2011 (4) TMI 1268 - HC - VAT and Sales Tax

Levy of penalty under section 22(2) of the Tamil Nadu General Sales Tax Act, 1959 made in connection with the turnover pertaining to the job-work done by the assessee Held that - When the tax had been collected under a valid provision as it stood then, the question of treating it as unauthorised collection to attract the provisions under section 22(2) of the Act, leading to levy of penalty thereon, does not arise. Revision allowed.

Summary

Issues involved:
Assessment of penalty under section 22(2) of the Tamil Nadu General Sales Tax Act for tax collection on job-work turnover during the assessment year 1985-86.

Detailed Analysis:

1. Background and Assessment of Penalty:
The petitioner, a dealer in hides and skins, collected tax at 70% of the turnover amounting to Rs. 7,87,140 for job-work during the assessment year 1985-86. The assessing officer levied a penalty under section 22(2) of the Tamil Nadu General Sales Tax Act. The petitioner objected to the penalty, claiming the tax collection was under a bona fide impression and the entire tax was remitted to the Government. Despite objections, the penalty was confirmed.

2. Appellate Proceedings:
The petitioner appealed the penalty imposition before the Appellate Assistant Commissioner, where the appeal was allowed. However, the State appealed to the Sales Tax Appellate Tribunal, which restored the penalty. This led the petitioner to file a revision challenging the Tribunal's decision.

3. Legal Validity and Constitutional Aspects:
The counsel for the petitioner argued that the tax collection at 70% of the turnover was in line with the provisions of section 3B of the Act. Referring to a previous court decision, it was highlighted that until rules were framed for quantifying taxable turnover, the charging provisions could not be enforced. The assessment order seemingly based the penalty on the illegality of the tax collection. Subsequent appeals and references to legal precedents were made to justify the penalty imposition.

4. Court's Decision and Reasoning:
The court acknowledged that the tax collection was lawful under the Act at the time of assessment, and any illegality arose only after a later court decision. It was emphasized that the tax collection was not unauthorized and did not warrant penalty under section 22(2) of the Act. The court considered the petitioner's actions as a bona fide mistake and a mutual mistake, citing relevant legal precedents to support the argument against penalty imposition.

5. Final Verdict and Conclusion:
In light of the legal validity of tax provisions and assessments, the court allowed the revision, setting aside the Tribunal's order and ruling in favor of the petitioner. The decision was based on the legality of tax collection at the time of assessment and the absence of grounds for penalty under section 22(2) of the Tamil Nadu General Sales Tax Act. The connected matter was closed as a result of the court's decision.