2009 (12) TMI 854 - HC - VAT and Sales Tax

Whether the purchase of the cement by the petitioner-assessee for construction of resorts attracts the payment of Central sales tax? Held that - In the instant case we not only find that the show-cause notice has been issued on September 5, 2001 for which admittedly the assessee has not replied nor objected to at the first appellate stage. On the other hand the assessee has taken up the contention that penalty cannot be levied under section 10(d) of the CST Act which in fact is to be understood that the assessee was well aware as to under which provision of the Act the penalty is being levied. Hence, the assessee now cannot contend contrary to the grounds urged before the first appellate authority for assailing the order of the learned Tribunal. In view of the above facts, the question of law raised in the petition memorandum has to be answered against the assessee and in favour of the Revenue. Accordingly the petition is dismissed.

Summary

Issues:
1. Correctness and legality of the order passed by the Karnataka Appellate Tribunal in S.T.A. Nos. 2016-2017/2004 dated October 5, 2007.
2. Whether the purchase of cement by the petitioner-assessee for construction of resorts attracts the payment of Central sales tax?

Analysis:
1. The assessee, a private limited company, used steel and cement purchased from outside the State for construction activities in a resort and health club. A notice was issued under section 10A of the CST Act, 1956, for not selling the purchased commodities subsequently, leading to a penalty of Rs. 2,30,580. The penalty was upheld by the Deputy Commissioner of Commercial Taxes (Appeals) and the Karnataka Appellate Tribunal, stating the assessee misled the authorities, amounting to an offense under section 10(d) of the CST Act, 1956.

2. The petitioner argued that since authorities permitted the use of cement and steel for construction, penal provisions should not have been invoked. The counsel contended that the penalty should be set aside as the authorities did not consider the non-application of mind by the adjudicating authority. However, the Additional Government Advocate argued that the misuse of C form was established, and the goods were not utilized for manufacturing or processing for sale, justifying the penalty.

3. The High Court found that the grounds raised by the appellant were considered by the appellate authority. The court emphasized that the assessee cannot raise objections at the third appellate stage if not done earlier. The Tribunal confirmed the penalty under section 10(d) of the CST Act, as the assessee did not raise this issue earlier. The court cited a case where a show-cause notice without specifying the provision was held invalid, unlike in the present case where the assessee was aware of the penalty provision.

4. Ultimately, the High Court ruled against the assessee, dismissing the petition and allowing the levy of penalty under section 10A of the CST Act. The court held that the assessee's awareness of the penalty provision earlier precluded them from contesting it at a later stage. No costs were awarded, and the respondent was permitted to file a memo of appearance within four weeks.