2017 (4) TMI 1072 - HC - VAT and Sales Tax

Levy of penalty - case of petitioner is that it had not availed of any input tax credit (ITC) in the assessment order in issue - Held that - The judgment delivered by the Division Bench of this Court in The Deputy Commissioner (C.T.), Coimbatore V. S.R.Ramaswami Chettiar and Bros., 1975 (8) TMI 114 - MADRAS HIGH COURT , clearly opine that penalty cannot be imposed by a separate, or, an independent order, which does not form part of the assessment order - petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to penalty order separate from assessment order

Analysis:
The petitioner, a dealer in finished leather, was called upon to pay a penalty of ?37,032 by an order dated 31.12.2013, independent of the assessment order passed on 31.07.2013. The petitioner contended that the penalty order was unsustainable in law as it was not part of the assessment order. Initially, the petitioner had paid tax based on self-assessment, but later notices were issued alleging non-disclosure of taxable turnover. The respondent added an escaped taxable turnover of ?6,17,205 to the already determined turnover, resulting in a revised taxable turnover of ?12,71,654. Despite having paid the tax due, the petitioner was later issued a notice for the imposition of penalty, which was confirmed through the impugned order.

In response, the petitioner argued that penalty cannot be levied independent of the assessment order and cited relevant judgments, including The Deputy Commissioner (C.T.), Coimbatore V. S.R.Ramaswami Chettiar and Bros., [1976] 38 S.T.C. 382, and Rainbow Foundations Ltd., V. Assistant Commissioner (CT), [2011] 37 V.S.T. 592 (Mad.). The respondent justified the penalty by pointing out the escapement of tax noted in the revised assessment order. The provision of Section 27(3) of the 2006 Act, regarding assessment of escaped turnover and wrong availment of input tax credit, was highlighted to support the penalty imposition.

The court analyzed the legal position based on the cited judgments and statutory provisions. Referring to the judgments, the court held that penalty cannot be imposed through a separate or independent order not forming part of the assessment order. The court emphasized that the assessing authority must make a definite finding on willful non-disclosure of taxable turnover to impose a penalty. As the penalty in this case was imposed through a separate order, the court set aside the impugned order and disposed of the writ petition accordingly, with no costs imposed.