Bona fide tax uncertainty defeats sales tax penalty where no intentional violation is shown.

Penalty under the Tamil Nadu General Sales Tax Act was held unsustainable where the assessee faced genuine uncertainty over liability on groundnut purchase turnover and had acted in line with an earlier departmental understanding. The court found no deliberate or intentional breach, noting that prior departmental and appellate views had supported the assessee's position and that tax had been collected and remitted under that understanding. In these circumstances, the penalty provision was not attracted because the assessee's conduct did not amount to a wilful violation of the Act, and the deletion of penalty was upheld.

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Issues: Whether penalty levied for alleged violation of section 22(1) of the Tamil Nadu General Sales Tax Act, 1959 was sustainable under section 22(2) of that Act in the circumstances of uncertainty regarding tax liability.

Analysis: The tax liability on groundnut purchase turnover had been in doubt, with earlier departmental and appellate views supporting the assessee's position and the assessee having been collecting and remitting tax under an understanding accepted by the department for prior years. In such a situation, the assessee could not be said to have committed a deliberate or intentional breach warranting penalty. The principle applied was that penalty provisions are not attracted where the assessed position is uncertain and the mistake is not attributable solely to the assessee.

Conclusion: The penalty was not exigible and the Tribunal's order setting it aside was upheld in favour of the assessee.

Final Conclusion: The revision failed and the dismissal left undisturbed the deletion of penalty.

Ratio Decidendi: Penalty under the sales tax statute is not attracted where the assessee's conduct occurred in a bona fide and uncertain tax position and there is no intentional violation of the Act.

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