Sales tax penalty principles: wilful suppression sustained, but penalty could not extend to additional tax or surcharge.

Penalty for failure to disclose last purchase turnover in monthly returns was upheld because the omission was treated as wilful and as an attempt to postpone tax due; later disclosure after notice did not cure the original defect. Penalty on additional tax was not sustainable because the governing additional sales tax provisions did not authorise such levy, and the State accepted that position. Penalty on surcharge was also not sustainable, as later Supreme Court authority had displaced the earlier view relied on by the Revenue and the sales tax penalty provision could not be extended to surcharge. The assessee therefore obtained partial relief only.

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Issues: (i) whether penalty under section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959 was sustainable for failure to disclose last purchase turnover in the monthly returns; (ii) whether penalty could be levied on additional tax; and (iii) whether penalty could be levied on surcharge.

Issue (i): whether penalty under section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959 was sustainable for failure to disclose last purchase turnover in the monthly returns.

Analysis: The returns did not disclose the last purchase turnover and tax thereon was not paid along with the returns. The disclosure made only after notice and before final assessment did not convert the original omissions into complete returns. On the facts, the omission was treated as wilful and as an attempt to postpone tax legally due, and the levy of penalty was upheld.

Conclusion: The penalty under section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959 was sustained.

Issue (ii): whether penalty could be levied on additional tax.

Analysis: The applicable provisions of the Tamil Nadu Additional Sales Tax Act did not authorise levy of penalty on the additional tax component. The State accepted that position, and the penalty insofar as it related to additional tax was held to be without authority.

Conclusion: The levy of penalty on additional tax was not sustainable.

Issue (iii): whether penalty could be levied on surcharge.

Analysis: The Court accepted the later view that the earlier ruling relied upon by the Revenue was no longer good law after the subsequent Supreme Court decisions. In that view, penalty could not be extended to surcharge merely by applying the sales tax provisions governing the principal levy.

Conclusion: The levy of penalty on surcharge was not sustainable.

Final Conclusion: The challenge failed as regards the main penalty on the suppressed turnover, but succeeded on the components attributable to additional tax and surcharge, resulting in partial relief to the assessee.

Ratio Decidendi: For penalty under the sales tax penalty provision, the nature of the return must be judged on the surrounding facts, and penalty cannot be imposed on components for which the governing statute does not authorise such levy.

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