1987 (4) TMI 472 - HC - VAT and Sales Tax

Summary

Issues:
- Collection of surcharge on sale of cement
- Imposition of penalty under section 22(2) of the Act
- Mutual mistake by both Revenue and petitioner
- Refund of surcharge and cancellation of bank guarantees

Analysis:

The judgment by Nainar Sundaram, J. of the Madras High Court dealt with three writ petitions raising a common question regarding the collection of surcharge on the sale of cement. The petitioner, despite not being entitled to collect surcharge, did so under a bona fide mistake for the years 1976-77, 1977-78, and 1978-79. The sale took place in Madukkarai, which was not notified for surcharge applicability. The Revenue and petitioner both were uncertain about this, leading to a dispute. The Commissioner of Commercial Taxes clarified that the sale was not liable to surcharge. The High Court, in a previous decision, held the levy was illegal, necessitating a refund. However, for the current year, the Revenue imposed a penalty under section 22(2) of the Act, initially at the maximum extent but later reduced.

The petitioner contended that the penalty imposition was unjust as it was a mutual mistake by both parties. The Revenue had also levied surcharge despite the legal issue. The Court agreed with the petitioner, noting the mistake on both sides and the unfairness of penalizing after initially allowing the surcharge. The Court referenced a previous case where penalty was not warranted due to mutual mistake, supporting the petitioner's argument. Consequently, the writ petitions were allowed, with the cancellation of bank guarantees provided during the case.

The judgment emphasized the mutual mistake and the lack of intentional violation by the petitioner. It highlighted the inequity in penalizing after the Revenue's initial acceptance of the surcharge. The Court's decision was influenced by the principle of mutual mistake and fairness in enforcing penalties. The petitioner committed to refunding the surcharge to stockists once refunded by the Revenue. Overall, the judgment focused on rectifying the mistake and ensuring fairness in the application of penalties under the Act.