Penalty under TNGST Act requires verification of disputed return filing and a fair hearing before confirmation.

Under the TNGST Act, a penalty under section 12(3)(a) cannot be confirmed merely because returns are absent from the assessment file when the assessee disputes filing. The factual basis for the penalty must first be verified, and the assessee must be given a reasonable opportunity of hearing before the legality of the levy is decided. Where that verification has not been made, the proper course is remand to the assessing authority for de novo examination and fresh decision on penalty.

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Issues: Whether the levy of penalty under section 12(3)(a) of the TNGST Act, 1959, could be sustained without first verifying the assessee's assertion that returns had been filed and without remanding the matter for fresh consideration.

Analysis: The penalty was restored by the Tribunal on the footing that returns were not available in the assessment file and, therefore, had not been filed for the relevant years. Since the factual dispute as to filing of returns required verification, the proper course was to remit the matter to the assessing authority for a de novo examination. The assessee was also entitled to a reasonable opportunity of hearing before the legality of the penalty was decided.

Conclusion: The levy of penalty could not be finally sustained on the Tribunal's approach, and the matter had to be remanded to the assessing authority for verification and fresh decision.

Ratio Decidendi: Where the factual basis for penalty is disputed on the question of filing of returns, the adjudicating authority must verify the fact and afford a reasonable opportunity before confirming the penalty; otherwise, remand is warranted.

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