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TMI Blog1977 (10) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... xplained that due to oversight the transaction of purchase of white paper could not be reflected in the books of accounts. It was, however, not the intention of the assessee to suppress the above purchases. With regard to the second allegation it explained that it was entitled to purchase plain white paper for the purpose of manufacturing the same into paper with printed lines on the strength of its registration certificate. So, there was no contravention of the proviso to s. 5(2)(A)(a)(ii) of the Act. 4. The assessing officer did not accept the above explanation and thought it proper to assess the assessee under s. 12(8) of the Act, On the basis of the first allegation he estimated the escaped turnover at Rs. 4,46,000. On the basis of the second allegation he added the sum of Rs. 5,04,000 to the taxable turnover and assessed tax of Rs. 69,000 in total. Besides, he imposed penalty of Rs. 1,03,500. Thus, the total demand stands at Rs. 1,72,500.00. 5. The assessee preferred an appeal before the Asst. Commissioner, who upheld the findings of the assessing officer and confirmed the assessment. 6. The learned Advocate appearing for the assessee raised the following contentions: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut to support the estimate materials must be found and indicated. It is open to the assessing officer to refer to the nature of the trade, the conduct of the assessee having been subject to various proceedings under s. 12(8) of the Act for other periods, any special features in the business which makes suppressions more convenient, reference to any particular trade practice prevailing in the locality or in the assessee's own business and other like factors to justify his estimate. A mere declaration in the order of assessment that the estimate is honest does not add support in law to the estimate. It must, be clearly kept in view that on account of escapement, reassessment is not intended to be penal, that is, arbitrariness can not come into the quantification of the escaped turnover. For such a conduct of the assessee, penalty is separately provided. 8. In the instant case, the escaped turnover was Rs. 19,505. It appears from the records that the assessee had a large extent of business in paper and its annual gross turnover extended to several lakhs of rupees. The transaction of the suppressed purchase was from the sister concern carrying on business in paper giving immense scop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erwise produce goods such as exercise books, drawing books, map drawing books, bound registers and bound books and paper with printed lines. If conversion of plain white paper into paper with printed lines would be treated according to law as manufacture, then obviously, the assessee will get the benefit of sl. 56 of the schedule of exempted goods, since it began making paper with printed lines with effect from 19th Dec., 1970 on which date amendment of the registration certificate was allowed, as against, the dead line dated 1st April, 1969 noted in sl. 56. If, however, the conclusion would be otherwise, namely, paper with printed lines, is not a distinct and separate product than plain white paper and the incidence of manufacture is not involved, then the assessee will not get exemption according to sl. 56 and shall be bound to pay tax according to the appropriate rate. In CST, U.P. Lucknow vs. Harbilas Rai and Sons(3) it was held as follows: "In our view, the word "manufacture" has various shades of meaning and in the context of ST legislation, if the goods to which some labour is applied, remain essentially the same commercial articles, it cannot be said that the final produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax according to sl. 3-G, of the schedule of taxable goods, they ought to have given an opportunity to the assessee to produce such declarations. 14. For the sake of easy references sl. 3-G is quoted below: "3-G. Goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for use by him in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power, subject to the production of a true declaration by the purchasing registered dealer or his authorised agent (in form appended below) ................................................... 3per cent 1st Jan., 1970 ". I have already held while deciding the second contention that process of manufacture was not involved for converting plain white paper into paper with printed lines. But, some form of processing was involved for the said conversion. In other words, use of some machinery and labour was involved for conversion of plain white paper into paper with printed lines. It is to be considered whether the above action is a form of processing within the meaning of sl. 3-G or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of sl. 3-G within a reasonable time. If the assessee would not furnish the declarations in form E, then only, the full rate of tax would be assessed on the turnover of Rs. 5,04,000 instead of allowing concessional rate of tax. In the above view of the matter, I would uphold this contention of the learned Advocate and direct that the assessee should be given reasonable opportunity to produce declarations in form-E for admission of concessional rate of tax according to sl-3-G of the schedule of taxable goods. For this limited purpose the case has to go back on remand. 17. According to s. 12(8) of the Act penalty can be imposed at a sum not exceeding one and half times of the tax assessed. In this case tax of Rs. 69,000 was assessed, and penalty of Rs. 1,03,500 was imposed. 18. With regard to penalty two aspects are to be considered. First, the assessee deliberately suppressed a purchase turnover which escaped assessment. Therefore, it was liable to be visited with penalty according to s. 12(8) of the Act. The second aspect relates to the application of s. 56 of the list of exempted goods or sl-3-G of the schedule of taxable goods. It was a question of law. The assessee thought, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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