2015 (11) TMI 1224 - HC - VAT and Sales Tax

Levy of penalty - Non filing of monthly and annual returns - Tax paid after being pointed out by Department - Held that - Where certain items which are not included in the turnover are discovered from the dealer s own account books and the assessing authority includes these items in the dealer s turnover, the assessment cannot be regarded as based on best judgment and penalty cannot be levied in respect of such items. As far as the case in hand is concerned, when there is no intention for evading of payment of tax and when the entire turnover is very much reflected in the books of accounts, there is no reason for levying penalty. This Court in the case reported in 2001 (10) TMI 1100 - MADRAS HIGH COURT (Appollo Saline Pharmaceuticals (P) Ltd., vs. Commercial Tax Officer (FAC) and others), has held that levy of penalty without considering the bona fides of the petitioner could not be sustained. - the petitioner is entitled to succeed. - Decided in favour of assessee.

Summary

Issues:
Challenge to order under Tamil Nadu General Sales Tax Act, 1959 - Assessment order with penalty imposition - Legality of penalty imposition based on inspection findings.

Analysis:
The petitioner, an exporter of hides and skins, challenged an order imposing penalty under the Tamil Nadu General Sales Tax Act, 1959. The petitioner contended that the transfer of Duty Entitlement Pass Book (DEPB) does not fall under the purview of the Act, based on previous court decisions. An inspection revealed a tax liability on the DEPB transfer, which the petitioner promptly paid. Subsequently, penalty proceedings were initiated for not filing monthly or annual returns, despite the tax payment. The petitioner argued that penalty cannot be imposed separately after assessment. The petitioner cited relevant court decisions to support this argument.

The petitioner objected to the re-assessment proceedings initiated solely for imposing a penalty under Section 16(2) of the Act, not for the tax already paid. The petitioner's objections highlighted that penalty imposition after the assessment order contradicts legal provisions. The petitioner sought the court's intervention to set aside the penalty imposition, emphasizing that the turnover was accurately reflected in their books without any intention to evade taxes.

The court considered precedents, including a decision by the Hon'ble Apex Court and a local court ruling, to determine the case. The court referred to the Hon'ble Apex Court's decision, stating that penalty cannot be levied if items not included in turnover are discovered from the dealer's own account books. Additionally, the court cited a local case where penalty imposition without considering the petitioner's bona fides was deemed unsustainable. Based on these legal principles, the court ruled in favor of the petitioner, setting aside the penalty imposed by the respondent's order dated 29.08.2003. The court held that since there was no intention to evade tax and the turnover was accurately recorded, penalty imposition was unwarranted.

In conclusion, the court allowed the writ petition, setting aside the penalty imposition under the assessment order. The court's decision was based on legal precedents emphasizing that penalty cannot be levied if the turnover is accurately reflected in the dealer's books and there is no intent to evade taxes. The petitioner succeeded in challenging the penalty imposition based on the inspection findings, with the court ruling in their favor and closing the connected miscellaneous petition without costs.