Delhi High Court
Bansal Dye Chem Pvt Ltd vs Commissioner Value Added Tax, ... on 24 September, 2015
Author: S. Muralidhar
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
8.
+ ST.APPL. 29/2015
BANSAL DYE CHEM PVT LTD ..... Petitioner
Through: Mr A. K. Babbar and Mr Surinder
Kumar, Advocates.
versus
COMMISSIONER VALUE ADDED TAX,
DELHI & ANR. ..... Respondents
Through: Mr Gautam Narayan, Additional
Standing Counsel (Civil) and GNCTD appearing
for Respondent nos.1 & 2.
CORAM:
HON'BLE DR. JUSTICE S.MURALIDHAR
HON'BLE MR. JUSTICE VIBHU BAKHRU
ORDER
% 24.09.2015
Dr. S. Muralidhar, J.
1. This appeal by the Assessee, Bansal Dye Chemical Private Ltd., under
Section 81 of the Delhi Value Added Tax Act, 2004 ('DVAT Act') is
directed against the impugned order dated 28 th April 2015 passed by the
Value Added Tax Appellate Tribunal ('AT') in Appeal No.
1248/ATVAT/13-14 for the assessment period 1st November 2012 to 30th
November 2012.
2. The question of law that arises for consideration is whether the AT was by
the impugned order dated 28th April, 2015 justified in affirming the order
dated 26th February 2013 passed by the Value Added Tax Officer (VATO)
imposing penalty on the Appellant Assessee under Section 86(10) of the
DVAT Act without issuing notice to the Assessee?
3. The Objection Hearing Authority (OHA) by an order dated 21st January
2014 dismissed the appeal of the Assessee against the order dated 26th April
2013 of the VATO on the ground that the Assessee had already paid the
penalty. The AT has by the impugned order confirmed the penalty.
4. The brief facts, as articulated by Mr. A.K. Babbar, learned counsel for the
Appellant, are that the Assessee's premises were surveyed on 16th
November 2012. Variation in cash and stock was found. The VATO
enhanced the gross profit and levied tax, interest and penalty. Admittedly,
prior to levying penalty under Section 86 (1) no separate notice was issued
to the Assessee. The Assessee paid the tax, interest and penalty. While the
Assessee did not challenge the levy of tax and interest, he questioned the
penalty order, inter alia, on the ground that no opportunity of hearing was
afforded on the question of penalty before the order was passed.
5. Mr Gautam Narayan, learned Standing Counsel for the Respondents,
submitted that the Assessee has not challenged the finding of the VATO as
far as the levy of tax and interest was concerned, the Assessee accepted that
it had filed a return with incorrect particulars. Therefore, there cannot be any
mitigating circumstances as far as Section 86(10) is concerned.
6. The fact remains that no notice was issued to the Assessee by the VATO
on the aspect of penalty. The mere fact that the Assessee had paid the
penalty under protest would not preclude it from questioning the levy of
penalty on the ground that the basic procedural requirement was not fulfilled
by the VATO.
7. Assessment of penalty is an exercise separate from the main assessment
for determining the tax and interest payable. This is evident from a perusal
of Sections 31 and 32 (which talk of the self assessment and default
assessment) and Section 33 of the DVAT Act which deals with the penalty
assessment and which reads as under:
"33. Assessment of penalty.- (1) Where the Commissioner has reason
to believe that a liability to pay a penalty under this Act has arisen, the
Commissioner, after recording the reason in writing, shall make and
serve on the person a notice of assessment of the penalty that is due
under this Act.
(2) The amount of any penalty assessed under this section is due and
payable on the date on which the notice of assessment is served by the
Commissioner.
(3) Any assessment made under this section shall be without prejudice
to prosecution for any offence under this Act.
Explanation.- A person may, if he disagrees with the notice of
assessment, file an objection under Section 74 of this Act".
8. In addition Rule 36 (2) of the Delhi Value Added Tax Rules, 2005
(DVAT Rules) states " Where the Commissioner makes an assessment of
penalty under Section 33, he shall record the order in Form DVAT-24A and
such notice of assessment of penalty shall be served on the dealer in the
manner prescribed in Rule 62."
9. The very nature of the proceedings under Section 33 of the DVAT Act
read with Rule 36 (2) of the DVAT Rules underscore the need for the
VATO to observe the principles of natural justice while making the penalty
order. This entails serving on the Assessee a separate notice to show cause
why penalty should not be imposed and affording the Assessee an
opportunity of being heard prior to passing the penalty order. The imposition
of penalty is not a mechanical or automatic exercise but requires application
of mind by the assessing authority to the facts and circumstances of the case.
The fact that an Assessee is found liable to pay enhanced taxes and interest
does not ipso facto determine whether the Assessee is also liable to pay a
penalty.
10. In Indian Tourism Development Corporation v. Sales Tax Officer
(decision dated 24th September 2010 in W.P. (C) Nos. 17431 of 2006), this
Court inter alia dealt with an identical issue as under:
"In the present petition, the petitioner has also challenged the
imposition of penalty on the independent ground that it had not been
given an opportunity of hearing. Mr. Randhir Chawla, learned counsel
for the petitioner has placed reliance upon the order of this Court
dated 19th July, 2010 passed in W.P.(C) 10527/2009.
Having heard the learned counsel for the parties, we are of the opinion
that petitioner ought to have been given an opportunity of hearing
prior to levy of penalty.
Consequently, we set aside the penalty order and remit the matter to
the Value Added Tax Officer to pass appropriate orders in accordance
with law after giving an opportunity of hearing to the petitioner."
11. Likewise in Indian Railway Catering and Tourism Corporation Ltd.
Govt. of NCT of Delhi 48 DSTC J-316 (decision dated 19th July 2010 in
WP(C) Nos. 10527/2009) this Court ordered: "We feel that the petitioner
ought to have been given an opportunity, of hearing before the penalty
orders could have been passed."
12. In the present case it is seen that on the basis of the survey, a notice was
issued to the Assessee under Section 59 of the DVAT Act as regards the
assessment to tax. The Assessee did not participate in the assessment
proceedings and an ex parte 'Notice of Default Assessment of Tax and
Interest' was issued on 24th February 2013 by the VATO under Section 32
of the DVAT Act read with Rule 36 (1) of the DVAT Rules in Form 24. On
the same day the VATO passed the penalty order, without any service of
prior notice on the Assessee. The VATO sent to the assessee the penalty
order as a "Notice of Assessment of Penalty" under Rule 36 (2) of the
DVAT Rules in Form 24A. The Assessee was simply called upon to deposit
the penalty amount already determined by the VATO.
13. Inasmuch as the penalty order dated 24th February 2013 under Section
86 (10) of the DVAT Act was passed by the VATO without service of prior
notice of penalty on the Assessee and without affording the Assessee an
opportunity of being heard on the question of penalty, the said order is held
unsustainable in law and is hereby set aside. The consequential order dated
21st January 2014 of the OHA and the impugned order dated 28 th April,
2015 of the AT are also set aside.
14. The Court remands the matter concerning penalty to the VATO for a
fresh decision in accordance with law.
15. The appeal is allowed in the above terms but with no order as to costs.
S.MURALIDHAR, J
VIBHU BAKHRU, J
SEPTEMBER 24, 2015/MK
