Unjust enrichment cannot support penalty where the sales tax statute contains no corresponding refund mechanism.

Penalty under the Tamil Nadu General Sales Tax Act, 1959 could not be imposed merely to neutralise a refund on a theory of unjust enrichment when the Act contained no provision comparable to sections 11-B and 12-A of the Central Excises and Salt Act, 1944. The doctrine of unjust enrichment, although recognised in fiscal law, could not be used to sustain a penalty order in the absence of statutory authority. Section 22(2) was also held inapplicable where the dealer collected tax from buyers and remitted it to the State. The penalty was therefore unsustainable and was set aside.

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Issues: Whether penalty could be levied under the Tamil Nadu General Sales Tax Act, 1959 solely to neutralise a refund on the ground of unjust enrichment, and whether the dealer's receipt and remittance of tax from buyers attracted the penal provision.

Analysis: The Court held that the authorities could not create a penalty mechanism merely to offset a possible refund in the absence of any provision in the Tamil Nadu General Sales Tax Act, 1959 corresponding to sections 11-B and 12-A of the Central Excises and Salt Act, 1944. The doctrine of unjust enrichment, though recognised in fiscal law, could not be invoked by the State to sustain a penalty order when the statute itself did not provide for such a consequence. The Court further held that section 22(2) of the Tamil Nadu General Sales Tax Act, 1959 had already been interpreted as inapplicable where a dealer collects tax from buyers and remits it to the State.

Conclusion: The penalty was not sustainable and was rightly set aside; the tax revisions were dismissed.

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