2010 (2) TMI 1054 - HC - VAT and Sales Tax

Whether the Sales Tax Appellate Tribunal is right in holding that penalty is not leviable under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act 1959 for the assessment year 1992-93 since the taxability or otherwise of sale of REP Licence was ultimately settled by the Supreme Court only in the year 1996 in Vikas Sales Corporation case 1996 (5) TMI 363 - SUPREME COURT OF INDIA ? Held that - In order to invoke the penalty provision a dealer as per the law that stood on that date must submit the prescribed return within such period as prescribed and only in the event that such return is found to be incorrect and incomplete then the provision for imposition of penalty can be invoked. As has been correctly found by the appellate Tribunal that on the date when the returns were filed the question as to whether the sale of REP/Exim scrips was exigible to tax or not was not clear. Till such time the said issue was decided by this Court in P.S.Apparel s case 1994 (4) TMI 366 - MADRAS HIGH COURT there was a bona fide belief on the part of the dealer in not disclosing the above turnover as the returns were filed much prior to the said judgment. In that view of the matter we find no infirmity in the order of the appellate Tribunal. Accordingly the tax case revision is dismissed.

Summary

Issues:
- Whether penalty is leviable under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959 for the assessment year 1992-93.

Analysis:
1. Background: The case involved a dispute regarding the imposition of penalty under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959 for the assessment year 1992-93. The respondent-assessee had sold REP/Exim scrips but did not disclose the sales turnover in their returns, leading to non-payment of sales tax dues.

2. Initial Assessment: The assessing officer rejected the returns filed by the assessee without levying a penalty for non-disclosure of sales turnover. However, the Deputy Commissioner revised this decision under Section 32 of the Act, directing the assessing officer to levy a penalty based on a previous court judgment.

3. Appellate Challenge: The assessee challenged this decision before the appellate Tribunal, arguing that at the time of filing returns, the taxability of REP/Exim scrips was unclear as a relevant court judgment was rendered after the assessment year. The Tribunal accepted this argument and set aside the penalty imposition.

4. Legal Analysis: The key question was whether the revenue could invoke penalty provisions under Section 12(5)(iii) based on the circumstances of the case. The relevant sections of the Act, specifically Section 12(4) and Section 12(5), outline the procedures for assessment and penalty imposition.

5. Interpretation of Law: To impose a penalty, the dealer must submit the prescribed return within the specified period, and only if the return is found to be incorrect or incomplete can the penalty be imposed. In this case, the uncertainty regarding the taxability of REP/Exim scrips at the time of filing returns justified the non-disclosure of sales turnover by the assessee.

6. Court Decision: The appellate Tribunal's decision to set aside the penalty imposition was upheld by the High Court. The Court found that the dealer had a bona fide belief in not disclosing the turnover due to the unclear legal position at the time of filing returns. Therefore, there was no justification for imposing a penalty under Section 12(5)(iii) of the Act.

7. Conclusion: The High Court dismissed the tax case revision, emphasizing that the penalty provisions could not be invoked retrospectively when there was genuine uncertainty regarding the taxability of the transactions in question. The decision highlighted the importance of considering the legal clarity available at the time of filing returns before penalizing taxpayers.