The Commissioner Trade Tax vs Faruqi Glass Industries

Rajes Kumar, J.—Present revision u/s 11 of U.P. Trade Tax Act (hereinafter referred to as "Act") is directed against the order of Tribunal dated 18.03.2000 relating to the assessment year 1996-97, by which Tribunal has deleted the penalty u/s 4-B (5) of the Act.

Brief facts of the case are that dealer/opposite party (hereinafter referred to as "Dealer") is registered both under the U.P. Trade Tax Act as well as Central Sales Tax Act and was holding recognition certificate u/s 4-B of the Act. Dealer was involved in the manufacturing of glass ware. Admittedly dealer purchased 347.47 MT soda ash as raw material against Form 3-B and availed the benefit of concessional rate of tax/exemption on such purchases. u/s 4-B (2) of the Act dealer was required to use such soda ash in the manufacturing of glass ware, but instead of using such soda ash in the manufacturing of glass ware, same was sold for Rs. 31,61,910/-. Assessing authority initiated the proceedings u/s 4-B (5) of the Act on the ground that the dealer had disposed of soda ash other than for the purpose for which recognition certificate was granted and dealer was liable for penalty u/s 4-B (5) of the Act. In reply to the show cause notice, it was submitted that due to the leakage in the godown quality and the conditions of soda ash was deteriorated and was not useable and therefore, same was sold for Rs. 31,69,910/-, Assessing authority had not accepted the plea of the dealer and levied the penalty at Rs. 4,75,500/-. Being aggrieved by the order dealer filed appeal before the Deputy Commissioner (Appeals), which was dismissed. Dealer further filed appeal before the Tribunal. Tribunal by the impugned order allowed the appeal and set aside the order. Tribunal held that the dealer had given the information vide receipt No. 303/27-12-96 about the sale of soda ash but instead of it, assessing authority had not made any verification. Tribunal accepted the explanation of the dealer that soda ash was sold because the quality of soda ash was deteriorated due to the rainy season and moisture and was not fit for use as raw material. Tribunal further held that the dealer had purchased soda ash @ Rs. 11,196/- per MT and sold the same @ Rs. 9,122.50p. per MT, which shows that the quality of soda ash was deteriorated and in this view of the matter Tribunal deleted the penalty.

Heard Sri B.K. Pandey, Learned Standing Counsel. Despite the service of notice no one appears on behalf of the opposite party.

Sri B.K. Pandey, Learned Standing Counsel produced the assessment record and submitted that the alleged information dated 27.12.1996 was not in respect of the sale of 347.475 MT soda ash, but a general information, that the dealer may sell soda ash and thus, Tribunal has wrongly treated such information dated 27.12.1996 as the information relating to the sale of soda ash. He submitted that since the alleged information was not relating to the sale of soda ash of 347.475 MT, there was no question of making any verification by the assessing authority. He further submitted that since the dealer had purchased soda ash as raw material against Form 3-B and availed the benefit of concessional rate of tax/exemption, it was obligatory on its part to use such raw material in the manufacturing and in case, if it was wholly impossible to use such soda ash in the manufacturing the same could be disposed of only with the permission from the assessing authority, but in the present case dealer sold such soda ash without taking any permission from the assessing authority in violation of Section 4-B (5) of the Act and, therefore, penalty has been rightly levied by the assessing authority.

I have perused the order of Tribunal and the authorities below. Section 4-B (2) and (5) read as follows:

4-B. Specific relief to certain manufacturers.

(2) Where a dealer requires any goods, referred to in Sub-section (1) for use in the manufacture by him in the State, of any notified goods, or in the packing of such notified goods manufactured or processed by him, and such notified goods are intended to be sold by him in the State or in the course of inter-State trade or commerce or in the course of export out of India, he may apply to the assessing authority in such form and manner and within such period as may be prescribed, for the grant of a recognition certificate in respect thereof, and if the applicant satisfies such requirements including requirement of depositing late fee, and conditions as may be prescribed, the assessing authority shall grant to him in respect of such goods a recognition certificate in such form and subject to such conditions, as may be prescribed.

(5) Where a dealer in whose favour a recognition certificate has been granted under Sub-section (2) has purchased the goods after payment of tax at concessional rate under this section or, as the case may be, without payment of tax and has used such goods for a purpose other than that for which the recognition certificate was granted or has otherwise disposed of the said goods, such dealer shall be liable to pay as penalty such amount as the assessing authority may fix, which shall not be less than the difference between the amount of tax on the sale or purchase of such goods payable under this section and the amount of tax payable under any other provisions of this Act but not exceeding three times the amount of such difference.

Admittedly, dealer purchased soda ash against Form 3-B the benefit of concessional rate of tax/exemption, thus, obligatory on its part to use such soda ash in the manufacturing for which recognition certificate was issued. Since the disposed of the soda ash instead of using in the manufacturing was liable for penalty u/s 4-B (5) of the Act may be a situation where after the purchase of raw material a the benefit of concessional rate of tax/exemption the business or raw material become non-useable and it may not be possible such raw material in the manufacturing. In case if any arises where it is impossible to use such raw material in the manufacturing, dealer should inform such situation to the assessing authority and seek the permission in this regard and only after seeking permission same should be disposed of. But it is not open to the dealer to dispose of such raw material without seeking permission from the assessing authority.

In the present case, admittedly before selling the alleged soda ash no permission has been sought. Tribunal has wrongly read the letter dated 27.12.1996 as information about the sale of 347.475 MT soda ash. Letter dated 26.12.1996 filed on 27.12.1996 read as follows:

le{k lgk;d dfe''uj �d-fu-� O;kikj dj f''kdksgkckn

fo"k; %& ^^lksMk,l^^ dh V~SfMax djus dh lwpuk

egksn;] izkFkhZ izkUr dsUnz o ekU;rk izek.k Ik= /kkjd gS izkFkhZ ds vke izfd;k esa lksMk;l Defective gks tkrk gS vr% vius iz;ksx gsrq ugh jg tkrk ,slh fLFkfr esa lksMk;l dh V~SfM+x djus gsrq lwpuk izsf"kr gS A d`Ik;k izkUrh; dze o fcdzh gsrq lksMk;l dh lwpuk ntZ djus dk d"V djsa A

/kU;okn A

izkFkhZ latho izdk''k feRry

By the aforesaid letter applicant had only informed the assessing authority that in normal course soda ash become defective and remain non-useable in this situation information is being given for trading but the said letter was not related to the sale of 347.475 MT soda ash. It is also not clear whether the dealer had paid any tax on the sale turn over of soda ash. Admittedly, dealer had sold soda ash on lesser value than the value on which it was purchased. Thus, even if tax would have been paid on the sale amount the revenue could not get its due tax.

On these circumstances, I am of the view that there was a violation of provisions of Section 4-B (2) of the Act and for the said violation and dealer was liable for penalty u/s 4-B (5) of the Act. Tribunal has erred in deleting the penalty. In this view of the matter, order of the Tribunal is liable to be set aside. The matter is remanded back to the Tribunal for the consideration of quantum of penalty.

In the result, revision is allowed. Order of the tribunal is set aside and the matter is remanded back to the Tribunal for the consideration of quantum of penalty on the facts and circumstances of case.