2006 (3) TMI 695 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether penalty under section 10(6) of the Act could be levied when the tax due as per the return had been paid?
2. Whether imported raw silk falls within the ambit of mill yarn (all kinds) as per the notifications issued by the State Government?

Analysis:
Issue 1: The High Court held that the penalty under section 10(6) of the Act could not be levied as the tax due on the basis of the return had been paid by the assessee. The Court referred to an authoritative pronouncement of the Constitution Bench of the Supreme Court and concluded that the penalty could not be imposed in this scenario. The plea of the assessee regarding the payment of tax as per the return was not disputed by the Revenue, leading to a decision in favor of the dealer against the Revenue.

Issue 2: The Court examined whether imported raw silk falls within the scope of mill yarn (all kinds) as per the notifications issued by the State Government. The petitioner, a Government undertaking, imported raw silk from China and claimed exemption from surcharge based on specific notifications. However, all three authorities had denied the exemption. The Court analyzed the relevant entries in the schedules and concluded that the Legislature had treated raw silk, silk yarn, and mill yarn as distinct entities for taxation purposes. The Court emphasized that separate commercial commodities are taxable goods once they emerge as distinct entities. The specific entries in the schedules indicated the legislative intent to differentiate between these goods. Consequently, the Court upheld the denial of exemption from surcharge for the imported raw silk, as it did not fall within the category of mill yarn (all kinds) eligible for the benefit.

In conclusion, the High Court ruled in favor of the dealer regarding the penalty levy issue and upheld the decision denying exemption from surcharge on imported raw silk, considering the distinct classification of goods under the relevant tax provisions.