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TMI Blog2010 (2) TMI 1104X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act ), relate to the justification of the levy of penalty for two assessment periods, namely, April 1, 2000 to March 31, 2001 and also from April 1, 2001 to March 31, 2002. Notices had been issued to the respondents on the admission. The respondents are served and represented by Smt. Geetha Menon, learned Additional Government Advocate. For the purpose of the record, we have admitted these revision petitions and taken up the revision petitions for disposal itself, with the consent of learned counsel appearing for the petitioner and the respondent-State and the Commissioner. The questions of law, which are sought for our examination, are indicated in the memorandum of revision petition, which reads as under: (i) Whether, in the facts and circumstances of the case of the petitioner, where the assessing authority who passed the original assessment orders under CST Act, 1956 for the years 2000-01 and 2001-02 made speaking orders that inter-State sales of de-oiled rice bran obtained out of KST paid rice bran were eligible for exemption from tax and accordingly exempted the inter-State sales from levy of tax and also as per provisions of section 8(2A) of the CST Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssable turnover by the dealer, direct the dealer to pay, in addition to the tax assessed under sub-section (1), a penalty not exceeding one and a half times the tax so assessed: Provided that no penalty under this sub-section shall be imposed unless the dealer affected has had a reasonable opportunity of showing cause against such imposition. The assessee, a dealer as a manufacturer of rice bran oil and also de-oiled rice bran, was also selling the residue of the de-oiled rice bran, after extraction of the oil from the rice bran. The assessee is a registered dealer under the provisions of the Act. In respect of the two years under consideration, assessee had claimed that certain amount of de-oiled rice bran had been transferred to its branch offices outside the State. The turnover of the assessee also included the inter-State sale of de-oiled rice bran and in respect of this part of the turnover, it is the version of the assessee that, the assessee had claimed the transaction being exempted from levy of Central sales tax for the reason that the de-oiled rice bran is to be treated at par with rice bran in terms of the ruling given by this court and further, that rice bran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of section 12A(1A) of the Karnataka Sales Tax Act to justify the penalty, when the facts and circumstances do not warrant such a penalty in terms of this provisions of law. Mr. G. Rabinathan, learned counsel for the petitioner, would also submit that the judgment of the Supreme Court in the case of State of Madras v. S. G. Jayaraj Nadar Sons [1971] 28 STC 700 clearly lays down the law that no penalty is leviable on the sales found from the books of accounts and brought to tax and this judgment is clearly attracted and the second question of law sought for answer is the question directly arising for examination on the ratio laid down by the Supreme Court in the above referred case; that the revision petition of the petitioner should be allowed, the order of penalty is to be set aside on applying the said law to the present set of facts, etc. Appearing on behalf of the respondent-State, submission of Smt. Geetha Menon, learned Additional Government Advocate, is that the assessee cannot claim any bona fide conduct; that the fact of the matter is that the assessee did not pay tax on the inter-State sales turnover; that the so-called claim towards exemption is a non-existent o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequent assessing authority in a reassessment order and if the assessee having not paid tax and except this, having now fallen in line with the view as taken by the assessing authority in the reassessment order, no penalty is warranted, etc. While, the language does indicate that a penalty is justified only in a situation where there is wilful non-disclosure by the assessee leading to escapement of tax, question is as to whether the present situation is one such or otherwise and a question of this nature is not necessarily answered by the ruling in the judgment of the Supreme Court reported in the case of S.G. Jayaraj Nadar Sons [1971] 28 STC 700. In fact, even in the present case as is indicated in the question, there are cases where there was not only disclosure, but payment of taxes. In the present case, it cannot even be said that there is a disclosure by a formal declaration of the same, whether in respect of the very orders that the assessee had claimed or some part as inter-State sale transaction as merely stocks transfer and that was also disallowed. But, more importantly, the assessee, assuming that it had claimed that the turnover was exempted from levy of taxes, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act and not otherwise. In the instant case, there is no dispute that there is no such Notification issued under section 8A of the Act, under the State Act. An exemption is granted to avoid a liability, which is otherwise a tax liability under the enactment. An exemption in respect of a non-liability is neither an exemption nor is necessary. A second point sale, being not subject to levy of taxes under the State Act, is a part of the scheme of levy and does not partake the character of an exemption in terms of section 8A of the Act. We are of the clear view that a second sale being not subjected to levy of taxes within the State Act, does not translate into an exemption in favour of a sales tax transaction of the very goods on the premise that a second sales is exempted within the State Act. Apart from this legal position, particularly, in so far as the penalty is concerned, what is important is the conduct of the assessee and in so far as conduct is concerned, the bona fide are also relevant and attracted. An assessee claiming a non-existing exemption when there is no express exemption granted in respect of the particular goods in terms of section 8A of the Act, can ..... X X X X Extracts X X X X X X X X Extracts X X X X
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