2017 (4) TMI 1072 - HC - VAT and Sales Tax

Court quashes penalty order separate from assessment for leather dealer, emphasizing willful non-disclosure requirement

The court set aside the penalty order imposed separately from the assessment order on the petitioner, a dealer in finished leather. Relying on relevant ... Penalty must form part of the assessment order - penalty under Section 27(3) of the Tamil Nadu Value Added Tax Act, 2006 - pari materia provision in Section 16(2) of the Tamil Nadu General Sales Tax Act, 1959 - wilful non-disclosure of assessable turnover - no jurisdiction to impose penalty by a separate and independent orderPenalty must form part of the assessment order - penalty under Section 27(3) of the Tamil Nadu Value Added Tax Act, 2006 - no jurisdiction to impose penalty by a separate and independent order - Validity of a penalty order dated 31.12.2013 imposed separately from the assessment order for AY 2008-2009. - HELD THAT: - The Court held that the statutory scheme embodied in Section 27(3) of the 2006 Act (which is pari materia with Section 16(2) of the 1959 Act) envisages levy of penalty only as part of the assessment process and not by a separate, independent order. The Division Bench decision in Deputy Commissioner (C.T.), Coimbatore v. S.R.Ramaswami Chettiar and Bros. and the Single Judge decision in Rainbow Foundations Ltd. were applied to conclude that absent a definite finding of wilful non-disclosure within the assessment order itself, the assessing authority lacks jurisdiction to impose penalty by a distinct order. Applying this principle to the facts (where a revised assessment was passed on 31.07.2013 but the penalty was confirmed by a separate order dated 31.12.2013), the separate penalty order could not be sustained and had to be set aside. [Paras 10, 11]The penalty order dated 31.12.2013, being a separate and independent penalty order not forming part of the assessment, is set aside.Final Conclusion: Writ petition allowed; the separate penalty order dated 31.12.2013 is quashed and the petition is disposed of with no order as to costs. Issues:Challenge to penalty order separate from assessment orderAnalysis:The petitioner, a dealer in finished leather, was called upon to pay a penalty of Rs. 37,032 by an order dated 31.12.2013, independent of the assessment order passed on 31.07.2013. The petitioner contended that the penalty order was unsustainable in law as it was not part of the assessment order. Initially, the petitioner had paid tax based on self-assessment, but later notices were issued alleging non-disclosure of taxable turnover. The respondent added an escaped taxable turnover of Rs. 6,17,205 to the already determined turnover, resulting in a revised taxable turnover of Rs. 12,71,654. Despite having paid the tax due, the petitioner was later issued a notice for the imposition of penalty, which was confirmed through the impugned order.In response, the petitioner argued that penalty cannot be levied independent of the assessment order and cited relevant judgments, including The Deputy Commissioner (C.T.), Coimbatore V. S.R.Ramaswami Chettiar and Bros., [1976] 38 S.T.C. 382, and Rainbow Foundations Ltd., V. Assistant Commissioner (CT), [2011] 37 V.S.T. 592 (Mad.). The respondent justified the penalty by pointing out the escapement of tax noted in the revised assessment order. The provision of Section 27(3) of the 2006 Act, regarding assessment of escaped turnover and wrong availment of input tax credit, was highlighted to support the penalty imposition.The court analyzed the legal position based on the cited judgments and statutory provisions. Referring to the judgments, the court held that penalty cannot be imposed through a separate or independent order not forming part of the assessment order. The court emphasized that the assessing authority must make a definite finding on willful non-disclosure of taxable turnover to impose a penalty. As the penalty in this case was imposed through a separate order, the court set aside the impugned order and disposed of the writ petition accordingly, with no costs imposed.