Heard Shri B. K. Shukla, learned counsel for the revisionist and Shri Rohit Nandan Shukla, learned Additional Chief Standing Counsel for the State.
This revision was admitted on the following question of law:-
"Whether a penalty under section 34(8) of the U.P. Vat Act 2008 is leviable in the absence of any deliberate act in defiance of law or contaminous conduct or in the absence of any dishonest intention or in the absence of a conscious disregard of its obligation, especially in the context of a government department such as the revisionist herein."
The revisionist herein is an Assistant Material Manager, Rail Electrification under the Indian Railways. The revisionist registered under the VAT Act, 2008 for the relevant year used to deposit the TDS deducted by it from the payment made in relation to works contracts. The TDS for the month of April, May, July, August and October, 2008 amounting to Rs.30,82,964.00 was deposited with delay of 94, 63, 55, 24 and 39 days allegedly on account of officials being busy in an ensuing inspection and on account of shortage of staff. On account of delayed deposit of TDS penalty to the extent of 200% of the TDS, amounting to Rs. 61,65,928/- was imposed by the Assessing Authority under Section 34(8) of the Act, 2008. The revisionist claims to have deposited Rs.15,41,482/- on 11.07.2013 as 25% of the penalty imposed. Interest under Section 34(9) on the delayed deposit of TDS had also not been deposited which was deposited only on 30.01.2013 i.e. after the passing of the penalty order on 03.01.2013.
Against the order of the Assessing Authority an appeal was preferred by the revisionist before the Additional Commissioner which was rejected. Thereafter, being aggrieved the revisionist preferred a second appeal under Section 57 of the Act, 2008 before the Commercial Tax, Tribunal, which, on a consideration of the facts and circumstances of the case, reduced the penalty to Rs.3,08,296.40/- (Three lakhs eight thousand two hundred and ninety six rupees and forty paise) i.e. 10% of the TDS amount vide its judgment dated 25.08.2015. Being further aggrieved this revision was filed.
Reliance has been placed by the learned counsel for the revisionist upon the decision of the Supreme Court in the case of Hindustan Steel Ltd. Vs. State of Orissa reported in AIR 1970 SC 253 to contend that penalty will not ordinarily be imposed unless there was deliberate defiance of law, dishonest conduct or conscious disregard of its obligation. A penalty will not be imposed merely because it is lawful to do so. Reliance has also been placed upon the decision of the Supreme Court rendered in the case of M/s State of Haryana Vs. Chandra Mani reported in AIR 1996 SC 1623 to contend that some delay with regard to functioning and decision making of Government Agencies is understandable. It was also contended that the interest already having been paid on the delayed deposit the penalty was not justified. In view of the above, it has been contended that the imposed penalty be quashed.
The learned counsel for the revisionist also relied upon a recent decision of the Supreme Court rendered in the case of Price Waterhouse Coopers Pvt. Ltd. Vs. Commissioner of Income Tax and Anr. reported in 2012 (348) ITR 306. In the said case the Supreme Court granted relief in an Income Tax matter in the facts of the said case considering the reputation of the Firm and the silly mistake committed by it. This was done keeping in mind the provision of Section 271(1)(c) of the Income Tax Act, 1961.
The learned Additional Chief Standing Counsel on the other hand contended that mens rea is not a prerequisite for imposition of penalty under Section 34(8) of the Act, 2008. There has been a conscious disregard of the statutory obligation to deposit the TDS amount within time, therefore, the impugned action does not require any interference, specially as, the 200% penalty imposed upon the revisionist has been reduced by the Tribunal to 10%, which is justified.
Under the provisions of Section 34 of the Act, 2008 TDS is to be deposited by 20th of every month following that in which the deduction is made.
On a perusal of Section 34 of the Act, 2008 the Court finds that the provision for imposition of liability to pay interest on the delayed deposit of TDS is contained in Sub-section 9 of Section 34 of the Act, 2008, whereas, the provision for imposition of penalty is separately contained in Sub-section 8 of Section 34 of the Act, 2008. Moreover, the opening line of Sub-section 9 itself says - ''without prejudice to the provisions of Sub-section (8)', meaning thereby, the imposition of penalty and interest are two separate liabilities and the fact that interest had been paid by itself would not be a ground for setting-aside the penalty nor would it be vice-a-versa.
Sub-section 8 of Section 34 reads as under:-
"(8) If any person referred to in sub-section (1) fails to make the deduction or after making deduction fails to deposit the amount so deducted as required by sub-section (6), the assessing authority may, after giving to such person an opportunity of being heard, by order in writing, direct that such person shall pay, by way of penalty, a sum not exceeding twice the amount deductible under this section but not so deducted and, if deducted, not so deposited into the Government Treasury."
As is evident from its reading: any person responsible for making deduction of TDS if he fails to make the deduction or after making deduction fails to deposit the amount so deducted as required by Sub-section 6, the Assessing Authority may, after giving to such person an opportunity of being heard, by order in writing, direct that such person shall pay, by way of penalty, a sum not exceeding twice the amount deductible under this section but not so deducted and, if deducted, not so deposited into the Government Treasury.
The imposition of penalty under Section 34(8) is in addition to and unaffected by the payment of interest under Section 34(8).
Thus, the imposition of penalty is discretionary which is evident from the use of the word ''may' and also from the fact that a prior opportunity of hearing is to be given to such person before taking a decision in this regard, which is obviously for the purposes of facilitating a just and fair consideration of the matter and the exercise of discretion in this regard. Even if the penalty is to be imposed, its extent subject to the maximum limit prescribed under Sub-section 8, is also in the discretion of the Assessing Authority which is to be exercised in a just and fair manner, meaning thereby, if there is a valid justification for non deposit of the TDS within time then the Assessing Authority, subject to his satisfaction, may not impose penalty or may impose lesser penalty.
Admittedly, there was some delay in depositing the TDS amount for the months of April, May, July, August and October, 2008.
In the present case, the Assessing Authority imposed penalty to the tune of 200% i.e. Rs. 61,65,928/- which was upheld in First Appeal, however, the Tribunal on a consideration of the facts and circumstances of the case as also taking into consideration the factum of payment of interest on the delayed deposit of TDS by the appellant and that it was a Government department where some procedural delay in this regard is routine, reduced the penalty to Rs.308296.40 i.e. 10% of the penalty amount.
Though the existence of mens rea or dishonest intent is not a prerequisite for imposition of penalty under Section 34(8) as is evident from a bare reading of the said provision and it is a civil liability, if there are bonafide reasons and mitigating factors which explain the delayed deposit of TDS they should be taken into account while taking a decision to impose or not to impose penalty or to determine its extent. Failure to make deduction would however stand on a different footing.
In the present case the delay in deposit of TDS for April, May, July, August and October, 2008 ranges from 24 days to 94 days. The Railways should have been conscious of its statutory obligations. Considering the fact that it is not a case of failure to make deduction but of failure to deposit TDS timely and also considering the fact that the matter relates to a Government department, in the facts of the case, the penalty is reduced from Rs.3,08,296.40/- to Rs.1541248 i.e. 05% of the TDS. This will act as a deterrent for the future. The order of the Tribunal stands modified accordingly.
In view of the aforesaid, the question framed hereinabove is answered accordingly.
The trade tax revision is disposed of in the aforesaid terms.