Provisional assessment and penalty must yield to final assessment where tax liability is reduced; excess penalty was refundable.

Provisional assessment under the Mysore Sales Tax Act was subject to adjustment on final assessment, and where the final assessment reduced the tax liability, the earlier assessment was superseded to that extent. Rule 20 required refund of excess tax collected, and the same principle applied to penalty linked to the disallowed portion because the amount was no longer lawfully payable under section 13. The excess penalty recovered with reference to tax later disallowed by the final assessment was therefore not sustainable and had to be refunded, and the State's revision failed.

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Issues: Whether penalty collected with reference to a provisional assessment remained recoverable after the final assessment reduced the tax liability, and whether the excess penalty corresponding to the reduction was refundable.

Analysis: The provisional assessment under section 12-B of the Mysore Sales Tax Act, 1957 was subject to adjustment on completion of the final assessment, and rule 20 of the Sales Tax Rules required refund of excess tax collected when the final assessment was lower. The scheme of sections 12, 20(5) and 21 showed that when an assessment is varied, the earlier assessment is superseded to that extent. On the same principle, the reduction brought about by the final assessment ceased to be tax lawfully payable under section 13, so penalty could not survive in respect of the amount found not payable under the final assessment.

Conclusion: The excess penalty recovered with reference to the portion of tax disallowed by the final assessment was not sustainable and was refundable; the revision petition by the State failed.

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