Mandatory penalty and invalid revised return after inspection under VAT rules upheld where tax evasion was detected.

Where tax evasion is detected on inspection, a revised return cannot be used to regularise the omission because Rule 7(9) permits revision only for errors or omissions discovered otherwise than by inspection, audit, or other information received by the assessing authority. A return filed after inspection on that basis was treated as not recognised in law. The Court also held that penalty under Section 22(5) is mandatory once the statutory conditions are satisfied, leaving no discretion to waive it. Reliance on decisions under other enactments was held inapplicable. The revisions failed on merits and the Revenue's position was upheld.

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Issues: Whether penalty under Section 22(5) of the Tamil Nadu Value Added Tax Act, 2006 was leviable when the tax liability was paid only after inspection and whether a revised return could validly be filed after such inspection under Rule 7(9) of the Tamil Nadu Value Added Tax Rules, 2007.

Analysis: The liability to penalty was held to arise once tax evasion was noticed and the tax was paid only after inspection. Rule 7(9) permits a revised return only where a dealer, after filing a return, discovers an omission or error otherwise than as a result of inspection, audit, or other information received by the assessing authority. A return filed after inspection on that basis was held not to be a return recognized in law. The Court further held that Section 22(5) leaves no discretion to waive penalty where the statutory conditions are attracted, and the reliance placed on cases under different enactments was held inapplicable. The principle that penalty is mandatory once the provision applies was treated as consistent with the rule stated in the excise decision relied upon.

Conclusion: Penalty under Section 22(5) was held to be justified, and the revised return filed after inspection was held to be impermissible.

Final Conclusion: The revisions failed on merits and the Revenue's position was upheld.

Ratio Decidendi: Where tax evasion is detected on inspection, a revised return cannot be used to regularize the omission, and a penalty provision expressed in mandatory terms must be applied once its conditions are satisfied.

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