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TMI Blog2009 (12) TMI 907X X X X Extracts X X X X X X X X Extracts X X X X ..... ing penalty was questioned by the assessee before the Joint Commissioner of Commercial Taxes (Appeals) who by order dated July 13, 2004 confirmed the order of levying penalty and dismissed the appeals. 3. Aggrieved by the same, the respondent-assessee preferred appeals before the Karnataka Appellate Tribunal in S.T.A. Nos. 2457-62 of 2004 and penalty levied under section 5A(2)/5A(3) of the KST Act for the assessment years 1997-98 to 2002-03 came to be set aside and the appeals came to be allowed by order dated August 23, 2005. The Revenue is questioning the said orders of the Tribunal in this revision petition. 4. We have heard Smt. Geetha Menon, the learned Additional Government Advocate appearing for the revision petitioner-Revenue and Sri M.N. Shankare Gowda, the learned counsel for the respondentassessee. 5. We find that at the time of admission of this revision petition, the following substantial questions of law have been framed for consideration in this revision petition: "(1) Whether the KAT was justified in observing that the expression 'manufacturing unit' employed under section 5A of the Act should not be construed in strict sense? (2) Whether the Tribunal w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring activity. He elaborates his submission by contending that change of law would not give rise to levy penalty particularly in the background of the Revenue itself having accepted the activity of the assessee amounted to manufacturing and accordingly submits that order of the Tribunal in allowing the appeal and annulling the orders of levying penalty does not call for interference. 8. Having heard the counsel for the parties, the only question that arises for consideration in this revision petition is: "Whether the Tribunal was justified in setting aside the penalty levied by the authorities for the assessment years in question on the ground that activity carried on by the assessee does involve manufacturing activity?" 9. It is an undisputed fact that for the assessment years in question, i.e., 1997-98 to 2002-03, the assessing officer has assessed the dealer by accepting the contention that they carry on manufacturing activity and accordingly demanded tax also. The ground on which the jurisdictional officer initiated penalty proceedings was on the basis of the judgment of this court rendered by the learned single judge in the case of Poonam Stone Processing Industries [2000] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n levying penalty under section 5A(2) and (3) of the Act. It is in this background, the provision of section 5A(2) and 5A(3) is to be looked into. The said provisions read as follows: "5A: Taxation of industrial inputs.-(1) . . . (2) If any person, (i) not having his manufacturing unit inside the State and having purchased any inputs by furnishing a declaration under the first proviso to sub-section (1), sells away such inputs contrary to such declaration, (ii) Omitted by Act No. 23 of 1983 with effect from April 1, 1983 (iii) Omitted by Act No. 9 of 1986, with effect from April 1, 1986 (iv) Having his manufacturing unit inside the State and having purchased any inputs by furnishing a declaration under the first proviso to sub-section (1), sells away such inputs contrary to such declaration, the assessing authority, after giving such person a reasonable opportunity of being heard, shall, by order in writing, impose upon him by way of penalty a sum, which shall not be less than the amount of tax leviable (under section 5) on the sale of the inputs so purchased, but which shall not exceed double the amount of such tax; (v) having his manufacturing unit inside the State and ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the said assessee and the judgment of the learned single judge came to be set aside which is Poonam Stone Processing Industries v. Deputy Commissioner of Commercial Taxes (Admn.), Gulbarga Division, Gulbarga reported in [2000] 118 STC 409 (Karn). It is no doubt true that as rightly contended by Smt. Geetha Menon that as regards the finding given by the learned single judge of this court with regard to manufacturing activity, no finding has been given by the Division Bench. The said decision cannot be pressed into service by the respondent-assessee. Be that as it may, the authorities themselves having issued a circular in the year 2003, i.e., on November 11, 2003 being in doubt as to under which category activity of polishing of granite stones is to be treated. Said notification dated November 11, 2003 reads as under: "No. KSA. CR. 12800-01 Office of the Commissioner of Commercial Taxes in Karnataka, Bangalore, dated November 11, 2003. COMMISSIONER OF COMMERCIAL TAXES CIRCULAR NO. 19/03-04 Sub : KST Act, 1957, availability of form 37 declarations facility to the dealers engaged in the process of cutting and polishing of rough granite stones into polished stones-Appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of unpolished granite stones for being used in conversion into polished granite stones. (4) Similarly action shall be taken to levy tax on sale of polished granite stones obtained out of KST suffered unpolished granite stones as first sale at the applicable rate. Any assessment concluded treating such sale as second sale shall be reassessed under section 12A or taken up in revision under section 21 or 22A as the case may be. (5) All the officers of the internal audit, Joint Commissioner of Commercial taxes (Administration), Additional Commissioners and Inspection Wing of this office shall specially review the cases falling under the above categories and also the action taken as per instructions issue. 4. All the concerned shall note and follow the above instructions carefully. Any deviation shall be viewed seriously." Hence, we do not find justification for the authorities in initiating penalty proceedings to a concluded proceedings particularly when the authorities themselves having accepted that the activity of the respondentassessee was that of manufacturing. Thus, we find that both the assessing authority as well as the first appellate authority were in error in proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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