Suppression penalty sustained, but unjust enrichment penalty fails absent proof that excess tax was actually retained

Penalty under section 12(3)(b) was sustained because the return and books disclosed material omissions, including underreported deductions and misuse of form XVII, showing that the understatement was not accidental. Penalty under section 22(2) was set aside because the excess tax collection had not been refunded to the assessee by the relevant date, so unjust enrichment could not be established. The decision distinguishes suppression-based penalty, which may stand on factual omissions in assessment records, from an unjust enrichment penalty, which requires proof that the assessee actually retained the excess collection.

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Issues: (i) Whether penalty under section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 was exigible on the basis of the omissions noticed in the return and books of account. (ii) Whether penalty under section 22(2) of the Tamil Nadu General Sales Tax Act, 1959 could be sustained on the ground of unjust enrichment when the excess tax collected had not been refunded to the assessee.

Issue (i): Whether penalty under section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 was exigible on the basis of the omissions noticed in the return and books of account.

Analysis: The assessment records showed variations between the returns and the books of account, including underreported sales return deductions and misuse of form XVII. These factual omissions supported the conclusion that the understatement was not accidental. Mere excess payment of tax by way of additional sales tax did not wipe out the effect of the suppression noticed in assessment.

Conclusion: Penalty under section 12(3)(b) was rightly sustained and the challenge failed.

Issue (ii): Whether penalty under section 22(2) of the Tamil Nadu General Sales Tax Act, 1959 could be sustained on the ground of unjust enrichment when the excess tax collected had not been refunded to the assessee.

Analysis: The excess tax collection arose from departmental directions and the subsequent refund order. The record also showed that the amount had not, in fact, been refunded to the assessee by the relevant date. In those circumstances, it could not be concluded that the assessee had unjustly enriched itself by retaining the amount collected from buyers.

Conclusion: Penalty under section 22(2) could not be sustained and was set aside.

Final Conclusion: The revision succeeded only in relation to the penalty based on unjust enrichment, while the penalty founded on the assessment omissions was maintained.

Ratio Decidendi: Penalty for suppression may be sustained where the return and accounts disclose material omissions, but a penalty based on unjust enrichment cannot stand unless the assessee is shown to have actually retained the excess collection.

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