Penalty for wrongful tax collection sustained where the dealer retained collected tax despite turnover below the taxable threshold.

Penalty for collecting and retaining tax was leviable where the assessee's turnover was below the statutory threshold, but it had still collected tax from buyers and failed to refund it after becoming aware that no tax was payable. The court distinguished cases involving collection at the department's instance or remittance to the State without the same statutory mischief, and held that those authorities did not apply on these facts. Mere remittance before assessment did not cure the earlier contravention, because the assessee showed no bona fides or prompt refund. The revision was therefore rejected and penalty sustained.

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Issues: Whether penalty under Section 22(2) of the Tamil Nadu General Sales Tax Act was leviable on the assessee for collecting and retaining tax despite its turnover being below the statutory threshold under Section 3(1).

Analysis: The turnover for the relevant year was below the minimum limit for attracting tax liability, but the assessee had collected tax from buyers and did not refund it to the customers even after becoming aware that the turnover was below the chargeable limit. The Court distinguished the authorities relied on by the assessee, noting that those decisions turned on different factual situations where the collection was either at the instance of the department or the tax had been remitted to the State in a manner that did not attract the mischief of Section 22(1). On the facts here, the assessee retained the collected tax without showing any bona fides or prompt refund, and the mere remittance before assessment did not erase the earlier contravention.

Conclusion: Penalty under Section 22(2) was held leviable and the revision was rejected.

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