Wilful misstatement and suppression findings govern penalty under entertainments tax law, while quantum may still be moderated.

Penalty under Section 7B(3) of the Tamil Nadu Entertainments Tax Act, 1939 was held to depend on a finding of wilful misstatement or suppression of facts; it could not be quashed merely because the assessee was not a habitual offender. The Madras High Court also noted that, for assessment years before the 1982 amendment, the authority had discretion on quantum within the statutory ceiling. Taking account of the lapse of time and the amount already deposited during proceedings, the penalty was confined to the sum in deposit, with no further payment or refund with interest.

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Issues: (i) Whether penalty under Section 7B(3) of the Tamil Nadu Entertainments Tax Act, 1939 could be sustained in the absence of a finding that there was wilful misstatement or suppression of facts; (ii) whether the quantum of penalty required interference.

Issue (i): Whether penalty under Section 7B(3) of the Tamil Nadu Entertainments Tax Act, 1939 could be sustained in the absence of a finding that there was wilful misstatement or suppression of facts.

Analysis: The provision contemplates levy of penalty only when the authority reaches a conclusion that tax was not levied because of wilful misstatement or suppression of facts by the proprietor. The assessment years involved were prior to the 1982 amendment, when penalty could extend up to 150 per cent. The earlier order had set aside penalty only on the ground that the assessee was not a habitual offender, without any finding negating wilful misstatement or suppression.

Conclusion: Penalty could not be set aside on that basis, and the order quashing penalty was not sustainable.

Issue (ii): Whether the quantum of penalty required interference.

Analysis: Before the amendment the authority had discretion as to quantum within the prescribed limit. Having regard to the long lapse of time and the fact that an amount had already been deposited during the proceedings, the penalty was moderated to the amount already lying in deposit.

Conclusion: The penalty was confined to the amount already deposited, with no further amount payable and no refund with interest.

Final Conclusion: The appeals succeeded to the extent that the quashing of penalty was reversed, but the penalty was restricted to the amount already deposited, resulting in a partial allowance of the revenue's challenge.

Ratio Decidendi: Penalty provisions requiring a finding of wilful misstatement or suppression of facts cannot be neutralised on equitable considerations alone, though the quantum may be moderated in the exercise of judicial discretion where the statutory scheme permits.

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