2019 (5) TMI 1177 - HC - VAT and Sales Tax

Imposition of penalty u/s 12(3)(b)(iv) of the TNGST Act - return filed by the Petitioner not rejected - HELD THAT - It is very clear that the Assessing Officer proceeded to impose penalty by impugned order dated 26.06.2006 without rejecting the return filed by the Petitioner. This course of action is contrary to the provisions of Section 12(2) of the TNGST Act. Consequently penalty cannot be imposed under Section 12(3) of the said Act. Hon ble Division Bench of this Court in APPOLLO SALINE PHARMACEUTICALS VERSUS COMMERCIAL TAX OFFICER (FAC) AND OTHERS 2001 (10) TMI 1100 - MADRAS HIGH COURT held that penalty cannot be imposed unless return is not filed or the filed return is rejected and thereafter assessment is made on best judgment basis. Neither of these requirements were fulfilled in the instant case. Petition allowed - decided in favor of petitioner.

Summary

Issues:
1. Validity of imposition of penalty under Section 12(3)(b)(iv) of the TNGST Act.
2. Interpretation of Section 12(2) and 12(3) of the TNGST Act.
3. Compliance with procedural requirements before imposing penalty.

Analysis:
1. The petitioner, a registered dealer, challenged the imposition of a penalty under Section 12(3)(b)(iv) of the TNGST Act for the Assessment Year TNGST 2003-04. The respondent issued a notice proposing the penalty due to a difference in the tax amount paid and the amount determined by the respondent. The petitioner, in response, remitted a partial amount and requested not to proceed with the penalty. Despite this, a substantial penalty was imposed through an order dated 26.06.2006. The petitioner contended that penalty cannot be imposed without the rejection of the return filed, as per the provisions of Section 12(2) and 12(3) of the TNGST Act.

2. The petitioner argued that penalty under Section 12(3) can only be imposed if the return is rejected, and assessment is made on a best judgment basis as per the statutory provisions. The petitioner relied on a Division Bench judgment which emphasized that penalty can only be levied when the assessment is made to the best judgment of the assessing authority. The court held that the assessing officer proceeded to impose the penalty without rejecting the return, which is contrary to the requirements of Section 12(2) of the TNGST Act. The court concurred with the petitioner's contention that penalty cannot be imposed without fulfilling the conditions of non-filing of return or rejection of the filed return followed by a best judgment assessment.

3. The respondent argued that a notice was issued to the petitioner before imposing the penalty, and no objections were raised by the petitioner. However, the petitioner clarified that objections were raised, and a partial amount was remitted as a gesture of compliance. The court, after considering the submissions and documents, found that the penalty was imposed without adhering to the procedural requirements of rejecting the return before making a best judgment assessment. Consequently, the court set aside the impugned order dated 26.06.2006, ruling in favor of the petitioner.