The Gujarat Sales Tax Act, 1969’s Section 45 Penalty is Mandatory and Binding; the Commissioner/AO Has No Discretion: Supreme Court

Last Updated on April 20, 2023 by Administrator

Issue

According to the Supreme Court, no authority is granted to the Commissioner/Assessing Officer to levy or refuse to levy the penalty and interest other than as required by Sections 45(6) and 47(4A) of the Gujarat Sales Tax Act, 1969, respectively.

Facts of the case

The assessor/respondent firm, M/s Saw Pipes Ltd, carries out contracts for the application of coal tar and enamelled coating on pipes. It chose to pay the tax in one lump amount as permitted by Section 55A of the Gujarat Sales Tax Act of 1969 and deposited tax at the rate of 2% on sales by classifying the transaction as a contract for civil works, as outlined in Entry 1 published by the Gujarat government.

The AO issued a decision finding; as a result, the composition amount, which the assessee had submitted, was not due at the rate of 2% and fell under Residuary Entry-8 of the aforementioned notification.

The tax agency appealed to the Supreme Court, disputing the High Court’s decision.

Arguments

The tax department asserted that the word “shall be levied” is employed in Section 45(6) of the Act. Furthermore, Section 47(4A) of the Act uses the same terminology for interest alone. It consequently argued that the High Court made a fundamental mistake by eliminating the penalty and interest on the aforementioned reasons since the assessor was legally required to pay them.

Reasoning

The penalty under Section 45(6) is automatically imposed once it is determined that a dealer has failed to pay the tax to the extent specified in Section 45(5). The Assessing Officer is not given the option of levying a lesser penalty than that specified in the aforementioned provision. As a result, the court stated that the dealer’s mens rea is not subject to consideration.

According to the Apex Court, Section 45’s text is clear, straightforward, and explicit. 

Judgement

The High Court’s decision and order were overturned by the court, reinstating the AO’s ruling.

Provisions used in case

Sections 45(6), 47(4A) and Section 55A  of the Gujarat Sales Tax Act, 1969.

Case title – State of Gujarat and Anr. vs M/s Saw Pipes Ltd

Written By – Nikita Shankar