1991 (10) TMI 295 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of the Tribunal to entertain and allow the enhancement petition.
2. Legality of the penalty levied u/s 22(2) of the Tamil Nadu General Sales Tax Act, 1959.
3. Justification of the penalty levied u/s 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959.

Summary:

1. Jurisdiction of the Tribunal to entertain and allow the enhancement petition:
The petitioners questioned the jurisdiction of the Tribunal to entertain and allow the enhancement petition, arguing that there was nothing to be enhanced since the appellate authority had deleted the entire penalty. The court referred to previous judgments, including State of Tamil Nadu v. Jakthi Veliyeetakam [1977] 40 STC 466 and Doveton Cafe v. State of Tamil Nadu [1981] 47 STC 345, which suggested that the Tribunal could not restore a penalty set aside by the appellate authority. However, the court noted that the word "enhance" is wide enough to include the imposition of a penalty that was not imposed by the appellate authority. The court concluded that the Tribunal had the jurisdiction to entertain the enhancement petition and impose the penalty.

2. Legality of the penalty levied u/s 22(2) of the Tamil Nadu General Sales Tax Act, 1959:
The assessees had collected a surcharge on cotton yarn and hosiery yarn, which were exempted from such levy. The penalty of Rs. 26,492 was proposed and later imposed for this illegal collection. The appellate authority canceled the penalty, but the Tribunal restored it, directing the department to refund the amount to the assessees, who would then refund it to the customers. The court upheld the Tribunal's decision, stating that the levy of penalty for the collection of surcharge is legal and valid as per the judgment in Deputy Commissioner (CT) v. M. Murugesan and Bros. [1985] 58 STC 143.

3. Justification of the penalty levied u/s 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959:
The assessees admitted the omission to report a turnover of Rs. 4,76,793.04 but contended that the omission was due to bona fide disputes about supplies, which were regularized and sale invoices raised on March 30, 1980. The penalty of Rs. 5,559 was imposed despite the assessees voluntarily disclosing the turnover and paying the tax before the assessment order was finalized. The court referred to judgments in Kalyani Agencies v. State of Tamil Nadu [1984] 10 STL (Mad.) 151 and State of Tamil Nadu v. P.S. Srinivasa Iyengar & Sons [1993] 89 STC 349, which supported the view that if the correct turnover is disclosed before the final assessment, no penalty should be levied. The court found that the assessees had disclosed the turnover and paid the tax before the pre-assessment notice and thus, the penalty u/s 12(5)(iii) was not justified. The penalty of Rs. 5,559 was deleted.

Conclusion:
The revision was accepted in part. The penalty of Rs. 5,559 imposed for the suppression of the turnover was deleted, while the penalty u/s 22(2) of the Act to the extent of Rs. 20,492 was upheld. The tax revision case was allowed in part, with no order as to costs.