2010 (10) TMI 964 - HC - VAT and Sales Tax

Summary

Issues:
Imposition of penalty under section 4B(5) of the U.P. Trade Tax Act, 1948 for misuse of recognition certificate.

Analysis:
The case involved a revision filed by the assessee against an order imposing a penalty for violating section 4B(5) of the U.P. Trade Tax Act, 1948. The assessee held a recognition certificate under section 4B for manufacturing cycle and moped parts, allowing purchase of raw materials like furnace oil. The issue arose when the assessee used the purchased material for job-work basis, leading to a penalty notice under section 4B(5). The first appellate authority set aside the penalty, stating the material was used for manufacturing cycle parts as intended. The Tribunal, however, upheld the penalty, triggering this revision.

Upon examination, the court noted that section 4B(5) mandates using purchased goods for the specific purpose mentioned in the recognition certificate. In this case, the certificate was for manufacturing cycle parts, and the material was indeed used for that purpose, albeit on a job-work basis. Citing precedent, the court emphasized that as long as the purpose remains aligned with the certificate, even job-work manufacturing is permissible. The standing counsel argued that sale of manufactured goods by the assessee is crucial for penalty imposition under section 4B(5), but the court disagreed.

After hearing arguments from both sides, the court concluded that using purchased materials for manufacturing items specified in the recognition certificate is sufficient compliance. Given the Deputy Commissioner's finding that goods were indeed produced from the purchased raw material, the penalty was deemed unjustified. Consequently, the court allowed the revision, setting aside the Tribunal's penalty order and deleting the penalty imposed on the assessee.