TMI Blog2015 (2) TMI 969X X X X Extracts X X X X X X X X Extracts X X X X ..... cooker is levied at the rate of 4%, the description in the entry is "utensils of all kinds including pressure cookers except made of precious metals" We agree with the stand taken by the Commissioner of Taxes in the aforesaid affidavit. Whether pressure cooker falls within the sweep of Entry No.6 of Part-A General of Second Schedule or not will have to be determined keeping in mind the legislative intent expressed through the words in the entry. When the description of the entry is aluminium utensils and enamelled utensils, the legislative intent is quite clear that to come within the sweep of Entry No.6, the good in question has to be an aluminium utensil and enamelled utensil. Had the Legislature intended to give the benefit of the entry to goods, such as pressure cooker, it would have been clearly mentioned in the entry itself. We cannot go beyond the description of the goods under Entry No.6 as given in the statute. As is well accepted, a taxing statute has to be strictly construed. The order imposing penalty, the reasons for imposition of penalty as well as the quantum of penalty must be discernible.This will reflect application of mind by the authority imposing the pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red necessary. WPC No. 5766/2007 4. In this case, M/s. Hawkins Cookers Ltd. is the petitioner. Petitioner is a public limited company having its registered office at Mumbai and a branch office at Guwahati. It is engaged in the business of manufacturing and marketing of pressure cookers under the brand name of Hawkins . It is also engaged in marketing of various kitchen ware items, such as frying pan, tava etc. The above goods are made of aluminium. Petitioner is a registered dealer under the Assam Value Added Tax Act, 2003 (VAT Act). Respondent No. 2 is the assessing authority of the petitioner. Since coming into force of the VAT Act, petitioner has been submitting its tax returns under the VAT Act showing the turnover of sales of pressure cooker and kitchen ware items made of aluminium. Since aluminium utensils and enamelled utensils specified under Entry No.6 of Part-A General of the Second Schedule to the VAT Act has prescribed tax thereon at the rate of 4%, petitioner paid tax at the rate of 4% on the sales turnover and disclosed the same in the returns. Respondent No.2 in his notice dated 24.03.2006 informed the petitioner that it had failed to pay tax at the correct ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifth Schedule, which is a residuary list attracting tax at the rate of 12.5% as prescribed. Therefore, view taken by the Commissioner is correct and requires no interference. WPC No. 173/2008 7. In this case M/s. Nirlep Appliances Ltd. is the petitioner, which is engaged in the business of manufacturing and marketing of various kitchen items and pressure cooker under the brand name of Nirlep . It is stated that the above goods are made of aluminium. Petitioner is a registered dealer under the VAT Act and has been submitting its tax returns showing the turnover of sales of pressure cooker etc. and paying tax at the rate of 4% by treating pressure cooker and the other items under Entry No.6 of Part-A General of Second Schedule as aluminium utensils and enamelled utensils. Assessing authority issued notice dated 22.06.2007 to show cause as to why tax at the rate of 12.5% should not be levied by taking the view that pressure cooker is not aluminium utensils and enamelled utensils. Petitioner was asked to file fresh return showing the turnover with additional tax. Petitioner submitted application before the Commissioner of Taxes, Assam under section 105 of the VAT Act for determi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply dated 27.12.2007 requesting the authority to drop the proceeding for realisation of additional tax as well as for imposition of penalty. Ultimately, order dated 31.12.2007 was passed by the assessing authority, whereby, it was stated that petitioner had paid 4% tax on sales turnover on pressure cooker instead of 12.5% and the differential amount of tax due came to ₹ 6,50,619.00. Penalty was also levied for such default. The breakup of the additional tax and the penalty imposed are as follows:- 2005-06 2006-07 2007-08 (upto Nov/07) Total Evaded Tax:- Rs.3,06,849/- Rs.2,14,993/- Rs.1,28,777/- Penalty u/s 90 Rs.3,06,849/- Rs.2,14,993/- ₹ 1,28,777/- Total demand due Rs.6,13,698/- Rs.4,29,986/- Rs.2,57,554/- Aggrieved, petitioner has filed the related writ petition challenging the legality and validity of the clarificatory order of the Commissioner of Taxes, Assam dated 24.07.2007 and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utensil as is commonly understood and, therefore, is not covered by Entry No. 6 of Part-A General of the Second Schedule. Since it is not covered by any of the entries in the First, Second, Third and Fourth Schedules, it would come under the Fifth Schedule as a residuary item under Entry No. 1 in which case tax is leviable at the rate of 12.5%. A connected issue of levy of additional tax by application of the higher rate of tax and imposition of penalty for default in the payment of the differential tax amount has arisen in one of the petitions. 12. We have heard Mr. GK Joshi, learned Senior Counsel for the petitioners and learned Standing Counsel, Finance (Taxation) Department, Assam. 13. Mr. Joshi, learned Senior Counsel for the petitioners submits that pressure cooker is made of aluminium. Use of other materials in minor quantities would not make it a non-aluminium item. In various other States of the country including in some of the neighbouring North Eastern States, pressure cooker is treated as an aluminium item and is taxed at the rate of 4%. Departure made by the revenue authorities in the State of Assam from the uniform pattern of taxation in other States is not just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooker will not come within the category of aluminium utensils mentioned in Entry No. 6 of Part-A General of the Second Schedule. Since there is no specific entry for pressure cooker, it will be covered by Entry-1 of the Fifth Schedule, which is the residuary Schedule and will be taxable at the prescribed rate of 12.5%. 17. The reasoning given by the Commissioner is a plausible one and appeals to the Court. This position has been further explained in the affidavit filed by the Commissioner on 19.05.2011 in WP(C) No. 5766/2007. It is stated that pressure cookers have valves made of steel, rubber gasket and also have rubber insulating materials. Pressure cooker is not made solely of aluminium so as to qualify for inclusion in Entry No. 6 of Part-A General of the Second Schedule. In common parlance, pressure cookers are not understood as mere utensils, but contrived appliances meant for domestic use. To fall within the sweep of Entry No. 6, the item must not only be a utensil, but must be aluminium or enamelled utensil. The affidavit has stated that in other States where tax on pressure cooker is levied at the rate of 4%, the description in the entry is utensils of all kinds includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. Subject to the observation as above, the aforesaid challenge is rejected. 20. Coming to the challenge to imposition of penalty, this Court has already held in WP(C) No.4112/2007 (Vishal Retail Ltd. Vs. State of Assam Ors.) disposed of today that imposition of penalty is not automatic on default. That was also a case relating to imposition of penalty under section 90 of the VAT Act. It has been held that discretion is vested on the authority empowered to impose penalty; whether to impose penalty at all or not and in the event it is decided to impose penalty, what should be the quantum. The order of penalty must reflect application of mind indicating exercise of discretion. It must be a speaking order. Relevant portion of the said order reads as under:- 14. A careful reading of the aforesaid provision would indicate that in case of contravention or failure to comply with any provision of the VAT Act or the Rules framed thereunder, if no other penalty is provided under the VAT Act for such contravention or failure, penalty of an amount not exceeding twice the amount of tax evaded or sought to be evaded or involved, may be imposed. As per the proviso, no penalty under the ..... 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