Wilful non-disclosure and penalty notices under VAT law require clear allegations and recorded satisfaction before penalty can stand.

Penalty under Section 27(4) of the Tamil Nadu Value Added Tax Act, 2006 could not be sustained where the show-cause notices did not specifically allege wilful non-disclosure and the assessing authority had not recorded satisfaction on that basis. The notices seeking reversal of input tax credit and levy of penalty failed to give clear notice of the alleged wilful conduct, and the fact that tax had already been paid at the time of inspection also weighed against penalty. In the absence of a recorded finding that the escapement resulted from wilful non-disclosure, the penalty notices and consequential orders were unsustainable.

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Issues: Whether penalty under Section 27(4) of the Tamil Nadu Value Added Tax Act, 2006 could be sustained when the show-cause notices did not specifically allege wilful non-disclosure and the assessing authority had not recorded satisfaction on that aspect.

Analysis: The notices proposing reversal of input tax credit and levy of penalty did not put the assessee on clear notice that the alleged non-disclosure was wilful. The tax had already been paid at the time of inspection, which was a relevant circumstance against imposition of penalty. In the absence of a recorded satisfaction that the escapement was due to wilful non-disclosure, the notices and consequential penalty orders were unsustainable.

Conclusion: The penalty under Section 27(4) could not be sustained and the impugned orders were liable to be set aside.

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