[2011] 46 VST 1 (Bom) - RS Goyal & Associates

VATLaws (Readable Version) - Thursday, January 10, 2013
regard. The authority has to determine whether a penalty should be
imposed and if it decides to impose a penalty what is the extent of the
penalty liable to be imposed. The Supreme Court held in its decision in
Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211 (SC) as follows
(page 214 in 25 STC):
1 Here italicised.
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". . . 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. . ."
The Legislature may of course take away that discretion and make the
imposition of a penalty mandatory for certain violations. Whether a penalty
is mandatory is a matter of construing the legislative provision. Here the
State Legislature by the use of the word "may" has not departed from the
ordinary rule that a penalty is discretionary. The discretion must extend
both to whether a penalty should be imposed and on the quantum. The
Legislature having used the word "may", a clear provision was required, if
the Act intended to oust the discretion on the quantum, in a case where
the Commissioner is of the view that a penalty has to be imposed. That is
not the case.
Having therefore, considered the submission which has been urged on
behalf of the appellant, we are of the view that there is no reason to accept
the contention that the discretion which is conferred by section 61(2) does
not extend also to the quantum of the penalty. Under the substantive part
of sub-section (2) of section 61 the State Legislature has conferred a
discretion on the Commissioner before he imposes a penalty on the dealer
for failing to furnish a copy of the audited report within the prescribed
period. The proviso to sub-section (2) states that if the dealer fails to
furnish a copy of the said report within the prescribed period but files it
within one month of the end of the period, and the dealer proves to the
satisfaction of the Commissioner that the delay was on account of factors
beyond his control, then no penalty under this sub-section shall be
imposed upon him. Hence, in the circumstances set out that the proviso to
sub-section (2), no penalty can be imposed at all if the conditions therein
are fulfilled. The proviso operates when (i) the dealer fails to furnish a copy
of the report within the prescribed period but files it within one month of
the end of the period; (ii) the dealer proves to the satisfaction of the
Commissioner that the delay was for reasons beyond his control. Where
the proviso applies, no penalty can be imposed on the dealer at all.
The proviso is an exception and does not control the substantive part of
section 61(2). The substantive part of sub-section (2) of section 61 also
confers a discretion upon the Commissioner which is not diluted by the
This copy was printed from VATLaws licensed to: R.S. Goyal
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