2014 (8) TMI 892 - HC - VAT and Sales Tax

Penalty under Section 10-A of the Central Sales Tax Act - petitioner had purchased machineries at concessional rate of tax by using Form-C when the petitioner does not have any liability of tax and was only involved in the execution of job work - Contravention of Section 10A - Non admission of any tax liability on the work done by it for NCL - Held that - The impugned order indicates the reason for imposition of penalty, namely, that since the petitioner has not admitted any tax liability on the execution of the works contract, hence the petitioner has contravened the provisions of Section 10-A of the Act. Such reasoning is patently perverse and does not come within the parameters of imposition of penalty under clause (b), (c) and (d) of Section 10 of the Act. The learned standing counsel, however, submitted that penalty has been imposed under clause (d) of Section 10 of the Act, which stipulates that if a person after purchasing any goods for any of the purposes specified in clause (b), (c) or (d) of sub-Section (3) or sub-Section (6) of Section 8 fails without any reasonable excuse to make any use of goods for any such purpose in which case penalty under Section 10-A of the Act could be imposed. From a perusal of the counter affidavit that nothing has been indicated that the equipment so purchased was not in consonance with the declaration given in Form-B nor it has been disclosed that the equipments so purchased are not being used by the petitioner. Imposition of penalty was wholly illegal and without any basis. The reasoning mentioned in the impugned order is in gross violation of the provisions of Section 10-A of the Act. Consequently, the impugned orders imposing penalty cannot be sustained - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of Section 8(3)(b) of the Central Sales Tax Act regarding the purchase of goods at a concessional rate for specific purposes.
2. Imposition of penalty under Section 10-A of the Act for alleged contravention of provisions.

Analysis:
1. The judgment involved a dispute regarding the interpretation of Section 8(3)(b) of the Central Sales Tax Act, which allows registered dealers to purchase goods at a concessional rate for specified purposes. The petitioner, a company undertaking works contracts, was granted registration under the Act to purchase heavy machinery for overburden removal in a mining project. The Assistant Commissioner allowed the petitioner to purchase equipment at a concessional rate against Form-C. The court examined the relevant provisions and concluded that the purchase for mining purposes was valid under the Act, as the works contract involved overburden removal akin to mining activities. The court noted that the equipment was used as per the declaration in Form-B and Form-C, thus upholding the petitioner's right to purchase machinery at a concessional rate for the works contract.

2. The imposition of a penalty under Section 10-A of the Act was challenged by the petitioner, contending that the penalty was unjustified as the purchases were made in compliance with the registration and for the intended purpose. The court reviewed the penalty provision, which allows penalties for specific offenses such as falsely representing goods covered by registration or failing to use purchased goods for specified purposes. The court found that the penalty imposed on the petitioner was erroneous, as the purchases were made for the execution of the works contract, as permitted under the registration. The court emphasized that the penalty reasoning lacked merit and contravened the Act's provisions. Consequently, the court quashed the penalty orders, ruling in favor of the petitioner in all the writ petitions.

This detailed analysis of the judgment highlights the key legal issues, the court's interpretation of relevant provisions, and the reasoning behind the decision to quash the penalty orders.