1997 (5) TMI 407 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Imposition of penalty under Section 10-A of the Central Sales Tax Act, 1956.
2. Compliance with Section 8(3)(b) of the Central Sales Tax Act, 1956.
3. Validity of the use of raw materials purchased on the strength of registration certificate (C forms).
4. Interpretation of the terms "intended for resale by him" and "for use by him in the manufacture or processing of goods for sale" under Section 8(3)(b).

Issue-Wise Detailed Analysis:

1. Imposition of Penalty under Section 10-A:
The petitioner-firm was penalized for allegedly misusing the goods purchased on the strength of the registration certificate. The Assessing Authority imposed a penalty of Rs. 2,00,000 for the year 1980-81, which was upheld by the Joint Excise and Taxation Commissioner (Appeals) and the Sales Tax Tribunal. The penalty was imposed for not using the goods for the specified purposes under Section 8(3)(b) of the Act, leading to a contravention of Section 10(d). The Court upheld the imposition of the penalty, stating that the petitioner-firm committed a breach of the condition of the registration certificate and the provisions of Section 8(3)(b).

2. Compliance with Section 8(3)(b):
The core issue was whether the petitioner-firm complied with Section 8(3)(b) of the Act, which requires that goods purchased on the strength of the registration certificate must be used for resale or in the manufacture of goods for sale. The Court found that the petitioner-firm did not fulfill this requirement as the gas cylinders manufactured were not sold by the petitioner or the oil companies for whom they were manufactured. Instead, the gas cylinders remained the property of the oil companies and were only used to contain liquefied petroleum gas, which was sold.

3. Validity of the Use of Raw Materials:
The petitioner-firm argued that they adhered to the registration certificate and used the raw materials for manufacturing gas cylinders, which were intended for sale. However, the Court noted that the cylinders were not sold but were used to contain gas sold by oil companies. This constituted a misuse of the goods purchased on the strength of the registration certificate, violating Section 8(3)(b) and justifying the penalty under Section 10-A.

4. Interpretation of Terms under Section 8(3)(b):
The petitioner-firm contended that the phrase "intended for resale by him" should mean resale by the purchasing dealer himself. The Court clarified that while "intended for resale by him" means resale by the purchasing dealer, the phrase "for use by him in the manufacture or processing of goods for sale" does not necessarily mean sale by the purchasing dealer. It means the goods should be used in manufacturing or processing goods intended for sale, irrespective of whether the sale is by the purchasing dealer or others. Since the gas cylinders were not sold but used for containing gas, the petitioner-firm did not meet the requirements of Section 8(3)(b).

Conclusion:
The Court dismissed the writ petitions, finding no merit in the appeals. The penalty imposed for the misuse of goods purchased on the strength of the registration certificate was justified as the petitioner-firm did not comply with the requirements of Section 8(3)(b) of the Central Sales Tax Act, 1956. The interpretation of the terms under Section 8(3)(b) was clarified, emphasizing that the goods must be used in manufacturing or processing goods intended for sale, irrespective of who sells the final product.