ASSESSING AUTHORITY Vs. JAMMU METAL ROLLING MILLS

JUDGEMENT

(1.) M /S Jammu Metal Rolling Mills, Talab, Tillo, Jammu, a partnership firm registered under the Jammu and Kashmir Partnership Act, applied for registration under Section 7 of the Central Sales Tax Act, hereinafter referred to as "The Act"). The application on behalf of the firm in form "A" as prescribed by Rule 3 of the Central Sales Tax Act (Registration and Turnover Rules), 1957, was submitted by Sh. Sushil Kumar Jain, one of the partners, on October 19, 1963. After processing the same and obtaining a report from the concerned inspector the Assessing Authority, Sales Tax Circle B, Jammu, issued certificate bearing No. 2225 -SDB dated October 23, 1963, authorising the firm to purchase in the course of inter -state trade or commerce goods specified below for the purpose of re -sale: "Machinery parts, raw material, polishing goods, coal, paints, electric goods, motor and chemicals". Although the certificate issued in favour of the firm did not conform to the request made by it in its aforesaid application inasmuch as in the application the aforesaid goods were specified as required for use in the manufacture or processing of goods for sale, the firm did not ask for amendment of the certificate and went on making purchases of machinery for four years by utilizing the C" forms -certificates that goods mentioned in the purchase orders or purchased are covered by the registration certificate issued to the dealer. The goods worth Rs. 44124.79 thus purchased were not resold by the firm but were utilized by it in the installation of its Rolling Mills. On receipt of information that the firm had contravened Section 8(3) of the Act by using the "C" forms for the purpose for which they were not issued to it, the Assessing Authority secured the account books of the firm and after checking the same and verifying the matter issued a notice calling upon the firm to show cause why penalty in accordance with section 10 -A of the Act be not imposed on it. In its reply to the show cause notice the firm represented that in its application for registration it had declared that the aforesaid goods were to be purchased by it for use in the manufacture or processing of goods for sale and had not specified that the goods were required for resale and that the registration certificate issued in its favour was contrary to that declaration. The Assessing Authority being, however, of the opinion that the firm not being a dealer on the date of its application for registration was not entitled to a registration certificate for manufacturing purposes, that the classification of goods, specified for the purpose of concessional rate of tax under rule 13 of the Central Sales Tax Rules did not warrant purchase of machinery or other goods mentioned in the registration certificate for use in the installation of Rolling Mills and the firm had by purchasing the goods for resale and utilizing the same for its personal use contravened the provisions of section 8 (3) of the Act and was liable to pay the penalty under Section 10 -A of the Act passed an order dated February 2, 1967, imposing a penalty of Rs. 4500/ -. Computing the tax at 10% the Assessing authority also held that the firm had evaded payment of the sale tax amounting to Rs. 3529.98. Against this order the firm went up in revision to the Sales Tax Commissioner, J & K Government. The Commissioner expressed the view that the firm not having started manufacture of utensils and not being qualified for dealership on the date of its application was not entitled to be registered, that if the certificate did not contain the correct description of the goods the firm ought to have applied for its amendment and that the action of the firm in going on making purchases of the goods in the inter state trade by misuse of the certificate came within the mischief of clause (d) of section 10 of the Act. The Commissioner further held that the concessional rate of tax is available only in respect of the purpose specified in the Registration Certificate and if the purchasing dealer makes use of the goods for a purpose other than the one which he is authorised to do, he commits an offence punishable under section 10(d) of the Act. The plea that the firm had specified in its application that it had to purchase goods for use in the manufacture of utensils and the certificate had been wrongly issued by the Assessing Authority did not prevail with the Commissioner. He accordingly rejected the revision petition.

(2.) THE aforesaid orders of the Sales Tax authorities were assailed by means of a writ petition filed before this court on May 12, 1969. Honble Bhat J. who heard the petition while observing that there was no substance in the plea of the firm that it was not liable to pay any penalty as it had specified in its application that the goods were required for use in the manufacture or processing of goods for sale, held that the maximum penalty that could be levied on the firm was 3% on Rs. 44124.79 which came to Rs. 1323.75. He accordingly reduced the penalty from Rs. 4500/ - to Rs. 1323.75. In support of his order the -learned Judge relied on a decision of the Madras High Court in State of Madras v. Prem Industries Corporation (1969) 24 S.T.C. 507. Aggrieved by the order of reduction in the penalty made by Honble Bhat J. the Assessing Authority and the Commissioner Sales Tax, have filed, this letters Patent Appeal. The firm has also filed cross objections against the aforesaid order of Honble Bhat J. holding that it was liable to pay the penalty. On the matter coming up before two of us, we referred it to a Full Bench in view of the conflict of judicial opinion as expressed in State of Madras v. Prem Industries Corporation (1969) 24, S. T. C. 507 and M. Pais and Sons and another v. The State of Mysore, (1966), 17, S. T. C. 161. This is how the case is before this bench.

(3.) MR . A. N. Raina, appearing on behalf of the Sales Tax Department has besides raising a preliminary objection to the maintainability of the cross objections has contended that the learned Single Judge has erred in reducing the penalty imposed by the Assessing Authority and confirmed by the Sales Tax Commissioner. Inviting our attention to the concluding words of Section 10 -A of the Act viz. "imposes upon him by way of penalty a sum not exceeding one -and -a -half times the tax which would have been levied under the Act in respect of the sale to him of the goods if the offence had not been committed" he has urged that as the non -concessional rate payable on the goods was 10% of the value of the goods the firm was liable to pay 15% of the value of the goods as penalty.