Penalty for disclosed turnover cannot stand where the dispute is only about classification and assessability, not proven tax evasion.

Penalty under Section 45A of the KGST Act was unsustainable where the dispute concerned classification and assessability of disclosed receipts and freight-related claims reflected in the books, not suppression of turnover. The Court held that a mere disagreement on whether such items formed taxable turnover did not establish a contumacious attempt to evade tax, and that penalty under this provision requires evidence of evasion-related culpability rather than a bona fide taxability claim. On that basis, the penalty orders were set aside in favour of the assessee.

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Issues: Whether penalty under Section 45A of the KGST Act was sustainable on the footing that the assessee misclassified disclosed receipts and freight-related claims as non-taxable turnover, and whether such conduct disclosed an attempt to evade tax.

Analysis: Penalty under Section 45A requires more than a mere dispute on taxability or classification. The disclosed amounts were found in the books of account, and the case rested on whether particular items shown as other income or expenditure ought to have been treated as taxable turnover. That issue was essentially one for assessment, not for penalty, since the materials did not establish suppression of turnover or a contumacious attempt to evade tax. In such a penalty provision, the existence of mens rea or at least conduct amounting to an attempt to evade remains relevant, and a bona fide claim based on disclosure in the accounts cannot, by itself, justify penalty.

Conclusion: Penalty proceedings were not sustainable and were set aside in favour of the assessee.

Final Conclusion: The impugned penalty orders could not stand because the dispute concerned assessability and classification of disclosed items, not proved suppression warranting penal action.

Ratio Decidendi: Penalty for alleged tax evasion cannot be imposed merely because a disclosed item is later held taxable; where the relevant facts are fully reflected in the accounts and the issue is one of classification or assessability, penalty under a discretionary provision requires proof of evasion-related culpability.

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