Nooty. Ramamohana Rao, J.
1. Tax Case [Revision Petition] No.24 of 2016 is preferred under Section 60 of the Tamil Nadu Value Added Tax Act, 2006 by the State, calling in question the order dated 14.10.2014 passed by the Sales Tax Appellate Tribunal [Main Bench] Chennai in T.A.No.43/2013.
2. The respondent-assessee is carrying on real estate development and sale of residential houses. The assessee has reported a total turnover of Rs.1,72,96,279/- under the Value Added Tax Act for the year 2011-12. The place of business of the assessee has been inspected by the Enforcement Wing of the Department between 09.03.2010 to 18.04.2012 and it was found out that the respondent-assessee dealer has purchased earth from one Sri.A.Ashok Kumar of Poonamallee for a value of little more than Rs.1.18Crores for the purpose of supply, filling, spreading, levelling and compacting the project site. The Assessing Officer has levied tax at the rate of 4% on the estimated turnover of Rs.1,30,81,453/- as the dealer has not paid the tax on the sale value of the goods acquired from Sri.A.Ashok Kumar. A penalty of Rs.7,84,887/- was also imposed under Section 27 of the Tamil Nadu Value Added Tax, 2006 [hereinafter referred to as the Act ]. Against this revised order of assessment dated 30.11.2012, the respondent/dealer/assessee preferred an appeal in VAT.No.15 of 2013 before the Appellate Deputy Commissioner [Commercial Tax], who dismissed it on 17.06.2013. The Second Appeal in T.A.No.43 of 2013 then was preferred to the Sales Tax Appellate Tribunal, which by its impugned order dated 14.10.2014 has deleted the penalty levied under Section 27 of the Act. Hence, this revision petition by the State.
3. The short question which has engaged our attention was whether the respondent/dealer/assessee, in the given facts and circumstances, is not liable to be imposed the penalty under Sub-section 3 of Section 27 at all or not ?
4. The Assessing Officer by his Pre-Revision Notice dated 08.10.2012 has proposed to levy tax on the sale value of the earth purchased by the respondent /dealer/assessee from Sri.A.Ashok Kumar. While doing so, it was also proposed to levy of penalty under Section 27 of the Act. The respondent/dealer/ assessee has in response thereto filed its objections on 30.10.2012 and after considering the objections, the Revised Assessment Order dated 30.11.2012 came to be passed. He levied tax at the rate of 4% on this disputed amount of Rs.1,30,81,453/- and the tax due of Rs.5,23,258/- was demanded. Penalty is also levied at the rate of 150% on the tax due, which works out to Rs.7,84,887/- The appeal preferred there against has been dismissed, by order dated 17.06.2013 by the Appellate Deputy Commissioner, Commercial Tax. Thus, came to be instituted a further Appeal before the Sales Tax Appellate Tribunal, which by its order dated 14.10.2014, while confirming the levy of the tax amount, has set aside the penalty imposed. Thus, giving rise to the present revision.
5. Heard Mr.S.Kanmani Annamalai, learned Additional Government Pleader for Commercial Tax as well as Mr.P.Rajkumar, learned counsel for the respondent/dealer/assessee.
6. It is mainly contended by the learned counsel for the State that levy of penalty is a consequence upon the revision of tax liability, upon detection of escaped turnover, pursuant to inspection carried out by the Enforcement Agency. Hence, the penalty levied, as allowed by the Statute ought not to have been interfered with by the Tribunal.
7. Per contra, the learned counsel for the respondent/dealer/assessee would submit that the Pre-Revision Notice dated 08.10.2012 had shown that it was proposed to levy penalty under Sub-section (4) of Section 27 of the Act and the said provision has in fact no application to the present set of facts. It thus reflects the mechanical attitude adopted by the Assessing Officer. It is also further pointed out by the learned counsel for the respondent/dealer/assessee that the Tribunal has sustained the levy of tax for an altogether a different reason than the one adopted by the Assessing Officer for levying the tax.
8. It is apt, therefore, for us to decipher the dynamics behind imposition of penalties, particularly, by taxing statutes.
9. The Supreme Court had an occasion to deal with the nature of penalty that is liable to be imposed, in the case of The Commissioner of Income-Tax, West Bengal Vs Anwar Ali 1970 SCC 185 and held as under :
... 4. The first point which falls for determination is whether the imposition of penalty is in the nature of a penal provision. The determination of the question of burden of proof will depend largely on the penalty proceedings being penal in nature or being merely meant for imposition of an additional tax, the liability to pay such tax having been designated as penalty under Section 28. One line of argument which has prevailed particularly with the Allahabad High Court in Lal Chand Gopal Das's case [supra] is that there was no essential difference between tax and penalty because the liability for payment of both was imposed as a part of the machinery of assessment and the penalty was merely an additional tax imposed in certain circumstances on account of the assessee's conduct. The justification of this view was founded on certain observations in C.A.Abraham v. Income-tax Officer, Kottayam and Another. It is true that penalty proceedings under Section 28 are included in the expression assessment and the true nature of penalty has been held to be additional tax. But one of the principal objects in enacting Section 28 is to provide a deterrent against recurrence of default on the part of the assessee. The section is penal in the sense that its consequences are intended to be an effective deterrent which will put a stop to practices which the Legislature considers to be against the public interest. It is significant that in C.A.Abraham's case [supra] this court was not called upon to determine whether penalty proceedings were penal or of quasi-penal nature and the observations made with regard to penalty being an additional tax were made in a different context and for a different purpose. It appears to have been taken as settled by now in the sales tax law that an order imposing penalty is the result of a quasi-criminal proceedings: [Hindustan Steel Ltd. v. The State of Orissa]. In England also it has never been doubted that such proceedings are penal in character; Fattorini [Thomas] [Lancashire] Ltd. v. Inland Revenue Commissioner.
5. The next question is that when proceedings under Section 28 are penal in character what would be the nature of the burden upon the department for establishing that the assessee is liable to payment of penalty. As has been rightly observed by Chagla, C.J., in Commissioner of Income-tax, Ahmedabad v. Gokuldas Harivallabhdas the gist of the offence under Section28[c] is that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income and therefore the department must establish that the receipt of the amount in dispute constitutes income of the assessee. ...
[emphasis is played by me]
By the aforesaid Judgment, the true nature of penalty is understood to provide for a deterrent element against possible recurrence of default on the part of the assessees and hence, any order imposing penalty is the end result of a quasi-criminal proceedings.
10. This apart, a Full Bench of this Court after considering in great detail the issue, in Kathiresan Yarn Stores Vs. The State of Tamil Nadu by its Judgment dated 11.04.1978 STC  42, held as under :
... We do not think that it will be a correct approach to belittle the importance of the observations in the earlier paragraph in the judgment, by referring to the subsequent paragraph. Both the passages contain very valid reasons for holding that the imposition of penalty was not justified, and they are to have cumulative effect. This does not mean that the earlier reasoning is less important. The observations in the judgment in Ponnusamy Asari v. State of Tamil Nadu [T.C.Nos.451 to 455 of 1969] appeal to us. So also the reasoning in A.V.Meiyappan v. Commissioner of Commercial Taxes. Those observations are in consonance with what the Supreme Court has held in Commissioner of Income-tax, West Bengal v. Anwar Ali. We, therefore, prefer to rest our decision on such reasoning. With great respect, we are not able to agree with the views expressed in Oveekee Textiles v. Deputy Commercial Tax Officer, Madras Metal Works v. State of Madras and Rajam Textiles v. State of Tamil Nadu, when it is said that the process of imposition of penalty is almost an automatic one whenever an estimate is made when it is found that no return has been filed or that the return filed did not indicate the turnover to the extent fixed on the basis of the best judgment basis. All the circumstances of the case will have to be carefully scrutinised and the question whether penalty should be imposed must be considered on the basis of the judicial determination of the question whether grounds exist for the imposition of such penalty. In order that penalty may be imposed, it must be possible first to come to the conclusion that there was actually turnover and further that that turnover was not disclosed. ...
11. Bearing the above said principles in mind, we need to first of all give a good look at the provision contained under Section 27 of the Act.
Sub-section (1) under Section 27 of the Act makes it clear that for any reason where the whole or part turnover of the business of a dealer has escaped the assessment to tax, the Assessing Authority at any time within a period of five years from the date of assessment determine to the best of its judgment the turnover which has escaped assessment and assess the tax payable on such turnover after making such enquiry as it may consider necessary.
Sub-section (2) under Section 27 of the Act dealt with a situation, where input tax credit has been either wrongly levied or availed or where the dealer has produced false bills, vouchers, declaration certificate or other documents with a view to support his claim of input tax credit or refund, the Assessing Authority shall at any time within a period of five years from the date of order of assessment, reverse the input tax credit availed and determine the tax due after making such enquiry.
Sub-section (4) under Section 27 of the Act clearly brings out that in addition to the tax determined under Sub-section (2), the Assessing Authority shall direct the dealer to pay as penalty a sum which shall be, in the case of first detection, 50% of the tax due in respect of such claim. Sub-section (4) therefore, can be invoked by the State only in the event, the input tax credit has been wrongly availed by the dealer or the claim of the said credit was the result of production of false bills, vouchers or declaration certificates etc of the dealers.
12. Since in the instant case, it was not the input tax credit, which the dealer never claimed, was the subject matter of consideration leading to reassessment of tax liability, consequently the question of invoking Sub-section (4) under Section 27 of the Act would not arise. It is, hence, a clear error on the part of the Assessing Officer in referring to Sub-section (4) of Section 27 of the Act in the Pre-Revisional Notice dated 08.10.2012. But, however, it is a settled principle of law that a mere quoting of wrong provision of law or misquoting a provision of law would not vitiate the exercise so long as the power is traceable.
In the instant case, Sub-section (3) of Section 27 of the Act clearly refers to the proposed revision of the assessment undertaken under Sub-section (1) of Section 27 of the Act and then authorised imposition of a penalty on a graded scale. As the Pre-revision Notice itself refers to the proposed revision under Sub-section (1) of Section 27 of the Act, the penalty that can become leviable in such a scenario is the one provided under Sub-section (3) of Section 27 of the Act, but not under Sub-section (4) of Section 27 of the Act. Hence the error committed by the assessing officer is a curable one. Since the very purpose of drawing a Pre-Revisional Notice is intended to provide an effective and meaningful opportunity to the dealer/assessee to putforth his defence against the proposed action, the same gets impaired to a certain extent, when an erroneous notice is drawn by the Assessing Officers.
13. It is not in dispute that Sub-Section (3) of Section 27 of the Act has in turn provided for imposition of penalty charges at the rate of 50%, 100% and 150% of the tax due, on such turnover, which has escaped the assessment earlier, depending upon the frequency of delinquency of the dealer. Sub-section (3) of Section 27 of the Act clearly required the Assessing Officer to be satisfied that the escape from the assessment is due to wilful non-disclosure of assessable turnover by the dealer. The provision under Sub-section (3) of Section 27 of the Act, therefore, requires, such a clear finding as a condition precedent for exercise of power available thereunder. The finding that the Assessing Officer is satisfied about the non-disclosure of turnover by the dealer also requires a specific finding that such non-disclosure is a wilful one, which observation is alone essential for imposition of a penalty.
14. In the instant case, the books of accounts maintained by the dealer did contain the factum of his making payment towards purchase of earth, its supply, spreading, consolidating and compacting it into specific layers at the site of work, where construction of a residential project was undertaken to be developed. It is true that it is the Enforcement Wing officials of the Department who have detected that the dealer/assessee has paid Sri.A.Ashok Kumar, an unregistered dealer, a little more than Rs.1.18 Crores towards purchase of earth, its spreading, levelling and compacting exercise at the project site, but no tax is paid thereon. It is, therefore, they who brought out that the said amount has not been subjected to tax, particularly, when the earth has been procured from an unregistered dealer.
15. In this context, we need to advert to the contention canvassed by the learned counsel for the respondent/dealer/assessee that the entire payment of little more than Rs.1.18 Crores has not been paid only for procuring the good quality earth, but the payment is also made for its collection at the project site, its spreading, for the levelling work of the site and then, compacting it into specific layers of not exceeding 300 millimetres depth. Therefore, a substantial portion of the monies paid to Sri.A.Ashok Kumar also go for the labour work, apart from going towards the machinery hiring, needed for levelling and compacting purposes. There is certainly considerable force behind this submission. But, however, if the respondent/dealer/assessee has taken any such plea and made any such attempt before the Assessing Officer to demonstrate as to what percentage of the payment goes towards cost of earth component alone, perhaps there would have been an occasion for the Assessing Officer to analyse carefully and properly the cost components and then arrive at a reasonable finding, as to how much out of the total amount paid would go for the quantity of the earth procured. Thus, the other components towards labour charges or machinery hiring charges could have been worked out simultaneously. But, unfortunately, no such plea was put up in response to the Pre-Revisional Notice.
16. We have grave reservation to subscribe to the view of the Tribunal that the respondent/dealer/assessee is liable to be charged under Section 12 of the Act as he has procured the material from an unregistered dealer. On the other hand, there is much force behind the submission of the respondent dealer that it is a works contract and therefore, Section 5 of the Act is what gets attracted. But, however, we hasten to add that, in the instant case, we are not required to advert to this question inasmuch as this revision petition is confined only to the extent of setting at naught by the Tribunal the penalty imposed on the respondent/dealer/assessee by the Department. Hence, we reserve it for a better case, to be examined in detail and depth.
17. As we have noticed, Section 27 enables a penalty to be levied wherever a revision of assessment has taken place, pursuant to detection of a portion of turnover that has escaped taxation. In the instant case, there is no dispute on the factual ground that the payment made to Sri.A.Ashok Kumar is in fact reflected in the books of accounts maintained by the respondent dealer in the ordinary course of business, and thus, there is no wilful suppression of any such expenditure, indulged in by the dealer/assessee. At the first round of assessment, in fact it has escaped the attention of the Assessing Officer. In other words, no serious exception has been taken thereto at the first instance. But, it is subsequent thereto, the scrutiny has been undertaken.
18. In these set of circumstances, we are of the opinion that there should have been a specific finding recorded by the Assessing Officer that the turnover that has escaped in the first and initial round of assessment, is the result of wilful non-disclosure or suppression by the dealer/assessee. There is no such finding recorded in the Revised Assessment Order dated 30.11.2012. We are, hence, of the view that a proper and careful quasi-criminal exercise of imposition of penalty has not been carried out by the Assessing Officer. The finding of wilful non-disclosure/suppression of turnover is the condition precedent, which alone fetches the imposition of penalty is conspicuous by its absence in the order of reassessment. In the absence of any such finding, imposition of penalty could not be lawfully carried out.
19. In the instant case, the assessee was not in appeal before us with regard to the assessment of tax. In fact, he has paid the tax imposed already. In that view of the matter, taking the principle that imposition of levy is a quasicriminal exercise, we confirm the order of the Tribunal in setting at naught imposition of such a penalty, though for an altogether different reason.
Accordingly, the revision fails, but however, without costs.