2007 (2) TMI 309 - SC - VAT and Sales Tax

Appeal filed by the appellant under section 24(1) of the Karnataka Sales Tax Act, 1957 dismissed - Held that - Appeal partly allowed. Revisional authority has elaborately discussed the legal and factual position to conclude that the claim made by the assessee-appellant was untenable and not sustainable. In fact, the High Court has also analysed the position in great detail as noted above. We concur with the view expressed by the High Court about the non-acceptability of the claim and levy of tax and penalty. However, so far as the question of quantum of penalty is concerned, it is to be noted that the legitimate amount which was to be collected by the Revenue was not deposited by the assessee- appellant because of the claim at concessional rate of tax. Considering the quantum of tax involved and the period for which the amount was withheld, we are of the view that levy of penalty of rupees five lakhs would suffice. The amount shall be deposited within a period of one month from today if not already done.

Summary

Issues:
1. Interpretation of conditions specified in a notification for reduced tax rate on machinery sales to industrial units.
2. Determination of whether tower cranes qualify as industrial inputs under the notification.
3. Assessment of penalty under section 8A(5)(a) for contravention of notification conditions.

Issue 1: The appeal challenged the Karnataka High Court's judgment on the legality of orders passed under the Karnataka Sales Tax Act, 1957. The appellant, a civil contractor involved in the construction of mass houses, purchased tower cranes at a concessional tax rate. The assessing authority found the appellant ineligible for the tax benefit due to non-compliance with conditions under a specific notification. The first appellate authority reversed this decision, but the Additional Commissioner of Commercial Taxes disagreed, initiating penalty proceedings. The High Court upheld the authorities' orders, leading to the appeal.

Issue 2: The appellant contended that the tower cranes purchased qualified as industrial inputs under the notification's conditions. The High Court disagreed, stating that tower cranes did not meet the criteria of being a component part or raw material for other goods. The appellant argued for a broader interpretation of "industrial input," but the court upheld the original decision, emphasizing that tower cranes were not intended for use as industrial inputs.

Issue 3: The penalty amount imposed under section 8A(5)(a) was a key aspect of the appeal. The assessing authority initially levied a penalty, later reduced by the revisional authority. The appellant challenged the penalty amount, citing findings in their favor by the Joint Commissioner of Commercial Taxes. However, both the revisional authority and the High Court upheld the penalty, emphasizing the non-maintainability of the appellant's claim for the concessional tax rate. The Supreme Court concurred with the lower courts on the tax and penalty aspects but reduced the penalty amount to five lakhs considering the circumstances and directed its payment within a specified timeframe.

In conclusion, the Supreme Court allowed the appeal only regarding the quantum of penalty, reducing it to five lakhs and mandating its payment within a month. Other aspects of the case were dismissed, with no costs awarded.