LAXMINARAYAN PUROHIT Vs. ADDITIONAL COMMISSIONER OF COMMERCIAL TAXES

JUDGEMENT

(1.) IS the Sales Tax Officer obliged to impose the maximum penalty prescribed under sub-section (6) of section 13aa of the Orissa Sales Tax Act, 1947 ? This is the short question that arises for consideration in this writ petition filed by the Executive Engineer, Roads and Building Division, Sambalpur.

(2.) THE facts necessary for adjudication of the above question may be delineated : The petitioner entrusts execution of different works to various contractors under his division. Sub-section (1) of section 13aa of the Orissa Sales Tax Act, 1947 (hereinafter referred to as "the Act") requires that any person responsible for paying any sum to any contractor for carrying out any works contract which involves transfer of property in goods shall at any time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or any other mode deduct an amount towards sales tax equal to four per cent of such sum of works contract if its value exceeds rupees one lakh. Under sub-section (3) thereof, the amount deducted from the bills or invoice is required to be deposited into a Government treasury within one week from the date of deduction in such form or challan as may be prescribed. Rule 37-A of the Orissa Sales Tax Rules, 1947 prescribes the procedure of deposit into the Government treasury (vide form XI ). Sub-section (6) thereof lays down that if any person contravenes the provisions of sub-section (1) or (2) or (3) or (5b), the Sales Tax Officer shall after giving him an opportunity of being heard, by an order in writing impose on such person penalty not exceeding twice the amount required to be deducted and deposited by him into Government treasury. 2. The Sales Tax Officer in letter No. 4447/ct. dated April 16, 1999 (annexure 3) called upon the petitioner to state as to why penalty under sub-section (6) of section 13aa of the Act shall not be imposed on him for wilful withholding of deposit of tax deducted at source amounting to Rs. 86,997. Despite service of notice on him, the petitioner did not file any cause. In the circumstances, the Sales Tax Officer imposed a penalty of Rs. 1,73,994 under sub-section (6) of section 13aa of the Act in his letter No. 4698/ct dated April 28, 1999 (annexure 4) by indicating as follows :

(3.) AS it appears, in course of hearing of the revision before the Commissioner a statement was filed on behalf of the petitioner regarding deduction of tax at source. The Commissioner found that the petitioner made payment to different contractors on July 13, 1998, September 27, 1998, November 11, 1998, November 26, 1998, December 3, 1998, December 27, 1998, January 17, 1999, January 25, 1999 and March 30, 1999. Out of such payment, only in respect of the payment made to the contractors on March 30, 1999, the deduction at source was made and deposited in the shape of bankers cheque. Although in the months of July, 1998, September, 1998, November, 1998, December, 1998 and January, 1999 payments were made to the contractors, no deduction of sales tax was made at the source. Under sub-sections (1) and (3) of section 13aa the petitioner was bound to make deduction towards sales tax from the bills of the contractors and deposit the same into the Government treasury within one week from the date of such deduction. Although he made payment to the contractors as indicated above, he did not deduct the sales tax from their payments at the source. There is therefore no doubt that he contravened sub-section (1) and sub-section (3) of section 13aa of the Act and incurred the liability of payment of penalty.