STATE OF TAMIL NADU Vs. SASMAN AND COMPANY

JUDGEMENT

(1.) THIS revision filed by the State is directed against the order of the Tribunal dated 28th October, 1977, in T.A. No. 567 of 1977.

(2.) THE assessee in this case is a manufacturer and dealer of cloth bags. During the assessment year 1975-76, the assessee has collected sales tax on the sale of the cloth bags at 4 per cent. While finalising the assessment for the assessment year, the assessing authority held that the assessee having collected 4 per cent tax on the sale of cloth bags as against 2 per cent provided under the Tamil Nadu General Sales Tax Act, he should be taken to have collected at the excess rate contravening the provision of the Act, and therefore, the penalty is leviable in respect of the excess collection of tax to the extent of Rs. 2, 176. In the assessment order, though the assessee has submitted his objections to the levy of penalty in answer to the show cause notice issued by the assessing authority, the assessing authority did not consider any of the objections raised by the assessee, but merely passed a creptic order which is as follows :

(3.) THE assessee took the matter in appeal to the Tribunal. Before the Tribunal, the assessment order was challenged on merits as well as against the order levying penalty. THE Tribunal after dealing with the merits of the assessment proceeded to consider the penalty levied under section 22(2) of the Act in a sum of Rs. 2176. THE Tribunal taking the fact that whether the transactions on the sale effected by the assessee should be tax at 4 per cent or at 2 per cent, was the subject-matter of controversy between the assessee and the Department and that controversy was resolved only on 24th November, 1976, by the Tribunal accepting only the case of the assessee that the tax is to be levied at 2 per cent and rejecting the case of the Revenue that tax is payable at 4 per cent on cloth bags. According to the Tribunal, since the Revenue was asserting that the transactions of sale effected by the assessee should be taxed only at 4 per cent and not at 2 per cent, the assessee bona fide charged the tax at 4 per cent on the sales of cloth bags taking note of the stand taken by the Revenue. Taking those circumstances into account the Tribunal has held that no penalty could be levied when the assessee has collected the tax at 4 per cent taking note of the stand taken by the Revenue. It is also pointed out by the Tribunal that in all the earlier years the assessee has collected tax at 4 per cent and the same has been remitted to the Department and the assessing authority also proceeded on the basis that the tax leviable is at 4 per cent and did not levy any penalty. In this view, the Tribunal set aside the order of penalty as the assessee has acted though bona fide in charging tax at 4 per cent. THE question is whether the view taken by the Tribunal could legally be sustained"