Court sets aside tax penalties due to defects in show cause notices; emphasizes requirement for wilful non-disclosure.

The court allowed the writ petitions challenging assessment orders under the Tamil Nadu Value Added Tax Act, 2006 for the levy of penalties under Section 27(4). The court found defects in the show cause notices as they did not specifically allege wilful non-disclosure by the petitioner, who had paid the tax at inspection. The court emphasized the importance of clear observations in show cause notices and the requirement for satisfaction of tax escapement due to wilful non-disclosure to justify penalties. Consequently, the impugned orders were set aside, with no costs imposed.

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Issues:
Challenge to assessment orders under Tamil Nadu Value Added Tax Act, 2006 for levy of penalty under Section 27(4) - Justification of proposed penalty despite payment of tax at inspection - Defectiveness of show cause notices - Requirement of specific observation on wilful non-disclosure - Satisfaction of escapement of tax due to wilful non-disclosure by the assessee.

Analysis:
The petitioner challenged assessment orders under the Tamil Nadu Value Added Tax Act, 2006 for the years 2013-14 and 2014-15 regarding the levy of penalty under Section 27(4) of the Act. The respondent proposed to reverse the input tax credit availed by the petitioner and levy a penalty. However, it was noted that the petitioner had paid the required tax even at the time of inspection, raising the question of whether the respondent was justified in proposing the penalty.

Upon reviewing the revision notices, it was observed that the show cause notices issued by the respondent did not specifically mention that the non-disclosure alleged against the petitioner was wilful, despite the petitioner paying the tax at the time of inspection. This omission rendered the notices defective. The court referred to a previous case where it was held that the conduct of the petitioner in paying the tax before the issuance of show cause notices could be a factor in not imposing a penalty. Additionally, the respondent did not record satisfaction that the escapement of tax was due to wilful non-disclosure by the assessee.

Based on the above reasons, the writ petitions were allowed, and the impugned orders were set aside. No costs were imposed, and the connected Writ Miscellaneous Petitions were closed. This judgment highlights the importance of specific observations in show cause notices regarding wilful non-disclosure and the necessity for the satisfaction of the tax escapement being due to such non-disclosure by the assessee to justify the imposition of penalties under the relevant tax laws.

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