2018 (4) TMI 373 - HC - VAT and Sales Tax

Assessment of turnover under TNGST Act - penalty u/s 12(3)(b) of the Act - Held that - Section 12(3)(b) of the Act deals with, submission of incorrect or incomplete return and for the purpose of levy of penalty - There is no suppression in the books of accounts and this fact has been categorically stated by the appellate authority, in his order, in which event, the assessee is entitled to invoke explanations (i) and (ii) to Section 12(3)(b) of the Act. Revision petition dismissed.

Issues Involved:
1. Stock discrepancy and closing stock assessment.
2. Levy of penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959.
3. Validity of the Appellate Assistant Commissioner's order.
4. Tribunal's decision on the penalty.
5. State's challenge to the Tribunal's decision.

Issue-wise Detailed Analysis:

1. Stock Discrepancy and Closing Stock Assessment:
The Assessing Officer discovered a stock discrepancy and closing stock issue in the Trading and Profit account for the year ending 31.03.1995. Consequently, the dealer was assessed on a taxable turnover of ?57,55,528/- for the year 1994-95 under the Tamil Nadu General Sales Tax Act, 1959, and a penalty of ?15,604/- was levied under Section 12(3) of the Act.

2. Levy of Penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959:
The dealer disputed the turnover and penalty, arguing that the stock discrepancy was below 2%. However, the Appellate Assistant Commissioner confirmed the assessment and penalty, stating that the stock difference was 3% of the total stock value at the time of inspection. The Tribunal later found that the figures were taken from the dealer’s books of accounts, concluding that the penalty under Section 12(3)(b) was not justified, as there was no omission by the dealer.

3. Validity of the Appellate Assistant Commissioner's Order:
The Appellate Assistant Commissioner dismissed the dealer's appeal, affirming the stock discrepancy and penalty. The Commissioner reasoned that the dealer had accepted the stock discrepancy and could not retract their statement. The assessment was based on the stock variation identified during the inspection.

4. Tribunal's Decision on the Penalty:
The Tribunal partly allowed the appeal, setting aside the penalty under Section 12(3)(b). It held that the penalty was not warranted as the figures were derived from the dealer’s books of accounts, indicating no omission by the dealer. The Tribunal emphasized that the penalty under Section 12(3)(b) is not applicable when the assessment is based on the dealer’s books of accounts.

5. State's Challenge to the Tribunal's Decision:
The State argued that the Tribunal erred in deleting the penalty, asserting that the penalty under Section 12(3)(b) is automatic when there is a balance of tax payable. The State referenced a pending Special Leave Petition before the Supreme Court on a similar issue. However, the court reiterated that penalty under Section 12(3)(b) is not justified if the assessment is based on the dealer’s books of accounts, as established in previous judgments.

Conclusion:
The court dismissed the Tax Case Revision Petition, upholding the Tribunal's decision to set aside the penalty. The substantial question of law was answered in favor of the dealer, confirming that penalty under Section 12(3)(b) is not applicable when the assessment is based on the dealer’s books of accounts and there is no suppression of turnover.

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