1987 (8) TMI 406 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Reopening of assessment and reassessment orders.
2. Imposition and quashing of penalties under sections 12(3) and 16(2) of the Tamil Nadu General Sales Tax Act, 1959.
3. Demand for payment of arrears and subsequent penalty under section 24(3) of the Act.
4. Validity of penalty demand without fresh notice post-appellate orders.

Issue-wise Detailed Analysis:

1. Reopening of Assessment and Reassessment Orders:
The Deputy Commercial Tax Officer reopened assessments for the years 1960-61 to 1963-64 on the grounds that certain sales of imported silk yarn and dyes were liable for sales tax. Reassessment orders were issued on 25th March 1966 for 1960-61 and on 31st March 1966 for 1961-62 to 1963-64. The firm was also assessed for 1964-65 on 21st February 1966.

2. Imposition and Quashing of Penalties under Sections 12(3) and 16(2) of the Act:
Penalties were levied under section 12(3) for the years 1960-61 to 1963-64 and under section 16(2) for 1964-65. The firm appealed against these penalties. The High Court quashed the penalties under section 12(3) but upheld the penalty under section 16(2). The Appellate Assistant Commissioner confirmed the assessments but set aside the penalties under section 12(3) while upholding the penalty under section 16(2) for 1964-65.

3. Demand for Payment of Arrears and Subsequent Penalty under Section 24(3) of the Act:
After the firm's dissolution in 1969, the Deputy Commercial Tax Officer issued a notice demanding Rs. 68,758.84 in tax arrears and Rs. 5,343.00 in penalties. The appellant paid this amount in two installments. However, another notice was issued demanding a penalty of Rs. 1,52,301 under section 24(3) for delayed payment of the original tax arrears.

4. Validity of Penalty Demand without Fresh Notice Post-Appellate Orders:
The court examined whether a fresh demand notice was necessary after appellate orders reduced the tax liability. The court found that as per section 24(3), a fresh demand notice should be issued after appellate modifications to call the assessee a defaulter. The original notice of assessment, which included penalties later quashed, could not be relied upon for levying penalties under section 24(3). The court noted that the assessing authority did not use form B-7 but relied on form 29 of the Standing Orders, which was not applicable.

The court concluded that without a fresh demand notice, the appellant could not be considered a defaulter liable for penalties under section 24(3). The penalty rates applicable at the time of the original assessment could not be retrospectively increased based on amendments made in 1977.

Conclusion:
The court allowed the writ appeal, set aside the penalty demand, and made the rule absolute, with no order as to costs. The demand made in form 29 was not in accordance with law, and the appellant was not liable for the penalty under section 24(3).