G.C. Bharuka, J.
1. These two revision petitions are directed against the common order dated June 18, 1993 passed by the Appellate Tribunal in S.T.A. Nos. 943 and 944 of 1991 sustaining a penalty of Rs. 50,000 under section 12B(3) of the Karnataka Sales Tax Act, 1957 (in short, 'the State Act' only) and of Rs. 1,00,000 under section 18(2) of the Central Sales Tax Act, 1956 read with section 12B(3) of the State Act (in short, 'the Central Act' only).
2. The penalties pertain to the assessment year 1986-87. It is not in dispute that the assessee, which is a limited company manufacturing machine tools, had failed to deposit advance tax within the time-limit as provided under section 12B of the State Act. Accordingly, it was subjected to penalties of Rs. 3,58,855 and Rs. 10,14,215 under the State and the Central Acts respectively by two separate orders dated March 29, 1990 passed by the assessing authority. The appeals preferred against the said orders to the Deputy Commissioner of Commercial Taxes proved to be futile. Therefore, second appeals were taken to the Tribunal, which were allowed in part by the impugned common order.
3. On behalf of the petitioner, various circumstances were placed before the Tribunal which had resulted in default in payment of advance tax at the hands of the assessee. As found by the Tribunal, some of the circumstances, which led to the said defaults were that the assessee had to sell its machine tool on credit but it could recover the payments after the lapse of more than 90 days. It was also found that the application filed by the assessee for refund with the State Government towards generating electricity for their captive consumption owing to continuous power cuts, which had gone up to 85 per cent during the year, was lying pending with the Government since November, 1985. Further, as per the final assessments it was found that the petitioner had paid excess tax to the extent of Rs. 1,88,688.26 under the State Act and to the extent of Rs. 21,027 under the Central Act.
4. Keeping in view the said circumstances, the Tribunal in paragraph 7 of the impugned order has recorded a finding of fact that the defaults in question have occasioned because of circumstances beyond the control of the petitioner and were not caused because of any dishonest intention or deliberate defiance of law. In paragraph 17 of its order the Tribunal has further held that the assessee is entitled to relief keeping in view the law laid down by the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa : [1972]83ITR26(SC) and in the case of Elestone Estates and Industries Ltd. v. State of Karnataka [1983] 54 STC 341 of this Court. Surprisingly, despite the said findings of fact and having rightly noticed the law in this regard, the Tribunal still sustained penalties to the extent of Rs. 50,000 under the State Act and Rs. 1,00,000 under the Central Act. We have failed to understand the reasons underlying the same.
5. In para 5 of the judgment in the case of Hindustan Steel Ltd. : [1972]83ITR26(SC) , the Supreme Court has held that :
'........An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances.'
6. In our opinion, once the Tribunal comes to a conclusion that the defiance was not deliberate and there was no dishonest intention on the part of the assessee in not acting in accordance with law in payment of advance tax and that the contravention had occurred because of the circumstances beyond its control, it was contrary to the settled principles of justice and equity to have still subjected the assessee with penal consequences.
7. It is further of importance to note that though admittedly an application filed by the petitioner for refund was pending before the State Government as noticed above, but without disposing of the same and ignoring the said fact altogether, the sales tax authorities found it quite convenient to impose penalties in question. This only speaks of an unjust approach on their part. Even the authorities under the taxing statute have to always bear in mind that they are public servants and under the constitutional mandate they are bound to act reasonably and justly. In the case of N.C. Mukherjee and Co. v. Union of India : [1968]68ITR500(SC) it has been held by the Supreme Court that :
'......We think that justice demands that before the Certificate officer executes the demand against the appellant-firm, amounts refundable to it or its partners should be ascertained by the concerned Income-tax Officer so that the demand may be executed only for the balance.'
8. In our opinion, in the present case also, before lying penalties, the assessing authority should have reasonably ascertained the amount which would have been refundable to the assessee only in order weigh as to whether it was a fit case for imposing penalty.
9. For the said reasons, we find it difficult to sustain the penalties in question. Accordingly, the impugned order of the Tribunal is set aside. The revision petitions are allowed. No order as to costs.
10. Petitions allowed.