2014 (7) TMI 194 - HC - VAT and Sales Tax

Levy of penalty u/s TNGST - non refund of excess collected to buyers - levy of penalty on the ground of unjust enrichment - Held that - Therefore, when on the one hand the collection of excess tax was on the specific direction of the Special Commissioner of Commercial Taxes and such excess collection after having been noted was ordered to be refunded was not actually refunded to the revision petitioner, it runs beyond ones comprehension as to whether even in those circum stances, the revision petitioner can be held to have had unjust enrichment of the moneys of its buyers. On the other hand, it will have to be stated that so long as the amount lies with the Department, it would be the responsibility of the Department to implement the order of the refund and only thereafter can expect the concerned assessee to ensure further refund of such amount to the actual buyers. There was no ground made out for imposing penalty under section 22(2) of the Act, on the ground of unjust enrichment on the part of the revision petitioner. - Decided in favor of assessee. Regarding penalty on account of certain omission between return and books of accounts - Held that - When factual findings relating to the omissions came to be noticed by the assessing authority based on the books of accounts maintained by the revision petitioner and the returns submitted by it, the ultimate conclusion relating to such omissions would be nothing, but deliberate suppression made by the revision petitioner. When once such a conclusion is inevitable, the levy of penalty under section 12(3)(b) of the Act, would become imperative. - Decided against the assessee.

Summary

Issues:
Penalties under sections 12(3)(b) and 22(2) of the Tamil Nadu General Sales Tax Act, 1959.

Analysis:

Penalty under Section 12(3)(b):
The assessing authority identified discrepancies between the return filed by the assessee and the books of accounts, leading to an increased tax liability. Although there was an excess payment of additional sales tax eligible for a refund, the assessing authority initially dropped the penalty proposal. However, the Deputy Commissioner of Commercial Taxes later imposed a penalty under section 12(3)(b) due to non-disclosure and unjust enrichment by the assessee. The Sales Tax Appellate Tribunal upheld this decision. The High Court affirmed that deliberate suppression by the assessee justified the penalty under section 12(3)(b), emphasizing that excess tax payment did not absolve the assessee from penalties.

Penalty under Section 22(2):
The assessing authority had imposed penalties under section 22(2) based on excess tax collections, which were later ordered to be refunded due to specific directions from the Special Commissioner of Commercial Taxes. However, the refund was not made to the assessee by the date of the appellate authority's order. The High Court noted that the responsibility for refunding excess tax lay with the Department, and until such refund occurred, the assessee could not be deemed to have unjustly enriched itself. Consequently, the High Court set aside the penalties imposed under section 22(2) and allowed the revision petition partially. The Department was directed to ensure the refund to the assessee and further refund to the buyers, with the option to take legal action in case of non-compliance.