1983 (7) TMI 298 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the levy of penalty under section 22(2) of the Tamil Nadu General Sales Tax Act, 1959, read with section 3(2) of the Tamil Nadu Sales Tax (Surcharge) Act, 1971.
2. Applicability of section 22 of the Tamil Nadu General Sales Tax Act, 1959, to the collection of surcharge under the Surcharge Act, 1971.

Detailed Analysis:

1. Legality of the Levy of Penalty:
The primary issue in the case is whether the levy of penalty under section 22(2) of the Tamil Nadu General Sales Tax Act, 1959, read with section 3(2) of the Tamil Nadu Sales Tax (Surcharge) Act, 1971, is legally justified. The assessee, a dealer in Tiruchengode, collected Rs. 320 as surcharge despite the area being exempt under the Surcharge Act. Consequently, the assessing authority imposed a penalty of Rs. 480. The appellate authority upheld the penalty but reduced it to Rs. 320. The Sales Tax Appellate Tribunal, however, set aside the penalty, stating that section 22(2) did not apply to surcharge collections under section 3(2) of the Surcharge Act. The Tribunal's decision was challenged by the State, leading to the present revision before the High Court.

2. Applicability of Section 22 to Surcharge Collections:
The Tribunal relied on the decisions in Shah & Co. v. State of Madras [1967] 20 STC 146 and Khemka & Co. v. State of Maharashtra [1975] 35 STC 571 (SC), which dealt with penalties under the Central Sales Tax Act. However, the High Court opined that these decisions were not applicable as both the Tamil Nadu General Sales Tax Act, 1959, and the Surcharge Act, 1971, were enacted by the same Legislature and supplemented each other. The High Court referred to its earlier decision in Rajamani v. State of Tamil Nadu [1980] 46 STC 451, which concluded that section 3(2) of the Surcharge Act applies all provisions of the Tamil Nadu General Sales Tax Act, 1959, including section 22, to the surcharge.

The High Court also noted a contrary view in State of Tamil Nadu v. Mathurai Veeraswamy & Co. [1983] 52 STC 131, which held that section 22 did not apply to surcharge collections. However, the High Court preferred the reasoning in Rajamani, supported by the Supreme Court decision in Ashok Service Centre v. State of Orissa [1983] 53 STC 1 (SC). The Supreme Court held that provisions of the principal Act, including penalty provisions, apply to additional taxes unless explicitly excluded.

Conclusion:
The High Court concluded that section 22 of the Tamil Nadu General Sales Tax Act, 1959, applies to the levy of surcharge under the Surcharge Act, 1971, due to the wide language of section 3(2) of the Surcharge Act. The penalty imposed on the assessee was upheld as legally valid. The tax case was allowed, and no order as to costs was made.