1. This judgment shall also dispose of Misc. Civil Case No. 494 of 1981.

2. This reference is made by the Tribunal at the instance of the dealer under Section 44(1) of the M. P. General Sales Tax Act, 1958, to answer the following questions of law, namely :

(a) Whether on the facts and in the circumstances of the case, the proceedings under Section 39(2) of the Act were lawful ?

(b) Whether on the facts and in the circumstances of the case, the reading and interpretation of the declaration contained in form XII-A was proper and correct and the levy of additional tax in the form of penalty under Section 8(2) of the Act was lawful and justified ?

3. The dealer, M/s. Sushil Kumar Sharad Kumar of Rewa, deals in paper, strawboard, binding cloth and exercise books. The relevant periods of assessment are 7th October, 1966 to 31st March, 1967 and 1st April, 1967 to 31st October, 1967 which have given rise to these two references. The dealer purchased paper from the Orient Paper Mills in this State of M. P. at concessional rate in accordance with section 8(1) of the Act, giving the declaration in form XII-A. The paper was then sent to the dealers at Allahabad in the State of Uttar Pradesh for manufacture of exercise books, which were then brought back to the State of Madhya Pradesh and sold within the State of M. P. The assessing authority completed assessments for both these periods, accepting the dealer's claim for payment of tax at the concessional rate in accordance with Section 8(1) of the Act.

4. The Additional Commissioner of Sales Tax reopened this assessment under Section 39(2) of the Act in revision. He took the view that on these facts, the dealer was not entitled to pay tax at the concessional rate and, therefore, a case for imposition of penalty under Section 8(2) of the Act had arisen. The Additional Commissioner accordingly imposed a penalty of Rs. 9,110 for the first period of assessment and Rs. 12,460 for the second period, in addition to the demand of additional tax of Rs. 360 for the latter period. The Additional Commissioner's order imposing the penalty under Section 8(2) of the Act is dated 24 March, 1976.

5. The dealer appealed to the Tribunal (Board of Revenue), which has rejected the appeal on merits. However, the quantum of penalty has been reduced only to the difference in the amount of tax payable according to the full rate and the concessional rate. The Tribunal took this view on account of the fact that no mala fide intention could be attributed to the dealer for the misuse of the declaration made in form XII-A. Aggrieved by the decision of the Tribunal, upholding imposition of penalty on merits, the dealer applied for a reference to this Court under Section 44(1) of the Act, which has been granted resulting in the aforesaid questions of law coming up for decision by this Court.

6. The material facts on the basis of which these questions have to be answered are these. The raw material, i.e., paper, for manufacture of exercise books was purchased by the dealer within the State of Madhya Pradesh, giving the requisite declaration in form XII-A, on the basis of which he was allowed to pay tax at the concessional rate in accordance with Section 8(1) of the Act. The paper was then sent by the dealer to its head office in Allahabad, within the State of Uttar Pradesh for the manufacture of exercise books and those exercise books were then brought back to the State of Madhya Pradesh, where they were sold. Admittedly, the sale of the manufactured goods, i.e., exercise books, was within the State of M. P. where the raw material, i.e., paper, was purchased on the declaration given in form XII-A getting the benefit of the concessional rate of tax under Section 8(1) of the Act. However, the manufacture of the exercise books was not within the State of M. P. but was done at Allahabad in the State of U. P. The question really is whether the fact that the exercise books were manufactured out of the raw material, i.e., pape