Separate penalty orders under Tamil Nadu VAT are unsustainable without a corresponding assessment on tax liability.

A separate penalty order under Section 27(3) of the Tamil Nadu VAT Act, 2006 was held unsustainable where no corresponding assessment order on the tax component had been passed. The Court reasoned that, after inspection, the assessing authority should issue notice and determine both tax liability and any penalty through the assessment process itself. Since the officer proceeded only on a penalty proposal and levied penalty by an independent order, the order lacked jurisdiction and was set aside in favour of the assessee.

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Issues: Whether a penalty order under Section 27(3) of the Tamil Nadu VAT Act, 2006 could be sustained when it was passed as a separate and independent order without a corresponding assessment order on the tax component.

Analysis: The petitioner had already paid the tax amount after inspection, but the Assessing Officer proceeded only on the penalty proposal and passed an independent order levying penalty. The reasoning adopted by the Court was that, on the basis of the inspection report, the Assessing Officer ought to have issued notice and determined both tax liability and penalty, if warranted, through the assessment process. Relying on the settled view that an assessing authority has no jurisdiction to levy penalty by a separate and independent order, the Court held that the impugned order was unsustainable.

Conclusion: The separate penalty order under Section 27(3) was invalid and was set aside, in favour of the assessee.

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