Ajay Kumar Mittal, J. - (1.) THIS appeal has been preferred by the appellant -assessee under section 68 of the Punjab Value Added Tax Act, 2005 (in short, "the Punjab VAT Act") against the order dated July 11, 2008, annexure A7 passed by the Punjab Value Added Tax Tribunal, Chandigarh (for brevity, "the Tribunal"), proposing to raise the following substantial questions of law for determination of this court: "(i) Having regard to the facts and circumstances of the case and on true and correct interpretation, is surcharge exigible under section 5(1C) of the Punjab General Sales Tax Act, 1948 upon an industrial unit holding exemption from payment of tax in accordance with the provisions of the Punjab General Sales Tax (Deferment and Exemption) Rules, 1991 when section 30AA under which surcharge was imposed was omitted with effect from December 7, 2002 and there was no specific provision left for the imposition of surcharge upon the exemption holders? (ii) On the facts and circumstances of the case, whether sales made by an exempted unit were deductible from gross turnover to determine taxable turnover liable to surcharge? (iii) In the facts and circumstances of the case, whether sales of three wheelers amounting to Rs. 6,90,181 could be subjected to surcharge despite prohibition contained in second proviso, when no surcharge was levied on such sales made during 2004 -05, for sheer non -mention of the name of the commodity on which higher rate of tax, i.e., 12 per cent was assessed? (iv) In the facts and circumstances of the case, whether penalty imposed under section 23 of the Punjab General Sales Tax Act, 1948 could be sustained on bald narration that an opportunity of hearing was granted when neither show -cause notice was served upon the assessee nor opportunity of hearing was given as per order sheet containing the proceedings of the case - A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. The appellant is a public limited company registered under the Companies Act, 1956. During 2003 -04, the appellant was engaged in the manufacture of tractors for sale. Besides tractors, the company also produced and sold three wheelers valuing Rs. 6,90,181 in the subsequent year. The company was registered under the Punjab General Sales Tax Act, 1948 (in short, "the PGST Act") and also under the Central Sales Tax Act, 1956 (in short, "the GST Act"). It was also holding exemption certificate under the Punjab General Sales Tax (Deferment and Exemption) Rules, 1991 (in short, "the 1991 Rules"). The appellant deposited Rs. 8 lacs as surcharge from its own funds. It being exemption holder neither collected any tax nor surcharge from its customers. The assessing authority framed assessment and determined tax payable at Rs. 8,06,433 and found Rs. 7,17,344 as refundable. He further imposed penalty of Rs. 5,000 under section 23 of the PGST Act and after reducing the same from refundable amount of Rs. 7,17,344, allowed refund of Rs. 7,12,344. The Assessing Authority while determining taxable turnover in the assessment order dated March 16, 2007, annexure A5 deducted Rs. 70,68,16,401 as exempted sales of tractors made within the State of Punjab and no tax was assessed on this turnover but while computing the quantum of monetary exemption availed of by the appellant during the year, he illegally included surcharge of Rs. 28,27,266 and reduced the available monetary exemption by Rs. 3,10,99,922. Aggrieved by the order, the assessee filed appeal before the Deputy Excise and Taxation Commissioner (Appeals) (DETC (Appeals)). Vide order dated September 6, 2007, annexure A6, the DETC (Appeals) held that tax under section 5 and surcharge under section 5(1C) of the PGST Act is to be assessed irrespective of the exempted units and the amount so calculated shall be reduced from the exemption amount granted to the units. The appellate authority also upheld the penalty of Rs. 5,000 imposed under section 23 of the PGST Act. Still not satisfied, the appellant filed second appeal before the Tribunal. Vide order dated July 11, 2008, annexure A7, the Tribunal dismissed the appeal holding that even when the appellant is an exempted unit as per entitlement certificate, still every year tax has to be calculated on the taxable turnover and then it has to be exempted within the exemption entitlement. The surcharge is leviable on tax payable and this shall also be added to the amount of tax for which exemption entitlement is there since section 30AAof the PGST Act added on November 7, 2001 had been omitted with effect from December 7, 2002. The Tribunal sustained imposition of surcharge in respect of sales of three wheelers amounting to Rs. 6,90,181 and iron scrap valuing Rs. 91,251 and penalty of Rs. 5,000 imposed under section 23 of the PGST Act. Hence the present appeal by the assessee.
(2.) WE have heard learned counsel for the parties and perused the record. Learned counsel for the appellant submitted that the goods produced by the appellant being exempt from payment of sales tax for a period of 10 years, no surcharge could be levied which would reduce the exemption entitlement of the assessee. According to the learned counsel, in view of rule 4A of the 1991 Rules, surcharge is on taxable turnover and not on the gross turnover. Reference was made to section 5(2) of the PGST Act which defines "taxable turnover". Reference was also made to rule 29 of the Punjab General Sales Tax Rules, 1949 (in short, "the 1949 Rules"). It was urged that the Assessing Officer -the first appellate authority and also the Tribunal had erred in determining surcharge for purposes of calculating tax payable and reducing it from the exemption limit which was allowed to the assessee. It was also submitted that no surcharge was leviable on sales of three -wheelers amounting to Rs. 6,90,181 in view of second proviso to section 5(1C) of the PGST Act. The imposition of penalty under section 23 of the PGST Act was also challenged. Support was drawn from following judgments: (i) Hoshiarpur Large and Medium Industries Association v. State of Punjab : [2002] 128 STC 637 (P & H) : [2002] 19 PHT 613; (ii) Jai Durga Cotton Mills v. State of Haryana : [2010] 29 VST 617 (P & H); (iii) Kagaz Print -N -Pack (India) Pvt. Limited, Bahadurgarh, District Piajjar v. State of Haryana : [2007] 5 VST 26 (P & H) : [2006] 28 PHT 266; and (iv) State of Haryana v. Liberty Enterprises : [2009] 22 VST 1 (SC).
(3.) ON the other hand, learned counsel for the State besides supporting the order passed by the Tribunal submitted that the surcharge was to be calculated on the net sales made by the assessee and had been rightly reduced from the exemption limit which was allowed to the assessee.;