Our Legal Correspondent

Chennai, Nov. 23

The Madras High Court has ruled that penalty for contravention of TN General Sales Tax Act, 1959 and availing of concessional rate of tax (against Form XVII) should be imposed on purchaser of the goods and not on seller.

The First Bench, consisting of Chief Justice Mr A.P. Shah and Mr Justice K. Chandru, who heard a writ appeal from a Coimbatore firm challenging the order of a single judge upholding the assessment order of Commercial Tax Officer, Coimbatore, imposing penalty, said that a reading of Section 3(3) of the Act would establish that seller was not made liable for wrong declaration under Form XVII by purchasing dealer.

The appellant-assessee was a dealer in machinery spares. Though the assessing authority had accepted turnover reported by appellant and also mentioned that purchases were covered by proper bills, the authority rejected turnover relating to concessional rate of tax against Form XVII.

This was assessed at 12 per cent on grounds that the purchaser had not bought the goods for use in manufacture of other goods. Consequently, the assessing authority assessed tax and imposed penalty under Section 12(3)(b) of Act.

The appellant contended that as purchasing dealer had contravened condition of Form XVII, tax and penalty could be imposed only against purchasing dealer and not against appellant who was selling dealer.

The Court has held that the manner in which the purchaser had dealt with goods was not concern of the seller and liability could be fastened only upon purchasing dealer and not seller.

(This article was published in the Business Line print edition dated November 24, 2006)
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