Mutual mistake in surcharge collection bars penalty absent wilful contravention of the sales tax law.

Penalty under section 22(2) of the Tamil Nadu General Sales Tax Act was held unjustified where surcharge on cement sales had been collected by both the assessee and the Revenue under a mutual mistake of liability. As the levy had been maintained despite administrative clarification and was later found illegal, the conduct was not a deliberate or intentional contravention of the statute. In the absence of wilful breach or mens rea, the statutory penalty could not be sustained, and the penalty demands were set aside.

---

---

Issues: Whether penalty could be imposed under section 22(2) of the Tamil Nadu General Sales Tax Act, 1959, for collection of surcharge under a mutual mistake without wilful or intentional violation.

Analysis: The collection of surcharge on cement sales at Madukkarai had been made by both the assessee and the Revenue under a mistaken understanding of liability. The mistaken levy had earlier been resisted by the Revenue despite a clarification from the Commissioner of Commercial Taxes, and the illegality of the surcharge was later judicially declared. On these facts, the collection could not be characterised as a deliberate or intentional breach of the Act. The circumstances brought the case within the principle that where a mistake is mutual and no mens rea or wilful disregard of the law is shown, penalty is not justified.

Conclusion: Penalty under section 22(2) was not warranted and the writ petitions were allowed.

Final Conclusion: The penalty demands were set aside on the footing that the disputed surcharge collection resulted from a mutual mistake and not from a culpable violation of the statute.

Ratio Decidendi: Penalty for statutory violation is not leviable where the conduct arose from a bona fide mutual mistake and there is no wilful or intentional contravention of the law.

---