P.K. Tare, C.J.
1. On an order passed by this court, the Board of Revenue, Madhya Pradesh, was required to refer the following question for consideration by this court:
Whether, in the facts and circumstances of the present case, the dyes and colours imported on C form declaration could be held to have been used in such a manner as to absolve the dealer from liability for penalty for infringement of Section 10(d) of the Central Sales Tax Act, 1956
2. The present reference arose on the following facts: The respondent was a registered dealer as per Section 7(2) of the Central Sales Tax Act, 1956. In his application for registration in form Aappended to the application vide item No. 16, the respondent had mentioned the following particulars :
Item 16.-The following goods or classes of goods are purchased by the dealer in the course of inter-State trade for resale or for use in manufacture of goods for sale or for use in the execution of contracts :
(b) jax]fQVdjh] ukbVz~sV] lksMk] lksfM;e ukbVz~sV] dkfLVd lksMk] ,flM] gk;MjkslYQkbM vkQlksMk A
(a) For resale,
(b) For use in manufacture,
(c) For use in the execution of contracts.
3. At both the places the respondent had struck out the phrase underlined, namely, 'for use in the execution of contracts'. The said words had also been struck out in the registration certificates. Clause (b) of Sub-section (3) of Section 8 of the Central Sales Tax Act, 1956, as it originally stood prior to the amendment, dated 1st October, 1958, was as follows :
(b) in any other case, are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale by him or for use by him in the manufacture of goods for sale or for use by him in the execution of any contract.
4. It is to be noted that the said provision requires that the goods should be intended for resale by the registered dealer or for use in the manufacture of goods for sale or for use by him in the execution of a contract. As such, the necessary ingredient is that mere manufacture by the registered dealer will not be enough, but it must be manufacture of goods for resale. Therefore, if a registered dealer merely manufactures goods, he will not be entitled to the benefit of the said provision unless the manufacture is coupled with resale. It is an admitted fact in the present case that the respondent merely executed contracts for dyeing the goods of other persons and no sale was ever intended of the goods so dyed. After the amendment, dated 1st October, 1958, Clause (b) of Sub-section (3) of Section 8 stands as under :
In the case of goods other than declared goods are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale by him or subject to any Rles made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power.
5. It is to be noted that manufacture or processing in the amended provision is in respect of goods for sale. Thus, the manufacture processing of goods is coupled with the sale of goods and the two cannot be separated from each other. Therefore, even according to the amended provision, the element of sale was altogether lacking, while the respondent undoubtedly manufactured or processed goods of others by simply dyeing them.
6. The relevant period in the instant case was the year 1960-61. Subsequently also, the said provision was amended on 1st April, 1963. But, we are not concerned with that amendment. On these facts, the question of law referred by the Board of Revenue arose whether the respondent rendered himself liable to a penalty under Section 10(b) or Section 10(d) of the Central Sales Tax Act, 1956, inasmuch as he contravened Section 8(3)(b) of the said Act by giving incorrect declaration in form A.
7. The Sales Tax Officer, by order dated 7th August, 1964, imposed a penalty of Rs. 2,800 under Section 10A of the Central Sales Tax Act, 1956, in lieu of prosecution on the ground that the dealer had used some part of the dyes imported against C forms in dyeing the yarn of others, which was a purpose other than what was stated in the declaration in form C. An appeal against that order filed by the assessee did not meet with success. In Second Appeal No. 196-IV/65, the Board of Revenue set aside the orders of the courts below and held that there was no breach for which a penalty could be levied under Section 10A. That order was passed on 23rd July, 1966. The Board of Revenue held that since the assessee had actually used the dyes and colours in dyeing the yarn of others, it would mean that he had sold the dyes and colours to them and what he charged included the cost of the colours as well as labour charges and moreover, the assessee claimed that the yarn belonging to others was either actually sold or was for sale and the departmental authorities have made no enquiry on this point and have held without any evidence that the dyed yarn may not have been sold.
8. However, this court held that it was necessary to find as a fact whether the charges which the assessee made from third parties, whose yarn he had dyed, were a lump sum charge or it had indicated the cost of the colour separately from other charges. In spite of best efforts, the Board of Revenue or the taxing authorities were unable to collect information in this behalf from the assessee who is said to be lying ill. However, we have to answer the reference on the information available.
9. It may be relevant to reproduce Section 10(d) of the Central Sales Tax Act, 1956, for contravention of which a penalty could be imposed under Section 10A of the said Act. Section 10(d) is as follows:
10. If any person....
(d) after purchasing any goods for any of the purposes specified in Clause (b)of Sub-section (3) of Section 8 fails, without reasonable excuse, to make use of the goods for any such purpose...he shall be punishable with simple imprisonment which may extend to six months, or with fine, or with both; and when the offence is a, continuing offence, with a daily fine which may extend to fifty rupees for every day during which the offence continues.
Section 10A of the Act is as follows :
10-A. If any person purchasing goods is guilty of an offence under Clause (b) or Clause (c) or Clause (d) of Section 10, the authority who granted to him or, as the case may be, is competent to grant to him a certificate of registration under this Act may, after giving him a reasonable opportunity of being heard, by order in writing, impose upon him by way of penalty a sum not exceeding one-and-a-half times the tax which would have been levied under this Act in respect of the sale to him of the goods if the offence had not been committed :
Provided that no prosecution for an offence under Sction 10 shall be instituted in respect of the same facts on which a penalty has been imposed under this Section.
10. Looking to the said provisions it is clear that the respondent having given a declaration in form A or form C, could not have used the dyes for dyeing the goods of others. For that it was necessary for him to keep the phrase which he had unfortunately struck out, namely, 'for use in the execution of contracts'. It may be that he might have struck out the phrase at two places inadvertently or not being aware of the implication of its omission. However innocent his act might have been, it will certainly amount to an offence as per Section 10(d) of the Central Sales Tax Act, 1956, although it might be of a technical nature not deserving a very severe penalty. But, there is no escape from the conclusion that the respondent was guilty of contravening Section 10(d) of the Act, which rendered him liable to a penalty under Section 10A of the Act for contravention of Section 8(3)(b) of the Central Sales Tax Act, 1956.
11. Under the circumstances and for the reasons mentioned above, we would answer the reference by stating that the dyes and colours imported on C form declaration could be held to have been used by the respondent in such a manner as to render the dealer liable for penalty for infringement of Section 10(d) of the Central Sales Tax Act, 1956. However, the authority imposing the penalty will, we hope, take into consideration our observations that the striking out of the relevant phrase by the respondent was probably an inadvertent and unintentional act for which a severe penalty need not be imposed. With these observations we return the reference to the Board of Revenue for taking the consequential action. We further direct that there shall be no order as to costs of this reference.