Advocate Akhilesh Kumar Sah

Complex Procedures, Harsh Rules, Penalties Under U.P. VAT Act/ Rules  Requiring Simplification

Everyone has to follows the laws of the land and unfollowing of the same attracts penalties, prosecution etc. Law is above all and everyone has to respect the respective / concerning / governing laws.

Value added tax system had been introduced in the Uttar Pradesh since 01.01.2008 and dealers, tax-practitioners after continuous understanding of the new regime are following the rules and regulations and, also, state is changing time-by-time the harsh provisions and practical problems are being solved through amendments, circulars, notifications etc.

For example, the penalty on not filing the Form 24 (prescribed under UP VAT Rules, 2008) on due date was reduced from Rs.10,000/- to Rs.2,000/- by the state government well understanding the difficulties.

But, still, there are a lot of problems faced by dealers since the inception of VAT. Recently, penalty notices for Rs.10,000/- are being issued for not filing Annual Returns on time. Compulsory e-filing of Form 24 was made for every dealer but relaxations were made for dealers having specified / lower turnover. Now there is compulsion of e-registration. Many of the persons do not have internet / scanning facilities. Always there remains power cutting / shortages. Once on 19.02.2010 tax was increased on the same date which caused problems to dealers. The VAT audit requirement, which is probably not in any other state of India and in some states income-tax audit report has been made sufficient compliance, and penalty of Rs.10,000/- for non-audit irks many dealers. Requirement of furnishing on , the last date i.e. upto 20th of the due month the tax, Form 24 can be extended upto 30th / 31st of the month looking to the huge complication of dealers in preparation of Annexure A and B etc.

Different type of invoices and the manner of authentication etc. looking to the other states is complicated in U.P.

Every dealer does not have same turnover but penalties almost are same for dealers for not following rules, in many situations.

Therefore, looking to the practical, infrastructural problems and smooth running of trade and commerce in the state there are needs of changing the harsh rules, penalties. The e-compliance at many places may be made optional.

Also, the judicial decisions which have given far reaching implications from tax payers point of view may be incorporated in the system of VAT. The commodity which does not find place in schedule of rates gets taxation @ 12.5 + 1.5% at present. The taxes may be made comparable according to the rates in other states to make Uttar Pradesh competitive.

Maximum revenue is collected in U.P. state from VAT and dealers pay taxes from their hard earnings from business and therefore, the VAT regime before it is replaced by GST should be made easy and friendly, co-operative. Many of the penal provisions may be relaxed giving room for just and reasonable ground & penalty amounts may be reduced/ deleted.

In Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26 (SC), the Supreme Court, has held that the penalty should not 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 circumstance. It was also held by Supreme Court that even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose the penalty when there is a technical or venial breach of the provisions of the Act or when the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. It was further held by Supreme Court that if the assessee was acting in honest and genuine belief in a particular manner, then no penalty could be imposed.

In Union of India vs. Playworld Electronics Pvt. Ltd. (184 ITR 308) (SC), it has been observed that it is also true that in order to create the atmosphere of tax compliance, taxes must be reasonably collected and when collected should be utilized in proper expenditure and not wasted.

It is often said that every one is presumed to know the law, but that it is not a correct statement. There is no such maximum known to the law [Motilal Padampat Sugar Mills Ltd. vs. State of Uttar Pradesh (118 ITR 326 at 339) (SC) ].

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  1. Mukesh says:

    Akhilesh ji,
    the penalty for not filing the Form 24 (prescribed under UP VAT Rules, 2008) on due date has been reduced from Rs.10,000/- to Rs.2,000/- with effect from which date and can you tell the notification/ circular no, through which this is done. Thanks in advance. Regards, Mukesh

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December 2023