Dismissed¶36

The State of Tamil Nadu v. Tvl.M.P.Natarajan and Company

Madras HC17 Jun 2026TC/30/2015

Case brief

AI extract

What is this about?

Madras High Court TC No. 30 of 2015, dated 17-06-2026; bench Dr G. Jayachandran J. and N. Mala J.; State of Tamil Nadu (Joint Commissioner CT Chennai North) v. Tvl.M.P.Natarajan and Company; TNGST Act 1959 Section 38 revisory appeal dismissed; Section 16(2) penalty Rs.35,98,171/- deleted for AY 2001-02; interstate purchases wrongly entered as second sales detected by Enforcement Wing inspection 17-20.06.2003; no mala fide suppression, bona fide belief, revised return accepted; Apollo Saline Pharmaceuticals v. Commercial Tax Officer, 2001 SCC OnLine Mad 1205, relied upon; Tribunal S.T.A.No.258 of 2005 (13.09.2010) confirmed; penalty deletion sustained, no costs.

What did the court decide?

None to the petitioner-State; the deletion of the penalty under Section 16(2) stands and the appeal is dismissed without costs. ¶36

The State of Tamil Nadu Vs Tvl.M.P.Natarajan and Company — Madras HC (2026) — LawSathi Research

What the court decided

AI extract

Outcome

None to the petitioner-State; the deletion of the penalty under Section 16(2) stands and the appeal is dismissed without costs.

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Issue for consideration

Whether the Tribunal was justified in upholding the order of the Appellate Assistant Commissioner deleting the penalty imposed under Section 16(2) of the Tamil Nadu General Sales Tax Act?

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Court's answer

This Court endorses the concurrent finding of the Appellate Authority and the Tribunal (the fact-finding forums) that the assessee did not suppress the turnover with any mala fide intention to attract penalty, consistent with the Apollo Saline Pharmaceuticals principle that penalty is wholly unwarranted where the entire turnover is disclosed under a bona fide belief.

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Ratio / Principle

The deletion of the penalty imposed on the assessee is justifiable, and accordingly the Appeal by the State stands dismissed.

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Detailed headnote1 paragraphs

Tax Case (TC No. 30 of 2015) under Section 38 of the Tamil Nadu General Sales Tax Act, 1959, by which the State of Tamil Nadu (Joint Commissioner CT, Chennai North Division) sought to revise the Tribunal (Additional Bench, Chennai) order dated 13.09.2010 in S.T.A.No.258 of 2005 confirming deletion of the penalty of Rs.35,98,171/- levied under Section 16(2) for Assessment Year 2001-02, arising from alleged wrong accounting of interstate purchases as second sales detected during an Enforcement Wing inspection in June 2003. Substantial question: whether the Tribunal was justified in upholding the Appellate Assistant Commissioner's deletion of the penalty. Relying on Tvl.Apollo Saline Pharmaceuticals Pvt. Ltd. v. Commercial Tax Officer (2001 SCC OnLine Mad 1205) - penalty is wholly unwarranted where the entire turnover is disclosed under a bona fide belief - and the concurrent finding of the fact-finding forums that the assessee suppressed no turnover with mala fide intention (a revised return had been submitted and accepted), the Court held the penalty deletion justifiable and dismissed the State's appeal without costs.

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TC No. 30 of 2015

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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DATED: 17-06-2026

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CORAM

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THE HON'BLE DR JUSTICE G. JAYACHANDRAN

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AND

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THE HON'BLE MRS. JUSTICE N. MALA

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TC No. 30 of 2015

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The State of Tamil Nadu Rep by the Joint Commissioner (CT), Chennai (North) Division, Chennai.

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..Petitioner(s)

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Tvl.M.P.Natarajan and Company No.284, Mint Street, Chennai 600 003.

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..Respondent(s)

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Tax Case filed under Section 38 of the Tamil Nadu General Sales Tax

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Act, 1959, to revise the order of the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Chennai, dated 13.09.2010 passed in S.T.A.No.258 of 2005.

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For Petitioner(s): Ms.G.Dhana Madhri Government Advocate (Taxes)

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For Respondent(s): Respondent – Steps not taken

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https://www.mhc.tn.gov.in/judis

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TC No. 30 of 2015

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ORDER

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(Order of the Court was made by Dr.G.Jayachandran J.)

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An Appeal by the State being aggrieved by the concurrent findings of the Appellate Authority as well as the Tribunal, wherein, the assessment order being reversed in respect of the alleged wrong return converting interstate purchases into second sales to avoid tax.

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2.The contention of the Department is that, for the Assessment Year 2001-02, the wrong accounting in respect of interstate purchases under second sales came to light during the inspection conducted by the Enforcement Wing between 17.06.2003 and 20.06.2003 and therefore, tax with penalty was levied on the assessee under Section 16(2) to the tune of Rs.35,98,171/-. Being aggrieved, the assessee preferred an Appeal before the Assistant Commissioner (CT). The Appellate Authority, considering the judgment of the Madras High Court in Tvl.Apollo Saline Pharmaceuticals Pvt. Ltv. v. Commercial Tax Officer reported in 2001 SCC OnLine Mad 1205, regarding imposition of penalty, held that the penalty levied by the Assessing Officer disallowing the claim of exemption stands deleted. The said finding of the Appellate Authority was confirmed by the State Appellate Tribunal by order dated 13.09.2010 in S.T.A.No.258 of 2005. The Tribunal

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__________ Page2 of 5

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https://www.mhc.tn.gov.in/judis

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TC No. 30 of 2015

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has positively held that there is no evasion of tax or manipulation of first sale as second sale to claim exemption with intention. The assessee has submitted the revised return and Assessing Officer has accepted the total turnover reported.

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3.At the time of admitting this Appeal by the State, this Court has framed the following substantial question of law for consideration :

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“Whether the Tribunal was justified in upholding the order of the Appellate Assistant Commissioner deleting the penalty imposed under Section 16(2) of the Tamil Nadu General Sales Tax Act ?”

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4.The Appellate Authority has relied upon the judgment rendered by the Division Bench of the Madras High Court in Tvl.Apollo Saline Pharmaceuticals Pvt. Ltd. v. Commercial Tax Officer reported in 2001 SCC OnLine Mad 1205, wherein, it has been observed that, when the entire turnover being disclosed but part of it not been regarded as taxable turnover by reason of bona fide belief that the assessee has entertained, then levy of penalty is wholly unwarranted. In this case, the Appellate Authority and the Tribunal, which are fact finding forum, had held that the assessee has not suppressed the turnover with any mala fide intention to attract penalty.

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https://www.mhc.tn.gov.in/judis

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TC No. 30 of 2015

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5.In such circumstances, we find the deletion of penalty imposed on

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the assessee is justifiable. Hence, the Appeal by the State stands dismissed.

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No costs.