Illegal collection of sales tax on non-taxable second sales attracts penalty where credit notes do not prove actual refund.

Collection of sales tax and surcharge on second sales not liable to tax was treated as a deliberate and wilful violation of the Act because the assessee retained the amounts instead of remitting them or proving any genuine refund to purchasers. The later issue of credit notes did not negate the contravention, as they did not establish actual repayment or convert the collection into a permissible rebate or discount. Penalty under section 22(2) was therefore correctly attracted, and the reduced penalty ordered below required no interference.

---

---

Issues: Whether collection of sales tax and surcharge on second sales of goods not liable to tax attracted penalty under section 22(2) of the Tamil Nadu General Sales Tax Act, 1959, and whether subsequent issue of credit notes could negate or reduce the penalty.

Analysis: The assessee had collected sales tax and surcharge on second sales when no tax was payable. The collection was not made under any dispute as to taxability, nor was it a case of tax collected and remitted to the Government, nor a case of refund at the end of the year in the nature of rebate or cash discount. The Tribunal found that the amounts were retained by the assessee, and the later passing of credit notes did not establish actual refund to the purchasers. On these facts, the collection was held to be a deliberate and wilful violation of section 22(1), attracting the penal consequence under section 22(2).

Conclusion: Penalty under section 22(2) was rightly attracted, and the reduced penalty ordered by the Appellate Tribunal called for no interference. The revision was dismissed.

Ratio Decidendi: Where a dealer collects tax on transactions not liable to tax and merely issues credit notes without proof of actual refund, the collection remains a contravention attracting penalty under the sales tax law.

---