1977 (10) TMI 54 - AT - VAT and Sales Tax

Issues Involved:
1. Purchase suppression of white paper worth Rs. 19,505.
2. Entitlement to purchase plain white paper free of tax.
3. Claim for exemption under sl. 56 of the schedule of exempted goods.
4. Claim for concessional rate of tax under sl. 3-G of the schedule of taxable goods.
5. Imposition and quantum of penalty.

Detailed Analysis:

Issue 1: Purchase Suppression of White Paper Worth Rs. 19,505

The assessee explained that the omission of the purchase of white paper worth Rs. 19,505 from its books of accounts was due to oversight and not an intentional suppression. However, the assessing officer did not accept this explanation and estimated the escaped turnover at Rs. 4,46,000. The appellate tribunal upheld this view, stating that the explanation of oversight was evasive and unacceptable. It was noted that the assessee, being a reputed dealer with a large turnover, was expected to maintain accurate accounts. The tribunal concluded that the estimate of the escaped turnover was reasonable and proper, considering the nature of the business and the potential for such suppressions.

Issue 2: Entitlement to Purchase Plain White Paper Free of Tax

The assessee contended that it was entitled to purchase plain white paper free of tax for manufacturing paper with printed lines based on its registration certificate. However, the tribunal found that the conversion of plain white paper into paper with printed lines did not constitute a manufacturing process. The tribunal referred to precedents which established that mere changes in form or appearance without substantial transformation do not qualify as manufacturing. Therefore, the assessee was not entitled to purchase plain white paper free of tax.

Issue 3: Claim for Exemption Under sl. 56 of the Schedule of Exempted Goods

The assessee claimed exemption from tax under sl. 56, arguing that the conversion of plain white paper into paper with printed lines was a manufacturing process. The tribunal disagreed, citing the decision in CST U.P. Lucknow vs. Harbilas Rai and Sons, which held that paper with printed lines retained its original characteristics and did not undergo substantial change. Consequently, the tribunal concluded that the assessee was not entitled to exemption under sl. 56.

Issue 4: Claim for Concessional Rate of Tax Under sl. 3-G of the Schedule of Taxable Goods

The assessee alternatively argued for a concessional rate of tax under sl. 3-G, which applies to goods used in manufacturing or processing. The tribunal agreed that while the conversion of plain white paper into paper with printed lines did not constitute manufacturing, it did involve processing. Therefore, the assessee was entitled to a concessional rate of tax under sl. 3-G, provided it produced declarations in form E. The tribunal directed the assessing officer to give the assessee a reasonable opportunity to furnish these declarations.

Issue 5: Imposition and Quantum of Penalty

The tribunal addressed the penalty imposed under s. 12(8) of the Act, which was set at Rs. 1,03,500. It acknowledged that the assessee had deliberately suppressed a purchase turnover, warranting a penalty. However, it also considered the legal ambiguity regarding the exemption under sl. 56, which mitigated the assessee's intent. Consequently, the tribunal reduced the penalty to 1 1/2 times the tax assessed on the escaped turnover of Rs. 4,46,000.

Conclusion:

1. The tribunal upheld the finding of purchase suppression and deemed the estimate of the escaped turnover at Rs. 4,46,000 as reasonable.
2. The assessee was not entitled to tax exemption under sl. 56 for converting plain white paper into paper with printed lines.
3. The assessee was entitled to a concessional rate of tax under sl. 3-G, subject to producing declarations in form E.
4. The penalty was reduced to 1 1/2 times the tax assessed on the escaped turnover.
5. The case was remanded to the assessing officer for further enquiry and reassessment, with instructions to refund any excess tax and penalty realized.

← Previous Next →