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2018 (12) TMI 1358 - HC - VAT and Sales TaxPenalty u/s 22(2) of the TNGST Act - there was no excess collection of sales tax, but there was only recoupment of entry tax collected in excess - Held that - The Assessing Officer did not dispute the fact that the entire amount of tax collected by the dealer i.e. by way of sales tax at 8% and by way of recoupment of entry tax paid being a sum of ₹ 87,144/- was remitted to the treasury. Unfortunately, the Tribunal committed a factual mistake in stating that the excess amount collected was not paid over to the State. On a perusal of the assessment order dated 27.12.2002 and the erratum order dated 31.1.2003, it is clear that the dealer paid the sales tax as well as collection made by way of recoupment of entry tax into the treasury. Can it be stated that the dealer has contravened the provisions of Section 22(1) of the Act. This question has been answered in favour of the dealer - the levy of penalty made by the Assessing Officer is unsustainable and the First Appellate Authority is right in allowing the appeal - revision allowed.
Issues:
Challenge to levy of penalty under Section 22(2) of the TNGST Act for alleged excess collection of tax. Analysis: The petitioner, a dealer in earthmoving equipment, contested the penalty under Section 22(2) of the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act) imposed by the Assessing Officer for an alleged excess collection of tax. The dealer moved equipment to Tamil Nadu, collected tax at 8%, and recouped entry tax paid in excess. The Assessing Officer issued a refund order but later proposed a penalty for the alleged excess collection. The dealer objected, stating no excess collection occurred, and all taxes were remitted. The First Appellate Authority found no illegal collection and allowed the appeal. The State appealed to the Tribunal, which ruled in their favor, leading to the dealer's challenge before the High Court. The High Court analyzed whether the penalty was justified under Section 22(2) of the Act. It noted that the dealer had remitted the entire tax amount collected, including the recouped entry tax, to the treasury. Referring to precedents, the Court explained that penalty under Section 22(2) applies when tax is collected illegally or retained. In this case, no excess sales tax was collected; the entry tax recoupment was separately shown and remitted. Citing previous judgments, the Court emphasized that if a dealer remits tax to the State, they cannot be penalized for amounts not payable as tax under the Act. The Court referred to the decision in State of Tamil Nadu Vs. Sakthi Sugars Ltd. and highlighted that dealers remitting tax to the State cannot be penalized under Section 22(2). It found the Tribunal erred in concluding the dealer was liable for the penalty. By examining a sample invoice, the Court confirmed that the recouped entry tax was distinct from sales tax and correctly remitted. Consequently, it held that the Assessing Officer's penalty was unjustified, affirming the First Appellate Authority's decision. The Court allowed the dealer's appeal, setting aside the Tribunal's order and restoring the Appellate Assistant Commissioner's ruling in favor of the dealer.
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