IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM FRIDAY, THE 26TH MARCH 2010 / 5TH CHAITHRA 1932 OP.No. 12051 of 2003(I) ----------------------- PETITIONER(S): --------------- THE MALANKARA PLANTATIONS LTD. (FORMERLY THE MALANKARA RUBBER & PRODUCE CO. LTD.) MALANKARA BUILDINGS, KODIMATHA, KOTTAYAM-686 001, REPRESENTED BY ITS MANAGING DIRECTOR, MR.J.K.THOMAS. BY ADVS. MR. JOSEPH MARKOSE, SENIOR ADVOCATE MR. THOMAS VELLAPPALLY RESPONDENT(S): --------------- 1. THE SALES TAX OFFICER, I CIRCLE, KOTTAYAM. 2. ADDITIONAL SALES TAX OFFICER-I, II CIRCLE, KOTTAYAM. 3. DEPUTY COMMISSIONER, COMMERCIAL TAXES, KOTTAYAM. 4. THE COMMISSIONER OF COMMERCIAL TAXES, TRIVANDRUM. GOVERNMENT PLEADER MR. K.P.PRADEEP THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 26/03/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: O.P.12051/03 APPENDIX PETITIONER'S EXHIBITS:- EXT.P1:- TRUE COPY OF THE REGISTRATION CERTIFICATE DT.1.7.1957 EXT.P2:- TRUE COPY OF REGN.CERTIFICATE ISSUED TO ERSTWHILE KARIMTHARUVI TEA ESTATES LTD. EXT.P3:- TRUE COPY OF ORDER DT.15.9.99 OF R1 EXT.P4:- TRUE COPY OF ORDER DT.30.9.2000 OF R2 EXT.P5:- TRUE COPY OF ORDER DT.25.8.2000 OF R3 EXT.P6:- TRUE COPY OF ORDER DT.9.1.2001 OF R3 EXT.P7:- TRUE COPY OF REVN. PETITION FILED BEFORE R4 AGAINST Ext.P5 ORDER EXT.P8:- TRUE COPY OF REVN.PETITION FILED BEFORE R4 AGAINST Ext.P6 ORDER EXT.P9:- TRUE COPY OF COMMON ORDER DT.28.10.2002 OF R4 RESPONDENT'S EXHIBITS:- NIL OKB //TRUE COPY// P.A. TO JUDGE C.K.ABDUL REHIM, -------------------------------- O.P.No.12051 OF 2003 --------------------------------- Dated this the 26th day of March, 2010 J U D G M E N T ---------------------- 1. The petitioner is a company engaged in cultivation of Rubber, Tea and other agricultural products. M/s.Karimtharuvi Tea Estates Limited is another company having business in the same line, which got amalgamated with the petitioner company. Both the companies are registered dealers under the Central Sales Tax Act (the CST Act, for short). Issue involved in this writ petition pertains to penalty imposed under Section 10A of the CST Act based on the allegation that the companies have misused 'C-Form' declarations issued to them and thereby committed offence under Section 10(b) of the CST Act. The allegation is that the petitioner company had purchased 'Weighing Machine' and 'Electronic Weigh Bridge' by paying concessional rate of tax on the strength of 'C-Forms', whereas the items purchased were not included in the registration granted in favour of the company. Likewise, the amalgamated company had purchased electrical goods by issuing 'C-Forms' at O.P.12051/03 -2- concessional rate of tax without there being such items included in the registration certificate. 2. When notices proposing penalty was issued, the petitioner replied that the Weighing Machine as well as the Electronic Weigh Bridge purchased by them are accessories of Centrifuging Machinery described in the certificate of registration, and hence they are entitled to purchase those items by issuing C-Forms. So also, on behalf of M/s.Karimtharuvi Tea Estates Limited it was contended that the registration certificate was amended on 1.12.1973 adding goods for use in the manufacture, which includes spare parts required for running and maintenance of the tea factory and its machineries, and the electrical goods purchased by them are only accessories required for machineries installed in the tea factory, and therefore those items will come under the purview of the registration. Discarding the objections penalty was imposed to the tune of 1/2 times of the differential amount of tax in the case of the petitioner and an equal amount of difference of tax in the case of M/s.Karimtharuvi Tea Estates. The 2nd respondent found that O.P.12051/03 -3- the objections submitted were not acceptable because there was a clear misuse of 'C-Forms' for purchase of goods which are not included in the registration under the CST Act. 3. Eventhough the petitioner filed appeals before the Deputy Commissioner, the orders were confirmed as evidenced from Ext.P5 and P6. The petitioner had filed second revision before the Commissioner, Commercial Taxes, the 4th respondent. The revision petitions were dismissed by Ext.P9 common order holding that Section 8(3)(b) stipulates that the goods for which concessional rates of tax is claimed should be goods of the class specified in the certificate of registration and since there is no dispute that the goods purchased in these cases are not included in the certificate of registration, the petitioner company as well as the other company were not entitled to purchase such goods by paying concessional rate of tax. Contentions of the petitioner that the goods in question were items required for effective operation of the plant and machinery and those items are only accessories required for functioning of the machinery which is included in the certificate of registration, were not O.P.12051/03 -4- accepted by the 4th respondent. 4. Learned counsel for the petitioner vehemently contended that the items purchased in both the cases are goods coming within the category mentioned in Rule 13 of the Central Sales Tax (R & T) Rules, 1957. Rule 13 clarifies that the goods referred to in clause (b) of sub-section (3) of Section 8 which can be purchased by a registered dealer, includes machinery, plant, equipment, tools, stores, spare parts, accessories, fuel and lubricants used in the manufacture or processing of goods for sale. It is contended that going by the description contained in Rule 13 the goods purchased in this case will come within the category of goods specified under Section 8(3)(b), for which the petitioner is entitled for purchase on paying concessional rate of tax. Learned Government Pleader on the other hand contended that this is a case where there is clear misuse of the 'C- Forms' which were issued to the petitioner. Both the companies were not authorised to issue 'C-Forms' for purchase of those items because the goods purchased are not items included in the registration certificate. I find force in O.P.12051/03 -5- the contention, because it is clear and evident that the Weighing Machine, Weigh Bridge and electrical items purchased in this case are not goods included in the respecive registration certificate. In the normal course, what the petitioner ought to have done is to apply for inclusion of those items in the registration certificate by way of amendment and thereafter could have issued 'C-Forms' for purchase of such items. Having not resorted to such procedure, I am of the opinion that the findings arrived by the authorities regarding misuse of 'C-Forms', is sustainable. 5. However, it is admitted that the differential amount of tax as well as 50% of the penalty imposed in both the cases had already been remitted. It is noticed that both the revisional authorities have not adverted to the contentions of the petitioner regarding quantum of penalty imposed. With respect to imposition of penalty, it is always left to discretion of the authorities to decide as to whether maximum penalty need be imposed. In other words, the authority concerned shall fix the quantum of penalty considering gravity of offence alleged. It is pertinent to note O.P.12051/03 -6- that, the respondents have no case that the items purchased by paying concessional rate of tax in both the cases were intended for sale. Nor is the case that the petitioner company had not utilised those items for their own purpose without installation in their factories. Therefore I am of the considered opinion that the quantum of penalty imposed are on the higher side. In my considered opinion an moderate estimate, I hold that the penalty can be reduced by 50% of the amounts stipulated in Ext.P3 & Ext.P4 respectively. 6. In the result, the writ petition is disposed of by modifying Ext.P3 and P4 to the extent of reducing the quantum of penalty by 50% of the amounts mentioned therein in both the cases. 7. Needless to say that the amount if any already paid by the petitioner shall be appropriated against the revised demand to be issued in this regard. C.K.ABDUL REHIM, JUDGE. okb