1972 (9) TMI 130 - HC - VAT and Sales Tax

Summary

Issues: Interpretation of section 8(3)(b) of the Central Sales Tax Act, 1956; Contravention of section 10(d) of the Act; Liability for penalty under section 10-A.

Analysis:
The judgment by the High Court of Madhya Pradesh addressed the issue of whether the dyes and colours imported on C form declaration by a registered dealer could absolve them from liability for penalty under section 10(d) of the Central Sales Tax Act, 1956. The court considered the respondent's registration details where the phrase "for use in the execution of contracts" was struck out, indicating that the goods were intended for resale or use in manufacture, not for contract execution. The court highlighted that the provision required goods intended for resale or manufacture for sale, emphasizing the necessity of coupling manufacture with resale for entitlement to benefits. The court noted that the respondent only executed contracts for dyeing goods, without intending to sell them, which did not fulfill the requirement of the provision. The amendment to the provision further clarified that manufacture or processing must be related to goods for sale, emphasizing the connection between manufacturing and selling goods. The court emphasized that the element of sale was lacking in the respondent's actions, as they only dyed goods for others without intending to sell them.

The court examined the penalty imposed under section 10-A of the Act due to the respondent's incorrect declaration in form A. The Sales Tax Officer levied a penalty for using dyes imported against C forms in dyeing yarn for others, which was deemed a different purpose than stated in the declaration. The Board of Revenue initially held that no penalty was warranted as the dyed yarn might have been intended for sale, but the court emphasized the need to ascertain if charges indicated the cost of colors separately. Despite the respondent's illness preventing collection of information, the court had to base its decision on available information.

The court referenced section 10(d) of the Act, which penalizes failure to use goods for specified purposes without reasonable excuse. The court concluded that the respondent's act of using dyes for dyeing goods of others, despite the incorrect declaration, constituted an offense under section 10(d), rendering them liable for penalty under section 10-A. The court acknowledged the inadvertent omission of the relevant phrase in the declaration but emphasized that it still amounted to a technical offense deserving a penalty. The court directed the Board of Revenue to consider the inadvertent nature of the act while imposing any penalty, highlighting that a severe penalty might not be warranted. Ultimately, the court answered the reference by holding the respondent liable for penalty under section 10(d) but advised a lenient approach considering the circumstances.