1985 (11) TMI 210 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of section 46(2)(d) of the Kerala General Sales Tax Act for penalty imposition based on misuse of form 18 declarations.

Analysis:
The judgment delivered by the Kerala High Court involved a case where the revenue challenged the imposition of penalty on an assessee for allegedly misusing form 18 declarations related to the purchase of naphtha for manufacturing chemical fertilizers. The revenue contended that the assessee failed to use naphtha for the declared purpose, warranting penalty under section 46(2)(d) of the Act. The assessing authority initially levied the penalty, which was upheld by the Deputy Commissioner but later overturned by the Appellate Tribunal. The Tribunal found that naphtha was indeed used as a component part in the manufacture of chemical fertilizers, based on evidence from a Chemical Engineer. The Tribunal concluded that there was no misuse of form 18 declarations by the assessee.

The revenue raised three questions of law challenging the Tribunal's findings, primarily questioning whether naphtha was used as a component part in the manufacturing process of chemical fertilizers. The Court analyzed section 46(2)(d) of the Act, which imposes a penalty if goods purchased under declaration are not used for the declared purpose. The Court emphasized that the revenue must establish that the assessee failed, without reasonable excuse, to use the goods as intended. The Court noted that the revenue's argument hinged on naphtha not being found as a component in the final product, but the assessee provided a detailed explanation of how naphtha was utilized in the manufacturing process. The Court highlighted the principle of strict interpretation of penal statutes in favor of the subject.

Ultimately, the Court upheld the Tribunal's decision, ruling that the assessee did not commit an offense under section 46(2)(d) of the Act. The Court concluded that the revenue failed to prove that the assessee misused the form 18 declarations by not using naphtha as intended. The judgment emphasized the importance of strict interpretation of penal provisions and ruled in favor of the assessee, dismissing the tax revision cases brought by the revenue.