The judgment of the Court was delivered by

MADON, J. - These are three references under section 9(2) of the Central Sales Tax Act, 1956 (hereinafter for the sake of brevity referred to as "the Central Act"), read with section 61(1) of the Bombay Sales Tax Act, 1959 (hereinafter for the sake of brevity referred to as "the Bombay Act"), which give rise to common questions of law.

The applicants were at all material times registered as dealers both under the Central Act and the Bombay Act. They carried on the business of bleaching and printing fabrics manufactured by them for sale as also bleaching and printing fabrics manufactured by others for sale. For this purpose the applicants used to purchase grey fabrics, dyes, caustic soda and other processing materials. So far as the purchase of these materials from outside-State dealers were concerned, the applicants used to purchase such materials on declarations given by them to their vendors, stating that the goods as purchased were intended for use by them in the manufacture or processing of goods for sale. Under the provisions of the Central Act in force when such declarations were given, the rate of tax applicable was 2 per cent. During the course of assessment proceedings for the periods 1st January, 1964, to 31st December, 1964 (hereinafter for the sake of brevity referred to as "the first period"), 1st January, 1965, to 31st December, 1965 (hereinafter for the sake of brevity referred to as "the second period") and 1st January, 1966, to 31st December, 1966 (hereinafter for the sake of brevity referred to as "the third period"), the Sales Tax Officer found that a part of the caustic soda purchased on such declarations by the applicants from their outside-State vendors was used by them for processing goods belonging to others and not their own goods. According to him, this constituted a breach of the declarations given by the applicants, and he issued a notice to the applicants to show cause why penalty should not be levied against them. The contraventions alleged to have been committed by the applicants were to the extent of Rs. 7,567 in the first period, Rs. 2,91,706 in the second period and Rs. 9,99,640 in the third period. In reply to the said show cause notice the applicants by their Advocate's letters dated 23rd June, 1969, 6th August, 1969, and 21st October, 1969, as also in the course of personal hearings given to them denied that they had committed a breach of any statutory provision. The applicants contended that under the relevant provisions of the Central Act they were entitled to use the said goods in the manufacture or processing of goods for sale, whether the goods so processed or manufactured belonged to them or to others. The applicants further stated that all goods manufactured and processed by them, whether they belonged to them or others, had been sold. Rejecting the contentions of the applicants the Sales Tax Officer imposed upon them penalties under section 10A of the Central Act in the sum of Rs. 800 in respect of the first period, Rs. 34,000 in respect of the second period and Rs. 96,000 in respect of the third period. These penalties which were imposed were on the basis that the maximum penalty leviable under the said section 10A was one and half times the amount of tax which would have been payable on the transactions of sale of such processing materials had they been sold to unregistered dealers. Against these orders imposing penalty the applicants filed appeals to the Assistant Commissioner of Sales Tax, who rejected all the said appeals. Following a decision of the Tribunal, however, the Assistant Commissioner of Sales Tax held that the maximum penalty which could be levied would be one and half times the amount of tax payable if the offence had not been committed. The Assistant Commissioner of Sales Tax thus reduced the amount of penalty to Rs. 225 in respect of the first period, Rs. 8,750 in respect of the second period and Rs. 39,610 in r