SREE BALAJI RICE MILL, BELLARY versus STATE OF KARNATAKA

Citation: [2005] 3 S.C.R. 12 · Decided: 31-03-2005 · Supreme Court of India · Bench: S.N. VARIAVA · Disposal: Dismissed

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Judgment (excerpt)

A 
SREE BALAJI RICE MILL, BELLARY 
v. 
ST A TE OF KARNA T AKA 
MARCH 31, 2005 
B 
[S.N. VARIAVA, DR. AR. LAKSHMANAN AND S.H. KAPADIA, JJ;l 
Sales Tax: 
Karnataka Sales Tax Act, 1957-Sections 22A and JBA-Suo-motu 
C revision under S.22A-Power of the Revisional Authority to levy penalty under 
S. J BA for the first time when no such penalty levied by the Assessing Authority--
Held:. If penalty under S. l BA is warranted, but not levied by the Assessing 
Authority, then, the Revisiona/ Authoriljl in his suo motu powers under S.22A 
may impose penalty on the ground that 'circumstances of the case justify the 
D levy of penalty'. 
Assessing Authority passed assessment order under S.12(3) of the 
Karnataka Sales Tax Act in respect of assessee-appellant, a registered 
dealer, for the assessment years 1987-88 and 1988-89. Concluding that the 
assessee had filed an incorrect tax return, the Assessing Authority 
E determined the amount of tax payable by the assessee. But it did not 
consider the question of the excess sales tax illegally collected by the 
assessee and did not levy any penalty under S.18A in respect of the said 
violation ofS.18 by the assessee. Revisional Authority, in suo motu revision 
proceedings under S.22A, revised the assessment order of the Assessing 
F Authority on the ground that the order was erroneous and prejudicial to 
the interest of the State and further levied penalty under S.18A for 
colJection of tax in contravention of S.18. High Court held that the 
determination of tax contemplated under S.12(3) took within its ambit the 
levy of penalty under S.18A and if the Assessing Authority while passing 
such an order had not considered levy of such penalty, .the order under 
G S.12(3) was amenable as such to the jurisdiction under S.22A. Hence the 
present appeals. 
Dismissing the appeals, the Court 
HELD: 1. Section ISA of the Karnataka Sales Tax Act prohibits 
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SREE BALAJI RICE MILL, BELLARY "· ST ATE OF KARNA TAKA 
13 
excess collection of tax by an assessee. If any person contravenes Section A 
18, penalty is provided under Section 18A of the Karnataka Sales Tax Act. 
(20-FJ 
2. The words used in the Karnataka Sales Tax Act are different from 
the words used in other States Sales Tax enactments. The words 'pass such 
order thereon as the circumstances of the case justify' as used in Section 22A B 
of the Karnataka Sales Tax Act is not incorporated in the other Acts. Also 
under Section 22A of the Karnataka Sales Tax Act, the revisional authority 
may enhance or modify the assessment or even cancel an assessment and 
direct fresh assessment. This indicates that the assessment proceedings are 
before the revisional authority who can pass such orders which the C 
adjudicating authority could or should have done. Hence, if penalty under 
Section 18A is warranted, and the same is not levied by the Assessing 
Authority, then, the Additional Commissioner/Revisional Authority in his 
suo motu powers may impose penalty on the ground that 'the 
circumstances of the case justify the levy of penalty'. [20-H; 21-A-B) 
D 
Khemchand Rajkumar v. State of Tamil Nadu, (1974) 33 STC 78; 
Shetkari Sahakari Sakhar Karkhana Ltd v. State of Maharashtra, (1996) 102 
STC 157; Tata Exports Ltd. v. State of Maharashtra, (1995) 98 STC 314; 
Dy. Commissioner of Commercial Taxes, Madurai Division, Madurai v. K.M 
Thomas & Co., 31 (STC) 529 Madras; Bhavnagar Chemical Works (1946) 
Ltd v. Commissioner of Sales Tax, Ahmedabad, 83 STC 409 (Gujarat) and E 
State of Haryana v. Dasunda Singh Waryam Singh, 103STC128 (Punjab & 
Haryana), distinguished. 
Additional C.l. T. v. J.K. D'Costa, (1982) 133 ITR 7; C/Tv. Nihal Chand 
Rekyan, (2000) 242 ITR 45 and CIT v. HH Rajkuverva Dowager Maharani F 
Saheb (Karnataka), (1978) 115 ITR 301, referred to. 
3. The argument of the appellant that the Revising Authority or the 
Appellate Authority higher than the Assessing Authority is not competent 
to levy a penalty for the first time when no penalty has been levied by the 
Assessing Authority is wholly untenable, without statutory basis and G 
unreasonable from any point of view. The necessity for there to be an order 
under Section 18A for the exercise of revisionary jurisdiction under Section . 
22A is once again fallacious. The non-levy of penalty is itself an illegality 
caused by a failure to exercise the jurisdiction by the Assessing Authority 
and therefore, prejudicial to the interests of the Revenue. Hence, 

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