Relief to HDFC Bank Ltd, Non Payment of Tax on Sale Of Repossessed Vehicles on assertion on Tax Exemption under DVAT Act does not Amount to Concealment: Delhi HC [Read Order]

As a relief to HDFC Bank Limited, the Delhi High Court has held that non-payment of tax on the sale of repossessed vehicles on assertion on tax exemption under Delhi Value Added Tax (DVAT) Act, 2004 does not amount to concealment.

The petitioner challenged the order passed by the Delhi Value Added Tax, Appellate Tribunal (DVAT) affirming the imposition of penalty upon the appellant. The appellant stated that the Tribunal has not only misconstrued the earlier orders of remit as framed by the Court, but it has also proceeded in complete ignorance of the ambit of the penalty provision, namely, Section 86 of the Delhi Value Added Tax Act, 2004.

According to the appellant, the Tribunal has not only misinterpreted the provisions of Section 86 of the Act, as mandating the imposition of a penalty, it has also clearly erred in failing to bear in mind that sub-sections (10), (14) & (15) of Section 86 were not attracted in the facts of the present case. According to the appellant, in the absence of it having submitted a false, misleading or deceptive return or having submitted one with particulars which could be said to fall within the meaning of the expressions ―false”, “misleading” or “deceptive”, the penalty itself was wholly unjustified.

Discrepancies on the point of deduction of TDS on work contracts were also noticed on examination of the bills of the work got executed by the bank on a contract basis, (for setting up its various branches/ATMs in Delhi from time to time). Since the dealer has some branches/ ATMs operating in Delhi, it also required examination in detail as to which date the dealer has set up its various branches/ATMs since the introduction of VAT and has got the work executed on a contract basis and has, therefore, not deducted the TDS required under the provision of the VAT Act & Rules.

Since it was observed that the tax was not paid/less tax was not paid because of concealment/omission/failure to disclose fully material particulars on the part of the dealer, the period of assessment of the dealer was also extended up to six years from the date on which the dealer has furnished a return under section 26 or sub-section (1) of section 28 of this Act.

Although the Tribunal has taken note of the judgments rendered by the Supreme Court in Hindustan Steel Ltd. vs State of Orissa as well as Pratibha Processors vs Union of India which had underlined the well-settled principle of penalty being quasi-criminal proceedings and thus liable to be sustained only where it be found that mens rea existed or the assessee being guilty of contumacious or dishonest conduct, it has essentially addressed the questions raised before it tested only on the anvil of proportionality and upheld the imposition of penalties under Sections 86(10), (14) & (15) of the Act albeit at a reduced quantification.

The penalty under Section 45(6) of the said statute which formed the subject matter of consideration became automatically leviable upon a failure of the assessee to pay the amount of tax as assessed or reassessed. Similarly, section 47(4A) of the 1969 Act provisioned for the levy of a penalty in a situation where a dealer failed to pay tax within the time prescribed. Those provisions thus contemplated the levy of a penalty and the assessee becoming liable to face penal action in case of an admitted failure to adhere to statutory obligations.

The penalty contemplated under Section 45(6) and 47(4A) of the 1969 Act thus did not rest on a discretion that may otherwise have been vested in the authority concerned. It was in the context of the aforenoted two statutory provisions that the observations of the Supreme Court in Saw Pipes Ltd. are liable to be appreciated.

It was pointed out that for the imposition of penalty for the period December 2005 to March 2006, the respondents had sought to invoke the extended period of limitation as constructed in terms of the Proviso to Section 34(1) of the Act. It was pointed out that the aforesaid Proviso empowers the respondents to commence proceedings for reassessment in cases where the Commissioner has reason to believe that tax was not paid on account of ―concealment, omission or a failure to disclose material particulars by an assessee.

A division bench of Justice Yashwant Varma and Justice Ravinder Dudeja observed that the non-payment of tax on the sale of repossessed vehicles is not alleged even by the respondents as being an outcome of ―concealment, omission or a failure to disclose all material particulars. The appellant chose not to deposit any tax in respect of the subject transactions proceeding on the assertion that the revenues obtained therefrom were not exigible to tax under the provisions of the Act.

The invocation of the Proviso placed in Section 34(1) lends further credence to our conclusion that the order of the Court dated 26 September 2016 cannot possibly be interpreted as restricting the scope of inquiry to the question of proportionality alone.

The Court allowed the instant appeal and answered the question of law as framed in favour of the appellant/assessee and against the Department. The Court set aside the impugned orders levying penalty upon the appellant and about FY 2005-06 and 2008-09.

To Read the full text of the Order CLICK HERE

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