2014 (5) TMI 686 - HC - VAT and Sales Tax

Levy of penalty Whether the Tribunal was justified in passing order ignoring the inclusion of items in the Certificate of Registration immediately after passing the impugned order of assessment in accordance with G.O.Ms.No.61 CT & RE dated 24.01.1984 - Bona fide belief Section 10(B) of CST Act - Held That - Judgment in State of Tamil Nadu Vs. NU-Tread Tyres 2006 (7) TMI 578 - MADRAS HIGH COURT followed - The use of the word falsely u/s 10(b) itself implies that the person making the representation knew that the certificate of registration does not cover that item, but knowing fully well that it is not, nevertheless contends that it is covered - What is required plainly u/s 10(B) is knowledge that the item is not covered by the certificate and the representation that it is covered by the certificate. The Revenue does not deny the fact that the items purchased by the assessee have a close link with the business activity of the assessee - The first Appellate Authority found out that the use of furnace oil, distribution pipes, copper cable, transformer and electrical goods are purchased to facilitate generating electricity and demineralising plant used in different processes have a bearing in the assessee s business - Therefore, read in the context of the enumerated Entries in the Registration Certificate and the items in question purchased established that assessee were under a bona fide impression that the enumerated Entries in the Registration Certificate would include the above items too - In view of instruction under Office letter D.Dis.Acts.Cell.IV/87729/84 dated 06.07.1984, that wherever a dealer had purchased goods on the basis of C form without including them in the Certificate under the CST Act either inadvertently or out of ignorance, no penalty need be levied u/s 10-B - The assessee is entitled to succeed in this Tax Case Revision that in respect of enumerated items there can be no levy of penalty - However, aluminium sheets cannot be brought the enumerated entries, to contend that the assessee was under a bona fide belief that they would get included in the enumerated entries - In the circumstances, we reject the assessee s contention in respect of aluminium sheets - As far as the levy of penalty is concerned, we restrict the levy of penalty at 50% to purchase of aluminium sheets alone - Revision stands disposed of Decided in partly in favour of assessee.

Summary

Issues:
1. Interpretation of guidelines framed by Full Bench of the Court.
2. Justification of passing order without including items in Registration Certificate.
3. Levy of penalty under Section 10-A of Central Sales Tax Act.
4. Consideration of bona fide belief in purchasing items.

Issue 1: Interpretation of guidelines by Full Bench
The assessee challenged the order of the Sales Tax Appellate Tribunal for the assessment year 1998-99, citing the Full Bench judgment in State of Tamil Nadu Vs. NU-Tread Tyres-C.S. Parthasarathy Chetty Vs. State of Tamil Nadu. The Tribunal was questioned for not following the guidelines set by the Full Bench in its order.

Issue 2: Passing order without including items in Registration Certificate
The appeal under the Central Sales Tax Act involved the inclusion of items not originally listed in the Registration Certificate. The assessee purchased various items not mentioned in the certificate, leading to a penalty under Section 10-A of the Act. The Tribunal considered the lack of inclusion of these items in the certificate as a basis for the penalty.

Issue 3: Levy of penalty under Section 10-A
The Assessing Officer imposed a penalty on the assessee for inter-State purchases using declaration under 'C' Forms for items not included in the Registration Certificate. The penalty was reduced by the Appellate Assistant Commissioner, considering the bona fide belief of the assessee in purchasing essential items for manufacturing activities. The Tribunal confirmed the penalty, citing lack of bona fides due to subsequent inclusion of items in the Registration Certificate.

Issue 4: Consideration of bona fide belief
The Tribunal evaluated the bona fide belief of the assessee in purchasing items not listed in the Registration Certificate. While some items were considered essential for manufacturing processes and electricity generation, others were not directly linked to business activities. The Tribunal upheld the penalty for items not closely related to the business but reduced it for items essential to the manufacturing process. The Court, guided by previous decisions and government instructions, upheld the penalty for items like aluminium sheets but reduced it for other essential items, emphasizing the need for a bona fide belief in including items in the Registration Certificate.

In conclusion, the Court disposed of the Tax Case Revision, restricting the penalty to 50% for the purchase of aluminium sheets alone, based on the assessee's bona fide belief and the nature of business activities.