered under the Gujarat Sales Tax Act and the Central Sales Tax Act. The Gujarat Value Added Tax Act ("the Act", for short) was enacted and brought into force with effect from 01.04.2006. A transitional provision was, therefore, made in the Act u/s.12 Page 1 of 9 C/SCA/7463/2017 ORDER enabling the dealers to take tax credit of the stock as on 31.03.2006. Subsection 7 of Section 12 was a penal provision providing penalty in case of a dealer claiming tax credit for the stock for which he is not entitled to claim such tax credit. This provision was invoked by the competent authority by order dated 01.03.2011 whereby, in addition to denying the tax credit, he levied penalty u/s.12(7) of the Act, which was computed at 20% of the excess claim of the input tax credit.
3. The Commissioner took the order of assessment in suo motu revision. He passed an order of revision on 28.04.2014. He was of the opinion that the assessee had deliberately claimed excess tax credit, which exhibited the malafide intentions on the part of the assessee. He, therefore, increased the penalty to 200% of the excess tax credit claimed.
4. The assessee was of the opinion that it was discretionary upon the assessing authority whether to levy penalty or not and if he desired to levy penalty, then at a rate not exceeding 200% of the wrongly claimed tax credit. The Tribunal, therefore, reversed the revisional order of the Commissioner and restored that of the assessing authority.
Page 2 of 9 C/SCA/7463/2017 ORDER5. The State Government has, therefore, filed this petition in which the main ground urged is that once the necessary facts for imposition of penalty under subsection 7 of Section 12 of the Act are established and the assessing authority decides to levy such penalty, he would, thereafter, have no discretion to reduce the penalty below 200% of the wrongly claimed input tax credit. The respondentassessee, however, opposes this contention and contends that whether to impose the penalty or not, that itself is a discretion of the assessing authority. Even if he decides to impose the penalty, he still retains the discretion as to what percentage, up to a maximum of 200% of the wrongly claimed input tax credit, penalty should be levied. Counsel for the respondent has relied on certain judgements, which we would refer to at a later stage.
6. Section 12 of the Act, as noted above, makes special provisions for transitory situations arising on account of introduction of the VAT Act. Section 12 itself carries a catchnote "Tax Credit for Stock on [31st March, 2006]". Sub section 1 of Section 12 would enable a dealer to furnish a statement of taxable goods held by him in stock as on 31.03.2006 for which he intends to claim tax credit. Subsection 3 of Section 12 Page 3 of 9 C/SCA/7463/2017 ORDER provides a formula under which such tax credit would be made available to him. Subsection 4 of Section 12 provides circumstances under which such tax credit will not be available. Sub section 7 of Section 12, which is relevant for our purpose, reads as under;
"7. If the Commissioner is satisfied that a dealer
(a) has claimed tax credit for such stock for which he is not entitled for claiming tax credit as per the provisions of section 11 and sub sections (3) and (4) of section 12, or
(b) has claimed excess tax credit than what he is entitled to under section 11 or under this section, the Commissioner may, after giving the dealer an opportunity of being heard direct him to pay a penalty equal to twice the amount of tax credit so claimed."
7. Under this subsection, thus, if the Commissioner is satisfied that a dealer has claimed tax credit for such stock for which he is not entitled to claim such credit or he has claimed excess tax credit than what he is entitled to, then the Commissioner may, after giving the dealer an opportunity of being heard, impose a penalty equal to twice the amount of tax Page 4 of 9 C/SCA/7463/2017 ORDER credit so claimed. This provision, thus, uses the expression "may" when it comes to the Commissioner imposing penalty, even if a breach, as mentioned in Clauses (a) & (b) of subsection 7 of Section 12, is shown to have been committed. The legislative intent, thus, clearly is to cloth the Commissioner with discretionary powers whether or not to impose such penalty. In other words, merely because a breach is established, it would not be compulsory for the Commissioner to impose the penalty. After giving an opportunity to the dealer of being heard, if the Commissioner is satisfied that it is not a fit case for imposition of penalty, then he may express such an opinion in his order by citing reasons. The question, then is, when the Commissioner has been vested with such wide discretion, would such discretion cease when it comes to the question of choosing the level of penalty. Accepting the argument of the Government would amount to a situation where it may be discretionary for the Commissioner to impose or not to impose a penalty all together but, once he decides to impose such penalty, he would have no choice but to fix the penalty at twice the amount of wrongly claimed tax credit. We do not think that the Legislature desired to bring about such a harsh and incongruent result. The discretion of the Commissioner in the matter of imposing penalty Page 5 of 9 C/SCA/7463/2017 ORDER would extend even on the choice of the penalty to be imposed, of course, up to a maximum of twice the value of the wrongly claimed tax credit. We may emphasize, the Statute has neither made it compulsory for the Commissioner to impose penalty once the breach is established nor has made the quantum of penalty mandatory. As is wellknown, various fiscal penal statutes, either prescribe a range of penalty from which the competent authority may chose or may provide a minimum penalty below which the competent authority cannot travel. The wordings of subsection 7 of Section 12 do not indicate either of these two situations. The statute has provided upper limit without prescribing the minimum level of penalty. As rightly pointed out by learned counsel for the respondent, the Division Bench of the Bombay High Court in case of Additional Commissioner of Sales Tax, VAT III, Mumbai v. Ankit International, (2011) 46 VST 1 (Bom), dealt with a some what similar situation arising out of the Maharashtra Value Added Tax Act. Subsection 2 of Section 61 of the said Act provides that the Commissioner may impose a penalty equal to 1/10th percentage of the total sales. On the basis of such provision, it was argued before the Bombay High Court that there was no discretion with regard to the quantum of penalty and that the penalty of an amount equal to 1/10th percentage of the total Page 6 of 9 C/SCA/7463/2017 ORDER sales would have to be imposed once the breach is established. The Bombay High Court rejected such contention and held that the discretion of the Commissioner would extend even with regard to the choice of penalty. It was observed as under;
"...The imposition of a penalty in sub section (2) of section 61 is not mandatory. The Commissioner has been conferred with the discretion to determine as to whether a penalty should or should not be imposed, if a dealer who is liable to get his accounts audited under subsection (1), fails to furnish a copy of the report within the time prescribed. The Legislature has provided that the Commissioner "may" impose a penalty after giving the dealer a reasonable opportunity of being heard. The use of the word "may" is clearly suggestive of the fact that imposition of a penalty is not mandatory. The legislative intent has been emphasized in the requirement of furnishing to the dealer a reasonable opportunity of being heard before a penalty is imposed. The fact that the Legislature contemplated an opportunity of being heard is indicative of the intent of the Legislature that the explanation which the dealer may have, has to be considered before the Commissioner determines as to whether penalty should be imposed. That the imposition of the penalty under subsection (2) of section 61 is not mandatory has been emphasized in a judgment of a Division Bench of this Court in Nitco Paints Ltd. v. State of Maharashtra (2011) 42 VST 71 (Bom) in the following terms;
"....But the submission which has been urged on behalf of the Revenue is that once the Commissioner proceeds to hold Page 7 of 9 C/SCA/7463/2017 ORDER that a penalty is liable to be imposed, he must necessarily impose a penalty equal to one tenth per cent of the total sales. In other words, it is urged that the discretion is whether or not a penalty should be imposed and not in regard to the extent of the penalty. As a matter of first principle there is no reason for the court to restrict, by a process of construction the legislative intent in regard to the imposition of a penalty and not with regard to the extent of the penalty. As a matter of first principle there is no reason for the court to restrict, by a process of construction the legislative intent in regard to the imposition of penalty by holding that the discretion would extend only to the imposition of a penalty and not with regard to the extent of the penalty. The Legislature is undoubtedly empowered in its plenary jurisdiction to determine whether a penalty is or is not mandatory. For instance the provisions in section 11AC of the Central Excise Act, 1944 came up for construction before the Supreme Court in the decision in Dharamendra Textile (2008) 18 VST 180 (SC); (2008) 306 ITR 277 (SC); (2008) 231 ELT 3 (SC). Section 11AC stipulated that where any duty of excise has not been levied or paid or has been short levied or shortpaid or erroneously refunded by reasons of fraud, collusion or any willful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the Rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under subsection (2) of Section 11A, shall also be liable to pay a penalty equal to the duty so determined..."Page 8 of 9 C/SCA/7463/2017 ORDER
8. In the result, the petition is dismissed. Rule is discharged.
(AKIL KURESHI, J.) (B.N. KARIA, J.) PRAVIN/* Page 9 of 9