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1997 Supreme(Mad) 831
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE JANARTHANAM
Prasad Productions Private Limited - Appellant
Versus
State of Tamil Nadu - Respondents
T. C. (Revision Petition) No. 704 of 1985
Decided On : 12 August 1997
The use of goods purchased on the basis of "C" forms for job-work of third parties, where the manufactured goods are intended for sale, does not constitute an infraction of section 10 of the CST Act, attracting penalty under section 10-A.
Headnote:
CST ACT - SECTION 8(3)(B) - INTERPRETATION - USE OF GOODS PURCHASED FOR JOB-WORK - NO INFRACTION OF SECTION 10 - PENALTY NOT JUSTIFIED.
Fact of the Case:
The assessee-dealers, registered under the CST Act, purchased goods on the basis of "C" forms issued by selling dealers for use in printing and processing of motion picture films. They used the goods not only for their own manufacture but also for job-work of third parties. The assessing authority initiated penalty proceedings for infraction of section 10 of the Act and proposed cancellation of the registration certificate. The Appellate Assistant Commissioner confirmed the penalty. On appeal, the Tribunal remanded the matter to the assessing authority for de novo re-examination.
Finding of the Court:
The Supreme Court in East India Cotton Mfg. Co. Ltd. held that section 8(3)(b) covers cases where a registered dealer manufactures or processes goods for a third party on a job-contract and uses materials purchased against the certificate of registration and declarations in form "C", so long as the manufactured or processed goods are intended for sale by such third party. The expression "for use by him in the manufacture or processing of goods for sale" does not restrict the sale to the registered dealer himself.
Issues: Whether the use of goods purchased on the basis of "C" forms for job-work of third parties constitutes an infraction of section 10 of the CST Act, attracting penalty under section 10-A.
Ratio Decidendi: The phraseology "for use by him in the manufacture or processing of goods for sale" in section 8(3)(b) of the CST Act does not require the sale to be made by the registered dealer himself. It covers cases where the manufactured or processed goods are intended for sale by a third party. The use of goods purchased for job-work of third parties, where the manufactured goods are intended for sale, does not constitute an infraction of section 10 of the Act.
Final Decision: The penalty imposed on the assessee-dealers by the taxing authorities is set aside. The order of remand by the Tribunal is also set aside.
JANARTHANAM, J.
This revision, at the instance of the assessee, is directed against the order of the Tamil Nadu Sales Tax Appellate Tribunal (Main Bench), Madras-104 (for short, "Tribunal") dated December 18, 1982 and made in T. A. No. 96 of 1982 relating to the assessment year 1979-80.
2. M/s. Prasad Productions (P) Ltd. having their place of business at door No. 2, Sarangapani Street, T. Nagar, Madras-17 are registered dealers under the Central Sales Tax Act, 1956 (Act No. 74 of 1956 - for short, "CST Act"). The assessee-dealers, it is said, were granted a certificate of registration in their favour for purchase of goods or materials on the basis of "C" forms issued by selling dealers
"for use in printing and processing of 35 mm. motion picture colour films, chemicals and other consumable spares for processing and printing machinery" *
, pursuant to an application made in their behalf. It appears, the dealers. subsequent to the issuance of the certificate of registration in their favour purchased goods and materials for use in manufacture and processing of goods for sale. As a matter of fact, the dealers, it is said, not only used the goods and materials so purchased for use in manufacture or processing of goods for sale by them, but also used the goods and materials so purchased for job-work of third parties or manufacturers for sale relatable to motion films.
3. The Commercial Tax Officer, T. Nagar (North) Assessment Circle, finding that the use of goods and materials covered by the certificate of registration for job-work done to others or manufacturers for sale is violation of the condition of the certificate of registration, issued a notice dated May 28, 1981 requiring the dealers to show cause as to why penalty proceedings should not be initiated for infraction or violation of the relevant clause of section 10, under section10-A of the CST Act, in lieu of prosecution and requiring them to file objections, if any, to the proposal for initiation of the penalty proceedings quantifying the penalty in a sum of Rs. 45, 036, calculated at 15 per cent on the purchase of the materials and goods on the basis of "C" forms. By the issuance of such a notice, it was also proposed by the said assessing authority to cancel the registration already granted to the dealers, in his office CST No. 17596/77-78 dated October 10, 1977.
4. The dealers filed their objections on June 15, 1981, inter alia, contending that they were not guilty of any misrepresentation whatever; that they had stated the purpose of purchase correctly in their application for the issuance of a certificate of registration and a certificate of registration was accordingly granted and that the cancellation of the certificate of registration iii the proceedings initiated for imposition of penalty is not proper.
5. The said assessing authority, overruling the objections so made, sustained the proposals made in the notice abovestated and issued a notice levying penalty in a sum of Rs. 45, 036.
6. The aggrieved assessee-dealers filed an appeal before the Appellate Assistant Commissioner (C. T.) IV, Madras-1, which was taken on file as Ap. CST. No. 56 of 1981.
7. The said learned Appellate Assistant Commissioner, in his order dated 13th day of November, 1981, held that the levy of penalty, as had been done by the assessing authority, is justified. Which he had confirmed and consequently, the appeal was dismissed.
8. The matter did not stop there. It was farther agitated by filing an appeal before the Tribunal, which was taken on its file as T. A. No. 96 of 1982.
9. During the pendency of the said appeal, the Revenue also filed a petition for enhancement in M. P. No. 367 of 1982.
10. (a) The Tribunal, after hearing the arguments of both sides and also perusing the materials available on record, recorded a finding, as below :
"9. ........... It cannot therefore be said that the RC was not issued as prescribed under the law. As already held the mention of the class of goods in
