TMI Blog1992 (12) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... despatched outside the State on consignment sale. The case of the assessee was that the packing materials were purchased using the declaration forms in good faith and therefore no mens rea could be attributed to it. However, the assessing authority found that the assessee had violated sub-section (7) of section 5 of the Act during the aforesaid assessment years. Exhibits P1 and P2 are the consequent orders levying penalty under section 45A for the years 1982-83 and 1983-84 respectively. A sum of Rs. 57,823 was levied as penalty for the year 1982-83 and a sum of Rs. 1,33,127 for the year 1983-84. The penalty levied as above works out to 1 times of the tax sought to be evaded for each year. As against these orders the assessee filed revision petitions and the Deputy Commissioner by exhibit P3 common order confirmed the levy of penalty under section 45A; but, however, the quantum of penalty was reduced to the amount equal to the tax sought to be evaded. In other words, a sum of Rs. 38,548 was fixed as penalty for the year 1982-83 and Rs. 88,746 for the year 1983-84. The Board of Revenue by exhibit P4 order, confirmed the common order of the Deputy Commissioner and penalty levied was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Sales Tax Act by reason of the first proviso thereof. The benefit of this provision shall be available only when the dealer selling the goods furnishes to the assessing authority declarations in the prescribed form. 4.. In this case it has come out from exhibits P1 and P2 orders that the assessee had issued declaration forms in form No. 18 claiming the benefit under section 5(7) of the Act. The contention is that the turnover relating to packing materials used for packing of finished goods is liable to tax only at the rate of 4 per cent and hence the said benefit is available. Assuming it to be so, the further point to be established is that the "sale" occurring in the expression "for packing of such finished products inside the State for sale" is sale "simpliciter". Reliance is placed on the decision of the Supreme Court in Assessing Authority-cum-Excise and Taxation Officer v. East India Cotton Mfg. Co. Ltd. [1981] 48 STC 239. The main controversy between the parties in that case centres round the true interpretation of section 8(3)(b) of the Central Sales Tax Act. After analysing the provisions the Supreme Court held thus: "Now here we find that the expression used by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act though tax is not payable by virtue of the notification. Such a situation did not arise in the present case. 7.. Even if this Court accepts the contention that the word "sale" in the aforesaid expression is sale "simpliciter", the assessee cannot succeed in view of the first proviso which says that the benefit of the sub-section will not apply where the sale of such finished products is not liable to tax either under this Act or under the Central Sales Tax Act or when such finished products are exported out of the territory of India. In the present case, finished products were despatched to outside the State on consignment of sale. There is no dispute that such sale was not liable to tax either under the provisions of the Kerala General Sales Tax Act or under the Central Sales Tax Act during the relevant period. 8.. It is contended on behalf of the State that the assessee is not entitled to claim the benefit under sub-section (7) of section 5 because what is purchased is only "containers" and not "packing materials". The argument is that subsection (7) deals with "packing materials" whereas sub-sections (5) and (6) deal with "containers" or "packing materials" and this dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The use for which the article is put is a decisive factor in deciding the character of the process whether it is a "containing" or "packing". When tin is used for storing coconut-oil, it can be called as a "container" but not as a "packing material". 10.. The next decision brought to my notice is of the Division Bench of the Orissa High Court in State of Orissa v. Balaji Wood Industries reported in [1978] 42 STC 178. The article which was dealt in that case was cable drums made of timber around which aluminium cables are wound so as to keep them intact. The Division Bench after considering the facts of that case and invoking common parlance theory held that cable drums can be treated as packing materials for aluminum cables. That conclusion was arrived at in view of the specific use of the cable drum as packing material for aluminium cable. The reliance is also placed on the decision of the Gujarat High Court (Division Bench) in State of Gujarat v. Kishor Timber reported in [1991] 83 STC 370. The article involved in that case was wooden pallets. It was found to be packing material in view of the use to which the goods were put. These two decision do not hold that once an article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e quantum of penalty should depend upon the gravity of the offence. If it is not so, and the maximum penalty is levied, in a mechanical manner, it is a pointer to show that the officer has not exercised the judicial discretion vested in him according to law." To put it differently the doctrine of "proportionality" or "Wednesbury" principle is to be applied in fixing the quantum of penalty in a particular case. It is time and again said that the penalty should not be levied because it is lawful to do so. In case maximum is prescribed it shall be levied according to the proportion of the magnitude of the offence and other connected circumstances. The following two decisions are also brought to my notice by the counsel appearing for the assessee. 13.. The Rajasthan High Court in Commercial Taxes Officer v. Board of Revenue reported in [1987] 65 STC 440 held: "But in any view of the matter two views are possible in this respect, as the Board of Revenue in the case of Assam Roller Flour Mills v. Commercial Taxes Officer, Special Circle 1, Jaipur 1975 RRD 255, took the view that if the purchase of wheat was tax-paid, then the sales tax was not leviable on the sale of maida or suji. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee for claiming the benefit of concessional rate of tax. It would have been possible for the assessing authority to take steps to prevent the assessee from using the declaration forms if it was vigilant enough to form an opinion that the assessee had used the declaration forms in violation of the provisions of the Act. Nothing had been done in this regard. At any rate, the question of benefit under sub-section (7) in this case is an arguable point as Supreme Court observed in Cement Marketing Company's case [1980] 45 STC 197. This point can only be decided by discussion, argument and exchange of views. In these circumstances it is difficult for this Court to say that the assessee in this case had acted deliberately or with guilty mind or dishonest intention in claiming the benefit under sub-section (7) by filing declaration forms. The said benefit is found to be claimed by the assessee bona fide in regular course of business transactions. 16.. Nevertheless I am not in favour of completely absolving the liability of the assessee from the clutches of penal provision. The reason is that its contentions are found to be unacceptable after elaborate discussion and argument. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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