1992 (12) TMI 203 - HC - VAT and Sales Tax

Issues Involved:

1. Levy of penalty under section 45A of the Kerala General Sales Tax Act, 1963.
2. Eligibility for concessional tax rate for packing materials under section 5(7) of the Act.
3. Interpretation of the term "packing materials" versus "containers".
4. Quantum of penalty and the application of the principle of proportionality.

Issue-Wise Detailed Analysis:

1. Levy of Penalty under Section 45A of the Kerala General Sales Tax Act, 1963:

The assessee, a partnership firm engaged in the manufacture of coconut-oil and oil-cake, was levied penalties under section 45A for the assessment years 1982-83 and 1983-84. The assessing authority found that the assessee had violated sub-section (7) of section 5 by purchasing empty tins at a concessional tax rate for packing coconut-oil dispatched outside the State on consignment sale. The penalties were initially set at 1 1/2 times the tax sought to be evaded but were later reduced by the Deputy Commissioner to an amount equal to the tax sought to be evaded. The Board of Revenue upheld this decision.

2. Eligibility for Concessional Tax Rate for Packing Materials under Section 5(7) of the Act:

Section 5(7) provided a concessional tax rate of 4% for industrial raw materials or packing materials used in the production of finished products inside the State for sale. However, this benefit was not applicable where the finished products were not liable to tax under the Act or the Central Sales Tax Act, or when exported out of India. The court noted that the finished products in this case were dispatched outside the State on consignment sale and were not liable to tax under the relevant Acts during the period in question.

3. Interpretation of the Term "Packing Materials" versus "Containers":

The court examined whether the tins used by the assessee could be considered "packing materials" under section 5(7). It was argued that sub-sections (5) and (6) of section 5 specifically mention "containers" and "packing materials" separately, implying a distinction. The court concluded that tins used for storing coconut-oil were "containers" and not "packing materials" as defined under sub-section (7). The court relied on common parlance and previous judicial interpretations, noting that "containers" are typically used for storing goods, whereas "packing materials" are used for wrapping or packing goods for transport or storage.

4. Quantum of Penalty and the Application of the Principle of Proportionality:

The court emphasized the need to apply the principle of proportionality in levying penalties, as established in previous judgments. The court noted that the assessee's use of declaration forms to claim the concessional tax rate was done in good faith and without fraudulent intent. Given the arguable nature of the legal interpretation and the absence of deliberate wrongdoing, the court decided to reduce the penalty to 10% of the tax sought to be evaded. The penalties were thus fixed at Rs. 3,865 for 1982-83 and Rs. 8,875 for 1983-84, modifying the previous orders accordingly.

Conclusion:

The original petition was disposed of with the penalties modified to 10% of the tax sought to be evaded, reflecting the court's application of the principle of proportionality and acknowledgment of the assessee's bona fide actions. The fourth respondent was directed to issue revised demand notices. No costs were awarded.

← Previous Next →