Wilful suppression of turnover and incorrect returns justified penalty relief being set aside under sales tax law.

Substantial suppression of sales turnover supported an inference of wilful non-disclosure under section 12(3) of the Tamil Nadu General Sales Tax Act, and the Tribunal's reduction of penalty to 50 per cent was unjustified because discretion had to be exercised on relevant facts with reasons. The omission of synthetic gems turnover from the returns also made the return incorrect and incomplete under section 12(5)(iii), so deletion of that penalty could not stand. On the facts stated, both Tribunal reliefs were set aside and the Revenue's position was restored.

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Issues: (i) Whether the reduction of penalty under section 12(3) of the Tamil Nadu General Sales Tax Act to 50 per cent was justified; (ii) Whether deletion of penalty under section 12(5)(iii) of the Tamil Nadu General Sales Tax Act was sustainable.

Issue (i): Whether the reduction of penalty under section 12(3) of the Tamil Nadu General Sales Tax Act to 50 per cent was justified.

Analysis: Penalty under section 12(3) was attracted only on wilful failure to disclose turnover. The record showed large-scale suppression of sales turnover over a considerable period, detected from the assessee's own records during inspection. The Tribunal reduced the penalty without giving reasons, although discretion to reduce penalty had to be exercised judicially on relevant facts and reasons. On the facts, the suppression was substantial and supported the inference of wilful non-disclosure.

Conclusion: The reduction of penalty under section 12(3) to 50 per cent was not justified and is set aside in favour of Revenue.

Issue (ii): Whether deletion of penalty under section 12(5)(iii) of the Tamil Nadu General Sales Tax Act was sustainable.

Analysis: Penalty under section 12(5)(iii) was liable where the return was incorrect or incomplete. The turnover relating to sale of synthetic gems had not been included in the returns at all; it was detected only on inspection. The Tribunal proceeded on an erroneous assumption that the turnover had been disclosed and exemption claimed. Since the omission rendered the return incorrect and incomplete, the assessee remained liable to penalty.

Conclusion: Deletion of penalty under section 12(5)(iii) was unsustainable and is set aside in favour of Revenue.

Final Conclusion: The assessee's revision loss was corrected, the Tribunal's relief on both penalties was annulled, and the appellate authority's order was restored.

Ratio Decidendi: Where substantial suppression of turnover is proved, penalty for wilful non-disclosure cannot be reduced without reasons, and omission of turnover from the return makes the return incorrect and incomplete for purposes of penalty.

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