1994 (11) TMI 381 - HC - VAT and Sales Tax

Summary

Issues:
1. Levy of penalty under section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959 for filing incorrect returns.

Comprehensive Analysis:
The judgment by the Madras High Court dealt with the issue of penalty imposition under section 12(5)(iii) of the Act on the assessee, a dealer in tread rubber and chemicals, for filing incorrect returns. The assessee reported a taxable turnover for the assessment year 1984-85, claiming second sale exemption for sales of chemicals. The assessing officer issued a notice alleging that the assessee did not show the commodity of chemicals in the returns, leading to the levy of a penalty of 50% of the tax due on the sale turnover of chemicals. The Appellate Assistant Commissioner and the Tribunal upheld the penalty. The Tribunal held that even though the incorrect return was not wilful, the penalty under section 12(5)(iii) was automatic.

The learned Additional Government Pleader argued that as per the Act, the penalty is automatic when incorrect returns are filed, regardless of the reasons behind the mistake. The assessee contended that the incorrect reporting was a bona fide mistake, as they mistakenly showed chemical sales under the exempted turnover column and did not collect sales tax on these sales. The Tribunal justified the penalty under section 12(5)(iii) based on the automatic nature of the penalty provision.

However, the Court analyzed previous judgments and held that before imposing a penalty under section 12(5) of the Act, it is crucial to consider the bona fides of the assessee in filing incorrect or incomplete returns. Referring to a previous Supreme Court decision, the Court emphasized the importance of assessing the bona fides of the assessee before penalizing them. In this case, the assessee had not concealed the sales of chemicals but mistakenly reported them under the wrong column. The assessee paid the entire tax due on the sale turnover of chemicals before the final assessment, ensuring that the revenue was not prejudiced. Considering these factors and the bona fide nature of the mistake, the Court held that the penalty under section 12(5)(iii) was not applicable.

Ultimately, the Court allowed the revision filed by the assessee, setting aside the penalty levied by the authorities and confirmed by the Tribunal. The judgment highlighted the importance of considering the bona fides of the assessee before imposing penalties under the relevant provisions of the Act.