Penalty u/s 45 of Gujarat Sales Tax Act is statutory and Mandatory, Commissioner/AO has no Discretionary Powers: Supreme Court [Read Order]

The Supreme Court in its recent judgement has held that the Commissioner or Assessing Officer has no discretionary powers on levying of penalty and interest leviable under Sections 45(6) and 47(4A) of the Gujarat Sales Tax Act, 1969 since those are statutory and mandatory sections.

M/s Saw Pipes Ltd, the respondent company ­ assessee is engaged in the business of executing indivisible works of undertaking contract of coal tar and enamel coating on pipes. The respondent ­ assessee had opted for payment of lump­sum tax as provided under Section 55A of the Gujarat Sales Tax Act, 1969.

The respondent-assessee deposited tax at the rate of 2% on sales involved in the execution of the works contract of coating of pipes by treating the same as the civil works contract as prescribed in Entry­1 of the notification dated 18.10.1993 issued by the Government of Gujarat.  

The Assessing Officer (AO) held that the contract of coating of pipes is not a civil works contract and therefore, the composition amount is payable not at the rate of 2% as deposited by the respondent but it falls under Residuary Entry­8 to the notification dated 18.10.1993.      

On appeal, the High Court allowed the appeal to the aforesaid extent, deleting the penalty and interest levied under Section 45(6) and Section 47 (4A) of the Gujarat Sales Tax Act, 1969.

It was submitted by the revenue that while deleting the penalty, the High Court has not at all considered sub­section (6) of Section 45 of the Act, 1969 in its true spirit and the High Court has not properly considered the fact that the penalty leviable under Section 45(6) of the Act, 1969, is a statutory penalty and hence, is compulsorily leviable.

Further argued that the penalty leviable under Section 45(6) of the Act, being a statutory penalty, there is no discretion vested with the Commissioner to levy or not to levy, as long as the assessee falls under Section 45(5) of the Act, 1969.

As per Section 45(6), if the dealer is deemed to have failed to pay the tax to the extent mentioned in Section 45(5), a penalty shall be levied on such a dealer not exceeding 1.5 times the difference of tax specified in the said provision.

The two-judge bench of Justices M.R. Shah and B.V. Nagarathna held that the court cannot read anything into a statutory provision which is plain and unambiguous and on a strict interpretation of Section 45 and Section 47 of the Act, 1969, the only conclusion would be that the penalty and interest leviable under Section 45 and 47(4A) of the Act, 1969 are statutory and mandatory and there is no discretion vested in the Commissioner/Assessing Officer to levy or not to levy the penalty and interest other than as mentioned in Section 45(6) and Section 47 of the Act, 1969.

The Apex Court restored the order(s) passed by the Assessing Officer confirmed up to the Tribunal to levy penalty and interest under Section 45(6) and Section 47(4A) of the Act, 1969. While allowing the appeal, the Supreme Court also quashed and set aside the impugned judgment and order passed by the High Court.

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