Madras High Court
M/S.Bhavani Distilleries & ... vs Tamil Nadu Sales Tax Appellate ... on 25 February, 2022
W.P.No.34856 of 2007
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 25.02.2022
CORAM :
THE HON'BLE MR. JUSTICE R.MAHADEVAN
AND
THE HON'BLE MR. JUSTICE J.SATHYA NARAYANA PRASAD
W.P.No.34856 of 2007
and
M.P.No.1 of 2007
M/s.Bhavani Distilleries & Chemicals Ltd.,
Represented by its Managing Director Srinivasan,
T.Pudur, Arcot Taluk,
Vellore District …
Petitioner
Vs.
1. Tamil Nadu Sales Tax Appellate Tribunal,
(Main Bench), Chennai - 600 104.
2. The Appellate Assistant Commissioner,
(Commercial Taxes), Vellore.
3. The Deputy Commercial Tax Officer,
Arcot Assessment Circle,
Arcot, Vellore District. ...
Respondents
Prayer :Writ Petition filed under Article 226 of the Constitution of India
praying for issuance of a Writ of Certiorari, calling for the records
relating to the order dated 01.08.2007 passed in STA.No.307/2003 on the
Page No.1 of 10
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W.P.No.34856 of 2007
file of the Tamil Nadu Sales Tax Appellate Tribunal (Main Bench)
Chennai and quash the same.
For Appellant : Mr.K.Govi Ganesan
For Respondents : Mr.Richardson Wilson
Addl. Government Pleader (Taxes)
JUDGMENT
(Judgment of the court was delivered by R.MAHADEVAN, J.)
Challenging the order dated 01.08.2007 passed by the Tamil Nadu
Sales Tax Appellate Tribunal (Main Bench), Chennai/ first respondent in
STA.No.307/2003, the petitioner / assessee has come up with this writ
petition.
2.The petitioner company is a registered dealer both under the
TNGST and CST Acts on the file of the 3rd respondent. During the
assessment year 1998-99, they had purchased agri films and cement to
the tune of Rs.2,38,005/- on issuance of form 'C' declaration from other
State dealers and used the same in the construction of plant and
machinery i.e., bio-compost yards and bio-gas reactors. Upon scrutiny of
the accounts submitted by the petitioner, it was pointed out by the third
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W.P.No.34856 of 2007
respondent that the petitioner company was not eligible for concessional
rate of tax as the said materials were not included in the registration
certificate issued to them. Stating so, the third respondent issued a notice
dated 01.03.2000 calling upon the petitioner to explain as to why penalty
@ 150% of the tax due under section 10A of the CST Act, should not be
levied on them. Upon receipt of the same, the petitioner filed its
objections on 19.06.2000. Being dissatisfied with the same, the third
respondent passed the assessment order on 11.07.2000 imposing penalty
of Rs.39,597/- under section 10A of the Act.
3.Challenging the order of assessment, the petitioner preferred an
appeal in A.P.No.587/2000(CST) before the Appellate Assistant
Commissioner (CT), Vellore / second respondent herein, who after
hearing both sides, set aside the penalty and allowed the appeal, by order
dated 18.09.2001. Aggrieved over the same, the State went on appeal
before the first respondent / Tribunal, which by order dated 01.08.2007,
set aside the order of the Appellate Assistant Commissioner (CT) and
restored the order of the Registering Authority. Therefore, the petitioner is
before this court with the present writ petition for the aforesaid relief.
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W.P.No.34856 of 2007
4.The learned counsel for the petitioner submitted that as per the
Form B registration certificate issued to them, the petitioner was
authorised to purchase plant and machinery, equipments, molasses,
industrial alchohol and other allied chemicals for use in the manufacture;
the agri film and cement have been purchased for the construction of
plant and machinery i.e., bio-compost yards and bio-gas reactor and the
same were used in the manufacture of goods; and therefore, they had
purchased the disputed goods at the concessional rate on issuance of form
'C' declaration under the bonafide belief that they are entitled for the
same. The learned counsel further submitted that there is no element of
'mens rea', which is the necessary component of the offence under section
10(b) of the Act, so as to levy penalty on the petitioner. Though the
second respondent / Appellate Authority has rightly pointed out the same
and deleted the penalty levied by the third respondent, yet, the first
respondent / Tribunal declined to accept such finding and erred in setting
aside the order of the second respondent and restoring the order of the
Registering Authority. Therefore, the learned counsel prayed for allowing
this writ petition by quashing the order of the Tribunal.
5.Per contra, the learned Additional Government Pleader (Taxes)
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W.P.No.34856 of 2007
appearing for the respondents submitted that the first respondent
considering all the facts and circumstances of the case in proper
perspective and correctly passed the order impugned herein, levying
penalty @ 150% of the tax due on the petitioner, which does not require
any interference at the hands of this court.
6.Heard both sides and also perused the materials placed before it.
7.There is no dispute that the petitioner was issued with Form B
registration certificate to purchase plant and machinery, equipments,
molasses and other allied chemicals and industrial alcohol for use in
manufacture of the commodity. However, they purchased the agri film
and cement for the construction of plant and machinery viz., bio-compost
yards and bio-gas reactors, which goods have not been included in the
registration certificate issued by the third respondent and therefore, they
violated the provisions of the CST Act, 1956 and misused the form 'C'
declaration issued to them. Though the petitioner pointed out that the agri
film and cement have been used in the construction of plant and
machinery, which is for use in manufacture of goods and hence, the same
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W.P.No.34856 of 2007
are eligible for concessional rate of tax against issuance of form 'C'
declaration, the third respondent rejected the said contention and levied
penalty at 150% of the tax due i.e., to the tune of Rs.39,597/- under
section 10A of the CST Act. The findings of the third respondent are
quoted below for ready reference:
...they have purchased Agri-film and cement for
their building i.e. plant construction purpose only and
there is no product of manufacturing and selling on the
goods purchased, for which, they are not eligible to
purchase the goods by issue of 'C' forms as the above
goods have not been included in class 'b' of the
certificate “for use in manufacture”.
8.On the other hand, the second respondent / Appellate Authority
in the appeal filed by the petitioner, set aside the penalty, by observing
that the petitioner had not violated the provisions of section 10(d) of the
CST Act with reference to which penalty could be imposed under section
10A of the Act. The said order was put to challenge by the State before
the first respondent / Tribunal.
9.The first respondent upon considering the arguments made on
both sides and having perused the connected records, was of the firm
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W.P.No.34856 of 2007
view that the petitioner had violated the provisions of the CST Act and
the levy of penalty by the third respondent is correct. Accordingly, it set
aside the order of the second respondent / Appellate Authority and
restored the order of the third respondent / Registering Authority. For
better appreciation, the findings recorded by the first respondent are
extracted below:
“7.It is seen from the records that the respondents
had purchased “agri film” and “cement” on issue of C
forms form outside the State. These goods are not
included in the Certificate of Registration issued to them
under the Central Sales Tax Act. These goods are also
not used as raw materials in the manufacture of other
goods in which the respondent deal. In such
circumstances, we find that the Registering Authority is
justified in imposing the penalty. Simply because, the
appellants have constructed buildings out of the cement
and agri film purchased by them and such buildings are
being used for manufacture of other goods, the
purchases without authorization could not be permitted
without the penal consequences. When these goods could
not be put to use as raw materials in the manufacture of
other goods, the conclusion of the first appellate
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W.P.No.34856 of 2007
authority that the buildings constructed out of these
materials are used for the purpose of manufacturing is
far fetch and cannot be accepted. The respondent had
violated the provisions of Central Sales Tax Act and the
Registering Authority is correct in the levy of penalty. We
therefore set aside the order of the Appellate Assistant
Commissioner (CT) and restore the order of the
Registering Authority.”
10.In the light of the admitted fact that the petitioner had
purchased the goods that are not covered under the Form B registration
certificate issued to them, at the concessional rate against issuance of
form 'C' declaration, this court has no hesitation to hold that they had
violated the provisions of the CST Act, thereby attracting penalty under
section 10A of the CST Act. The first respondent has rightly rendered
such a clear cut finding for levying penalty on the petitioner, which
warrants no interference by this court.
11.As regards the quantum of penalty @ 150% of the tax due,
having regard to the facts and circumstances of the case, it will be fair
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W.P.No.34856 of 2007
and just, if the penalty is levied at 100%, instead of 150%. Accordingly,
this court reduces the penalty imposed on the petitioner to 100% from
150% of the tax due. The order of the Tribunal is modified to that extent.
12.With the above modification, the writ petition stands disposed
of. No costs. Consequently, connected miscellaneous petition is closed.
(R.M.D.,J.) (J.S.N.P.,J.)
25.02.2022
gba/msr
Index : Yes/No
To
1. Tamil Nadu Sales Tax Appellate Tribunal,
(Main Bench), Chennai - 600 104.
2. The Appellate Assistant Commissioner,
(Commercial Taxes), Vellore.
3. The Deputy Commercial Tax Officer,
Arcot Assessment Circle,
Arcot, Vellore District.
https://www.mhc.tn.gov.in/judis
W.P.No.34856 of 2007
R.MAHADEVAN, J.
and
J.SATHYA NARAYANA PRASAD, J.
msr /rk
W.P.No.34856 of 2007
25.02.2022
https://www.mhc.tn.gov.in/judis
