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Commissioner of Sales Tax Vs. Malwa Vanaspati and Chemicals Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMadhya Pradesh High Court
Decided On
Case NumberM.C.C. No. 23 of 1984
Judge
Reported in[1987]66STC96(MP)
AppellantCommissioner of Sales Tax
RespondentMalwa Vanaspati and Chemicals Co. Ltd.
Appellant AdvocateA.M. Mathur, Adv.-General and ;S. Kulshrestha, Adv.
Respondent AdvocateG.M. Chaphekar, Adv.
DispositionPetition dismissed
Cases ReferredM.P. v. Gwalior Oil Mills
Excerpt:
.....been committed even though the assessee by not keeping separate accounts and separate stock of raw materials purchased and goods produced failed to prove that goods sold outside the state were manufactured out of the goods purchased otherwise than on declarations in form xii-a ? (2) whether, in the facts and in the circumstances of the case, the board of revenue was justified in setting aside the penalty levied under section 8(2) of the act and holding tha even assuming that an assessee is required to maintain an account in a particular manner and if he has failed to do it the only consequence would be that his accounts be not accepted and be liable to a best judgment assessment but that failure to maintain the accounts would not ipso facto warrant a conclusion as contended on behalf of..........been committed even though the assessee by not keeping separate accounts and separate stock of raw materials purchased and goods produced failed to prove that goods sold outside the state were manufactured out of the goods purchased otherwise than on declarations in form xii-a ?(2) whether, in the facts and in the circumstances of the case, the board of revenue was justified in setting aside the penalty levied under section 8(2) of the act and holding that for the purpose of considering breach of condition under section 8(2) of the act the entire annual transaction should be the main criterion and not the valuation on a particular day ?(3) whether the assessee fails to prove that no breach of conditions under section 8(1) has been committed by him and whether estimation on fro fata basis.....
Judgment:

P.D. Mulye, J.

1. This order shall govern the disposal of M.C.C. No. 24 of 1984 (Commissioner of Sales Tax v. Malwa Vanaspati & Chemicals Co. Ltd., Indore), M.C.C. No. 25 of 1984 (Commissioner of Sales Tax v. Malwa Vanaspati & Chemicals Co. Ltd., Indore), M.C.C. No. 26 of 1984 {Commissioner of Sales Tax v. Malwa Vanaspati & Chemicals Co. Ltd., Indore), M.C.C. No. 27 of 1984 (Commissioner of Sales Tax v. Malwa Vanaspati & Chemicals Co. Ltd., Indore), M.C.C. No. 28 of 1984 (Commissioner of Sales Tax v. Malwa Vanaspati & Chemicals Co. Ltd., Indore) and M.C.C. No. 353 of 1985 (Commissioner of Sales Tax, M.P., Indore v. Bharat Commerce & Industries Ltd., Nagda) as all these petitions arise between the same parties except M/s. Bharat Commerce & Industries Ltd. and common questions of law are involved in these cases.

2. These reference applications have been filed by the Commissioner of Sales Tax under Section 44(2) of the M.P. General Sales Tax Act, 1958 as the Tribunal (Board of Revenue) has rejected the applications filed by the petitioners under Section 44(1) of the said Act whereby they have declined to make a reference to this Court though according to the petitioner following questions of law arise in all these cases :

(1) Whether, under the facts and circumstances of the case, the Board of Revenue was justified in setting aside the penalty under Section 8(2) on the ground that no breach of condition of declarations furnished in form XII-A has been committed even though the assessee by not keeping separate accounts and separate stock of raw materials purchased and goods produced failed to prove that goods sold outside the State were manufactured out of the goods purchased otherwise than on declarations in form XII-A ?

(2) Whether, in the facts and in the circumstances of the case, the Board of Revenue was justified in setting aside the penalty levied under Section 8(2) of the Act and holding that for the purpose of considering breach of condition under Section 8(2) of the Act the entire annual transaction should be the main criterion and not the valuation on a particular day ?

(3) Whether the assessee fails to prove that no breach of conditions under Section 8(1) has been committed by him and whether estimation on fro fata basis of the quantum of turnover relating to breach of condition is not proper?

3. The respondent, M/s. Malwa Vanaspati & Chemicals Co. Ltd., Indore, is engaged in the business of manufacture and sale of edible and hydrogenated oil and oilcakes. They maintained accounts as per mercantile system and the accounts are closed and quantitative. In these petitions we are concerned for the relevant years 1962 to 1969.

4. The Tribunal by its order passed on 20th October, 1982 in all these cases has given the necessary details regarding the gross turnover of the respondent-assessee, the amount of tax assessed and the penalty levied under Section 8(2), Section 17(3) and Section 43 of the Act. The account books of the assessee showed purchases of imported raw materials and purchases of raw materials at the concessional rate on form XII-A. The accounts also showed the quantum of sale of the oil outside the State and the rest of the turnover which related to sale either in the State of M.P. or in the course of inter-State sales. The assessee had claimed before the assessing authority deduction on account of freight charges which were deducted from the bills of sales. Tax-paid deductions were claimed under Section 2(r)(ii) of the Act.

5. In first appeal preferred by the assessee the amount of penalties were reduced under Sections 8(2) and 17(3) of the Act. Freight charges were deemed as part of the sale price and no relief was given and the claim or deduction under Section 2(r)(ii) of the Act was not considered in first appeal in all these cases though penalty orders under Section 43 of the Act were set aside.

6. On an appeal being filed by the assessee, the Tribunal found that there has been no breach of Section 8(1) and penalty under Section 8(2) is not leviable. Therefore order of penalty under Section 8(2) of the Act was set aside. Thus the Tribunal allowed the appeals partly and directed that the claim for freight will be decided by the first appellate authority after ascertaining the terms and conditions of the contract in respect of these years, the claim for tax-paid deductions will be considered and determined, the penalty imposed under Section 17(3) will be calculated by the first appellate authority and penalty under Section 8(2) of the Act was deleted in all these appeals.

7. The Revenue therefore submitted an application under Section 44(1) of the said Act calling upon the Tribunal to make a reference to this Court which was declined on the ground that no question of law had arisen in all these cases and the decision rested oh findings of fact. Hence these references.

8. We have not stated the contents of these references in details as facts regarding sale and purchase as also their quantum is not disputed. The learned Advocate-General, Shri A.M. Mathur, frankly submitted that the questions raised in these references have already been answered in favour of the assessee and against the department by two Division Bench decisions of this Court reported in [1983] 16 VKN 165 (Raysinet Kemical Company v. State of M.P.) and [1985] 18 VKN 230 (Commissioner of Sales Tax, M.P. v. Gwalior Oil Mills, Indore) wherein it has been held that it is a trite law that to establish the entitlement for exemption from tax, the burden is on the assessee who claims that exemption and that claim cannot be equated to the question of imposition of penalty for any contravention of the provisions of law; that it would also be pertinent to consider the expression used in Section 8(2) of the Act which indicates that it is a sort of charge against an assessee and when it is a charge against the assessee it has to be proved by the person making the charge. Therefore no penalty under Section 8(2) of the M.P. General Sales Tax Act is attracted if the quantity of finished products sold in SOS did not exceed the quantity of raw materials purchased without concessional rate even though there was every possibility of the raw materials purchased at concessional rate and otherwise forming part of the finished products in the ratio of their purchases the accounts of the two sorts of raw materials and the finished products not being separately maintained that Section 9 talks of the liability to pay tax it does not talk of penalty that Section 26 of the Act casts an obligation on a registered dealer to keep true accounts. It does not lay down the manner of keeping the accounts that on an ex facie reading of Rule 52 it cannot be understood to mean that an assessee is required to maintain separate accounts regarding the consumption of raw materials purchased at concessional rate and otherwise in the finished products so as to indicate whether the finished products sold outside the State were produced from the raw materials purchased at concessional rate or from the material purchased without concessional rate. Even assuming that an assessee is required to maintain an account in a particular manner and if he has failed to do it the only consequence would be that his accounts be not accepted and be liable to a best judgment assessment but that failure to maintain the accounts would not ipso facto warrant a conclusion as contended on behalf of the respondents.

9. In view of these decisions we see no valid ground to call upon the Tribunal to refer the questions of law as stated above to this Court for its opinion and consequently we decline to accept the prayer of the Revenue and reject these petitions with no order as to costs.


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