Tax demand sustained, but penalty for belated returns was remanded after failure to consider binding precedent.

Tax demand arising from belated filing of returns and consequential reversal of Input Tax Credit was sustained because the assessment record showed the returns on the web portal and supported the tax conclusion. Penalty for belated filing was set aside, however, because the authority failed to consider a binding Division Bench precedent relied upon by the assessee on the scope of penalty under the Tamil Nadu VAT law. The penalty issue was remanded for fresh consideration after hearing the assessee, while the tax component was left undisturbed.

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Issues: (i) Whether the tax demand arising from belated filing of returns and consequential reversal of Input Tax Credit required interference; (ii) Whether the penalty imposed for belated filing of returns could be sustained without considering the binding precedent relied upon by the assessee.

Issue (i): Whether the tax demand arising from belated filing of returns and consequential reversal of Input Tax Credit required interference.

Analysis: The assessment records showed that the returns for the relevant month were filed belatedly and were available on the web portal. The order also reflected consideration of the dealer's returns and the conclusion on tax was based on the material available. In these circumstances, the tax component was supported by the record and did not warrant interference in rectification proceedings.

Conclusion: The tax demand and consequential reversal of Input Tax Credit were sustained and interference was declined.

Issue (ii): Whether the penalty imposed for belated filing of returns could be sustained without considering the binding precedent relied upon by the assessee.

Analysis: The assessee had placed a Division Bench judgment before the authority for the proposition that penalty under Section 27(4) of the Tamil Nadu Value Added Tax Act, 2006 should not be invoked merely because returns were filed belatedly. The impugned order did not refer to or examine that precedent, and the omission to consider a binding decision constituted a sufficient ground to reopen the penalty aspect.

Conclusion: The penalty could not be sustained in its existing form and was set aside for fresh consideration.

Final Conclusion: The challenge failed on the tax component but succeeded on the penalty component, which was remanded for reconsideration after hearing the assessee.

Ratio Decidendi: A penalty order that fails to consider a binding precedent directly governing the issue is liable to be interfered with and remanded for reconsideration, even where the underlying tax demand is otherwise sustainable on the record.

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