Penalty liability cannot arise from a procedural collection provision where the governing tax statute creates no corresponding penal offence.

Section 9(3) of the Central Sales Tax Act is procedural and permits State authorities to collect tax and penalty only where the Central Act itself creates that liability. It cannot be used to impose a penalty for failure to disclose turnover under the Madras General Sales Tax Act when the Central Sales Tax Act contains no corresponding penal provision for that default. The penalty provisions in sections 10 and 10A did not cover the contravention, and incorporation by reference was confined to the law as it stood when the reference was made. The penalty was therefore not leviable and cancellation of the penalty was upheld.

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Issues: Whether a penalty for failure to disclose turnover under section 16(2) of the Madras General Sales Tax Act, 1959 could be levied in proceedings under the Central Sales Tax Act, 1956 by virtue of section 9(3) of that Act.

Analysis: Section 9(3) of the Central Sales Tax Act is procedural in nature and authorises the State authorities to collect tax and penalty only where such liability is already created under the Central Sales Tax Act. It does not itself create a liability to penalty for a contravention for which the Central Sales Tax Act contains no corresponding penal provision. The penalty provisions in sections 10 and 10A of the Central Sales Tax Act did not cover the default in question. The reasoning was also reinforced by the principle that incorporation by reference takes in the statute as it stood at the date of reference, and the 1959 Madras Act introduced the relevant penalty provision for the first time, whereas the 1939 Act contained no such provision.

Conclusion: The penalty was not leviable and the Tribunal was right in cancelling it.

Final Conclusion: The revision failed because the statutory machinery under the Central Sales Tax Act could not be used to impose a penalty for a default not made penal by that Act itself.

Ratio Decidendi: A procedural provision authorising collection of tax and penalty cannot be used to create a penalty liability in the absence of a substantive charging or penal provision in the governing Act, and incorporation by reference is confined to the law as it stood at the time of incorporation unless the later amendment is clearly attracted.

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