NAINAR SUNDARAM, J.


In these three writ petitions, a common question is being raised. The petitioner, though not entitled to collect surcharge on sale of cement to its stockists, for the relevant years 1976-77, 1977-78 and 1978-79, under a bona fide mistake, did collect such surcharge. The sale of cement took place at Madukkarai, which was not notified as a suburban area for the purpose of applicability of the Tamil Nadu Sales Tax (Surcharge) Act, 1971, and collection of surcharge thereunder. There was an ambiguity entertained both by the Revenue and the petitioner in this behalf. For the earlier years, the petitioner realised this mistake and wanted refund of the surcharge paid over in turn to the Revenue. But that was resisted by the Revenue throughout. It must be noted here that this resistance was in spite of the fact that the Commissioner of Commercial Taxes, when a clarification was sought for, did opine that sale of cement effected by the petitioner at Madukkarai was not liable to surcharge. Ultimately for the said earlier years the petitioner was obliged to come to this Court, and this Court by its decision reported in Associated Cement Companies Ltd. v. State of Tamil Nadu 1986 (63) STC 63, held that the levy on the petitioner was not under the authority of law and the demand of surcharge was illegal and equity and public interest compelled the refund of illegal exactions. The pronouncement of this Court was rendered only on 9th January, 1984. For the present year, the Revenue has chosen to impose penalty on the petitioner under section 22(2) of the Tamil Nadu General Sales Tax Act (1 of 1959), hereinafter referred to as the Act, on the ground that the collection of surcharge was illegal under the provisions of the Act. The initial imposition of penalty was to the maximum extent contemplated under section 22(2) of the Act, namely, one and half times the surcharge collected. However, pending the writ petitions, the quantum has been reduced on appeals before the Appellate Assistant Commissioner.


2. Mr. G. Narayanan, learned counsel for the petitioner, in impugning the levy of penalty, would submit that this is a case of mutual mistake to which both the Revenue and the petitioner were parties and this was finally set aright only by the pronouncement of this Court referred to above, and the petitioner did not intentionally violate the provisions of the Act in making the collection of the surcharge, and this Court should take note of these circumstances to hold that there is no warrant for imposition of penalty under section 22(2) of the Act. If I take note of the facts that have transpired in the present cases, I have to uphold the submissions of the learned counsel for the petitioner. The Revenue itself levied surcharge on the petitioner in respect of sale of cement at Madukkarai, even though it was not permissible in law. When the petitioner realising the mistake, wanted refund, for the earlier years, that was resisted by the Revenue and that too despite the opinion expressed by the Commissioner of Commercial Taxes. Obviously, there was a mistake on the part of both the Revenue and the petitioner on the question of collection of surcharge. Further having held out a position that there is nothing wrong in the levy of surcharge, to turn round and say that the collection of surcharge, was illegal and to proceed to levy penalty is highly unfair and inequitable. Under these circumstances, it is not possible to hold that the petitioner wilfully and intentionally violated the provisions of the Act in making the collection of the surcharge. On the other hand, it is a clear case of mutual mistake on the part of both the Revenue and the petitioner. These circumstances compel me to countenance the contentions put forth by the learned counsel for the petitioner with regard to the imposition of penalty in the instant cases. A Bench of this Court in State of Tamil Nadu v. Sasman and Company 1984 (57) STC 160 , has also, on the ground of mutual mistake, held that the levy of penalty was not warranted. The ratio of the Bench is certainly attracted to the facts of the present cases. Under these circumstances, these three writ petitions are allowed. No costs. I am told that pending the writ petitions, the petitioner was obliged to furnish bank guarantees for the amounts of penalty demanded. Now these writ petition

s having been allowed, the said bank guarantees shall stand cancelled. Mr. G. Narayanan, learned counsel for the petitioner, would submit that his client is duty bound to and shall refund to its stockists the amounts of surcharge collected by it by mistake for the years in question, irrespective of any question of limitation, as and when the petitioner gets refund of surcharge already passed on to the Revenue. This statement of the learned counsel stands recorded.Writ petitions allowed.