2008 (2) TMI 839 - HC - VAT and Sales Tax

Whether in the facts and in the circumstances of the case, the learned Tribunal is justified to treat the sale of Silair air-bubble film as sale of packing material and therefore taxable at the first stage of sale under section 5(1A) of the Punjab General Sales Tax Act, 1948? Whether in the facts and in the circumstances of the case, the learned Tribunal is justified to uphold the imposition of penalty under section 10(6) and levy of interest under section 11D of the PGST Act, 1948, when there was no default under section 10(4) of the Act ibid? Whether the imposition of penalty as upheld by the Tribunal can be justified when there was no mens rea on the part of the appellantdealer? Held that - A perusal of the order of the Tribunal would show that the Tribunal has given a finding of fact to the effect that the assessee was dealing in Silair air-bubble film which is a packing material. For arriving at this conclusion, the Tribunal has relied upon the fact that the said item has been classified under chapter 39.23 as packing material under the Central Excise Tariff Act, 1985 and even the said classification under the Central Excise Tariff Act, 1985 has been upheld by the Tribunal in the case of Collector of Central Excise, Bombay v. Tender Care International 1998 (9) TMI 163 - CEGAT, NEW DELHI and the said classification has never been challenged by the appellant. Thus, it is evidently clear that the material sold by the dealer was treated as packing material from the very beginning beyond the reasonable doubt and at no stage he has challenged the said classification which he himself had chosen to indicate in his trading account. We find no ground to interfere in the said finding of fact given by the Tribunal. Appeal dismissed.

Summary

Issues:
1. Classification of Silair air-bubble film as packing material for tax purposes under section 5(1A) of the Punjab General Sales Tax Act, 1948.
2. Imposition of penalty under section 10(6) and levy of interest under section 11D of the PGST Act, 1948 without default under section 10(4).
3. Justification of penalty imposition in absence of mens rea on the part of the appellant-dealer.

Issue 1: Classification of Silair air-bubble film as packing material
The appellant, a registered dealer, challenged the Sales Tax Tribunal's order treating the sale of Silair air-bubble film as the sale of packing material taxable at the first stage under section 5(1A) of the Act. The Tribunal found that the item was classified as packing material under the Central Excise Tariff Act, 1985. The Tribunal relied on previous classifications and the appellant's own trading accounts showing the material as packing material. The Tribunal concluded that the material was treated as packing material from the beginning, and the appellant did not challenge this classification. The High Court upheld the Tribunal's findings, stating that the material was clearly considered packing material throughout, and the appellant did not contest this classification, leading to the dismissal of the appeal.

Issue 2: Imposition of penalty and interest without default under section 10(4)
The appellant also contested the imposition of penalty under section 10(6) and interest under section 11D without default under section 10(4) of the Act. The Assessing Officer had taxed the Silair air-bubble film at the first stage and imposed penalties and interest. The appeal to the Appellate Authority reduced the penalty under section 10(6) but upheld other penalties. The High Court noted that the appellant did not raise arguments supporting this issue during the appeal. Consequently, the High Court found no merit in this aspect of the appeal and dismissed it.

Issue 3: Justification of penalty imposition in absence of mens rea
The third issue raised was whether the penalty imposition could be justified in the absence of mens rea on the part of the appellant-dealer. The appellant argued that as a dealer in resale of Silair air-bubble film, no penal action or interest should be imposed. However, the Assessing Officer and subsequent authorities imposed penalties and interest. The High Court did not delve deeply into this issue as the appellant's counsel did not present arguments supporting it during the appeal. Therefore, the High Court found no grounds to interfere with the penalty imposition and dismissed the appeal accordingly.