Penalty for bona fide classification dispute rejected where sales were disclosed and no concealment was found.

Penalty under Section 61 of the Rajasthan VAT Act was held not exigible where the assessee had disclosed the sales in its books and returns, and the dispute arose only from a bona fide difference over interpretation and classification of goods. The records showed no concealment or misinformation, so additional tax and interest did not by themselves justify automatic penalty. The principle applied was that penalty cannot follow merely because the department's view on classification is ultimately accepted.

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Issues: Whether penalty under Section 61 of the Rajasthan Value Added Tax Act, 2003 could be imposed automatically where the assessee had disclosed the sales in its books and the dispute related only to interpretation and classification of the goods.

Analysis: The assessment records showed that the sales transactions for the relevant year were reflected in the books of account and there was no concealment or misinformation in the returns. The tax and interest arose from a bona fide dispute on interpretation of the relevant entries and the classification of the goods. In such circumstances, levy of additional tax and interest did not by itself satisfy the conditions for automatic penalty. The settled position, as applied in the earlier decision relied upon by the Court, was that penalty could not follow merely because the department's view on classification was accepted.

Conclusion: Penalty under Section 61 was not exigible on the facts and the assessee succeeded on this issue.

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