Madras High Court Grants Relief to Mahindra, Quashes Penalty

Madras High Court Grants Relief to Mahindra, Quashes Penalty

The Madras High Court (HC) in the case titled, Mahindra & Mahindra Ltd. (Appellants) v. The Joint Commissioner (CT) (Respondents) quashed the penalty imposed on the appellants for non-declarations of concessional rate of tax in the registration certificate.

The division bench of HC comprising of Justices T.S. Sivagnanam and R.N. Manjula observed that the proposal to levy penalty was made by an officer, who was not the officer and passed the order, as there has been a transfer of the officer and the new officer took over the charge.

The factual background of the case is that the appellant challenged the order passed by the first Appellate Authority, who partly confirmed the orders of the Assessing Officer (AO) levying penalty respectively for the assessment years 2008-09 and 2013-14.

The AO had issued the notices respectively proposing to levy penalty on the ground that the dealer purchased SAP software at concessional rate of tax against C Form Declarations without having included the same in the registration certificate issued under the Central Sales Tax Act (CST Act).

The AO was of the view that the software was not capable of being used in manufacturing and therefore, had proposed to levy a penalty under Section 10A(1) of the CST Act.

On behalf of the appellants, it was contended that the AO did not offer any opportunity of personal hearing to the appellant though more than one year had elapsed.

They further stated that their registration certificate issued under the CST Act, computer software is also one of the items mentioned in their certificate of registration. Had an opportunity of hearing been granted to the dealer, especially when the AO took more than one year to complete the assessment, they would have explained the same.

It was further submitted that the proposal to levy penalty was made by an officer, who was not the officer and passed the order dated 30 January 2014, as there has been a transfer of the officer and the new officer took over the charge.

The HC stated, "We are of the considered view that the case of hand having fallen under one of the exceptional circumstances as mentioned above warranting exercise of jurisdiction under Article 226 of the Constitution of India and as the defect, which has occurred by levying penalty without affording an opportunity of personal hearing would go to the root of the very levy itself."

The Court added, "We are inclined to interfere with the impugned order, the assessment orders, and remand the matters to the Assessing Officer for a fresh consideration."