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TMI Blog1992 (7) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... e trade names of "Indamine" and Indamine Super". One of the ingredients or the component part of these products is "formaldehyde". At the relevant points of time, the Act had the following provisions, which are relevant here: "Section 5(3-A). Notwithstanding anything contained in sub-section (1) or sub-section (3), the tax payable by a dealer in respect of any sale of goods mentioned in the Second Schedule by such dealer to a registered dealer for use by the latter as component part of any other goods mentioned in that Schedule, which he intends to manufacture inside the State for sale, shall be at the rate of three per cent or the rate specified in the Second Schedule in respect of such goods whichever is lower on the turnover relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eclare the purpose for which he purchases the goods in question. 4.. In the instant case, while purchasing "formaldehyde", the respondent furnished form No. 37 declaring the said goods to be used in the manufacture of "synthetic resin". The fact that a declaration is furnished while furnishing an article, itself implies, that the said article is to be used as a component part of the end-product to be manufactured and the said endproduct is one of the goods covered by the Second Schedule to the Act. Therefore, when the respondent furnished the declaration at the time of the purchase of "formaldehyde", stating that this article is to be used in the manufacture of "synthetic resin" it is implicit that the respondent considered "synthetic resi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the respondent under section 5(3-B). The assessing authority states in his order that although the respondent "admits that their products fall under Second Schedule of the Act, it is not specified as to under which of the entry in the Second Schedule the goods so produced by them is to be considered. Such entry is not in the Second Schedule. Hence, objections filed are rejected and penalty is levied as under treating the same as chemicals liable to tax at 10 per cent, under entry 79 of the Second Schedule to the Karnataka Sales Tax Act, 1957". The approach of the first appellate authority could be gathered from the following: "There is no dispute as to the fact that formaldehyde is a component of resin. The only issue which is to be deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt the benefit to a component is to reduce the burden of tax element on the finished product in view of the fact that the end-product is liable to tax at a higher rate on a scheduled commodity." He also observed that the respondent had committed an offence by misusing the goods purchased "against declaration" and hence liable to pay the penalty. 9.. The Appellate Tribunal, however, held that "synthetic resin" is a chemical covered by the words "chemicals of all kinds" in entry 79 of the Second Schedule and therefore the respondent had furnished correct declarations in form No. 37 and the assessing authority did not go into the correctness of the returns filed by the dealer under section 12 and hence there was no occasion for the said auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing statute and its enforcement has to be strictly in terms of the language used in it. Equitable considerations and moral questions have no bearing on the enforcement of the provisions of a taxing statute, unless the clear language of any particular provision permits the introduction of these considerations. Further, penalty proceedings are normally independent of assessment proceedings; it is only under certain circumstances levy of penalty is attracted as a consequence of and incidental to the assessment orders. For example, in the cases falling under section 12(4) and section 12A(1-A) of the Act, penalty is leviable along with the assessment orders, as incidental to the main proceedings. A penal provision has to be strictly construed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht within section 5(3-B) at all. It is quite possible that a dealer may actually purchase a component part of a Second Schedule goods by furnishing form 37 declaration and thereafter he may produce a Second Schedule goods. However while paying the tax on the end-product he may treat the end-product as a non-scheduled goods to enrich himself; in this process the Revenue may have suffered loss. But the medication to be applied under such a situation is not found in section 5(3-B). The Act has provided other provisions to cope up with such a situation. For example section 29(1)(h) treats filing of a false declaration under section 5(3A), an offence. Again as per section 29(2)(d) any person who wilfully acts in contravention of any of the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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