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2018 (4) TMI 1219 - HC - VAT and Sales TaxPenalty u/s 12(3)(b) of TNGST Act - contention of the assessee is that the liability on the sales of special import licence is not yet a settled issue and that under bonafide belief only they have not reported this turnover - suppression of facts with intent to evade not present - Held that - In Indira Industries Vs. State of Tamil Nadu, 2014 (5) TMI 305 - MADRAS HIGH COURT , this Court considered a question, as to whether, levy of penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959, was justifiable, particularly, when there was no suppression pointed out by the Revenue that the Claim of the assessee related only to concessional rate of tax. This Court held that When the turnover assessed under the assessment order is drawn from the books of accounts and no reference to any specific concealment of the turnover in the accounts made, the question of invoking Section 12(3)(b) would not arise. Penalty cannot sustain - Tax Case Revision Petition is dismissed.
Issues Involved:
1. Levy of penalty under Section 12(3)(b) and Section 16(2) of the Tamil Nadu General Sales Tax Act, 1959. 2. Determination of wilful non-disclosure of assessable turnover. 3. Validity of best judgment assessment and its implications on penalty. 4. Applicability of Supreme Court and High Court precedents in determining penalty. Issue-wise Detailed Analysis: 1. Levy of Penalty under Section 12(3)(b) and Section 16(2) of the Tamil Nadu General Sales Tax Act, 1959: The core issue revolves around the levy of penalty on the dealer for the assessment year 1997-98. The dealer was assessed on a total and taxable turnover of ?12,05,759 and ?4,30,759 respectively, and a penalty of ?70,452 was imposed under Section 12(3)(b) of the Act. The Appellate Assistant Commissioner deleted the penalty, reasoning that the turnover was disclosed in the profit and loss account and verified by the assessing authority. The Tribunal upheld this decision, emphasizing that the penalty under Section 16(2) is only applicable when there is wilful non-disclosure of assessable turnover, which was not the case here. 2. Determination of Wilful Non-Disclosure of Assessable Turnover: The Tribunal and the Appellate Assistant Commissioner both concluded that there was no wilful non-disclosure by the dealer. The turnover was available in the accounts and verified by the assessing authority, negating any deliberate intention to evade tax. The Tribunal referenced the Supreme Court's decision in Hindustan Steel Ltd v. State of Orissa, which mandates a definite finding of wilful non-disclosure for imposing a penalty. The Tribunal also noted that the taxability of Special Import Licences was not settled until the Supreme Court's decision in Vikas Sales Corporation, further supporting the absence of wilful non-disclosure. 3. Validity of Best Judgment Assessment and Its Implications on Penalty: The assessing officer resorted to a best judgment assessment, rejecting the dealer's returns as incorrect and incomplete. However, the Tribunal found that the turnover was disclosed in the dealer's accounts and verified by the assessing authority, making a best judgment assessment inappropriate. The Tribunal cited the Supreme Court's decision in State of Madras v. Jayaraj Nadar & Sons, which held that penalty can only be levied when the assessment is based on an estimate and not solely on the dealer's accounts. 4. Applicability of Supreme Court and High Court Precedents in Determining Penalty: The Tribunal and the High Court relied on several precedents to conclude that penalty was not justified. These included: - Hindustan Steel Ltd v. State of Orissa: Emphasized the need for a definite finding of wilful non-disclosure for imposing a penalty. - State of Madras v. Jayaraj Nadar & Sons: Clarified that penalty is applicable only in cases of best judgment assessment based on estimates. - Vikas Sales Corporation v. Commissioner of Commercial Taxes: Addressed the taxability of import licences and its implications on penalty. - Appollo Saline Pharmaceuticals (P) Ltd. v. Commercial Tax Officer: Held that penalty is not justified when the assessment is based on the dealer's accounts. - Indira Industries v. State of Tamil Nadu: Reinforced that penalty is not applicable when there is no suppression of turnover in the accounts. Conclusion: The High Court dismissed the Tax Case Revision Petition, validating the Appellate Assistant Commissioner's and Tribunal's decisions to delete the penalty. The Court emphasized that the turnover was disclosed in the dealer's accounts and verified by the assessing authority, negating any wilful non-disclosure. The Court also reiterated that penalty under Section 12(3)(b) is not automatic and must consider the bona fides of the assessee. The substantial question of law was answered in favor of the assessee, affirming that the penalty was not justified under the circumstances.
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