2014 (5) TMI 305 - HC - VAT and Sales Tax

Revision against the order passed by the Tribunal(A) - Whether levy of penalty u/s 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 was justifiable when there was no suppression pointed out by the Revenue Held that - When the turnover assessed under the assessment order is drawn from the books of accounts and no reference to any specific concealment of the turnover in the accounts made, the question of invoking Section 12(3)(b) would not arise - The Explanation to Section 12(3)(b) specifies the turnover which merited to be excluded for the purpose of levy of penalty - Even while calculating the turnover for the purpose of levy of penalty, the turnover are to be excluded and only those turnover which are estimated having reference to a specific concealment alone invite the penal provisions under the Act - when the assessment is based on the accounts turnover, the question of levy of penalty does not arise Order of Tribunal Set aside Decided in favour of assessee.

Summary

Issues:
1. Levy of penalty under section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 without considering the proviso to Section 12(3) of the Act.

Analysis:
The case involved a Tax Case (Revision) filed by the assessee against the order passed by the Sales Tax Appellate Tribunal relating to the assessment year 2005-2006. The substantial question of law raised was whether the Tribunal was correct in upholding the levy of penalty under Section 12(3)(b) of the TNGST Act without considering the proviso to the same section. The assessee, a manufacturer of Industrial Noise Control Machineries and Components, claimed a concessional rate of tax at 4% for sales made to BHEL, Hyderabad and Tamil Nadu Electricity Board. However, the claim was rejected due to lack of necessary certificates. The Tribunal confirmed the assessment but levied a penalty under Section 12(3)(b) of the Act due to a difference between tax assessed and tax paid.

The main contention raised by the assessee was that the penalty was unjustified as the turnover in question was recorded in the books of accounts and the assessment was based on the details available in the books. The Senior Counsel argued that the Tribunal failed to consider the Explanation to Section 12(3)(b) introduced in 2002, which specified deductions from the tax assessed for the purpose of penalty calculation. The Tribunal confirmed the assessment based on documentary evidence but failed to consider the provisions of the Act regarding the levy of penalty.

During the hearing, it was emphasized that the only issue in question was whether the turnover should attract a concessional rate of tax or be assessed at 12%. The Tribunal's decision was based on the documentary evidence that the goods were sold to BHEL, Hyderabad for delivery to Courtallam. However, the Explanation to Section 12(3)(b) of the Act was crucial in determining which turnovers should be excluded for penalty calculation. The judgment referred to a previous case where it was established that when the assessment is based on accounts turnover, the levy of penalty does not apply.

In conclusion, considering the previous judgment and the explanation to Section 12(3)(b) of the Act, the High Court set aside the Tribunal's decision to levy a penalty under the Act. The Tax Case (Revision) was allowed with no costs incurred by either party.