Penalty under assessment only when wilful non-disclosure is found; separate post-assessment penalty proceedings are without jurisdiction.

The Madras HC held that penalty under Section 27(3) of the Tamil Nadu Value Added Tax Act, 2006 can be imposed only as part of the assessment under Section 27(1)(a) and only on a definite finding of wilful non-disclosure of taxable turnover. Where the assessment orders had already been completed without levying penalty and without such a finding, penalty could not later be initiated through a separate post-assessment proceeding. The court treated the provision as analogous to Section 16(2) of the Tamil Nadu General Sales Tax Act, 1959, under which penalty is not an independent proceeding. The separate penalty orders were therefore without jurisdiction and were quashed.

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Issues: Whether penalty under Section 27(3) of the Tamil Nadu Value Added Tax Act, 2006 could be imposed by a separate post-assessment proceeding after the assessment orders were passed without levying penalty.

Analysis: Section 27(3) permits penalty only while making an assessment under Section 27(1)(a) and only where there is a definite finding of wilful non-disclosure of taxable turnover. The provision was treated as materially similar to Section 16(2) of the Tamil Nadu General Sales Tax Act, 1959, under which penalty was held not to be the subject of an independent proceeding. Since the assessment orders had already been completed without any penalty and no finding of wilful non-disclosure formed part of those orders, fresh penalty proceedings could not be initiated later.

Conclusion: The separate penalty proceedings were without jurisdiction and were liable to be quashed.

Final Conclusion: The writ petitions succeeded and the impugned penalty orders were set aside.

Ratio Decidendi: Penalty under Section 27(3) of the Tamil Nadu Value Added Tax Act, 2006 must be imposed, if at all, as part of the assessment under Section 27(1)(a) on a definite finding of wilful non-disclosure, and cannot be initiated by an independent later order after completion of assessment without penalty.

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