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2017 (5) TMI 1119 - HC - VAT and Sales TaxWhether penalty under Section 10 (b) of CST Act can be levied even in respect of “class of goods” being exempted from payment of tax, when such goods are permitted to be purchased as per the list annexed to the Certificate of Registration? Held that: - the goods which have been purchased by the dealer against Form-C were undisputedly included in the certificate of registration. The very fact that the goods purchased by the dealers were included in the certificate of registration and those goods alone have been purchased by them against Form-C establishes the bonafides of the dealers or in other words there was no intention to suppress at the time of purchasing the goods. It has to be presumed that the authorities were satisfied the said goods are for use in the manufacturing and processing of goods for sale by the dealers. In terms of Rule 3 (5) of the CST Rules, the notified authority while granting the certificate of registration would have included the goods in the said certificate only upon satisfying itself that the said goods are indeed eligible for inclusion in terms of the end use and as such a presumption has to be raised in favor of the dealers. Hence, it cannot be gainsaid by the authorities that the dealers had misrepresented or gave a wrong impression regarding the usage of goods to attract levy of penalty. It was not the case of the adjudicating authorities that the goods in question which have been purchased by the appellant/dealer had not been purchased by them on inter state basis. But on the other hand it was their specific case that appellant / respondent had misused Form-C as these goods are not integrally connected with the manufacturing process. Under Rule 3(5) of the CST Rules the notified authority at the time of granting registration certificate is required to conduct an enquiry as it deems fit and then issues the registration certificate containing list of goods upon being fully satisfied that the particulars contained in the application are correct. Once the goods are included in the certificate of registration which in terms of Rule 5 of the CST Rules is done, an enquiry regarding the feasibility of use of such goods in the manufacturing process or processing of goods for sale etc. the eligibility to purchase such goods against Form-C would not be a ground available to the adjudicating authority and deprive the dealer such benefit on the ground that the goods are not used in the manufacture or processing of goods for sale. When once the item has been included in the registration certificate, automatically it would be eligible for the concession until and unless the registration certificate is either amended, cancelled or annulled - In the instant case the rail and its spares for rail used by the appellant for movement of raw materials (fly ash) to the manufacturing unit and also loose cement from the manufacturing unit to the packing unit have direct link to the activities carried on by the appellant namely manufacture of cement and it is an integral part of the said activity. The whole process of operation is integral and is essentially of mining nature. The activity of transporting the goods from railway yard to the manufacturing location is an activity which is integrally connected to the manufacturing process and the goods purchased in respect of such transpiration would also be covered under Section 8 (3)(b) of CST Act. Hence, the goods purchased by the appellant in STA No.154/2016 would not contravene the provisions of the act and therefore the order of levy of penalty in the case of the appellant under suo moto proceedings cannot be sustained. Appeal allowed - decided in favor of assessee.
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