Overruled precedent in penalty proceedings led to remand for fresh decision under the correct legal position.

Penalty and appellate orders based on a Division Bench precedent could not stand after that precedent was overruled by a Full Bench and the overruling was affirmed by the Supreme Court. As the assessing authority had proceeded on a legal position that no longer survived, the foundation of the impugned orders failed. The proper course was remand for reconsideration under the correct law, without any final view on the merits. The High Court therefore set aside the penalty and appellate orders and remitted the matter to the assessing authority for a fresh decision in accordance with law, in favour of the assessee.

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Issues: Whether the penalty order and the appellate orders could be sustained when the assessing authority had relied on a precedent later overruled, and whether the matter required remand for fresh decision.

Analysis: The assessment and penalty orders were founded on a Division Bench decision which had treated the relevant penalty provision as identical to another sales tax enactment. That decision had subsequently been overruled by a Full Bench and the overruling was affirmed by the Supreme Court. In view of that change in the governing legal position, the basis of the impugned orders no longer survived. The proper course was to remit the matter to the assessing authority for reconsideration under the correct legal position, without expressing any final opinion on the merits.

Conclusion: The penalty and appellate orders were set aside and the matter was remanded to the assessing authority for fresh decision in accordance with law, in favour of the assessee.

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