A.K. Patnaik, C.J. - (1.) THIS is a reference under section 44 of the M.P. General Sales Tax Act, 1958 made by the Board of Revenue, Madhya Pradesh, Gwalior. The facts are stated in the statement of case drawn up by Board of Revenue are that M/s Eastern Air Products (Pvt.) Ltd., Bhopal (hereinafter referred to as 'the assessee') carried on the business of manufacture, purchase and sale of gas. For the Diwali year 1983 -84, the assessee filed returns late and monthly tax was also found not to have been paid according to provisions of section 27(2) of the M.P. General Sales Tax Act, 1959 (hereinafter referred to as 'the Act'). Accordingly, a penalty of Rs. 19,191/ - was imposed under section 17(3) of the Act. The assessee filed a first appeal against the levy of penalty under section 17 of the Act, but the Deputy Commissioner rejected the appeal. Thereafter, the assessee filed second appeal before the Board of Revenue, Madhya Pradesh and the Board of Revenue held that in order to attract penalty under section 17(3) of the Act, there must be positive finding that the failure or the default to file the return within time and to pay the tax within time was without sufficient cause. Such a finding is missing in the assessment order. The Board of Revenue further held that the absence of sufficient cause alone enables the lower authorities to initiate penalty proceedings and in absence of such finding of fact there can be no initiation of penalty proceedings and when the initiation of penalty proceedings itself is not proper, a penalty order is not authorised and accordingly set aside the penalty of Rs. 19,191/ - by its order dated 17 -7 -1990. Thereafter, at the instance of the department, the Board of Revenue has referred the following question of law for our opinion : Whether under the facts and circumstances of the case, the Tribunal was justified in holding that the penalty under section 17(3) of the M.P. General Sales Tax Act, 1958 cannot be imposed unless there is a positive finding about the lack of sufficient cause.
(2.) WE have heard Mr. Sanjay Yadav, learned Deputy Advocate General for the State of MP and Mr. H. S. Shrivastava, learned Senior Advocate with Mr. Sandesh Jain, Advocate for the assessee. While Mr. Sanjay Yadav, learned Dy. A. G. submits that the Board of Revenue was not justified in holding that the penalty under section 17(3) of the Act was not sustainable, Mr. H. S. Shrivastava, learned Senior Counsel for the assessee submits that in the very assessment order itself, the penalty under section 17(3)(b) of the Act was imposed by the Assessing Officer and, as a result, the assessee has not had the opportunity to establish before the Assessing Officer that he had sufficient cause for not filing the return within time or to pay the tax within time. The provision for imposition of penalty on a registered dealer for not furnishing return in time or for failing to furnish along with the return proof of payment is made in Clause (b) of section 17(3) of the Act. The provisions which relate to imposition of penalty under sub -clause (b) of section 17(3) are quoted herein below : 17(3) If - (b) a registered dealer fails without sufficient cause to pay the amount of tax in the manner prescribed under sub -section (2) of section 22 or to furnish his return under sub -section (1) or revised return under subsection (2) for any period in the manner and by the date prescribed thereunder or while furnishing the return fails to furnish along with the return, the proof of payment as required by sub -section (1 -A); the Commissioner may, after giving such dealer a reasonable opportunity of being heard direct him to pay, by way of penalty - (ii)(a) in the cases referred to in clause (b) above, in addition to the amount of tax, if any, payable by him, a sum equal to one percent, of the tax for every month for the first six months and 1.5 percent, for the next six months of the first year during which the default continued and thereafter 2 per cent, of the tax for every month during which the default continued but not exceeding aggregate 25 per cent of tax which may be assessed on him under section 18 and where no tax is payable, a sum not exceeding five hundred rupees;
(3.) IT will be clear from the aforesaid provisions that if a registered dealer fails without sufficient cause to furnish a return under sub -section (1) of section 17 for any period in a manner and by the date prescribed thereunder or while furnishing a return fails to furnish proof of payment as required by sub -section (1 -A) of section 17, the Commissioner may, after giving him a reasonable opportunity of being heard, direct him to pay by way of penalty the amount stipulated in clause (ii) of section 17(3). It is thus clear that where sufficient cause is shown by the registered dealer for not filing the return within the prescribed date or for not furnishing along with the return proof of payment of tax due, such penalty cannot be imposed. Infact, he requirement in the provision for giving a reasonable opportunity of being heard is for the purposes of enabling the dealer to establish before the Commissioner that he had sufficient cause for not filing return by the date prescribed or for not furnishing along with the return proof of payment as required by sub -section (1 -A) of section 17 of the Act. The word "may" in the provision further makes it clear that the Commissioner may or may not impose penalty under section 17(3) of the Act in any particular case. In other words, where sufficient cause is shown by the registered dealer by the date prescribed for not furnishing the Return or for not furnishing proof of payment along with the return as required sub -section (1 -A) of section 17 of the Act, the Commissioner in exercise of such discretion will not impose a penalty on such dealer. This is not to say that initiation of penalty proceedings under section 17(3) of the Act could be made only when the Commissioner comes to the conclusion that sufficient cause has not been shown for the default committed by the dealer. Where a registered dealer has not filed the return by the date prescribed or has not furnished proof of payment of tax along with return as required by sub -section (1 -A) of section 17 of the Act, the Commissioner may initiate penalty proceedings by asking the assessee to show cause as to why penalty will not be imposed for the default. But while passing the order of penalty, he has to record a finding either that no cause was shown by the dealer or that the cause shown by the dealer was not sufficient. The conclusion of the Board of Revenue in the impugned order that absence of sufficient cause alone enables the lower authorities to initiate penalty proceedings and in absence of such a finding there can be no initiation of penalty proceedings, in our opinion, are not correct.;