QUESTION AND ANSWER
Levy of automatic and Mandatory penalty.
Under the Maharashtra Value Added Tax Act, 2002, duly amended in July 2009, a new sub-section 8 of section 29 has been inserted, which reads as ;
Where, any person or dealer has failed to file within a prescribed time, a return for any period as provided in Section 20, the Commissioner shall impose on him, a sum of Rupees Five Thousand by way of penalty. Such penalty shall be with prejudice to any other penalty imposed under this Act.
Further more this penalty is made non-appealable, the section 85 is amended as ;
No order passed or proceedings taken under this act, rules or notification by any authority appointed or constituted under this Act, shall be called in question in any Court, no appeal shall lie against such order,
[b-2] an order levying penalty under sub-section 8 of section 29.
Apart from being un-constitutional, can it be challenged on the ground that the amount of penalty is very harsh and dis-proportionate to the offence committed [ whether by mens rea or not ] ?
I said disproportionate because, payment of taxes and filing of returns are 2 different responsibilities cast on a dealer. Where taxes are paid well in time, but somehow, return cannot be filed, whether an offence is commited by dealer to attract such a penal action ?
Please elaborate how the amendment is unconstitutional.
2.Once a law is intravires hardships to citizens is immaterial.Courts will not interfere.
The Amendment does not provide for a chance of being heard, a Show Cause Notice must necessarily be served on the defaulting dealer, and if the authority is not satisfied with the reasons for the default, then and then only a penalty can be imposed.
2. If a dealer feels that penalty imposed on him is un-just, he can appeal against it. In this case, the penalty order is made non-appealable. This is considered to be against the principle of Natural Justice.
3. The amount of penalty is Rs 5,000/-. This is also felt to be very harsh as compared to the default. Non filing of returns till prescribed date cannot attract such heavy penalty. If in a situation a dealer has paid his taxes in time, but has failed to upload his return, there is no element of mens rea involved in it.
4. The department ( govt ) should try to increase its revenue by way of collection of taxes and not by way of penalty.
5. Similar penal provision has been struck down by Karnatak HC in Jan 2009. The Maharashtra Penalty provision is much more harsh and arbitrary than the Karnatak one. I have confirmed this from the advocate who fought the KVAT provision.
6. We cannot afford to give our govts such freedom to impose any amount of penalties. I can see 2 complete different views on this topic. One says that the provision is arbitrary and will be struck down and the other says that the Court will not entertain the Writ. If the court cannot do anything in such a case, then it is quite serious thing for the regular tax-payers and for the country.
Whatever it is, I will fight it in the HC and if needed, also in the SC.
JOGESHWAR THEN WROTE TO ME IN MY ORCUT AS FOLLOWS:-
Swapnil has raised a constitutional issue in 'Judges and Justice' community. You are welcome to the debate.Here is the link:
MY REPLY IS AS FOLLOWS:-
I do not find anything unconstitutional in the Act. The excerpts from the Act have been wrongly reported in the question. The correct provisions are as follows:-
20. Returns and self-assessment
(1) (a) Every registered dealer shall file correct, complete and self-consistent return in such form, by such date, for such period and to such authority as may be prescribed. Different types of returns may be prescribed for different classes of dealers.
(b) The Commissioner may examine the return to ascertain whether it is complete and self-consistent. If the return is not complete or self-consistent, the Commissioner may serve on the dealer, within four months of date of filing of the return, a defect notice in the prescribed form. The said registered dealer shall correct the defects and submit to the prescribed authority a fresh complete and self-consistent return, within one month of the service of the defect notice:
PROVIDED that, the registered dealer who fails to submit a complete or self-consistent fresh return within the said period of one month shall be deemed not to have submitted the return within the prescribed time as required under clause (a).
(2) Notwithstanding anything contained in sub-section (1), the Commissioner may, subject such terms, and conditions, as may be prescribed, permit any dealer,-
(a) to furnish returns for such different period, or
(b) to furnish a consolidated return relating to all or any of the places of business of the dealer in the State for such period or periods, to such authority, as he may direct.
(3) Every person or an unregistered dealer who is required to file a return under any other provision of this Act, shall file such return for such period, in such form, by such date and to such authority as may be prescribe and the provisions contained in paragraph (b) of sub-section (1) shall apply to such return as they apply to the return prescribed under paragraph (a) of sub-section (1).
(4) Any person or dealer who, having furnished a return under sub-section (1), (2) or (3) discovers any omission or incorrect statement therein, may furnish a revised return in respect of the period covered by the return at any time before a notice for assessment is served on him in respect of the period covered by the return or before the expiry of a period of six months from the end of the year containing the period to which the return relates, whichever is earlier.
21. No notice for assessment in certain cases
(1) Where a return is filed by the prescribed date by a registered dealer, no notice calling the dealer for assessment in respect of the period covered by the return shall be served on the dealer after two years from the end of the year containing the period to which the return relates.
(2) Where a registered dealer has not filed a return in respect of any period by the prescribed date, no notice calling the dealer for assessment in respect of the said period shall be served on the dealer after three years from the end of the year containing the said period.
Notwithstanding anything contained in sub-section (1) or (2), a notice for assessment in respect of any period ending on or before the 31st March, 2008, may be served on the dealer within a period of four years from the end of the year containing the said period.
xxx xxx xxx xxx xxx
29. Imposition of penalty in certain instances
1[x x x]
(3)While or after passing any order under this Act, in respect of any person or dealer, the Commissioner, on noticing or being brought to his notice, that such person or dealer has concealed the particulars or has knowingly furnished inaccurate particulars of any transaction liable to tax or has concealed or has knowingly misclassified any transaction liable to tax or has knowingly claimed set-off in excess of what is due to him, the Commissioner may, after giving the person or dealer a reasonable opportunity of being heard, by order in writing, impose upon him, in addition to any tax due from him, a penalty equal to the amount of tax found due as a result of any of the aforesaid acts of commission or omission.
(4) Where any person or dealer has knowingly issued or produced any document including a false bill, cash memorandum, voucher, declaration or certificate by reason of which any transaction of sale or purchase effected by him or any other person or dealer is not liable to be taxed or is liable to be taxed at a reduced rate or incorrect set-off is liable to be claimed on such transaction, the Commissioner may, after giving the person or dealer a reasonable opportunity of being heard, by order in writing, impose on him in addition to any tax payable by him, a penalty equal to the amount of tax found due as a result of any of the aforesaid acts of commission or omission.
3[x x x]
(6)Where, any person or dealer contravenes the provision of section 86, so as to have the quantum of tax payable by him to be under-assessed, the commissioner may, after giving the person or dealer a reasonable opportunity of being heard, by order in writing, impose on him, in addition to any tax payable by him a penalty equal to half the amount of tax which would have been under-assessed or one hundred rupees, whichever is more.
(7) Where, any person or dealer has failed Without reasonable cause to comply with any notice in respect of any proceedings, the Commissioner may, after giving the person or dealer a reasonable opportunity of being heard, by order in writing, impose on him, in addition to any tax payable by him, a penalty equal to one thousand rupees.
(8) Where, any person or dealer has failed without reasonable cause to file within the prescribed time, a return for any period as provided under section 20, the Commissioner may, after giving the person or dealer a reasonable opportunity of being heard, by order in writing, impose on him, in addition to any tax payable by him, a sum of rupees two thousand by way of penalty. Such penalty shall be without prejudice to any other penalty, which may be imposed under this Act:
PROVIDED that, if the return is filed before the initiation of the proceeding for levy of penalty, the penalty shall be levied at rupees one thousand and in any other case, the penalty shall be levied at rupees two thousand.
(9)[x x x]
(c) Where a dealer has filed a return and such return is found to be not 4 complete and self-consisted, then the Commissioner may, after giving the dealer a reasonable opportunity of being heard, impose on him, by order in writing, a penalty of rupees one thousand. The levy of penalty shall be without prejudice to any other penalty which may be imposed under this Act.
(10)Where a person or dealer has collected any sum by way of tax in contravention of the provisions of section 60,-
(a) he shall be liable to pay a penalty not exceeding two thousand rupees, and
(b) in addition, any sum collected by the person or dealer in contravention of section 60 shall be forfeited to the State Government.
If the Commissioner, in the course of any proceeding under this Act or otherwise, has reasons to believe that any person has become liable to a penalty or forfeiture or both penalty and forfeiture of any sum under this sub-section, he may serve on such person a notice in the prescribed form requiring him on a date and at a place specified in the notice to attend and show cause why a penalty or forfeiture or both penalty and forfeiture of any sum as provided in this sub section should not be imposed on him. The Commissioner shall thereupon hold an inquiry and shall make such order as he thinks fit. When any order of forfeiture is made, the Commissioner shall publish or cause to be published a notice thereof for the information of the persons concerned giving such details and in such manner as may be prescribed.
(11) No order levying penalty under the foregoing provisions of this section shall be passed in respect of any period after five years from the end of the year containing the said period.
(12)No order imposing a penalty under any of the foregoing sub-sections shall be made,-
(a)by a Sales Tax Officer or an Assistant Commissioner where the penalty exceeds rupees five lakh except with the prior approval of the Deputy Commissioner;
(b)by a Deputy Commissioner or a Senior Deputy Commissioner, where the penalty exceeds rupees ten lakh except with the prior approval of the Joint Commissioner:
PROVIDED that, nothing in this sub-section shall apply to any penalty which may be imposed by an appellate authority.
(12) For the purposes of this section, Commissioner includes any appellate authority appointed or constituted under this Act.
(1) An appeal, from every original order, not being an order mentioned in sub-section (2) of section 85 passed under this Act or rules or notifications, shall lie if the order is made,-
(a) by a Sales Tax Officer or an Assistant Commissioner, or any other officer subordinate thereto, to the Deputy Commissioner;
(b) by a Deputy Commissioner or Senior Deputy Commissioner, to the joint Commissioner;
(c) by a Joint Commissioner, Additional Commissioner or the Commissioner, to the Tribunal.
(2) In the case of an order passed in appeal by a Deputy commissioner or a Joint
commissioner, a second appeal shall lie to the Tribunal.
(3) Every order passed in appeal by the Tribunal under this section, subject to the provisions of sections 24 and 27, be final and every order passed in appeal by any other appellate authority, shall, subject to the provisions of sections 24, 25 and 27, be final.
(4) Subject to the provisions of sections 80 and 81, no appeal including a second appeal shall be entertained unless it is filed within sixty days from the date of the communication of the order appealed against.
(5) Subject to such rules of procedure as may be prescribed, every appellate authority (both in the first appeal and the second appeal) shall have the following powers, namely:-
(a) in an appeal against an order of assessment, it may confirm, reduce, enhance or annul the assessment:
PROVIDED that where the appeal is filed before the Tribunal, the Tribunal may set aside the assessment and refer the case back to the assessing authority for making a fresh assessment in accordance with the direction given by it and after making such further inquiry as may be necessary; the assessing authority shall thereupon proceed to make such fresh assessment and determine, where necessary, the amount of tax payable on the basis of such fresh assessment;
(b) in an appeal against an order imposing a penalty, the appellate authority may confirm or cancel such order or modify it in accordance with the provisions of this Act;
(c) in an appeal against an order levying interest, the appellate authority may confirm or cancel such order or modify it in accordance with the provisions of this Act;
(d) in any other case, the appellate authority may pass such order in the appeal as it deems just and proper:
PROVIDED that, the appellate authority shall not enhance an assessment or a penalty or interest or sum forfeited or reduce the amount of set-off or refund of the tax, unless the appellant has been given a reasonable opportunity of showing cause against such enhancement or reduction.
Explanation: While disposing of an appeal, the appellate authority may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before it by the appellant or that no order was made in the said proceedings regarding such matter.
(6) The Appellate Authority or the Tribunal, as the case may be, may, while admitting the appeal, pending the disposal of the appeal, stay the order appealed against in full or part, subject to such conditions or restrictions as it may deem necessary including a direction for depositing of a part or whole of the disputed amount by the appellant.
(7) Every appellate authority including the Tribunal, insofar as it may, shall decide the appeals pending before it, by such priorities as may be prescribed:
PROVIDED that, if a person has attained the age of seventy-five years or more and such person is the proprietor of the business, a partner in a firm or a director having substantial interest in company being a body corporate, then on an application in the prescribed form made by him in this regard, any appeal made by the proprietary concern, partnership firm or the company shall be decided on priority to the exclusion of all other appeals.
27. Appeal to High Court
(1) An appeal shall lie to the High Court from every order passed by the Tribunal including a judgment by way of advance ruling, if the High Court is satisfied that the case involved a substantial question of law.
(2) The Commissioner or the applicant before the Tribunal aggrieved by any order passed by the Tribunal may file an appeal to the High Court and such appeal under this sub-section shall be,-
(a)filed within one hundred and twenty days from the date on which the order appealed against is received by the assessee or the Commissioner;
(b) in the form of a memorandum of appeal precisely stating therein the substantial question of law involved.
(3) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question.
(4) The appeal shall be heard only on the question so formulated, and the respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question:
PROVIDED that, nothing in this sub-section shall be deemed to take away or abridge the power of the court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question.
(5) The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit.
(6) The High Court may determine any issue which,-
(a) has not been determined by the Tribunal; or
(b) has been wrongly determined by the Tribunal, by reason of a decision on such question of law as is referred to in sub-section (1).
(7) The payment of any amount due to be paid by the applicant before the Tribunal or, as the case may be, by the Commissioner in accordance with the order of the Tribunal in respect of which an appeal has been preferred under this section, shall not be stayed by the High Court pending the final disposal of such appeal, but if such amount is varied as the result of the final disposal of the appeal, the difference shall be recovered or, as the case may be, refunded in accordance with the provision of this Act.
(8) Where the High Court delivers a judgement in an appeal filed before it, effect shall be given by the Tribunal to the order passed in the appeal on the basis of a certified copy of the judgment:
PROVIDED that, for the purpose of this sub-section, the Tribunal may accept a certified copy of the judgment furnished by the Commissioner or, as the case may be, by the dealer.
(9) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section.
56. Determination of disputed questions
(1) If any question arises, otherwise than in a proceedings before a Court or the Tribunal under section55, or before the Commissioner has commenced assessment of a dealer under section 23, whether, for the purposes of this Act,-
(a) any person, society, club or association or any firm or any branch or department of any firm, is a dealer, or
(b)any particular person or dealer is required to be registered, or
(c) any particular thing done to any goods amounts to or results in the manufacture of goods, within the meaning of that term, or
(d)any transaction is a sale or purchase, or where it is a sale or purchase, the sale price or the purchase price, as the case may be, thereof, or
(e) in the case of any person or dealer liable to pay tax, any tax is payable by such person or dealer in respect of any particular sale or purchase, or if tax is payable, the rate thereof, or
(f) set-off can be claimed on any particular transaction of purchase and if it can be claimed, what are the conditions and restrictions subject to which such set off can be claimed,
the Commissioner shall, subject to rules, make an order determining such question.
Explanation: For the purposes of this sub-section, the Commissioner shall be deemed to have commenced assessment of the dealer under section 23 when the dealer is served with any notice by the Commissioner under that section.
(2) The Commissioner may direct that the determination shall not affect the liability under this Act of the applicant or, if the circumstances so warrant, of any other person similarly situated, as respects any sale or purchase effected prior to the determination.
(3) The Commissioner, for reasons to be recorded in writing, may, on his own motion, review an order passed by him under sub-section (1) or (2) and pass such order thereon as he thinks just and proper. The Commissioner may direct that the order of review shall not affect the liability of the person in whose case the review is made in respect of any sale or purchase effected prior to the review and may likewise, if the circumstances so warrant, direct accordingly in respect of any other person similarly situated:
PROVIDED that, no order shall be passed under this sub-section unless the dealer or the person in whose case the order is proposed to be passed has been given a reasonable opportunity of being heard:
PROVIDED FURTHER that, before initiating any action under this sub-section,
the Commissioner shall obtain prior permission of the State Government.
(4) If any such question arises from any order already passed under this Act or any earlier law, no such question shall be entertained for determination under this section; but such question may be raised in appeal against such order.
(5) The Commission6r, insofar as he may, shall decide the applications for determination in the chronological order in which they were filed.
85. Bar to certain proceedings
(1) Save as is provided by section 27, no order passed or proceedings taken under this Act, the rules or notification by any authority appointed or constituted under this Act, shall be called in question in any Court, and save as is provided by section 26, no appeal shall lie against any such order.
(2) No appeal shall lie against,-
(a) any notice issued under this Act, rules or notifications, or
(b) any summons issued under sub-section (1) of section 14, or a defect notice issued under section 20 or
(b-1) an assessment order passed under sub-section (1) of section 23, or
(c) any order issued on an application for instalment, or
(d) any order or notice issued under sub-section (1) or (2) of section 34, or
(e) an order pertaining to the seizure or retention of books of accounts, registers and other documents, or
[(f) x x x]
(g) any order or assignment under section 59, or
[(h) x x x]
(i) an interim order issued in the course of any proceeding not being an order issued under sub-section (6) of section 26.
Thus there is a provision for right to be heard before imposition of penalty, the maximum fine amount of Rs.2000 being not any fixed amount is discretionary and there being a right to appeal to the Tribunal and then to the High Court, I see no reason how the provisions can be called unconstitutional. In my opinion the Act is not UNCONSTITUTIONAL as dubbed by my friend.
Here are the links to amended section 29 and 85, w.e.f. 01-07-2009. Those you read was the old act. Please read this and comment.,
Amended section 29 :- http://www.mahavat.gov.in/mahavat/ACTS/new_upload/29.pdf
Amended section 85 :- http://www.mahavat.gov.in/mahavat/ACTS/new_upload/85.pdf
the object of all this penal exercise, as mentioned in the Levy and Amendment Act, is just to reduce the quantum of penalty from 10,000 to 5,000.
If courts cannot interfere in hardships caused to citizens by statutes that are "IntraVires", then I dont find any reason for us to have a constitution.
Yes, now that I have gone through the Amendment as quoted by you I am of opinion that you indeed have a good case to fight in a Court of Law to challenge the legality of the Amendment.