Pre-assessment cheque payment can reduce sales tax liability and defeat penalty for suppressed turnover to that extent.

Penalty for suppressed turnover was held unsustainable to the extent the assessee had issued a cheque towards the tax liability before final assessment. The cheque, enclosing letter and later bank encashment, showed a pre-assessment payment that reduced the outstanding liability, and the assessment order was passed after the cheque date. The authorities failed to consider this material circumstance when sustaining penalty under section 12(3) of the Tamil Nadu General Sales Tax Act, so the penalty could not stand for the portion already covered by the pre-assessment payment.

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Issues: Whether penalty under section 12(3) of the Tamil Nadu General Sales Tax Act was justified when the assessee had issued a cheque towards the tax liability before completion of assessment.

Analysis: The assessee produced the letter enclosing the cheque dated 7 January 1998 and the bank statement showing encashment on 10 January 1998. The assessment order was dated 8 January 1998, and the cheque amount exceeded the balance tax then payable. In view of the principle that payment made before final assessment reduces the liability to that extent, the earlier issuance of the cheque was treated as a relevant pre-assessment payment. The authorities below failed to consider this material circumstance while sustaining penalty.

Conclusion: Penalty under section 12(3) was not justified and the assessee succeeded on the issue.

Ratio Decidendi: Where tax liability is satisfied by a cheque issued before final assessment, the payment is attributable to the date of the cheque and penalty for suppressed turnover cannot be sustained to the extent of such pre-assessment payment.

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