Strict compliance for penalty notices under sales tax law: defective notice cannot be recharacterised to sustain penalty.

Penalty proceedings under section 12-A(1-A) of the Karnataka Sales Tax Act require strict compliance with statutory preconditions: the notice must reflect the assessing authority's satisfaction that escapement of turnover resulted from wilful non-disclosure and must give a reasonable opportunity to show cause. A notice issued as one under section 12(4), framed on the basis of post-assessment penalty, did not meet those requirements and could not be recast to support penalty under section 12-A(1-A). Because that penalty must be imposed simultaneously with assessment, the penalty order based on the defective notice was unsustainable.

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Issues: Whether the notice issued for levy of penalty could be treated as a valid notice under section 12-A(1-A) of the Karnataka Sales Tax Act, 1957, and whether the penalty order based on such notice was sustainable.

Analysis: Penalty proceedings require strict compliance with the statutory preconditions. A notice under section 12-A(1-A) must indicate that the assessing authority is satisfied that escapement of turnover occurred due to wilful non-disclosure and must afford the dealer a reasonable opportunity to show cause. The notice in question was couched as one under section 12(4) and proceeded on the footing of post-assessment penalty; it did not satisfy the statutory requirements of section 12-A(1-A). Since penalty under section 12-A(1-A) has to be imposed simultaneously with assessment, the notice could not be recharacterised to sustain the penalty.

Conclusion: The notice was not a valid notice under section 12-A(1-A), and the penalty order was unsustainable. The assessee succeeded.

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