The Madras High Court has held that the imposition of penalty under section 27(3) of the Tamil Nadu VAT Act is not automatic, and deleted the penalty order.
The petitioner, Sayar Cars is an authorized sales and service centre for Chevrolet cars in Vellore and a registered dealer under the provisions of the Tamil Nadu Value Added Tax Act, 2006.
The petitioners were assessed by the VAT department in respect of the assessment years 2013-14, 2014-15 and 2015-16, assessments were framed based upon an inspection by the officials of the Enforcement Wing in the premises of the petitioner in February, 2016. The officials noticed at the time of inspection that there were lacunae in the monthly returns filed by the petitioner. Specifically, two defects were pointed out. The first related to difference in sales turnover as per invoices and the second related to difference in consideration on sales of old vehicles.
Justice Anita Sumant observed that there was no finding recorded by the assessing authority specific to the position that the escapement of turnover was as a result of wilful non-disclosure or suppression by the assessee concerned.
“This would also vitiate the levy of penalty. It is an admitted position that none of the assessment orders or, for the matter, the show cause notices, reveal any application of mind to the aspect of wilful suppression,” the Court said.
“An additional factor in this matter is that the petitioner has admittedly remitted the difference in tax along with interest even at the time of inspection. This aspect of the matter is not disputed by the learned Government Advocate. Bearing in mind the conspectus of facts and available precedents, I am of the considered view that the conclusion arrived at by the appellate authority, that the imposition of penalty under Section 27(3) is automatic, is erroneous in law. The appellate order, to this extent, is set aside,” the Court observed.
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