2014 (2) TMI 488 - HC - VAT and Sales Tax

Penalty under Section 16(2) of the Tamil Nadu General Sales Tax Act 1959 - Whether on the facts and in the circumstances of the case, the Tribunal was right in levying penalty on the petitioner even after holding that the petitioner has reported the turnover and claimed exemption is correct in law - Held that - The assessing authority also levied penalty under section 16(2) of the TNGST Act, 1959. According to the assessees the claim of exemption was made bona fide and the same was also accepted in the original assessments. The assessments were revised on a mere change of opinion. Therefore, the penalty under section 16(2) of the Act would not be attracted. According to the Revenue, the original penalty orders of the assessing officer should be restored. The assessees have filed counters for enhancement petitions filed by the department. According to the assessees the Appellate Assistant Commissioner ought to have deleted the entire penalty instead of sustaining 50 per cent of the penalty levied by the assessing authority. It remains to be seen that the exemption claimed by the assessees was allowed in the original assessment. The non-disclosure of turnover on the apart of the assessees came into existence because of the revised assessments made by the assessing officer. Simply because the assessees claim for exemption was negatived by the department, that does not mean that the assessees have suppressed anything. Under these circumstances, the Tribunal was correct in holding that no penalty is exigible in the case of all the assessees under section 16(2) of the Act - Following decision of Deputy Commissioner of Commercial Taxes, Trichy Division, Trichy Versus VR. Kuppusamy Gounder and Sons 1994 (11) TMI 375 - MADRAS HIGH COURT - Decided in favour of assessee.

Summary

Issues:
1. Whether the Tribunal was right in levying penalty on the petitioner despite reporting turnover and claiming exemption?
2. Whether the Tribunal was correct in levying penalty based on the ground of non-disclosure coming to light through investigation?

Analysis:

Issue 1:
The primary issue revolves around the admissibility of the penalty imposed on the assessee under Section 16(2) of the Tamil Nadu General Sales Tax Act 1959. The assessing authority disallowed the exemption claimed by the assessee regarding certain High Sea Sales, resulting in the imposition of a penalty. The Appellate Assistant Commissioner upheld this decision, leading the assessee to appeal to the Tribunal. The Tribunal, in its impugned order, reduced the penalty to a minimum of 50%, citing willful non-disclosure by the assessee. However, it is crucial to note that merely claiming exemption in the bill of lading does not necessarily constitute willful non-disclosure. The law requires deliberate falsehood or suppression for the imposition of penalties, as highlighted in the relevant provisions of the TNGST Act. The Supreme Court's stance in COMMISSIONER OF INCOME-TAX V. RELIANCE PETROPRODUCTS PVT.LTD. further emphasizes the necessity of deliberate intent for penalty imposition.

Issue 2:
The second issue delves into the interpretation of Section 16(2) of the TNGST Act in light of the consistent judicial views. Referring to the case law of DEPUTY COMMISSIONER OF COMMERCIAL TAXES, TRICHY DIVISION, TRICHY V. V.R.KUPPUSAMY GOUNDER AND SONS, the Court emphasizes that a bona fide claim of exemption, even if denied by the authority, cannot be equated with suppression. The judgment underscores that the mere denial of an exemption claim does not automatically imply non-disclosure or suppression by the assessee. Therefore, the Tribunal's decision to levy a penalty based on the denial of exemption, without evidence of willful non-disclosure, is legally untenable.

In conclusion, the High Court of Madras allowed the revision filed by the assessee, ruling in favor of the assessee and against the Revenue. The Court's decision was anchored in the principles of law requiring intentional non-disclosure for penalty imposition and the consistent judicial interpretation that a denied claim of exemption does not equate to suppression. The revision was allowed, and the connected pending matter was disposed of without costs.