1993 (2) TMI 287 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Breach of condition No. (2) of sub-item No. 2 of entry of the Government Notification issued under section 49(2) of the Gujarat Sales Tax Act, 1969.
2. Validity of levy of purchase tax under section 50 of the Gujarat Sales Tax Act, 1969, without independent proceedings.
3. Imposition of penalty under section 45(6) of the Gujarat Sales Tax Act, 1969.

Issue-Wise Detailed Analysis:

1. Breach of Condition No. (2) of Sub-Item No. 2 of Entry of the Government Notification:
The main question was whether the sale of manufactured goods outside Gujarat constituted a breach of the undertaking given in form "NN" under entry No. 94(2) of the Government Notification dated June 26, 1978. The applicant, a new small-scale industrial unit, used raw materials purchased tax-free under the exemption certificate but sold the manufactured goods outside Gujarat. The court had to determine whether the phrase "which shall not take place outside the State of Gujarat" qualified the term "manufacture" or "sale". The court concluded that the phrase qualified the term "sale" and not "manufacture". The specified manufacturer was required to sell the manufactured goods within Gujarat to avail of the tax exemption. Thus, the sale of goods outside the state was a breach of the conditions set in form "NN", and the applicant was not entitled to the exemption.

2. Validity of Levy of Purchase Tax under Section 50 Without Independent Proceedings:
Given the answer to the first issue, the question of whether the levy of purchase tax under section 50 was valid without independent proceedings was not pressed by the applicant's counsel. The court did not address this issue further.

3. Imposition of Penalty under Section 45(6):
The applicant argued that the breach of the undertaking was due to a misunderstanding of entry No. 94(2), believing it only required manufacturing within Gujarat, not restricting sales outside the state. This argument was rejected as the undertaking in form "NN" was explicitly clear, imposing a double obligation to manufacture and sell within Gujarat. The Tribunal had reduced the penalty to half, considering possible misunderstanding. However, the court found no scope for reducing the penalty, given the clear language of sections 45(5) and 45(6) of the Act. Therefore, the imposition of the penalty was upheld.

Conclusion:
The court answered questions Nos. 1 and 3 in the negative, in favor of the Revenue, and question No. 2 was not pressed. There was no order as to costs. The reference was answered accordingly.