Law: Sales Tax Act, (III of 1951)

Section: 23,10(3)

(a) Sales Tax Act (III of 1951) Ss. 23 & 10(3) Initiation of proceedings Limitation Reasonable time ¬Imposition of penalty Inordinate delay Effect. In the present case the assessee, a company engaged in the business of sale of products Filed its sales tax returns showing nil sales for the purposes of Sales Tax Act. In the assessment proceedings before the Sales Tax Officer it was contended by the assessee that no sales tax was leviable on the product during the relevant assessment years as it was made exempt from sales tax from assessment year 1974 75 onwards. The Sales tax Officer however, directed the assessee to produce such notification and on default sales tax was levied in assessment years 1974 75, 1975 76 and 1976 77 respectively vide his order dated 19th December, 1977. On 20th March, 1981 the Sales Tax Officer served a notice on the assessee to show cause as to why penalty should not be imposed on it under section 23(1) of the Sales Tax Act. The assessee explained to the Sales Tax Officer that since the Customs Authorities did not charge any sales tax on the imports it got the impression that the sales tax on that material was abolished. It was further explained to the Sales Tax Officer that the assessee neither collected nor paid any sales tax and in all its quarterly returns it was mentioned that the product of the assessee was exempt from sales tax. It was further argued before the officer that levy of penalty after three years would not be legally sustainable. The Sales Tax Officer however, repelled all the submissions and levied penalty in each assessment year by his order dated 29th April. 1981. The perusal of the record shows that there did exist some confusion and misunderstanding regarding the taxability of the item and it appears that the Sales Tax Officer was also not clear about the taxability of the product for the reason that he also did not object to the company's claim and non payment of sales tax for three years under reference. Although the law may not cast any responsibility upon the Sales tax Officer but, his silence on the company's claim and non-¬collection and non payment of sales tax strengthened the assessee's confusion.…

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