2007 (3) TMI 693 - HC - VAT and Sales Tax

Summary

Issues:
- Levy of penalty under section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959
- Reduction of estimation by appellate authority
- Tribunal's restoration of assessing officer's order
- Levy of penalty on various components
- Absence of substantial provision for penalty and surcharge
- Applicability of previous court rulings on penalty

Levy of Penalty under Section 12(3)(b):
The petitioners, running a hotel, were assessed for the year 1994-95, where a difference in turnover was found by the assessing officer. Penalty was levied under section 12(3)(b) of the Act. The appellate authority reduced the estimation from 20% to 2%, confirming the assessment. The Tribunal then restored the assessing officer's order, which was challenged in the High Court. The issue before the court was the legality of the penalty imposed.

Reduction of Estimation by Appellate Authority and Tribunal's Decision:
The appellate authority reduced the estimation made by the assessing officer, confirming the assessment. However, the Tribunal modified the appellate authority's order and reinstated the assessing officer's decision. This led to the matter being brought before the High Court for review.

Levy of Penalty on Various Components:
The penalty was levied on different components, including TNGST due, surcharge due, additional surcharge, and additional sales tax. The court considered the absence of a substantial provision in the Act for the levy of such penalties and surcharges, which was a crucial point of contention in the case.

Absence of Substantial Provision for Penalty and Surcharge:
The court deliberated on the absence of a substantial provision in the Act for the levy of penalty, surcharge, additional surcharge, and additional sales tax. Relying on previous court rulings, it was established that no penalty could be imposed on additional tax during the relevant period. The court referred to specific cases and legal precedents to support its decision.

Applicability of Previous Court Rulings on Penalty:
The court referred to a Division Bench ruling and subsequent Supreme Court judgments to support the argument that penalties on surcharge, additional surcharge, and additional sales tax could not be legally sustained during the relevant period. Based on these precedents, the court modified the Tribunal's order and set aside the penalty on these components.

In conclusion, the High Court allowed the writ petition, modifying the Tribunal's order regarding the levy of penalty on surcharge, additional surcharge, and additional sales tax, based on the absence of a substantial provision in the Act and previous court rulings on the matter.