Wilful nondisclosure is essential for penalty under VAT law; automatic levy without it cannot stand.

Penalty under Section 27(3) of the Tamil Nadu Value Added Tax Act, 2006 cannot be imposed automatically; it requires the assessing authority to be satisfied that the escape from assessment resulted from wilful nondisclosure of assessable turnover. A mere mismatch between books of account and monthly returns, or the making of a best judgment assessment, is insufficient by itself to justify penalty. Where the record does not show application of mind to the element of wilful suppression, and the dealer has already remitted the differential tax with interest, the levy cannot be sustained.

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Issues: Whether penalty under Section 27(3) of the Tamil Nadu Value Added Tax Act, 2006 could be imposed automatically without a finding of wilful nondisclosure of assessable turnover.

Analysis: Penalty under Section 27(3) is contingent on the assessing authority being satisfied that the escape from assessment was due to wilful nondisclosure by the dealer. Mere discrepancy between the books of accounts and monthly returns, or the fact that a best judgment assessment was made, does not by itself justify penalty. The material on record showed no application of mind in the assessment orders or show cause notices to the essential element of wilful suppression, and the dealer had also remitted the differential tax with interest at the time of inspection. The conclusion that penalty was automatic was therefore contrary to the settled legal position.

Conclusion: Penalty under Section 27(3) could not be sustained on an automatic basis and the challenge to its levy succeeded.

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