Unauthorised collection of tax attracts penalty when the dealer retains collected sums instead of remitting them to Government.

A dealer who collected tax and surcharge despite turnover below the taxable limit was liable to penalty under section 22(2) of the Tamil Nadu General Sales Tax Act, 1959. The earlier view that such collection did not contravene section 22 was rejected because the decisive fact was that the collected amounts were not shown to have been remitted to the Government and were retained by the assessee. On that basis, the statutory penalty provision was attracted, and deletion of the penalty was held unsustainable.

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Issues: Whether penalty under section 22(2) of the Tamil Nadu General Sales Tax Act, 1959 was rightly levied for collection of tax and surcharge by a dealer whose turnover was below the taxable limit, and whether the absence of a finding that the collected amount was remitted to the Government justified deletion of the penalty.

Analysis: The dealer had collected tax and surcharge though no tax liability had arisen on account of the turnover falling below the taxable threshold. The first appellate authority and the Tribunal proceeded on the view that such collection was not in contravention of section 22, but that view was rejected. The decisive consideration was that the amounts collected as tax and surcharge were not shown to have been paid over to the Government and were retained by the assessee. In such circumstances, the statutory penalty provision was attracted, and the authorities below had erred in deleting the penalty.

Conclusion: Penalty under section 22(2) was rightly leviable and its deletion was unsustainable.

Final Conclusion: The revision succeeded and the order deleting the penalty was set aside, with the levy of penalty restored.

Ratio Decidendi: Where a dealer collects amounts by way of tax without being entitled to do so and retains those amounts instead of remitting them to the Government, penalty under the provision governing unauthorised collection of tax is exigible.

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