CHETANA ENTERPRISES Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) THESE petitions throw up for decision a point of law that is not only unusual and interesting but one which is extremely fine or rather subtle. The majority of the facts are not in dispute. The petitions concern two assessment years and they are 1992-93 and 1993-94.

(2.) THE charge against the petitioners is identical, viz. , that they ought not to have filed the declaration in form 37 in respect of the products that are the subject-matter of the dispute, viz. , tamarind kernel (seeds) and tamarind powder. Admittedly, the assessees were purchasing the seeds in question and putting them through a process whereby they have been converted into powder. It was their contention that the seeds constitute an input in the manufacturing process of the tamarind powder and consequently, they filed the declaration in form 37 which entitled them to a lower rate of taxation, viz. , 4 per cent instead of 8 per cent. The litigation went through different stages with which we are not really concerned because admittedly, the petitioners have paid the tax at the higher rate in view of the fact that the various court decisions which were fluctuating were applied by the department and the petitioners have in fact paid the tax at the higher rate. The present petitions concern only one facet of the law, viz. , the fact that the petitioners have been penalised under Section 5-A (2) (v) of the Act on the ground that they had made a misdeclaration for the two years in question and the obvious implication is that through such a misdeclaration the petitioners had attempted to evade the payment of tax. The section prescribes a heavy penalty which is equivalent to the amount of tax involved and for the first of the two assessment years they have been visited with a penalty amounting to double the amount of tax involved, viz. , Rs. 5,26,162. For the second year, the penalty was initially an amount equivalent to twice the amount of tax involved but at the appellate stage, on the verification of relevant data the appellate authority reduced the penalty to Rs. 3,59,095. These orders were confirmed by the Tribunal and it is against the decision of the Tribunal in these two appeals that the present petitions have been preferred.

(3.) THE defence plea is a very unusual one. According to the petitioners they were guided entirely and solely by the decision of the Karnataka High Court which held the field at that point of time and on the basis of the ratio of this decision, the petitioners contend that they were fully justified in having filed the declaration under form 37. The petitioners' learned counsel in the course of the hearing has reinforced this submission with several arguments.