2009 (4) TMI 839 - HC - VAT and Sales Tax

Penalty levied under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959 for the assessment year 1992-93 deleted by Tribunal Held that - As it was observed by the Assessing Officer that all along the assessee has considered bonafide that the sale proceeds of REP licences cannot be regarded as turnover liable to tax, so as to offer the sales turn over for taxation, which factum has also been accepted by the Tribunal itself in the earlier assessment order by following earlier order. Hence, we conclude that non-offering of the sale turnover of REP licence is a bonafide act. We do not find any illegality or irregularity in the deletion of the penalty by the Tribunal and we are not able to approve the way in which the learned Special Government Pleader projected the summary of the conclusion for levy of penalty. Revision dismissed.

Summary

Issues:
1. Appeal against the order of the Appellate Tribunal deleting the penalty imposed on the assessee under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959.

Analysis:
1. The Tribunal deleted the penalty based on the assessee's bonafide belief that they were not liable to include the sale amount of REP licenses in the taxable turnover. Citing legal precedents, including the case of Hindustan Steel Ltd. vs. State of Orissa, it was emphasized that penalties should not be imposed unless there is deliberate defiance of the law or contumacious conduct. The High Court of Kerala's ruling in "Seven Seas Distillery Ltd. vs. Assistant Commissioner of Sales Tax" was also considered, stating that if an assessee excludes an item from taxable turnover in good faith, it should not attract penalty. The Tribunal found that the appellants acted under a bonafide belief and thus were entitled to the benefit of bonafides, leading to the deletion of the penalty.

2. The issue revolved around the taxation of the turnover from the sale of REP licenses. The Court had previously decided in the case of P.S. Apparels vs. Deputy Commercial Tax Officer that REP licenses were considered "goods" for taxation purposes. The Division Bench had clarified that penalties under Section 12 or 16 of the Tamil Nadu General Sales Tax Act would be applicable from the assessment year 1992-93 onwards for such cases. The authorities were granted discretion to levy penalties based on the merits of each case.

3. The Special Government Pleader argued against the deletion of the penalty, relying on the observation that penalties under Section 12 would be applicable from 1992-93 onwards. However, the Court disagreed, stating that not all cases of non-taxation of REP license sales automatically warrant penalties. The authorities were required to consider each case individually based on its specific circumstances before imposing penalties.

4. The Court upheld the Tribunal's decision to delete the penalty, noting that the assessee genuinely believed that REP license sales were not taxable turnover. The Assessing Officer and the Tribunal had both acknowledged this bonafide belief in earlier assessments. Therefore, the Court found no irregularity in the Tribunal's decision and dismissed the revision, affirming the deletion of the penalty.