Penalty contingent on tax due cannot stand when assessed liability is nil; writ maintainable on a pure question of law.

Penalty under Section 27(4) of the Tamil Nadu VAT Act could not be sustained where the tax determined under Section 27(2) was nil, because the penalty is statutorily contingent on an actual tax liability and is computed as 300% of such tax due. The impugned orders recorded no net tax balance for the relevant years, so the penalty machinery had no operative basis. The writ petition was nevertheless maintainable despite an alternate statutory appeal, since the challenge raised a pure question of law on the very leviability of penalty. The penalty orders were quashed.

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Issues: (i) Whether penalty under Section 27(4) of the Tamil Nadu Value Added Tax Act, 2006 could be levied when the tax determined under Section 27(2) was nil; (ii) Whether the availability of a statutory appeal barred the writ petition.

Issue (i): Whether penalty under Section 27(4) of the Tamil Nadu Value Added Tax Act, 2006 could be levied when the tax determined under Section 27(2) was nil.

Analysis: Section 27(2) provides for reversal of wrongly availed input tax credit and determination of tax due, while Section 27(4) authorises penalty only in addition to the tax determined under Section 27(2) and quantifies it as 300% of such tax due. The levy of penalty is therefore dependent on an actual tax liability being computed under Section 27(2). On the facts, the impugned orders themselves recorded the net balance due as nil for all assessment years. In the absence of any tax due under Section 27(2), the machinery for computing penalty under Section 27(4) could not operate.

Conclusion: Penalty under Section 27(4) was not sustainable and the issue was answered in favour of the assessee.

Issue (ii): Whether the availability of a statutory appeal barred the writ petition.

Analysis: The challenge raised a pure question of law concerning the very leviability of penalty. Such a legal issue did not require relegation to the alternative appellate remedy.

Conclusion: The writ petition was maintainable notwithstanding the alternate remedy, and this objection failed.

Final Conclusion: The penalty orders were quashed because penalty under Section 27(4) could not be sustained without a quantified tax due under Section 27(2), and the writ petitions were allowed.

Ratio Decidendi: A penalty provision quantified as a percentage of tax due cannot be invoked unless tax is first determined as payable under the corresponding assessment provision.

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