2004 (2) TMI 660 - HC - VAT and Sales Tax

Non-disclosure of turnover in monthly returns - penalty - omission to include the turnover of cardamom wilful or not - additional tax and surcharge - HELD THAT - Petitioners failed to disclose the details in the monthly returns. It is rather difficult to accept that such mistakes had crept in bona fide, and the intention was obvious, viz., to postpone the tax legitimately due to the Government or to defraud the revenue. Their merely filing a statement in response to a notice and their paying the tax due ultimately after the final assessment order, would not come to their rescue. As rightly pointed out by the fourth respondent that even if the statement filed at the time of final assessment is treated as revised returns , the same cannot be accepted as a complete return since there was no proof of payment of tax due accompanied the return. The petitioners, obviously, submitted incorrect and incomplete returns with a view to postpone the tax legitimately due to the Government. We find that both the third and fourth respondents have considered each and every circumstance of the case and came to the conclusion that the failure to disclose the details in the monthly returns can only be treated as wilful and in those circumstances, the levy of penalty is fully justified. The tax due is indicated as Rs. 56,209 and the additional tax is Rs. 23,420. Learned counsel appearing for the petitioner contended that as per the then provisions of the Tamil Nadu Additional Sales Tax Act, no penalty can be imposed on this additional tax. Learned counsel for the State fairly concedes that the said claim of the petitioner is correct. That being so, the levy of penalty on additional tax has to be held as illegal. This Court holds that levy of penalty on the additional tax and surcharge cannot be sustained. Petition allowed in part.

Summary

Issues involved:
The judgment deals with the issues of non-disclosure of turnover in monthly returns, imposition of penalty under section 12(5)(iii) of the TNGST Act, 1959, appeal against penalty levy, revision of appeal decision, appeal before Tamil Nadu Taxation Special Tribunal, and the legality of penalty on additional tax and surcharge.

Non-disclosure of turnover in monthly returns:
The petitioners, dealers in cardamom, failed to report the last purchase turnover of cardamom in monthly returns, leading to non-payment of tax due. They argued that since they disclosed the turnover before final assessment, the omission was not wilful. The court considered the case of State of Tamil Nadu v. P.S. Srinivasa Iyengar & Sons and emphasized the need to carefully analyze each case to determine the correctness of returns.

Imposition of penalty under section 12(5)(iii) of the TNGST Act, 1959:
The first respondent levied a penalty on the petitioners for not reporting the last purchase of cardamom and for filing incorrect and incomplete returns. The second respondent initially set aside the penalty, but the third respondent later revised the decision, justifying the penalty due to non-disclosure in statutory returns.

Appeal and revision process:
The petitioners appealed the penalty levy before the Tamil Nadu Taxation Special Tribunal, which dismissed the appeal, stating that the intention behind incorrect returns was to postpone tax payment. The court highlighted the importance of scrutinizing all circumstances before imposing penalties.

Legality of penalty on additional tax and surcharge:
The court examined the legality of imposing a penalty on additional tax and surcharge. While the penalty on additional tax was deemed illegal due to the provisions of the Tamil Nadu Additional Sales Tax Act, the penalty on surcharge was also found to be unsustainable based on legal precedents and subsequent rulings.

Conclusion:
The court allowed the writ petition in part, holding that the levy of penalty on additional tax and surcharge was not sustainable. The judgment emphasized the need to carefully analyze each case before imposing penalties and highlighted the importance of legal provisions and precedents in determining the legality of penalties.