Tribunal reduces penalty disproportionate to gravity of sales tax default?

LAHORE: An Inland Revenue appellate tribunal has reduced penalty against defaulter of sales tax owing to disproportionate to the gravity of default, said sources. The tribunal was of the view that once the contravention was established, the penalty had to follow and only the quantum was discretionary.

According to details, a sales tax officer had imposed penalty against fibres manufacturer for not depositing sales tax for a period of one and half years. Details of delay in sales tax payment along with calculation of penalties and default surcharge for each tax period was tabulated in the show cause notice as well as order-in-original.

The concerned tax officer had alleged that the taxpayer had failed to furnish any explanation despite seeking adjournments. Resultantly, the officer Inland Revenue finalised the show-cause proceedings and levied penalty worth millions of rupees along with default surcharge.

The taxpayer challenged the imposition/recovery of penalty by agitating that there was no willful default on his part, therefore, imposition of penalty in absence of proving any mens rea was not tenable. But the tribunal did not agree with the defaulter, saying the default making sales tax payments was for tax periods spanning almost one and half years and for prudent mind it was not hard to understand that the taxpayer has committed a wilful default.

However, the tribunal reduced the penalty to 10% of amount imposed by authorities, stating that the penalty had to be imposed in compliance with the provisions of law and the quantum must be proportionate to the gravity of default by the taxpayer. It further maintained that penalty provisions had been provided in the statute to ensure compliance, which had never been regarded as a tool to generate revenue.

The tribunal simultaneously stated that the commissioner appeals had rightly turned down the contention of taxpayer against the imposition of penalty, as sales tax included penalty, which could rightly be assessed and recovered by the department.

Copyright Business Recorder, 2024