The levy of penalty under section 18a of the Karnataka Sales Tax Act, 1957 is discretionary and not automatic. The assessing authority has to consider the circumstances under which the dealer collected the amount, the conduct of the dealer, and the bona fides of the dealer while imposing the penalty.

K. SHIVASHANKAR BHAT, J.

( 1 ) THE dealer is the petitioner in both these revision petitions, under the provisions of the Karnataka Sales Tax Act, 1957 ("the Act", for short ). These petitions pertain to the assessment years 1981-82 and 1982-83. The question is regarding the scope of section 18a of the Act.

( 2 ) THE petitioner is the dealer in grey iron rough castings. Till the year 1980-81 this was taxed under the Act, under section 5 (1), that is to say the goods in question did not fall within any of the enumerated goods under various Schedules to the Act. The petitioner was collecting the tax from its customers according to law. In August, 1982, the petitioner entertained a doubt about the rate of tax applicable to the goods in question and sought clarification from the assessing authority. However there was no response from the assessing authority to this letter. But, in respect of the assessment year 1982-83 he made an assessment in November, 1982, treating the goods as falling under section 5 (1 ). The petitioner filed an appeal contending that the goods in question came under entry 2 of the Fourth Schedule to the Act. This was accepted by the appellate authority and hence be remanded the matter for fresh assessment. The goods enumerated in the Fourth Schedule are the declared goods in respect of which a single point tax is levied under section 5 (4) of the Act at the rate specified in the Fourth Schedule. The rate of tax under Fourth Schedule was lower than the rate of tax under section 5 (1) of the Act. After the remand order the assessing authority made a fresh order even in respect of assessment year 1981-82 treating the goods under the Fourth Schedule. Since the petitioner had collected excess amount from the customers the assessing authority ordered forfeiture of the said excess amount purporting to act under section 18a of the Act. Similar order of forfeiture was made in respect of the year 1982-83 also. The assessing authority observed that these excess collections of tax were in contravention of the provisions of section 18 and therefore the petitioner was liable for penalty under section 18a at one and a half times the tax so collected in excess of the real tax amount. This order was affirmed by the appellate authority as well as by the Appellate Tribunal. The petitioner contended that the tax collected by the petitioner under section 5 (1), was in fact collected under a genuine belief that the goods in question were liable to be charged under the said provision and in fact all along during the previous years the Revenue also had treated the goods in question as falling under section 5 (1) of the Act. The petitioner further contended that it was a case of a mutual mistake about the applicability of the real charging provision and in such a situation section 18a of Act of the Act cannot be invoked to impose a penalty on the dealer. This contention was negatived by the assessing authority in its order dated 6/09/1985, by relying upon the decision of the Supreme Court in R. S. Joshi, Sales Tax Officer v. Ajit Mills Limited [1977] 40 STC 497. The assessing authority observed that the dealer collected the excess amount by "pretending himself as confused about the rate of tax but the facts proved otherwise". The assessing authority ultimately levied the penalty which was equivalent to the excess amount collected by the petitioner even though section 18a empowered him to levy the penalty at one and a half times the excess collection. The Appellate Tribunal, on facts found that this was a clear case of mutual mistake regarding the rate of tax applicable. For this purpose the Appellate Tribunal has referred to the earlier order of assessment levying the tax under section 5 (1) of the Act and the failure of the assessing authority to respond to the letter addressed by the petitioner seeking clarification. However the Appellate Tribunal thought that the decision of the Supreme Court in Joshi s case [1977] 40 STC 497 gov

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