Research › Search › Judgment

Patna High Court · body

2007 DIGILAW 1260 (PAT)

Indian Oil Corporation Ltd. v. State Of Bihar

2007-08-01

KISHORE K.MANDAL, NARAYAN ROY

body2007
Judgment Narayan Roy, J. 1. Heard counsel for the parties. 2. This writ application has been filed by M/s Indian Oil Corporation Limited for quashing order dated 15.7.2004 passed by the Commercial Taxes Tribunal, Bihar, Patna (hereinafter to be referred to as "Tribunal"). 3. The main thrust of the argument centres round imposition of penalty of Rs. 70.00 lacs under the provisions of Section 15(9) of the Bihar Sales Tax Ordinance, 1980 (hereinafter to be referred to as "Ordinance") and consequently demand notice was issued by the authorities. 4. Relevant facts with regard to the matter in issue are briefly stated as follows: Petitioner No. 1 who is a Government Company incorporated under the provisions of the Companies Act, 1956, was assessed for the year 1980-1981 vide order dated 27.8.1984. The amount of tax as per the return was already paid in time. However, subsequently, it came to light that the petitioner company had withheld the admitted tax of Rs. 7204093.47 paise for more than thirty months, and, accordingly, a penalty of Rs. 70.00 lacs was imposed on it in exercise of power under sec. 15(9) of the Ordinance, and further penalty of Rs. 5000/- was imposed for non-submission of return In time under sec. 15(8) of the Ordinance. The petitioner thereafter challenged the order passed under sec. 15(9) of the Ordinance before the Commissioner of Commercial Taxes and also before the Tribunal, and, ultimately, no interference was made with the order of penalty and consequently, thereof, the assessing authority again passed the assessment order imposing penalty of Rs. 70.00 lacs. 5. The petitioner company thereafter again challenged the order aforesaid unsuccessfully in revision, appeal and before the Tribunal, and, ultimately, this writ application was filed. 6. Dr. Debi Pal, learned counsel for the petitioners, submitted that the petitioner company had paid the admitted taxes as per its return in time, but had to revise its return after compilation and reconciliation of its records for the purposes of computation of its tax liability in relation to transactions relating to the State of Bihar, and, as such, the liability exceeded to the amount already paid and balance payment was made subsequently, and, therefore, the provisions of Sec. 15(9) of the Ordinance was not attracted, as no sufficient opportunity of hearing was given to it. Learned counsel further submitted that there was no laches on the part of the petitioner company nor there was any mens rea or any intent to conceal sales or evade tax and, therefore, the imposition of penalty was wholly unjustified and without jurisdiction. Learned counsel also contended that althrough the petitioner company cooperated with the assessing authority and immediately after compilation of assessment it was not possible for it to get all the relevant documents or to produce the same before the assessing officer, as it had to be collected from different parts of the country before its compilation and reconciliation, and, in this view of the matter, the action taken by the assessing authority cannot be said to be justified, as sufficient time was not granted. 7. Dr. Pal, learned senior counsel for the petitioners, further submitted that no intention can be attributed to the petitioner company in evasion of tax and the breach, if any, found was of venial nature, and, therefore, the omission and commission, if any, committed by the petitioner company would have been held to be bona fide and no penalty could have been imposed specially when it had deposited the admitted tax as per the return and its filing of revised annual return and making further payment of Rs. 72.00 lacs as per its revised return before the assessment proceeding explaining the reasons for the delay in said revision application. Learned counsel, therefore, submitted that the default in payment of tax is wholly unintended. 8. Mr. P.K. Shahi, learned Advocate General, appearing on behalf of the State, submitted that the conduct of the petitioner company was not bona fide and it evaded tax despite several opportunities of hearing being given to it in between 18.11.1981 and 29.12.1983, and, therefore, the default on its part was found to be wilful and deliberate, and, thus, imposition of penalty under sec. 15(9) of the Ordinance was wholly justified. 9. In support of his contention, learned Advocate General placed reliance in case of Inder Singh Harbansh Singh and Others vs. State of Madhya Pradesh and Others (49 STC 347) and in case of R.S. Joshi vs. Ajit Mills (AIR 1977 Supreme Court 2279) and submitted that due delay in clearing the tax liability would be a justified around to impose penalty and necessarily it involves the question of mens rea. 10. Dr. 10. Dr. Debi Pal, learned counsel for the petitioners, lastly submitted that owing to the bona fide intention of the petitioner and keeping in view the complicity of the accounts, it might not have been proper for the revenue authorities to detect the omission and the shortage in the amount of tax paid by the petitioner and no sooner the error was detected in the petitioners regional office, it was corrected voluntarily and the balance amount of the total tax liability for the assessment period in question was paid alongwith the corrected return. Learned counsel, in this view of the matter, submitted that imposition of penalty was wholly unjustified and untenable in law. In support of his submission, learned counsel relied upon a judgment of Supreme Court in case of Hindustan Steel Limited vs. State of Orissa [ (1970)25 S.T.C. 211 ] and in the case of the Cement Marketing Company of India Limited vs. The Assistant Commissioner of Sales Tax, Indore and Others [ (1980)45 S.T.C. 197 ]. 11. In Hindustan Steel Limited vs. State of Orissa [ (1970)25 S.T.C. 211 ] the Apex Court observed: "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. 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. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute." 12. In case of Cement Marketing Company of India Limited vs. The Assistant Commissioner of Sales Tax [(1980)45 S.T.C. (Supreme Court) 197], in which the Apex Court has reiterated the same view, as expressed in (1970)25 S.T.C. 211 . 13. In case of Cement Marketing Company of India Limited vs. The Assistant Commissioner of Sales Tax [(1980)45 S.T.C. (Supreme Court) 197], in which the Apex Court has reiterated the same view, as expressed in (1970)25 S.T.C. 211 . 13. Learned counsel for the petitioner also placed reliance on an unreported judgment of this Court rendered in C.W.J.C. No. 3253 of 2005 (M/s Indian Oil Corporation Limited and Another vs. State of Bihar and Others) and also upon case of Mansa Cooperative Spinning Mill Limited vs. State of Punjab and Others [(2005)148 S.T.C, 443](Punjab & Haryana High Court) wherein the Courts held that the provision of penalty was not attracted when the dealer had paid its tax in full according to its return and its motive was found to be unintended to conceal or evade tax. 14. From the pleadings of the parties, it is undisputed that the petitioner has its business all over the country and it had to collect the relevant datas from different parts of the country before compilation and production for assessment and when it came to its notice towards filing of its incomplete return it immediately filed the revised return and paid the tax liability 15. In the background of the facts and circumstances of the case, it would be difficult to hold that default in payment of the balance tax amount by the petitioner company was intentional or had a design to evade tax. The ingredients of mens rea, in this view of the matter, would not be attributable to the petitioners firm when it cleared the tax liability at the time of filing of the revised return. 16. On hearing counsel for the parties and on careful consideration of the materials on record and in view of the legal propositions, as referred to above, I find substance in submission of Dr. Debi Pal, learned counsel for the petitioners, and I am of the considered view that penalty imposed against the petitioners appears to be unjustified and untenable in law. 17. In the result, this writ application is allowed, the order imposing penalty upon the petitioners by the revenue authorities for the assessment year 1980-1981 is set aside. 18. No order as to costs. Kishore K.Mandal, J. 19 I agree.