2014 (1) TMI 1426 - HC - VAT and Sales Tax

Penalty u/s 16(2) - Suppression of taxable turnover - Whether the Hon ble Tribunal has erred in confirming the imposition of penalty under Section 16(2) of the erstwhile Tamil Nadu General Sales Tax Act 1959 - Held that - levy of penalty under Section 16(2) of the Act would arise only if a dealer evades payment of tax due to wilful non-disclosure. Further the Assessing Authority must record the satisfaction that the escape from assessment is due to wilful non-disclosure of the assessable turnover. As is seen from the Assessment Order the reason recorded by the Assessing Officer for revision of assessment was that that the assessee included the entry tax paid into the price for the purpose of charging the sales tax - No ground for holding that there is a suppression of turnover with a wilful intention for the purpose of levy of penalty. The purchase price are consideration for goods which is agreed to between the willing buyer and the seller who admittedly agreed for fixing the price that was inclusive of the entry tax paid and that does not mean that the assessee had wilfully suppressed the turnover. In fact the assessee had disclosed the entire turnover in the books of accounts which was dissented to by the Assessing Officer - Therefore order of the Tribunal is set aside - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of Section 4(2) of the Entry Tax Act regarding taxable turnover.
2. Impact of clarification by the Principal Commissioner on liability to pay tax.
3. Validity of penalty imposition under Section 16(2) of the Tamil Nadu General Sales Tax Act, 1959.
4. Assessment of excess entry tax as penalty under relevant provisions.

Issue 1: Interpretation of Section 4(2) of the Entry Tax Act
The petitioner challenged the inclusion of entry tax in their taxable turnover under Section 4(2) of the Entry Tax Act. The Court noted that a previous decision had ruled against the assessee on similar grounds, leading to the admission of the case only on the issue of penalty imposition.

Issue 2: Impact of Commissioner's Clarification on Tax Liability
The Tribunal confirmed the imposition of penalty under Section 16(2) of the Sales Tax Act, citing wilful non-disclosure by the assessee. However, the First Appellate Authority disagreed, emphasizing that no penalty could be levied without a finding of mensrea. The Authority also referenced a 1993 clarification stating that entry tax should not be included in the basic cost of vehicles for sales tax calculation.

Issue 3: Validity of Penalty Imposition
The Assessing Officer proposed a penalty under Section 16(2) based on alleged wilful suppression of taxable turnover. The First Appellate Authority disagreed, highlighting the lack of mensrea finding and the assessee's proper disclosure in their books of accounts. The Tribunal upheld the penalty, citing continuous wilful non-disclosure over five years.

Issue 4: Assessment of Excess Entry Tax as Penalty
The Court analyzed the assessment order and found no grounds for wilful suppression of turnover to justify penalty imposition. The Court emphasized that the inclusion of entry tax in the price for sales tax calculation did not indicate wilful non-disclosure. Consequently, the Court allowed the Tax Case Revisions, setting aside the Tribunal's order and closing the connected miscellaneous petitions.