1981 (10) TMI 171 - HC - VAT and Sales Tax

Summary

Issues:
Penalty proceedings for unauthorized collection of sales tax on second sales of timber and bamboo under the Tamil Nadu General Sales Tax Act, 1959.

Detailed Analysis:

The judgment pertains to penalty proceedings initiated by the State Government against the assessee for collecting sales tax from customers on second sales of timber and bamboo, which are taxable only at the stage of first sale in the State under the Tamil Nadu General Sales Tax Act, 1959. The assessing authority levied a penalty of Rs. 1,512, which was later reduced to Rs. 463 by the Appellate Assistant Commissioner based on a correct calculation. The Tribunal considered the appeal and an enhancement petition by the department, ultimately holding that there was no case for a penalty under section 22 of the Act. The Tribunal disagreed with the department's contention that the original penalty calculation was correct, stating that the reduction by the Appellate Assistant Commissioner was justified.

The judgment discusses the provisions of section 22(2) of the Act, emphasizing that the levy of penalty does not require a finding of wilfulness or neglect on the part of the assessee. The Supreme Court's interpretation of a similar penalty provision in the Bombay Sales Tax Act, 1959, is cited, highlighting that the penalty is applicable whenever an assessee collects sales tax unauthorizedly, irrespective of mens rea considerations. The Tribunal's decision to cancel the penalty, even after reduction by the Appellate Assistant Commissioner, is criticized for lacking justification, especially when the assessee admitted to collecting tax on second sales where only first sales are taxable.

Regarding the enhancement petition filed by the department to restore the penalty to the original amount, the Court upheld the Tribunal's decision to dismiss the application. The Court declined to delve into the arithmetic of the penalty, deferring to the authorities' conclusion that the penalty should not exceed Rs. 463 based on the unauthorized collection of sales tax on second sales. Consequently, one revision was allowed, while the other was dismissed, resulting in the penalty being sustained at Rs. 463. No costs were awarded due to the mixed results of the revisions.