Best judgment tax penalty must be computed only on the balance tax difference after adjusting tax already paid.

Penalty under Section 22(5) of the Tamil Nadu Value Added Tax Act, 2006, in a best judgment assessment under Section 22(4), must be computed on the balance tax difference after crediting tax already paid. Where returns were not filed and assessment proceeded on best judgment, the figures in the assessment order had to reflect total tax due, tax paid and the outstanding balance; the penalty could not be fixed without that basis. The demand was therefore contrary to Section 22(5) and was set aside, with liberty to re-compute the penalty in accordance with law.

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Issues: Whether the penalty levied under Section 22(5) of the Tamil Nadu Value Added Tax Act, 2006, in a best judgment assessment under Section 22(4) of the Tamil Nadu Value Added Tax Act, 2006, was computed in accordance with law.

Analysis: The assessment was made because the returns had not been filed and the respondent resorted to best judgment assessment under Section 22(4). The tax and penalty had already been paid during the pendency of the writ petition, leaving only the penalty levy for consideration. The figures in the assessment order showed the total tax due, tax paid and balance tax outstanding. On that basis, penalty under Section 22(5), which had to be worked out on the balance tax difference, could not have been fixed at the amount demanded in the impugned order.

Conclusion: The penalty demand was held to be contrary to Section 22(5) of the Tamil Nadu Value Added Tax Act, 2006, and was set aside with liberty to re-compute the penalty in accordance with law.

Ratio Decidendi: Penalty under Section 22(5) of the Tamil Nadu Value Added Tax Act, 2006, must be calculated on the difference between the tax assessed and the tax already paid, and cannot exceed the amount legally recoverable on that basis.

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