Jharkhand High Court: A Division Bench of H.C. Mishra and Deepak Roshan, JJ., allowed the present petition against the respondent authorities charging penalty on non payment of TDS, reiterating, “…only because a provision has been made for levy of penalty, the same by itself would not lead to the conclusion that penalty must be levied in all situations.”
Background
Three writ applications bearing common issues were heard together by the present Court, with the facts mentioned as follows;
The petitioner Company was engaged in the production, supply and sale of electricity for which it purchased coal from the Central Coalfields Limited. As provided under Section 45(1) of the Jharkhand Value Added Tax Act, 2005, (hereinafter referred to as the ‘JVAT Act’), the petitioner Company was required to deduct 2% on account of VAT, as tax deducted at source (for short ‘TDS’), from the bills raised by the Central Coalfields Limited and by virtue of Section 45(3) of the JVAT Act, the same was to be deposited to the Government Treasury in the prescribed manner.
By virtue of Section 45(5) of the JVAT Act, if such TDS was not made, the Company was liable to pay by way of penalty a sum not exceeding twice the amount of the tax deductible under sub-Section (1). In all these matters, this obligation of deduction of TDS was not carried out by the petitioner Company, and accordingly, the impugned demand was raised by the Assessing Authority under the JVAT Act, imposing penalty as well as tax upon the petitioner. The assessment orders were passed on 19-03-2015, 05-03-2016 and 21-03-2017. However, by the said orders the liability imposed was not only for the penalty but also for the deductible 2% of the tax amount.
Contentions
Counsel for the petitioner, submitted that the impugned assessment orders as also the consequent garnishee orders cannot be sustained in the eyes of law, in as much as, the VAT payable on the coal purchased has already been deposited by the petitioner Company to the CCL and the CCL, in turn, has deposited the tax in the State-exchequer. This is an admitted position and there is no revenue loss to the State-exchequer due to the non deduction of TDS by the petitioner at 2%. Further, it was submitted that since there was no revenue loss to the State Government, the petitioner Company was also not liable to any penalty. Reliance was placed on;
Hindustan Steel Ltd. v. State of Orissa, (1969) 2 SCC 627, wherein it was held by the Supreme Court, “An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so.”
Employees’ State Insurance Corporation v. HMT Ltd., (2008) 3 SCC 35, re-emphasized the need and objective of imposing a penal liability, in the words, “Only because a provision has been made for levy of penalty, the same by itself would not lead to the conclusion that penalty must be levied in all situations.”
Nirlon Ltd. v. Commissioner of Central Excise, (2015) 14 SCC 798, where it was found that the entire exercise was revenue neutral and there was no mala fide intention on the part of the assessee, the penalty imposed was set aside.
Counsel for the State opposed the prayer and submitted that a plain reading of Section 45(5) of the JVAT Act would show that the provision is mandatory in nature and the Revenue Authorities had no way out, but to impose the penalty, once it was found that the TDS was not deducted by the petitioner Company. It was further submitted that Revenue Authorities had only limited discretion in deciding the quantum of penalty but so far as the imposition of penalty is concerned, the provision of the Act is mandatory. Reliance was placed on the following judgments, namely;
Guljag Industries v. Commercial Tax Officer, (2007) 7 SCC 269, wherein it was said, “…The penalty is for statutory offence. Therefore, there is no question of proving of intention or of mens rea as the same is excluded from the category of essential element for imposing penalty”
State of West Bengal v. Kesoram Industries Ltd., (2004) 10 SCC 201, “In interpreting a taxing statute, equitable considerations are entirely out of place. A taxing statute cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency”
Observations
Quashing the impugned orders, the Court observed, “…a plain reading of the impugned assessment orders clearly show that the mandate of Proviso to Section 45(5) of the JVAT Act, has not been followed by the Assessing Authority. There is no discussion at all about the defence of the Company and without stating anything about the reasons that might have been shown before the Assessing Authority by the counsel for the Company, the assessment orders/demand notices have been passed…”
With regards to the precedents referred to by the Counsel for the petitioner, the Court said, “…The Assessing Authority shall pass the necessary orders in accordance with law, keeping in view the ratio of the decision in Hindustan Steel Ltd. case, that penalty is not ordinarily to be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation, and that the penalty is not to be imposed merely because it is lawful to do so. The Assessing Authority shall also take into consideration the ratio of the decision in Employees’ State Insurance Corporation case, that only because a provision has been made for levy of penalty the same by itself would not lead to the conclusion that penalty must be levied in all situations. The Assessing Authority shall also exercise its discretion, in accordance with law, as regards the quantum of penalty, if the penalty is found leviable, and shall not go for the highest amount of penalty in a mechanical manner.”
Decision
Allowing the present three writ applications, the Court reiterated the settled legal precedents and further directed, “…in case the Assessing Authority comes to the finding that the penalty was not leviable, the amount already deposited by the petitioner Company pursuant to the garnishee orders shall be refunded back with the statutory interest.”[Tenughat Vidyut Nigam Ltd. v. State of Jharkhand, 2019 SCC OnLine Jhar 2908, decided on 05-12-2019]
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