1985 (8) TMI 338 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Lawfulness of proceedings under section 39(2) of the M.P. General Sales Tax Act, 1958.
2. Proper reading and interpretation of the declaration in form XII-A and the justification of additional tax and penalty under section 8(2) of the Act.

Issue-wise Detailed Analysis:

1. Lawfulness of Proceedings under Section 39(2):
The Tribunal referred the case to the High Court to determine the legality of the proceedings initiated under section 39(2) of the M.P. General Sales Tax Act, 1958. The dealer had purchased paper at a concessional rate under section 8(1) of the Act, giving the declaration in form XII-A. The Additional Commissioner of Sales Tax reopened the assessment under section 39(2), imposing penalties and additional tax, arguing that the dealer was not entitled to the concessional rate because the manufacture of the exercise books occurred outside Madhya Pradesh. The High Court concluded that the proceedings under section 39(2) were contrary to law, as the dealer's actions did not breach the conditions of section 8(1).

2. Interpretation of Declaration in Form XII-A and Levy of Penalty under Section 8(2):
The dealer declared that the purchased paper was for manufacturing goods for sale within Madhya Pradesh, which was done. However, the manufacture took place in Allahabad, Uttar Pradesh, and the finished goods were sold in Madhya Pradesh. The Additional Commissioner imposed penalties under section 8(2) for alleged misuse of form XII-A. The High Court analyzed whether the phrase "in the State of Madhya Pradesh" in section 8(1) qualified both "manufacture" and "sale" or just "sale." The Court concluded that the words "in the State of Madhya Pradesh" qualified only the word "sale" and not "manufacture." Therefore, the dealer's actions did not constitute a misuse of the declaration in form XII-A. The High Court held that the Tribunal's interpretation was incorrect and that the levy of penalty under section 8(2) was neither lawful nor justified.

Conclusion:
The High Court answered the common questions of law as follows:
1. The proceedings under section 39(2) of the Act were contrary to law.
2. The Tribunal's reading and interpretation of the declaration in form XII-A and section 8(2) of the Act were improper, and the levy of penalty was neither lawful nor justified.

The judgment concluded with no order as to costs.