Exempted turnover cannot be included for additional sales tax, and penalty fails when the underlying levy is invalid.

Exempted sales under the Tamil Nadu General Sales Tax Act could not be counted as taxable turnover for the Tamil Nadu Additional Sales Tax Act because the additional levy had no independent definition of taxable turnover and operated through the parent Act's definitions and machinery. The inclusion of such sales in the threshold for additional tax was therefore erroneous, and the issue was decided for the assessee. Penalty under Section 12(3)(b) also could not stand once the underlying additional sales tax demand failed, as the penalty depended on the validity of the levy. The revision succeeded and the tribunal's order was set aside.

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Issues: (i) Whether exempted sales made to Hyundai Motors India Limited could be included in the taxable turnover for determining liability under the Tamil Nadu Additional Sales Tax Act, 1970; (ii) Whether penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 could be sustained when the additional sales tax levy itself was wrongly made.

Issue (i): Whether exempted sales made to Hyundai Motors India Limited could be included in the taxable turnover for determining liability under the Tamil Nadu Additional Sales Tax Act, 1970.

Analysis: The charging provision in the Additional Sales Tax Act did not contain an independent definition of taxable turnover. By virtue of Section 2(1)(b), the provisions of the Tamil Nadu General Sales Tax Act, 1959 applied to the additional tax in the same manner as they applied to tax under the parent Act. The Court held that the additional sales tax enactment depended upon the parent Act for definitions, assessment, levy, collection, and remedies. Since the sales in question were exempted sales under the 1959 Act, they formed part of exempted turnover and could not be treated as taxable turnover for the purpose of the additional sales tax threshold.

Conclusion: The inclusion of exempted sales in the taxable turnover was erroneous and the issue was decided in favour of the assessee.

Issue (ii): Whether penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 could be sustained when the additional sales tax levy itself was wrongly made.

Analysis: The penalty depended upon the validity of the underlying levy. Once the turnover was wrongly brought within the charging provision and the additional sales tax demand itself failed, the foundation for penalty disappeared.

Conclusion: The penalty could not be sustained and this issue was also decided in favour of the assessee.

Final Conclusion: The revision succeeded, the questions of law were answered for the assessee, and the tribunal's order was set aside.

Ratio Decidendi: Where the additional sales tax enactment incorporates the parent sales tax law for its working and does not provide an independent definition of taxable turnover, exempted sales under the parent Act cannot be counted as taxable turnover for the additional levy.

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