AHMEDABAD STEEL CRAFT AND ROLLING MILLS Vs. STATE OF GUJARAT

JUDGEMENT

(1.) THE assessee is a dealer registered under the Gujarat Sales Tax Act, 1969 (hereinafter referred to as the "act" ). THE assessee manufactures bars and angles out of iron and steel ingots, billets, scrap, etc. , which it purchases from registered dealers. In the three assessment periods, namely, 6th May, 1970, to 31st March, 1971, 1st April, 1971, to 31st March, 1972, and 1st April 1972, to 19th October, 1972, the assessee effected sales of bars and angles. In the bills issued at the time of effecting those sales, no amount was separately mentioned as having been recovered as sales tax, nor was it mentioned in the bills that the sale price was inclusive of sales tax. In the books of account maintained by the assessee, however, entries were made whereunder a specific amount was bifurcated from month to month out of the amount recovered by way of sale price and it was separately shown as the amount of sales tax. At the time of furnishing the quarterly returns, the amount of sales tax worked out accordingly was paid along with the returns. In the assessment orders for the relevant periods, the Sales Tax Officer held that the sales of bars and angles were resales of goods (iron and steel) purchased by the assessee from registered dealers and that therefore those resales were required to be deducted from the assessee's turnover of sales of goods under section 7 read with section 2 (26) (iii) of the Act. In view of the fact, however, that the assessee had in its books of account bifurcated and separately shown the amount of sales tax as aforesaid and paid such amount along with the quarterly returns for the relevant assessment periods, the Sales Tax Officer held that the assessee had acted in breach of the prohibition against collection of tax prescribed in section 56 of the Act and that, therefore, it was liable to be visited with penalty under section 46 (1) (ii) of the Act. THE Sales Tax Officer, therefore, levied penalty in sums equal to the amounts shown to have been collected by way of sales tax by the assessee during the three accounting periods. THE amounts paid as sales tax along with the quarterly returns for the assessment period in question were adjusted against the penalty levied accordingly.

(2.) THE assessee feeling aggrieved by the order imposing penalty carried the matters in appeal.

(3.) ONE should have thought that having arrived at the aforesaid finding the Tribunal would quash the orders of penalty and order refund of the amounts retained by way of penalty. Instead of adopting such course, however, the Tribunal observed that it was necessary to consider a further question, namely, whether in view of the decision of the Supreme Court in State of Tamil Nadu v. Pyare Lal Malhotra reported in [1976] 37 STC 319 (SC), the sales of goods in the shape of bars and angles effected by the assessee during the course of the three assessment periods could be subjected to sales tax as they could not be considered to be resales of the goods purchased, namely, iron and steel. The Tribunal considered this inquiry necessary because in Pyare Lal's case [1976] 37 STC 319 (SC), it was held that each sub-item in entry No. (iv) in section 14 of the Central Sales Tax Act, 1956, is a separate taxable commodity for the purpose of sales tax and that each of them forms a separate species for each series of sales although they may all belong to the genus, "iron and steel". The Tribunal was of the view that if there was no resale of the goods purchased the sale transaction would be liable to be taxed. The Tribunal then observed : " In the case the question of applying the provisions of section 46 of the Act would not arise because in that case the appellant cannot be held to have recovered any amount by way of tax illegally (even assuming that the amount which has been spilt up as sales tax and which has been paid along with the quarterly returns is held to have been recovered from the buyers by the appellant ). . . . . . . . . . . If the Supreme Court's decision referred to above is interpreted to mean that the definition of 'resale' given in section 2 (26) (iii) of the Act would be applicable only when the goods purchased and the goods sold would fall under the same sub-item of entry 3 of Schedule II-Part A to the Act, then the position would be that in this case even assuming that the appellant had recovered the tax on the sales made by it from the buyers; that tax has been rightly recovered and the appellant had rightly paid up that tax along with the returns. In that case, the question of penalty would not arise at all. . . . . . . So the question of legality of tax recovered and the question of penalty are interwoven. The question of penalty is absolutely dependent upon the question of legality of tax said to have been recovered. . . . We have held that the appellant had not recovered any amount by way of tax and so the order of penalty would be bad in law only when the sales made were not liable to tax. Thus the legality of the order of penalty would also depend upon whether the sales made by the appellant were liable to tax or not. . . . . So, the question of penalty and the question of levy of tax on the sales are inter-dependent and hence, we feel that the question of levy of tax on the sales made by the appellant requires to be decided in the light of the aforesaid decision of the Supreme Court. . . . . Therefore, in the interest of justice, all these matters should be remanded to the Sales Tax Officer for considering the point whether the tax was leviable on the sales made by the appellant in view of the Supreme Court decision reported in State of Tamil Nadu v. Pyare Lal Malhotra [1976] 37 STC 319 (SC ). "