1996 (1) TMI 395 - HC - VAT and Sales Tax

Summary

Issues:
Levy of penalty under section 10-A of the Central Sales Tax Act on the purchase of a diesel generating set for manufacturing lapping abrasive powder.

Analysis:
The revisionist, a dealer registered under the Central and U.P. Sales Tax Acts, purchased a diesel generating set for the production of lapping abrasive powder. The assessing officer imposed a penalty under section 10-A, alleging that the set was used for electricity production, not directly connected to the powder's manufacture. Both the first and second appeals upheld the penalty, citing a precedent where a similar situation led to penalty imposition.

The penalty was levied under section 10-A read with section 10(d) of the Act, triggered when goods purchased for specific purposes aren't used accordingly. However, the diesel set was listed in the registration certificate for manufacturing purposes, and its use for electricity generation was consistent with both parties' intentions. The dealer didn't misrepresent its use, and the set's purpose aligned with the assessing officer's understanding during registration.

The court emphasized that the diesel set's sole function was electricity production, vital for operating machinery in goods production. No evidence suggested misuse or diversion of electricity for non-manufacturing purposes. Unlike the precedent cited, where inclusion in the registration certificate was denied, here, the set was listed, and its use for intended purposes was undisputed.

Conclusively, the court allowed the revision petition, overturning the Tribunal's decision on the penalty. The dealer's appeal against the penalty on the diesel set purchase was accepted, annulling the penalty. Each party was directed to bear their respective costs, and the judgment favored the dealer based on the consistent use of the diesel set for the intended manufacturing purpose.