FAQs on Penalties with Select Landmark Judgments

FAQs on Penalties with Select Landmark Judgments: Part 1

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Research by: Abhishek Raja Ram, 9810638155

Don't forget to read till last and do suggest whether I should write part-2 or close this series.

Q1. Can a penalty equal to the tax amount be imposed for delayed tax payments?

A1. NO

An order was passed against the petitioner imposing a penalty of Rs. 28,00,476, but there was no allegation against the petitioner of tax evasion; the only allegation was that the amount was paid after a delay; in case of delay, the maximum punishment would be Rs. 10,000 as per Section 126(2), and therefore, the petitioner was to be directed to pay Rs. 10,000 as a penalty.

(2023) 12 CENTAX 299 :: TRT-2024-1228

Q2. Whether penalty can be invoked if there was a bona fide doubt about chargeability of tax?

A2. NO

An extended period of limitation is not invokable where there is no suppression of facts, the assessee had a bona fide belief in the exemption, and the department did not bring evidence on tax evasion. For the same reason, no question arises for the imposition of a penalty.

(2022) 137 taxmann com 248 :: TRT-2024-328

Q3. Whether penalty can be invoked if assessee suo-motu approaches the department to intimate the issue?

A3. NO

The assessee had stated that on its, own it had approached the Department as early as on 18-8-2003 with regard to the taxability of its services. However, the show-cause notice, dated 7-1-2005, had invoked the longer period, which is invoked for only suppression of facts, mis-statement or fraud with an intent to evade tax.

In the instant case, the ingredients for invocation of longer period were not present.

Hence, invocation of the longer period was not sustainable. In view of the above, there was no merit in the impugned order and the same was to be set aside. [Para 5.3] On the same ground Penalty is not leviable.

(2009) 22 STT 411 :: (2009) STR 413 :: TRT-2024-310

Q4. Whether penalty can be imposed on partners separately if already imposed on partnership Firm?

A4. NO

It is settled law that once the penalty is imposed on the partnership firm it's partner cannot be imposed penalty separately. This issue has been considered and settled by the Gujarat High Court in the case Commissioner of Central Excise vs. Jai Prakash Motwani. Hence no penalty can be imposed on Shri Amit Gupta.

2023-TIOL-263 :: TRT-2024-621

2023-TIOL-263 :: TRT-2024-621

Q5. Whether penalty is leviable if irregular input tax credit was availed but not utilized?

A5. NO

Perusal of response filed by Appellant to Show Cause Notice make it clear that Appellant had clearly mentioned that though credit was taken by mistake, credit was not availed by Mill – When credit itself was not taken/availed by Appellant, there is no scope whatsoever to allege wilful or deliberate intention to evade duty.

Demand of duty by invoking extended period cannot sustain, as Revenue has not been able to justify same – Demand as confirmed in impugned order cannot be sustained – When demand itself cannot be sustained, penalty imposed also cannot be sustained.

2022-VIL-983 :: TRT-2024-79