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2020 (3) TMI 817 - HC - VAT and Sales TaxImposition of penalty u/s 4-B(5) of the U.P. Trade Tax Act, 1948 - diesel purchased against Form III-B - existence of mens-rea on the part of the applicant or not - admittedly diesel has been used in generator set for generation of electricity used for plant and machinery, used for manufacture of Khandsari namely notified goods - HELD THAT - It is an admitted fact that the revisionist factory had no power connection and therefore had installed generator set for production of power which in turn was used to run the plant and machinery for manufacture of sugar. It has also been urged that the remaining amount of Diesel was used for maintenance and installation of machinery, which is permissible under the law. Looking into the facts and circumstances that the Revenue in exercise of power under Section 4-B of the Act, 1948 has granted recognition certificate to the revisionist for procuring Diesel Oil to be used for production of sugar and taking into consideration the judgment of this Court in the case of M/S SHREE BHAWANI PAPER MILLS LTD., M/S RAMA SHYAMA PAPERS LTD., M/S GOELS COIR FOAM (INDIA) PVT. LTD., M/S CAMPHOR AND ALLIED PRODUCTS, M/S N.P. AGRO (INDIA) INDUSTRIES LTD., M/S BHOLENATH INDUSTRIES LTD. VERSUS STATE OF U.P. AND ANOTHER 2015 (11) TMI 48 - ALLAHABAD HIGH COURT , the revisionist was entitled for the benefit under the Act, 1948. Perusal of the impugned order passed by the Tribunal clearly indicates that there was no material before the Tribunal to conclude that the excess Diesel has been diverted for private gain or that the excess quantity of Diesel Oil was utilised for other purposes which was different from the purpose of manufacturing sugar. Before coming to such a finding, there should have been sufficient material before the Tribunal to reach such a conclusion. In absence of any such material, such a finding cannot be recorded by the Tribunal. The matter is required to be remanded to the U.P. Trade Tax Tribunal, to pass fresh orders - revision allowed by way of remand.
Issues Involved:
1. Imposition of penalty under Section 4-B(5) of the U.P. Trade Tax Act, 1948. 2. Justification of penalty without establishing mens-rea. 3. Utilization of diesel purchased against Form III-B for manufacturing purposes. Issue-wise Detailed Analysis: 1. Imposition of Penalty Under Section 4-B(5) of the U.P. Trade Tax Act, 1948: The revisionist challenged the order of the Trade Tax Tribunal, Bareilly, which affirmed the penalty imposed by the Revenue under Section 4-B(5) of the U.P. Trade Tax Act, 1948, for the Assessment Year 2006-07. The revisionist, a company incorporated under the Indian Companies Act, 1956, and registered under the Act, 1948, was granted a recognition certificate under Section 4-B(2) for purchasing diesel against Form III-B. The diesel was used in generator sets to produce electricity for manufacturing "Khandsari Sugar." The Assistant Commissioner (Assessment), Trade Tax, Bareilly, issued a notice under Section 4-B(5), and after considering the revisionist's reply, imposed a penalty of ?13,00,000/-. This penalty was upheld by the Deputy Commissioner (Appeals) and the Trade Tax Tribunal. 2. Justification of Penalty Without Establishing Mens-Rea: The revisionist did not press the substantial questions of law regarding the decision in M/s Vam Organic Chemicals Limited Vs. State of U.P. and the findings on mens-rea. Therefore, the court focused on whether the penalty under Section 4-B(5) was justified in the absence of established mens-rea. The revisionist argued that the diesel was used for running and maintaining the plant and machinery necessary for manufacturing sugar, and the penalty was unjustified without proving misuse or diversion of diesel. 3. Utilization of Diesel Purchased Against Form III-B for Manufacturing Purposes: The revisionist contended that the diesel was essential for running the generator sets, which powered the plant and machinery for manufacturing sugar. The revisionist referenced the Division Bench judgment in M/s Shree Bhawani Paper Mills Ltd. Vs. State of U.P., which supported the use of diesel in generators as integral to manufacturing. The court noted that the Tribunal found the revisionist procured 175 Kilo Liters of diesel, far exceeding the 10 Kilo Liters required for production, suggesting possible diversion for other purposes. However, the Tribunal failed to provide material evidence for this conclusion. Conclusion: The court concluded that the Tribunal's finding lacked sufficient material to prove that the excess diesel was diverted for private gain or purposes other than manufacturing sugar. The penalty imposed appeared arbitrary and without proper application of mind. Consequently, the court set aside the Tribunal's order and remanded the matter back to the U.P. Trade Tax Tribunal to pass fresh orders or remit it to the Assessing Authority for a detailed enquiry. The revisionist was allowed to produce relevant documents to substantiate their claim regarding diesel utilization. The revision was allowed, and the substantial question of law was answered in favor of the revisionist. Order: The impugned order dated 26.03.2008, passed by the Tribunal, was set aside. The matter was remitted back to the Tribunal for a fresh decision or to the Assessing Authority for a detailed enquiry. The entire exercise was to be completed within three months from the date of production of the certified copy of the order. The revisionist's counsel undertook to cooperate in the proceedings. The revision was allowed, and the substantial question of law was answered in favor of the revisionist and against the Revenue.
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