1985 (8) TMI 353 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the Division Bench was correct in dismissing the special appeal and holding that no penalty could be imposed.
2. Whether it is obligatory for the dealer to maintain a separate stock register as provided under rule 42(2).
3. Whether failure to maintain a stock register amounts to a contravention and attracts penalty if nil tax is assessed.

Detailed Analysis:

1. Dismissal of Special Appeal and Imposition of Penalty:
The assessing authority imposed a penalty of Rs. 500 on the manufacturer for not maintaining a stock book as required by rule 42(2) of the Rajasthan Sales Tax Rules, 1955. The Deputy Commissioner (Appeals) set aside the penalty, and the Board of Revenue upheld this decision, stating that the penalty was imposed only on a technical ground and that the dealers were not liable to tax since they dealt only with exempted goods. The Division Bench of the Board dismissed the special appeal, relying on its earlier decision in Laxmi Misthan Bhandar's case, asserting that the point was too clear to warrant a reference to the High Court.

2. Obligation to Maintain Separate Stock Register:
The core issue revolved around whether a dealer or manufacturer dealing only in exempt goods is still "liable to pay tax under the Act" and thus required to maintain a stock book. The court examined the definitions and provisions under the Rajasthan Sales Tax Act, 1954, particularly focusing on the terms "liable to pay tax" and "tax shall be payable." It was concluded that even if the tax is not payable due to exemptions, the dealer or manufacturer is still considered liable to pay tax under the Act if their turnover meets the criteria set out in section 3.

3. Contravention and Penalty for Not Maintaining Stock Register:
The court noted that the manufacturer did not maintain the required stock book for raw materials and finished goods. Despite the goods being exempt from tax, the manufacturer was still liable to pay tax under the Act, and failure to maintain the stock book constituted a contravention of rule 42(2). This non-compliance attracted the imposition of a penalty under section 16(1)(n) of the Act. The court emphasized the distinction between "liable to pay tax" and "tax shall be payable," clarifying that the manufacturer's liability to pay tax exists irrespective of the exemption from actual payment.

Conclusion:
The application was allowed, and the orders of the Deputy Commissioner (Appeals), the Board in revision, and the special appeal were set aside. The assessment-cum-penalty order imposing a Rs. 500 penalty on the manufacturer was restored. The court affirmed that non-compliance with rule 42(2) entails the imposition of a penalty under section 16(1)(n) of the Act. The petition was allowed with no order as to costs.