Reimbursement treated as prohibited tax collection, but penalty reduced; escaped-assessment penalty fails without wilful non-disclosure.

Receipt of additional sales tax as reimbursement from the Electricity Board was treated as collection of prohibited additional tax under the Tamil Nadu Additional Sales Tax Act, so liability under Section 3-A was attracted; however, the statutory ceiling made the penalty discretionary, and the amount was reduced to 20% in view of bona fide belief and the transaction's circumstances. Penalty for alleged escaped turnover was unsustainable because there was no affirmative finding of wilful non-disclosure of assessable turnover, and the provision invoked was inapplicable. The penalty on that issue was therefore set aside.

---

---

Issues: (i) Whether receipt of additional sales tax by way of reimbursement from the Electricity Board amounted to collection of additional sales tax in contravention of the Tamil Nadu Additional Sales Tax Act, 1970, and if so, whether the penalty under Section 3-A could be sustained in full; (ii) Whether penalty under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959 was sustainable in the absence of a finding of wilful non-disclosure of assessable turnover.

Issue (i): Whether receipt of additional sales tax by way of reimbursement from the Electricity Board amounted to collection of additional sales tax in contravention of the Tamil Nadu Additional Sales Tax Act, 1970, and if so, whether the penalty under Section 3-A could be sustained in full.

Analysis: The prohibition under Section 2(2) bars collection of additional tax, and Section 3-A permits penalty where such tax is collected in contravention of that bar. The material on record showed that the assessee had received additional sales tax at 2.25% from the Electricity Board. Even if the amount was described as reimbursement under the contract, the receipt still constituted collection of additional tax for the purposes of the statute. The violation was therefore established, but the statutory provision only prescribed a maximum penalty and not a mandatory full levy. In view of the assessee's bona fide belief and the circumstances of the transaction, the penalty was found to be excessive.

Conclusion: The levy of penalty under Section 3-A was upheld, but the quantum was reduced to 20%.

Issue (ii): Whether penalty under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959 was sustainable in the absence of a finding of wilful non-disclosure of assessable turnover.

Analysis: Penalty under Section 16(2) is attracted only when escaped assessment is due to wilful non-disclosure of assessable turnover. The record contained no finding that the assessee had deliberately or intentionally suppressed turnover. On the contrary, the assessee had proceeded under a bona fide belief that the reimbursement was not taxable. The penalty had been imposed under Section 12(5)(iii), which was held to be inapplicable, and the prerequisites for penalty under Section 16(2) were not satisfied. The authorities below therefore erred in sustaining the penalty.

Conclusion: The penalty under Section 12(5)(iii) was set aside.

Final Conclusion: The revision succeeded in part, with the penalty on the additional sales tax issue reduced and the penalty relating to alleged suppressed turnover deleted.

Ratio Decidendi: Penalty for escaped assessment can be sustained only when wilful non-disclosure is affirmatively found, while a receipt of tax reimbursement that results in collection of prohibited additional tax attracts liability, though the quantum of penalty remains discretionary within the statutory ceiling.

---