Bona fide mistake defeats penalty for excess tax collection where the breach was not deliberate or dishonest.

Penalty for excess collection of tax under section 22(2) of the Tamil Nadu General Sales Tax Act was treated as a discretionary, quasi-criminal measure, not an automatic consequence of every contravention. The dealer's new business status, mistaken understanding of the applicable rate, payment of the excess tax through monthly returns, and later adjustment by credit note supported a bona fide explanation. On those facts, the breach was not shown to be deliberate, dishonest, or attended by conscious disregard or culpable negligence, so the sustained penalty was set aside.

---

---

Issues: Whether penalty for excess collection of tax under section 22(2) of the Tamil Nadu General Sales Tax Act, 1959 was justified where the dealer claimed bona fide mistake and later refunded the excess amount.

Analysis: Section 22(1) prohibits collection of tax except in accordance with the Act, and section 22(2) authorises penalty, after reasonable opportunity of hearing, for contravention of that prohibition. The penalty provision was treated as a discretionary, quasi-criminal measure, akin to penalties for fiscal defaults, and not as something to be imposed automatically. On the facts, the dealer was new to business, the excess collection arose from a mistaken understanding of the applicable rate, the excess tax had been paid to the Government with monthly returns, and the amount was later adjusted by credit note. These circumstances supported the explanation that the breach was neither deliberate nor dishonest and did not show conscious disregard or culpable negligence.

Conclusion: Penalty under section 22(2) was not warranted; the assessee succeeded and the sustained penalty was set aside.

---