Penalty under sales tax law requires prior rejection of return and best judgment assessment before Section 12(3) can apply

Penalty under Section 12(3) of the Tamil Nadu General Sales Tax Act applies only where the assessing authority first proceeds under Section 12(2), by rejecting a return as absent, incomplete or incorrect and making a best judgment assessment. Where the return has not been rejected and assessment is completed without invoking that statutory step, the precondition for penalty is absent. The cited principle requiring Sections 12(2) and 12(3) to be read together therefore limits penalty jurisdiction and protects the assessee from punishment without the foundational assessment process.

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Issues: Whether penalty could be imposed under Section 12(3) of the Tamil Nadu General Sales Tax Act, 1959 without first rejecting the return and making a best judgment assessment under Section 12(2).

Analysis: Penalty under Section 12(3) is attracted only when the assessing authority proceeds under Section 12(2), namely where no return is filed or the return is found to be incomplete or incorrect and is then rejected for best judgment assessment. The assessment order in this case was passed without rejecting the return filed by the dealer. The statutory precondition for imposing penalty was therefore absent, and the cited precedent on the need to read Sections 12(2) and 12(3) together governed the matter.

Conclusion: Penalty could not be imposed under Section 12(3) in the absence of rejection of the return and a best judgment assessment; the impugned order was liable to be set aside in favour of the assessee.

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