Penalty for wrongful tax collection is discretionary, not automatic, where excess tax was collected under bona fide mistake and remitted.

Penalty under section 22(2) of the Tamil Nadu General Sales Tax Act, 1959 is not automatic merely because tax was collected at an excess rate and later remitted to the Government. The assessing authority must exercise discretion on the facts, and the decisive question is whether the dealer collected the amount and retained it as its own or collected it under a bona fide mistake without illegal retention. On the admitted facts, the assessee collected tax at the old rate without knowledge of the reduction, did not retain any amount, and paid the full sum over to the Government. The Tribunal's deletion of penalty was therefore upheld.

---

---

Issues: Whether penalty under section 22(2) of the Tamil Nadu General Sales Tax Act, 1959 was attracted on the facts, and whether such penalty was automatic merely because tax had been collected at an excess rate and later remitted to the Government.

Analysis: Section 22(2) authorises imposition of penalty where tax is collected in contravention of section 22(1), but the provision is discretionary and requires the assessing authority to consider the facts of each case. The decisive factor is whether the amount was collected and retained as the dealer's own, or whether it was merely collected under a bona fide mistake and paid over to the Government. On the admitted facts, the assessee had collected tax at the old rate without awareness of the reduction, did not retain any amount, and remitted the entire sum to the Government. The Court applied the principle that "collected" in such a context means collected and kept as one's own, and that penalty is not warranted where there is no illegal retention.

Conclusion: Penalty under section 22(2) was not automatic and was not exigible on the facts; the Tribunal's deletion of penalty was upheld and the revision was dismissed.

Ratio Decidendi: Penalty for wrongful tax collection under section 22(2) is not mandatory in every case; it depends on a judicious exercise of discretion and is attracted only where the amount is collected in contravention of the Act and retained or otherwise rendered liable for penalty on the facts.

---