2014 (5) TMI 645 - HC - VAT and Sales Tax

Imposition of Penalty - Penalty u/s 22(2) of Act - Levy of tax on gallonage fee Taxable Turnover - Includibility under turnover Taxable Limit Conduct of assessee Assessee had knowledge of turnover being below limit attracting charge - Held that - It is admitted by the assessee that the turnover during the period 16.7.1996 was ₹ 19,237.50, which was well below ₹ 1,00,000/- turnover limit prevailing during the period - So too the taxable turnover from 17.7.1996 to 31.3.1997 was ₹ 1,32,001/- - By Act 38/96, the turnover limit for attracting charge was raised to ₹ 3,00,000/- - Thus, irrespective of whether the turnover upto 16.7.1996 is taken as one block and from 17.7.1996 to 31.3.1997 as one block, with the total turnover remaining at ₹ 1,76,239/- and hence, below the chargeable minimum, it is too difficult to accept the case of the assessee that when the reported turnover was very much within the knowledge of the assessee at ₹ 1,51,237/- and that too well below the minimum, the assessee could justifiably contend that there are no ground to warrant levy of penalty u/s 22(2) of the Act. The fact that it had remitted the sum before the assessment was not justifiable of its violation, more so when it had the knowledge of the turnover well below the chargeable limit This court is not satisfied with the claim of the assessee herein in retaining the tax collected without taking any steps to refund the same to the customers even by 31.3.1997, when by that time it had realised the taxable limit was well below ₹ 3,00,000/- - In the absence of any circumstances shown as to the bonafide of its conduct, there is no hesitation in rejecting the plea of the assessee - Consequently, the revision is dismissed Decided against assessee.

Summary

Issues:
Challenge to levy of penalty under Section 22(2) of the Tamil Nadu General Sales Tax Act for assessment year 1996-97.

Detailed Analysis:

1. The assessee, a registered dealer, contested the penalty imposed under Section 22(2) of the Act for reporting a total turnover below the taxable limit. The Assessing Authority levied the penalty citing violation of Section 22(1) due to tax collection. The Appellate Assistant Commissioner and the Tribunal upheld the penalty, leading to the revision by the assessee.

2. The total turnover for the year was Rs. 1,76,239, well below the minimum taxable turnover of Rs. 3,00,000. Despite this, the Assessing Officer added a lump sum under "defects found" without proper justification. The penalty was imposed based on the alleged illegal collection of tax, leading to unjust enrichment by the assessee.

3. The assessee argued for a refund based on a previous court decision, claiming no liability to remit tax due to turnover below the chargeable limit. However, the Appellate Assistant Commissioner and the Tribunal found the tax collection and retention by the assessee as illegal and unjust, rejecting the appeal.

4. The Court referred to past judgments regarding penalties under Section 22(2) of the Act. It highlighted cases where penalties were not automatic but discretionary based on the circumstances. The Court emphasized that mere collection of tax, in mutual mistake situations, does not automatically attract penalties.

5. The Court dismissed the assessee's claim that remitting tax before assessment negates penalty imposition. It noted the assessee's failure to refund the collected tax despite knowing the turnover was below the taxable limit, leading to the rejection of the revision.

6. Ultimately, the Court rejected the plea of the assessee, emphasizing the lack of justification for retaining the tax collected and dismissing the revision without costs.

This detailed analysis of the judgment highlights the legal intricacies surrounding the challenge to the penalty under Section 22(2) of the Tamil Nadu General Sales Tax Act for the relevant assessment year.