Departmental circulars cannot override statutory discretion; reduced penalty sustained where bona fide doubt and repayment of tax benefit existed.

Departmental circulars may bind tax but cannot override statutory discretion or control the Tribunal or Court. In a case concerning concessional purchases used in dyeing activity, the Court noted that penalty under Section 23 of the Tamil Nadu General Sales Tax Act, 1959 is discretionary and that bona fide doubt existed about the nature of the activity. Because the assessee had repaid the tax benefit availed, the reduced penalty imposed by the first appellate authority was sustained. The Appellate Tribunal's restoration of the maximum penalty was quashed, and the reduced penalty remained in force.

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Issues: Whether the Appellate Tribunal was justified in restoring the penalty imposed under Section 23 of the Tamil Nadu General Sales Tax Act, 1959, and whether the departmental circular prescribing a reduced penalty should govern the case.

Analysis: The petitioner had availed concessional purchases under Form XVII for goods used in dyeing activity, and the authorities treated the activity as outside the scope of manufacture for the purpose of concessional purchase. The Court noted that the penalty under Section 23 of the Tamil Nadu General Sales Tax Act, 1959 is discretionary and that the departmental circular issued by the Commissioner, though binding on departmental officers, does not bind the Tribunal or the Court. At the same time, the Court took into account that the petitioner had paid back the tax benefit availed and that, in the facts of the case, there was room for bona fide doubt regarding the nature of the activity. In those circumstances, the reduced penalty ordered by the first appellate authority was considered appropriate.

Conclusion: The restoration of the maximum penalty by the Appellate Tribunal was unsustainable, and the reduced penalty was upheld in favour of the petitioner.

Final Conclusion: The writ petition succeeded and the impugned order of the Appellate Tribunal was quashed, leaving the reduced penalty in place.

Ratio Decidendi: Departmental circulars bind officers of the department but cannot override statutory discretion or control the decision of a Tribunal or Court; where the facts disclose bona fide doubt and the assessee has substantially complied by repaying the benefit, a reduced penalty may be sustained.

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