2014 (5) TMI 610 - HC - VAT and Sales Tax

Levy of Penalty - Deletion of penalty u/s 12(3)(b) of the TNGST Act - Whether Tribunal in affirming the deletion of penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act is legally sustainable in view of the amendment of Section 12(3) under Act 25 of 1993 Best of judgment Assessment based on Best of judgment - Bonafide of the assessee - Held That - Judgment in Cement Marketing Company of India Vs. Assistant Commissioner of Sales Tax 1979 (10) TMI 184 - SUPREME COURT OF INDIA followed - Section 12(3) would operate only in the case of best of judgement assessment, whereby the returns filed by the assessee appears to the Assessing Authority to be incomplete or incorrect - It was held that in the case on hand there was no best of judgement assessment and hence the levy of penalty was set aside - Relying upon Appollo Saline Pharmaceuticals Private Limited Vs. Commercial Tax Officer (SAC) and others 2001 (10) TMI 1100 - MADRAS HIGH COURT - Penalty may be levied only in case where the assessment is best of judgement assessment The addition was only as regards the gross profit and freight and there was no suppression found in the turnover, otherwise - No sufficient cause or reason is found to set aside the order of the Tribunal - Hence, Revision stands dismissed Decided in favour of Revenue.

Issues:
1. Revision against deletion of penalty under Section 12(3)(b) of Tamil Nadu General Sales Tax Act
2. Assessment of total and taxable turnover for the year 1993-1994
3. Imposition of penalty under Section 12(3)(b)(iii) for tax balance
4. Applicability of penalty provisions under Section 12(3)(b) for the assessment year 1993-1994
5. Interpretation of legal precedents regarding best judgment assessment and penalty imposition

Analysis:

1. The High Court of Madras heard a revision against the deletion of a penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act. The Tribunal had affirmed the deletion of the penalty, prompting the Revenue to challenge its decision.

2. The case involved the assessment of total and taxable turnover for the year 1993-1994. The Assessing Officer had proposed rejecting the dealer's return due to discrepancies in maintaining stock accounts and sales records. Subsequently, the total and taxable turnover were determined to the best of judgment, leading to a tax balance.

3. A penalty was proposed under Section 12(3)(b)(iii) for the tax balance, which the dealer opposed, citing the need for a discreet exercise of power by the Assessing Authority. The dealer argued against the penalty imposition based solely on the difference between tax assessed and tax paid.

4. The dispute centered on the applicability of penalty provisions under Section 12(3)(b) for the assessment year 1993-1994. The Assessing Authority justified the penalty under the amended provisions of Act 25 of 1993, despite the dealer's objections and reliance on legal precedents.

5. Legal precedents, including the decisions in State of Tamil Nadu Vs. S.G. Jayaraj Nadar and Sons and The State of Tamil Nadu Vs. Indian Metal and Metallurgical Corporation, were cited to support the argument that penalty imposition requires a best judgment assessment. The Tribunal ruled in favor of the dealer, emphasizing the need for turnover off the books to justify a best judgment assessment and penalty imposition.

6. The High Court upheld the Tribunal's decision, noting that there was no suppression in the turnover apart from the addition related to gross profit and freight. Citing the precedent in Appollo Saline Pharmaceuticals Private Limited Vs. Commercial Tax Officer, the Court dismissed the Tax Case Revision, stating that penalty imposition is warranted only in cases of best judgment assessment.

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