1967 (4) TMI 194 - HC - VAT and Sales Tax

Summary

Issues:
1. Justification of penalty on the respondents for failure to disclose turnover assessable under the Central Sales Tax Act during the year 1959-60.

Analysis:
The judgment delivered by the High Court of Madras involved a revision case where the State of Madras, represented by the Deputy Commissioner of Commercial Taxes, Coimbatore Division, was the petitioner, and a firm of jewellers, Messrs. Angappa Chettiar and Sons, Tiruppur, were the respondents. The primary issue was whether the Sales Tax Authorities were correct in imposing a penalty on the respondents for allegedly failing to disclose a turnover assessable under the Central Sales Tax Act for the year 1959-60. The department discovered a note-book and slips during an inspection, indicating goods dispatched outside Madras State worth Rs. 27,840, leading to the inference of omitted turnover of inter-State sales. The assessing authorities added this turnover to the accounts and levied a penalty of Rs. 2,923 under section 16(2) of the Madras General Sales Tax Act, 1959, along with section 9(3) of the Central Sales Tax Act, 1956.

The respondents appealed before the Sales Tax Appellate Tribunal, which upheld the additional assessment but canceled the penalty. The Tribunal reasoned that the penalty provisions under the Sales Tax Act, sections 10 and 10A, did not cover the contravention mentioned in section 16(2) of the Madras General Sales Tax Act, 1959. It highlighted that section 9(3) of the Central Sales Tax Act only empowered the collection of penalties under that Act and not for contraventions under the Madras General Sales Tax Act. The Tribunal's decision was challenged by the department through a revision case.

The High Court supported the Tribunal's decision on various grounds. Firstly, it emphasized that section 9(3) of the Central Sales Tax Act was procedural and only allowed the collection of penalties as provided in that Act. The Court referred to a previous decision that penalties could only be levied under the Central Sales Tax Act itself and not solely based on the provisions of the Madras General Sales Tax Act. Additionally, the Court discussed the incorporation of the General Sales Tax Act, 1939, by reference in the Central Sales Tax Act, noting that the 1959 Madras General Sales Tax Act introduced penalty provisions not present in the previous Act. The Court held that legislation by reference should be limited to the statute as it stood at the time of reference, thereby concluding that the penalty imposed in this case could not be upheld. Consequently, the High Court dismissed the revision case with costs.