Bona fide mistake on tax rate and levy point bars penalty where collection was made under a shared understanding.

Tax collected under a bona fide and mutually shared mistake as to the applicable rate and point of levy does not amount to a penal violation. The dealer had collected sales tax at 4 per cent multi-point in line with the then-prevailing understanding, and the department shared that view; the later position that the sales were taxable at 8 per cent single point showed only a mutual error on taxability. On that basis, penalty under section 22(1) could not be sustained, and the consequential penalty under section 22(2) also failed. The Revenue's revision was therefore unsuccessful.

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Issues: Whether penalty could be levied for collection of sales tax at 4 per cent multi-point on the sale of petroleum jelly when the collection was made under a bona fide belief shared by both the dealer and the department as to the applicable rate and point of tax.

Analysis: The assessee had collected tax at 4 per cent multi-point in accordance with the assessment then prevailing and the department's own understanding. The later view that the sales were liable to be taxed at 8 per cent single point showed that the collection had been made under a mutual mistake regarding taxability and rate. In such circumstances, the collection could not be treated as a violation warranting penalty under section 22(1), and the consequential penalty under section 22(2) was unsustainable.

Conclusion: Penalty was not leviable, and the revision by the Revenue failed.

Ratio Decidendi: Where tax is collected under a bona fide and mutually shared mistake as to the applicable rate or point of levy, the collection does not constitute a penal violation attracting penalty provisions.

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