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TMI Blog1989 (12) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... panies, viz., Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation. Both these activities were recognised by the concerned licencing authorities, as well as, the sales tax authorities and the required certificates. were granted by them. In the various financial years, it had purchased the raw materials at a concessional rate of sales tax, from another registered dealer, for being used in its manufacturing activity, but had to use them in connection with the job-work for the three petroleum corporations. This utilisation of the raw materials, for purposes other than for which it was purchased, have been held to be contravention of the provisions contained in section 8(3) of the Central Sales Tax Act. The concerned authorities had invoked the sections 10(d) and 10A of that Act, and had levied penalty on the assessee firm. The imposition of the penalty has been challenged before the appellate authorities under that act. The deduction of these amounts had been claimed on the reasoning that, the authorities are aggrieved with the fact of the assessee having had the benefit of concessional rate of sales tax and not using the raw material for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment and the offences under section 10A were also criminal in nature for it provided imposition of penalty in lieu of prosecution. He was further of the view that, section 10A provided the imposition of penalty not exceeding a maximum of one and half times the tax as would have been levied under section 8(2) of that Act, i.e., the penalty being related to the normal tax payable and not to the concessional tax, the imposition had no connection to the additional sales tax. He also observed that, the quantum of penalty may be more or less the same as the amount of the additional tax for the improper utilization of the raw materials but since the imposition was in lieu of prosecution, the nature of imposition remained to be penalty. He was further of the view, that, the imposition being for the violation of the statutory provisions, it was only a penalty, and thus upheld the disallowance. The assessee, thus has come up in appeal before us. 5. The learned counsel Sh. Ganesan, appearing for the assessee, filed a paper book consisting of 103 pages, which comprised of the submissions in relation to the issue under appeal before the lower authorities, the orders of the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey were using the cylinders for packaging the liquid gas and it was only the gas that was sold and not the cylinder itself. He also placed reliance on the Supreme Court ruling in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363, for the proposition that, the liability came to be fastened on the assessee, by means of the demand made vide order dt.15-3-82and therefore, the liability was rightly claimed in the year. He therefore pleaded, that the claim to the extent of Rs. 9,60,494 should be allowed as a deduction. 6. The learned DR Sh. Puneet Gangal pleaded, that, the Central Sales Tax Act only talks of penalty and not penalty in lieu of the tax and therefore, the plea as advanced by the assessee needs to be rejected. He also placed reliance on the orders of the lower authorities. 7. We have given our very careful consideration to the rival submissions, the various materials that have been placed on record and also to the case laws relied upon by either side. The crux of the appeal before us lies on the interpretation of sections 10(d) and 10A of the Central Sales Tax Act. Before we proceed with the analysis of these two sections, we would have to briefly recapitulate the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e third party, but were used for its own purposes, the assessee would incur the penalty prescribed in those sections." He then proceeded to estimate the proportional purchase of the materials used in the job-work and then levied the penalty for the various years. The quantum of purchases made by use of R.C. but used for the job-work and the quantum of penalty as levied for the various years is given below in a table :-- Quantum of purchases Year used in job-work Penalty Rs. Rs. 1974-75 16,04,483 2,40,000 1975-76 47,64,519 7,10,000 1976-77 12,61,140 1,80,000 1977-78 6,10,519 90,000 1979-80 13,64,282 2,00,000 7.1 We would have to reproduce the sections 10(d) 10A of the Central Sales Tax Act and the section, the contravention of which, penalties are provided, viz., section 8(3)(b) of that Act. 7.2 Section 10(d) If any person after purchasing any goods for any purposes specified in clause (b), or clause (c), or clause (d) of sub-section (3) of section 8 falls, without reasonable excuse, to make use of the goods for any such purpose ; he shall be punishable with simple imprisonment which may extent to six months, or with fine, or with both ; and when the offenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing of goods for sale or in mining in generation or distribution of electricity or any other form of power. 7.3 In para 7 and 7.1 above, we have observed that the penalties were imposed on the assessee, for the various years for the contravention of the provision contained in section 8(3)(b) of the Central Sales Tax Act. As per this sub-section, a dealer is issued a certificate of registration, specifying the class or classes of goods, which goods, he is allowed to purchase under concessional rate of tax either for resale of such class/classes of goods, or for being used in the manufacture or processing of goods for resale. In the instant case, the assessee is alleged to have bought the goods for manufacturing cylinders for resale but had used the goods for the manufacture of cylinders for the three corporations, who use it for packing of liquid petroleum gas and it is only the gas that is sold. Since it was not intended for resale by the three corporations, the assessee had been held to have contravened the provisions of section 8(3)(b) of that Act. The penal provisions are quasi-criminal in nature and recognising this factor, the section 10(d) has used the words "without re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.3 above that, section 8(3)(b) of the Central Act does not allow any option to a dealer, to purchase the goods as specified in the registration certificate for one purpose, and to use it for a different purpose. It is for such change or modification of purpose or intention with which the goods are purchased, the penalty provisions are spelt out in section 10(d) and section 10A of that Act. The certificate of registration entitles the dealer to purchase the goods at a concessional rate of tax for the specified purposes only and therefore, when a dealer uses that certificate, purchases the goods but utilises them for a different purpose, then it could be said to be misrepresentation of the facts to the dealer from whom he had purchased the goods. Providing of a certificate of registration for purchase of goods to the selling dealer is a procedure evolved under the Act but strict compliance of the contents of that certificate is not merely a procedure but a mandatory one, i.e., the dealer has no choice in the manner of following or adopting it to his convenience. However, section 10(d) provides that, using of the goods for a purpose different from the one for which it was intended, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of which is additional tax is clearly bereft of any substance and is rejected. 7.8 In support of its contention that, the penalty included the element of additional tax, and to that extent it should be allowed as business expenditure, it had placed reliance on the Madhya Pradesh High Court ruling in Simplex Structural Works' case and also in the ruling of the same High Court in S. S. Ratanchand Bholanath's case. 7.9 We have to observe that, the first ruling in Simplex Structural Works' case the assessment year involved was 1976-77, and relates to a period prior to the introduction of section 9(2A) of the Central Act and therefore, would not be applicable to the instant case before us. In this ruling the nature of penalty as was levied under sections 10(d) and 10A of the Central Act was examined and since the penalty came to be imposed equal to the difference in normal rate and the concessional rate, it had been concluded that, the penalty was in the nature of additional tax. While coming to this conclusion, reference was made to the earlier ruling of the same High Court in CIT v. Malwa Vanaspati Chemical Co. Ltd. [1982] 135 ITR 221 (MP) and it was observed that, in that cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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