Penalty under sales tax law not sustainable when inter-State sales were disclosed in books and assessed accordingly

Penalty under section 78(5) of the Rajasthan Sales Tax Act, 1994 was held unsustainable where the disputed sales were recorded in the books of account, disclosed in the returns, and later accepted as inter-State sales for assessment. The court noted that the invoices' reference to tax payment was explained as inadvertent, and the transaction had been duly accounted for in the books and tax liability declared. On those facts, there was no admission of guilt to justify penal action, and the absence of a transporter's bilty alone did not warrant penalty when the transaction was otherwise disclosed and assessed.

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Issues: Whether penalty under section 78(5) of the Rajasthan Sales Tax Act, 1994 was leviable where the disputed sales were recorded in the books of account, were later accepted as inter-State sales, and the tax liability was duly declared and assessed.

Analysis: The disputed invoices were explained as containing an inadvertent mention of tax payment, while the underlying transaction was claimed to be an inter-State sale. The transaction had been entered in the books of account, the returns under the relevant sales tax regime were filed, and the assessing authority later accepted the declared tax liability on the basis of those books. On these facts, there was no admission of guilt warranting penal action, and the absence of a transporter's bilty, by itself, did not justify penalty when the transaction was otherwise accounted for and disclosed.

Conclusion: Penalty under section 78(5) was not sustainable and was wrongly upheld.

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