Unauthorized tax recoupment can be treated as tax collection and attract penalty under the statutory prohibition.

Collection of amounts described as sales tax recoupment without statutory authority falls within the prohibition against collecting any amount by way of tax, or purporting to be by way of tax, under section 22(1) of the Tamil Nadu General Sales Tax Act, 1959. Where such collection is made in contravention of that provision, section 22(2) permits imposition of penalty. A description such as recoupment does not change the legal character of the receipt if it is, in substance, a tax-like collection retained by the assessee. On those facts, there was no basis for reducing the penalty.

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Issues: Whether collection of an amount described as sales tax recoupment, without authority under the Act or the Rules, amounted to collection of an amount by way of tax or purporting to be by way of tax so as to attract penalty under section 22; and whether there was any justification for reduction of the penalty.

Analysis: Section 22(1) prohibits collection of any amount by way of tax or purporting to be by way of tax otherwise than in accordance with the Act and the Rules, and section 22(2) authorises imposition of penalty where such collection is made in contravention of that prohibition. The assessee had admittedly collected sales tax recoupment without statutory authority, and the use of that description did not alter the legal character of the collection. The record supported the finding that the collection was a device to recover an amount in substance purporting to be tax. Since the amount so collected was retained, there was no basis for interference with the quantum of penalty.

Conclusion: The collection contravened section 22(1) and attracted penalty under section 22(2) of the Tamil Nadu General Sales Tax Act, 1959, and the request for reduction of penalty was rejected.

Final Conclusion: The penalty order was upheld and the appeal failed.

Ratio Decidendi: An amount collected without authority under the guise of tax recoupment is a collection purporting to be by way of tax and is liable to penalty under the statutory prohibition.

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