State of Tamil Nadu Vs Tvl. M. P. Natarajan and Company (Madras High Court)
The Madras High Court dismissed the State’s appeal challenging the concurrent findings of the Appellate Authority and the Tribunal, which had deleted the penalty imposed on the assessee under Section 16(2) of the Tamil Nadu General Sales Tax Act. The Department contended that, during an Enforcement Wing inspection for the Assessment Year 2001-02, interstate purchases had been wrongly accounted for as second sales to avoid tax, resulting in tax and penalty of ₹35,98,171. The Appellate Authority, relying on the Madras High Court’s decision in Tvl. Apollo Saline Pharmaceuticals Pvt. Ltd. v. Commercial Tax Officer, held that the penalty was not sustainable and deleted it.
The Tribunal affirmed this finding, observing that there was no tax evasion or intentional manipulation of first sales as second sales to claim exemption. It also noted that the assessee had filed a revised return, which was accepted by the Assessing Officer. The High Court held that both the Appellate Authority and the Tribunal, being fact-finding forums, had concluded that there was no suppression of turnover or mala fide intention. Since the entire turnover had been disclosed and the classification was based on a bona fide belief, the deletion of penalty was justified, and the State’s appeal was dismissed.
