Court rules payment as tax, not penalty, under TN VAT Act Section 67(3)(b).

The court ruled in favor of the petitioner, determining that the amount paid should be considered as tax, not a penalty. The detention officer lacked the authority to impose penalties under Section 67(3)(b) of the Tamil Nadu Value Added Tax Act, 2006. The writ petition was disposed of, directing the respondents to treat the payment as tax and allowing the petitioner to seek additional remedies under the Act if necessary. No costs were awarded, and the related miscellaneous petition was closed.

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Issues:
Challenge to release order by detention officer - Jurisdiction of detention officer to adjust payment as penalty or tax

Analysis:
The petitioner challenged a release order by the detention officer, arguing that the amount paid was for tax, not penalty. The petitioner referred to Section 67(3)(b)(i) and (ii) of the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act) to support the contention that the officer can only call for tax payment, not levy a penalty. The provision allows the officer to detain goods if tax evasion is suspected, directing payment of tax or security. The court noted that the officer lacked the power to levy a penalty.

The Additional Government Pleader cited Section 71(3) of the TNVAT Act, stating that penalties apply to those submitting false returns or evading tax willfully. However, the court highlighted that the detention officer, not the assessing officer, issued the order. The detention officer acted under Section 67(3)(b) of the TNVAT Act, detaining and releasing goods without the authority to impose penalties. The petitioner argued they had filed returns and claimed input tax credit, exceeding the VAT due, thus contending they owed no tax.

The court concluded that the amount paid should be considered as tax, not a penalty. The writ petition was disposed of, directing the respondents to treat the payment as tax and allowing the petitioner to pursue further remedies under the Act if needed. No costs were awarded, and the connected miscellaneous petition was closed.

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