- (1.) These appeals, by special leave, are directed against the judgments and orders delivered by the High Court of Judicature at Allahabad, reversing the orders passed by the Sales Tax Tribunal, Meerut, (for short "the Tribunal"). In the first set of appeals (No. 2344-2347/2004) the Tribunal had affirmed the levy of penalties on the respondent, under Section 10(b) read with Section 10A of the Central Sales Tax Act, 1956 (for short "the Act") whereas in the second set (appeals No. 6382-6383/2004), the Tribunal had set aside the levy of penalties under the said Section on the appellant. Since the appeals raise a common question of law, it would be convenient to dispose them of by this single judgment.
(2.) Shorn of unnecessary details, the facts essential for the adjudication of these appeals are: The respondent (hereinafter referred to as "the dealer") is registered under Section 7(2) of the Act and since the year 1977-78 is engaged in the business of manufacture and sale of Handloom fabrics. The dealer was authorized to issue Form 'C' on the import of cotton and cotton yarn as raw materials. It is not in dispute that the dealer had imported cotton waste, polythene, sutli and tat against Form 'C' in order to avail the benefit of payment of concessional rate of Central Sales Tax. On 15th October 1985, the revenue issued a notice to the dealer to show cause as to why penalty under Section 10(b) read with Section 10A of the Act should not be imposed on them for using Form 'C' for the purchase of items which were not covered by their certificate of registration. Immediately on the issuance of the said notice, dated 15th October 1985, the dealer applied for amendment of the certificate of registration for inclusion of "cotton waste" in the certificate. The said amendment was granted on the same day. In reply to the show cause notice, the dealer pleaded that they were under a bona fide belief that "cotton" included "cotton waste", and thus there was no false representation on their part. However, not being convinced with the reply, sometime in January 1986, the Assessing Authority imposed penalty on the dealer under Section 10(b) read with Section 10A of the Act amounting to Rs.18,840/-; Rs.63,822/-; Rs.55,111/- and Rs.51,141/- for all the four assessment years in question, viz. 1979-80, 1981-82. 1982-83 and 1983-84 respectively, for making false representation in respect of purchase of tat, sutli, polythene, cotton waste, and jute. The first appeals preferred by the dealer were dismissed by the Assistant Commissioner (Judicial) by two separate orders. Being aggrieved, the dealer filed four separate second appeals before the Tribunal. It appears that in the meanwhile, by an order dated 30th April 1987, the Tribunal, in Second Appeal Nos. 243 of 1986 for the assessment year 1977-78; 242 of 1986 for assessment year 1978-79 and 550 of 1986 for assessment year 1980-81, set aside the order of penalty on purchase of cotton waste on the ground that no objection was raised by the revenue for the previous years, and therefore, the issuance of Form 'C' for the purchase of said commodity was a bona fide error on the part of the dealer and it did not involve false representation. In relation to other commodities, the Tribunal remanded the matters for re-fixation of penalty. However, when appeals for the present assessment years were taken up, notwithstanding its earlier orders, the Tribunal vide order dated 22nd January 1991, affirmed the orders levying penalty, inter-alia observing that for the purposes of sales tax, cotton and cotton waste are two different commodities and the fact that the dealer had deliberately used Form 'C' to import items like cotton waste, sutli, tat etc., established that the dealer had imported the goods by making a false representation and had taken the benefit of concessional rate of tax unauthorizedly. According to the Tribunal, these circumstances proved the mala fide on the part of the dealer. Finally, distinguishing its earlier orders on the ground that in those cases, the matter was remanded and it remained unclear as to how the matter had proceeded further; the Tribunal reduced the amount of penalty imposed. Being dissatisfied with the order of the Tribunal, dated 22 nd January 1991, the dealer filed Sales Tax Revisions before the High Court of Allahabad. The only dispute which was put in issue in these revisions was with regard to the levy of penalty for use of Form 'C' on the purchases of cotton waste. As stated above, by the impugned judgment the High Court has allowed the revision petitions, inter alia, observing: "Cotton" and "Cotton Waste" are two different commodities known to Sales Tax Laws. However, there is not much distinction from the point of view of ordinary people. The applicant is a registered dealer since the assessment year 1977- 78 and has been making purchases of "Cotton waste" and issuing Form-C thereof since then. The department earlier than 15th October, 1985 raised no objection. This as was submitted by the learned counsel for the applicant is very relevant circumstance for determination of the question "false representation" occurring in Section 10(b) of the Act............ When Tax Laws are so complex the administration should proceed specially in the penalty matter from the view of ordinary citizen who is always willing to comply with the conditions of law. The assessee as soon as it came to know about its (sic) fault filed application for amendment of registration certificate. Some fault was on the part of the department also for maintaining silence over the period of about eight years." The appellant herein (hereinafter again referred to as "the dealer") was carrying on the business of manufacture and sale of oil and oil cakes and was registered under Section 7 of the Act. It appears that during the assessment proceedings relating to the assessment years 1985-86 and 1986- 87, the Assessing Authority found that the dealer had issued Form 'C' for the import of oil seeds from outside the State and had availed of the benefit of concessional rate of tax by issuing Form 'C' in respect of the said item, which was not included in their registration certificate. Accordingly, a notice was issued to the dealer under Section 10(b) read with Section 10A of the Act to show-cause as to why penalty under the said provisions should not be levied on them. Not being satisfied with the reply furnished by the dealer, the Assessing Authority levied penalty in the sum of Rs.73298.60p. and Rs.2,08,064/- for the assessment years 1985-86 and 1986-87 respectively. Dealer's first appeal to the Deputy Commissioner (Appeals) pertaining to the assessment years 1985-86 was partly allowed in as much as the quantum of penalty was reduced to Rs.1075/- but on merits, appeals for both the assessment years were rejected. Being aggrieved, the dealer preferred two second appeals before the Tribunal. Inter alia, observing that apart from the fact that in the application under Section 7(1) and 7(2) of the Act in Form 'A', the word 'oil seed', mentioned in an inappropriate column- 16-GHA was deleted, the dealer was also under a bona fide belief that they were authorized to purchase oil seeds against Form 'C' as the department had been regularly issuing Form 'C' to them for the purchase of oil seeds, the Tribunal set aside the penalty levied on the dealer under Section 10(b) of the Act. Not being satisfied with the order passed by the Tribunal, the revenue took the matter in revision to the High Court. As afore-stated, the High Court came to the conclusion that the order of the Tribunal deleting the penalty was erroneous. However, having regard to the facts and circumstances of the case, the High Court held that since the revenue had been regularly issuing Form 'C' in spite of details being furnished by the dealer, penalty only to the extent of benefit availed by the dealer i.e. @ 4% should be levied. Accordingly, the High Court reduced the penalty to Rs.27,275/- and Rs.66,955/- in respect of assessment years 1985-86 and 1986-87 respectively.
(3.) Hence both the revenue and the dealer are before us in these appeals.;