INDIAN GAS CYLINDERS Vs. INSPECTING ASSISTANT COMMISSIONER.

JUDGEMENT

(1.) THE appeal is filed by the assessed, a registered firm, aggrieved by the order of the CIT (A) dt. 25 -11 -1986. In this appeal, the grievance of the assessed is on the disallowance of claim of deduction in respect of penalty of Rs. 14,20,201 levied under Sec. 10A of the Central Sales Tax Act and on the levy of interest under Sec. 217 of the I. T. Act.

(2.) THE assessed provided in its accounts for the previous year ended on 31 -3 -1982, the demand of penalty under Sec. 10A, amounting to Rs. 14,20,201 raised by the Assessing Officer, Excise and Taxation Office, Faridabad by his orders for the various years 1974 -75 to 1977 -78 and 1979 -80, passed on 15 -3 -1982. The assessed had claimed that, it carries on two activities, one was manufacturing of gas cylinders and the other was job -work of manufacture of gas cylinders for the three petroleum companies, viz., Indian Oil Corporation, Baharat Petroleum Corporation and Hindustan Petroleum Corporation. Both these activities were recognised by the concerned licencing authorities, as well as, the sales tax authorities and the required certificates were granted by them. In the various financial years, it had purchased the raw materials at a concessional rate of sales tax, from another registered dealer, for being used in its manufacturing activity, but had to use them in connection with the job -work for the three petroleum corporations. This utilisation of the raw materials, for purposes other than for which it was purchased, have been held to be contravention of the provisions contained in Sec. 8(3) of the Central Sales Tax Act. The concerned authorities had invoked the Ss. 10(d) and 10A of that Act, and had levied penalty on the assessed firm. The imposition of the penalty has been challenged before the appellate authorities under that act. The deduction of these amounts had been claimed on the reasoning that, the authorities are aggrieved with the fact of the assessed having had the benefit of concessional rate of sales tax and not using the raw material for the purpose for which it was bought, the concessional tax should not have been allowed but, tax should have been levied as if, the assessed was not a registered dealer and thereby with the intention of recovering the difference in tax between the normal rate and the concessional rate, have raised the demand of tax. It was pleaded that though the words used are penalty, but in reality, it involves only the differential tax element and since it is regularization of a wrong committed, it needs to be allowed. The assessed had placed reliance on the ruling of Madhya Pradesh High Court in Simplex Structural Works v/s. : [1983]140ITR782(MP) , which supported the claim of the assessed.

(3.) THE ITO after considering the pleadings of the assessed and also the orders of the sales tax authorities, observed that, the authorities had levied penalties for breach of law and cannot be described as a business loss. He placing reliance on the ruling of Allahabad High Court in CIT v/s. : [1980]121ITR747(All) , held that, the penalties so claimed are not permissible deduction and disallowed the claim.