TMI Blog2017 (6) TMI 839X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of the 1959 Act, would show that an Assessee can avail of the concessional rate of tax of 3%, only, if the consumable, in this case, furnace oil and hytherm oil, is used in the manufacture of goods, which are sold by him - while in the present case, the findings of fact recorded by the Adjudicating Authority, which have been affirmed by the Tribunal, to the effect, that JTP had processed cotton fabric, albeit, on a job work basis, we have no difficulty in accepting the submission of Ms.Hemalatha, that, job work would fall within the scope and ambit of the expression manufacture , Having said so, what we are not able to agree with, is that, manufacture, in this case, processing, can be done in respect of a third party's property - thus, the concessional rate of tax of 3% was not available to JTP. The JTP, was thus, as found by the Adjudicating Authority, required to pay tax at the usual and normal rate, which at the relevant time was 12%. Penalty - quantum of penalty - Held that: - A mere perusal of Section 23 would show that, if it is found that a person is guilty of any offence under clause (e) of subsection (2) of Section 45 of the 1959 Act, the Assessing Officer "may" aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are required to be noticed: 3.1.JTP claims to be a works contractor which, processes cotton fabrics. For this purpose, they purchased furnace oil and hytherm oil against Form XVII. The JTP thus, claim a concessional rate of tax, as provided in Section 3(3) of the Tamil Nadu General Sales Tax Act, 1959 (in short, the 1959 Act), on the ground that furnace oil and hytherm oil, was used by them in processing cotton fabrics. The Revenue, found fault with it and accordingly, issued a show cause notice. 3.2.We are told, a reply was filed and after a hearing was held in the matter, two separate adjudication orders of even date, i.e., 25.10.2004 were passed. By virtue of the said adjudication orders, the Adjudicating Authority, came to the conclusion that JTP had misused the declaration as contained in Form XVII and thus, directed levy of penalty under Section 23 of the 1959 Act. Consequent thereto, penalty at the rate of 150% of the tax due was proposed. 3.3.Resultantly, in absolute terms, penalty in the sum of ₹ 1,87,028/- was levied in respect of the assessment year 2001-02, while, in respect of the assessment year 2002-03, penalty amounting to ₹ 2,19,515/- was levie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interfered in the matter. 7.Mr.Annamalai, on the other hand, largely relied upon the order of the Tribunal. 7.1.It was the learned counsel's submission that concessional rate of tax could not have been availed of, by JTP, in view of the fact that it had only processed the cotton fabric, albeit, on job work basis, which activity took it out of the ambit of Section 3(3) of the 1959 Act. 7.2.Learned counsel further submitted that in view of the clear violation of the provision of Section 3(3) of the 1959 Act, the First Appellate Authority, i.e., AAC, rightly, sustained the order of the Adjudicating Authority, whereby, penalty was imposed. 8.We have heard the learned counsels for the parties and perused the record. 9.Before we proceed further, it may be important to set forth hereunder the relevant extracts of Section 3(3) of the 1959 Act: Sec.3(3) Notwithstanding anything contained in 3[sub-section (2), (2-A) or (2-C),] but subject to the provisions of sub-section (1), the tax payable by a dealer in respect of sale of any goods including consumables, packing material and labels, but excluding plant and machinery, to another dealer for use by the latter in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, is that, manufacture, in this case, processing, can be done in respect of a third party's property. 10.1.The reason for the same, is that the provision requires that the consumable should be used in the manufacture of goods, which are sold by the manufacturer. In case of job work, the property is not that of the Assessee, but, is that of a third party. 10.2.Therefore, according to us, the concessional rate of tax of 3% was not available to JTP. The JTP, was thus, as found by the Adjudicating Authority, required to pay tax at the usual and normal rate, which at the relevant time was 12%. 11.That being said, as to the other aspect of the matter, whether penalty ought to have been levied in the instant case, Ms.Hemalatha has pointed out that tax was paid by JTP, prior to the passing of the order by the Adjudicating Authority, though, after the issuance of show cause notice. 11.1.This fact is not disputed by Mr.Annamalai, which is a fact, that emerges from the record as well. 12.The question, therefore, is, as to whether in these circumstances, penalty ought to have been imposed and if so, at what rate. 12.1.In this behalf, the provisions of Section 23 and 45 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have discussed this aspect of the matter. This is specially so, as Section 23 of the 1959 Act, provides for discretion qua, the quantum of levy of penalty as well. 12.8.As indicated above, since the First Appellate Authority, i.e., AAC, reversed the view of the Adjudicating Authority on merits and hence, concluded that no penalty was leviable. The Tribunal via the impugned judgment reversed the view of the First Appellate Authority, i.e., AAC, on merits and thereafter, simply affirmed the levy of penalty, without discussing, as to whether in the facts and circumstances of the case, penalty ought to have been levied at the maximum rate. 13.Given the aforesaid, we are inclined to set aside the order of the Tribunal, to the extent, the levy of penalty, has been confirmed at the rate of 150%. 13.1.The matter is remanded to the Adjudicating Authority for the limited purpose of de novo quantification of the penalty. 13.2.While doing so, the Adjudicating Authority will bear in mind, the totality of facts, including the fact that penalty qua, machinery has been deleted by the Tribunal on the ground that it came within the ambit of Section 3(5) of the 1959 Act. 13.3.The impu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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