Penalty under sales tax law requires prior notice and hearing before levy; collection without them was illegal and refundable.

Penalty under section 14 of the Andhra Pradesh General Sales Tax Act, 1957 could not be levied without a prior show cause notice and a reasonable opportunity to explain the alleged omission. Section 14(4-B) required the assessing authority to hear the dealer and conduct necessary enquiry before directing payment, and section 14(8) showed that the quantum of penalty depended on whether the default was wilful or due to bona fide mistake. The absence of notice deprived the dealer of the statutory defence, so collection of the penalty was held illegal and arbitrary and refund was justified.

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Issues: Whether penalty collected under section 14 of the Andhra Pradesh General Sales Tax Act, 1957, without issuing a prior show cause notice and without giving the dealer a reasonable opportunity to explain the omission, was legal.

Analysis: Section 14(4-B) requires the assessing authority to give the dealer a reasonable opportunity to explain the omission to disclose turnover or to furnish particulars correctly and to make such enquiry as may be necessary before directing payment of penalty. Section 14(8) also shows that the quantum of penalty depends on whether the failure was wilful or arose from a bona fide mistake, which is a matter that must be examined after hearing the dealer. The absence of notice deprived the dealer of the statutory defence and violated the mandatory pre-condition for levy of penalty.

Conclusion: The collection of penalty without prior notice and opportunity of hearing was illegal and arbitrary, and refund of the penalty was justified.

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