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TMI Blog1990 (10) TMI 350X X X X Extracts X X X X X X X X Extracts X X X X ..... at the goods purchased on the strength of declarations in form "C", had been utilised for purposes other than in the process of manufacture or processing of goods for sale and goods not covered by the registration certificate had been purchased by misusing the declaration in form "C", the Sales Tax Officer, Keonjhar, initiated a proceeding under section 10A of the Central Sales Tax Act and issued notice calling upon the petitioner to explain why penalty as prescribed should not be imposed. The petitioner showed cause explaining that the refractory in respect of which "C" forms had been utilised were not included in the registration certificate due to some mistake because any sponge iron plant would require refractory for lining up the kiln. The other items were included in the registration certificate. 2.. The Sales Tax Officer held that goods like iron, steel, cement, weighing machines, etc., purchased at concessional rate by utilisation of "C" forms were not utilised in the manufacture or processing of goods for sale. Therefore, the petitioner utilised the goods otherwise without reasonable excuse. Hence, it committed an offence under section 10(d) of the Central Sales Tax Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the quashing of the orders passed by the Sales Tax Officer and the revisional authority as per annexure 3 and annexure 7. 3.. Dr. Debi Pal appearing for the petitioner has contended that the list appended to the certificate of registration has been nomenclatured as under: "List of goods intended to be used for setting up sponge iron plant." In the said list are specified the following items: 25.. Rotary kiln with inlet and outlet goods, etc. 49. Erection materials. 56. Laboratory instruments. 65. Construction materials of all types like steel, cement, wood, hardwares, sanitarywares, electrical fittings, flooring materials, stationery materials, barbed wires, paints, etc. He has urged that the rotary kiln was the core of the sponge iron plant and operates at a temperature of 1050 centigrade to 1100 centigrade. The post combustion chamber forms a part of the kiln and the kiln is lined up with refractory and ceramic fibre blanket. Rotary kiln cannot be purchased and sold. It has to be constructed. Refractories constitute an essential part of the kiln for the purpose of lining. Refractories, therefore, came within the entry "rotary kiln with inlet and outlet goods, etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es were not specified in the certificate of registration. It falsely represented to the selling dealer that refractories were included in its certificate of registration and it was entitled to purchase of the same at the concessional rate. Therefore, it committed infraction of section 10(b). The plea taken by the petitioner that refractories were covered by the expression "etc." in item No. 25, was an afterthought since in its statement filed before the Sales Tax Officer, Keonjhar Circle, it clearly stated that refractories were not included in the registration certificate because of a sheer mistake and a request was made to treat refractories as a part of the registration certificate with retrospective effect. The statement has been filed as annexure A/3. Even annexure A/2 furnished by the petitioner showed that cement worth Rs. 4,98,425 out of the cement purchased for setting up of the sponge iron plant was utilised for construction of staff colonies. Similarly, steel worth Rs. 3,56,817 was used for construction of township. Several goods not having been used in the manufacture of goods there was an infraction of clause (d) of section 10. Hence, penalty was exigible. It has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity of raw materials fed and the product produced. Computers are essential for analysis in the process of manufacture. Road weigh bridges are utilised for measuring iron ore and coal fed into the plant. The value of these goods were also included in the proceeding. But neither of the authorities has considered if these were covered by rule 13 or if they were integrally connected in the manufacture of goods. 6.. In J.K. Cotton Spinning Weaving Mills Co. Ltd. v. Sales Tax Officer [1965] 16 STC 563, the Supreme Court, construing section 8(3)(b) read with rule 13, observed: "The expression 'in the manufacture of goods' in section 8(3)(b) should normally encompass the entire process carried on by the dealer of converting raw materials into finished goods. Where any particular process is so integrally connected with the ultimate production of goods that, but for that process, manufacture or processing of goods would be commercially inexpedient, goods required in that process would fall within the expression 'in the manufacture of goods'.......... if a process of activity is so integrally related to the ultimate manufacture of goods so that without that process or activity manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... normally be regarded as equipment necessary to effectually carry on the manufacturing process. It negatived the contention that electrical equipments to fall within the terms of rule 13 must be an ingredient of the finished goods to be prepared, or it must be a commodity which was used in the creation of goods. It concluded: ".......If, having regard to normal conditions prevalent in the industry, production of the finished goods would be difficult without the use of electrical equipment, the equipment would be regarded as intended for use in the manufacture of goods for sale......." The Supreme Court held that office equipment such as fans, coolers, air-conditioning units, would not be admissible to special rates. In Indian Copper Corporation Ltd. v. Commissioner of Commercial Taxes [1965] 16 STC 259 (SC), which was a case relating to a dealer engaged both in mining operations and the manufacturing process, the two processes being interdependent, it was held that vehicles which were used for removing from the place where mining operations were concluded to the factory where the manufacturing process starts, would come within the expression "intended to be used" in the manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer certified that the petitioner could purchase a rotary kiln at a concessional rate, it is understood that the various parts which would go to make a rotary kiln could be purchased at a concessional rate. Counsel for the petitioner has relied upon State of Tamil Nadu v. South India Drum Manufacturing Co. [1985] 60 STC 110 (Mad.) where the court was called upon to consider if 26, 24 and 22 gauge CRCS sheets covered all raw materials required for the manufacture of drums within the expression "raw materials like 26, 24 and 22 gauge CRCS sheets ". It was held that the expression "like 26, 24 and 22 gauge CRCS sheets" was only descriptive and was not exhaustive of the raw materials. In the State of Tamil Nadu v. A.S.A.M. Adian Chettiar [1984] 55 STC 353 (Mad.) the controversy was if the expression "resale of only brassware, eversilverware, copperware, steel furniture, etc." would cover aluminiumwares. It was held that the expression "etc." would cover all those articles referred to earlier and also allied articles. We are, therefore, of the view that the entry in item No. 25 would cover refractories without which a rotary kiln cannot be constructed and function. It, therefore, foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC); AIR 1980 SC 346, penalty was imposed for non-inclusion of an item in the taxable turnover. It was held that where an item was not included under a bona fide belief that the assessee was not liable, it would not be right to condemn the return as a false return inviting imposition of penalty. Unless the filing of an inaccurate return is accompanied by guilty mind, the provisions could not be invoked for imposition of penalty. Reliance was placed upon Hindustan Steel Limited v. State of Orissa [1970] 25 STC 211 (SC); AIR 1970 SC 253, where it was observed: "..........even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute...." Dr. Pal, the learned counsel for the petitioner, contended that imposition of penalty is unjustified when the petitioner purchased cement, steel, etc., at a concessional rate in the bona fide belief that it could do so in view of the statement in the registration certificate. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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