2011 (10) TMI 549 - HC - VAT and Sales Tax

Whether the Tribunal has legally erred in having applied Explanation to section 12(3) of the Tamil Nadu General Sales Tax Act, 1959, which provision came into force only from April 1, 1996 whereas the assessment year is 1995-96 - Held that - Tribunal considered the Explanation clause inserted to section 12(3)(b) of the TNGST Act, 1959 which excludes certain kinds of turnover - Thus, the Tribunal directed the assessing authority to levy penalty on the actually suppressed turnover of ₹ 1,09,956 and deleted the penalty levied on the turnover estimated by the assessing authority on further additions - no reason to interfere with the order of the Sales Tax Appellate Tribunal - Decided against Revenue.

Summary

Issues:
- Interpretation of Explanation to section 12(3) of the Tamil Nadu General Sales Tax Act, 1959 for assessment year 1995-96.
- Validity of penalty under section 12(3)(b) based on estimated turnover.
- Applicability of penalty on suppressed turnover.

Interpretation of Explanation to section 12(3) of the Tamil Nadu General Sales Tax Act, 1959 for assessment year 1995-96:
The case involved a tax revision by the Revenue against the Sales Tax Appellate Tribunal's order. The substantial question of law raised was whether the Tribunal erred in applying the Explanation to section 12(3) of the Act, which came into force after the assessment year. The Tribunal directed the assessing authority to levy penalty only on the actually suppressed turnover, excluding turnover estimated by the authority. The Tribunal's decision was based on the exclusion criteria provided in the Explanation to section 12(3)(b) of the Act. The court upheld the Tribunal's decision, dismissing the tax case revision and answering the substantial question of law against the Revenue.

Validity of penalty under section 12(3)(b) based on estimated turnover:
The assessing officer had estimated the sales of inter-State purchases and made equal additions for suppression, resulting in a best judgment assessment. The Appellate Assistant Commissioner upheld the assessment, emphasizing the clear-cut suppression and justified the equal additions. The Sales Tax Appellate Tribunal also confirmed the levy of tax on the turnover. However, regarding the penalty under section 12(3)(b), the Tribunal directed the assessing authority to impose the penalty only on the actually suppressed turnover, excluding estimated turnover. The Revenue argued for penalty imposition on the estimated value as well based on equal time addition. The court found no reason to interfere with the Tribunal's order, leading to the dismissal of the tax case revision.

Applicability of penalty on suppressed turnover:
The Tribunal clarified that for the purpose of penalty levy, only the actual suppression by the appellants should be considered, not the estimated suppression. The assessing authority was directed to re-impose the penalty on the suppressed value alone. The court agreed with the Tribunal's decision and upheld the exclusion of penalty on estimated turnover, affirming that penalty should be levied solely on the actually suppressed turnover. The Revenue's contention for penalty imposition on the estimated value was rejected, leading to the dismissal of the tax case revision.