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Issues: Whether the amount of Rs. 55,000 collected and retained as penalty could be sustained in the absence of a valid statutory basis and whether the respondents were bound to refund it.
Analysis: The notice initially issued under section 29 of the Karnataka Sales Tax Act, 1957 was accepted to be a mistake, and the attempted justification based on an alleged undertaking by the petitioner could not replace a statutory provision. Penalty under the Act could be levied only under an enabling provision and only in accordance with the prescribed procedure, including quantification under section 28A(4) of the Act. Since no proper exercise had been undertaken under the correct provision and the amount was retained without lawful support, the retention could not be justified.
Conclusion: The retention of Rs. 55,000 was unlawful and the petitioner was entitled to refund.
Final Conclusion: The writ petition succeeded, the impugned notice and the order supporting retention were quashed, and the respondents were directed to refund the amount, with liberty reserved to proceed in accordance with law if any infraction of the Act was established.
Ratio Decidendi: Penalty or other fiscal exaction cannot be sustained unless imposed under a specific statutory provision and in compliance with the procedure prescribed by the statute.
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