Case Law Details
Maa Santoshi Engineering Jaipatna Vs State of Odisha (Orissa High Court)
A. The question whether the Tribunal was legally justified to tax tyre, tube and flaps when sold along with tractor-trolley as a single unit to be taxed separately @ 12.5% [up to 31.03.2011] and 13.5% [after 01.04.2011] and tractor-trolley without tyre, tube and flaps will be sold @ 4% is answered in the positive, i.e., in favour of the opposite party-Revenue and against the petitioner-dealer.
B. The question whether the dispute being the rate of tax the confirmation of penalty by the Tribunal is correct in law is answered in the positive inasmuch as the penalty is imposed on the tax assessed invoking Section 42(5) of the OVAT Act, e., in favour of the opposite party-Revenue and against the petitioner-dealer.
C. The question whether the Tribunal was correct in confirming the imposition of maximum penalty by the assessing officer without taking into consideration the decisions relied on by the petitioner rendered in the case of Union of India Vrs. Rajasthan Spinning & Weaving Mills, (2010) 1 GSTR 66 (SC), which has been relied on by the Hon’ble Supreme Court in the case of Commissioner of Central Excise, Chandigarh Vrs. Pepsi Foods Ltd., 2010 (260) ELT 481 (SC), is answered in favour of opposite party-Revenue and against the opposite party.
FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT
1. Assailing Order dated 14th March, 2016 passed in S.A. No.73(V) of 2014-15 in the case of State of Odisha Vrs. Maa Santoshi Engineering, Jaipatna, Kalahandi and Order dated 16th March, 2016 passed in S.A. No. 71(V) of 2014-15 in the case of State of Odisha Vrs. R.K. Engineering, Junagarh, Kalahandi by the learned Odisha Sales Tax Tribunal, Cuttack [Division Bench in Bhawanipatna Camp], the petitioners have raised the following questions of law:
“i) Whether on the facts and in the circumstances of the case, the Tribunal was legally justified to tax tyre, tube and flaps when sold along with tractor-trolley as a single unit to be taxed separately @ 12.5% and 13.5% and tractor-trolley without tyre, tube and flaps will be sold @ 4%?
ii) Whether on the facts and in the circumstances of the case, the dispute being the rate of tax the confirmation of penalty by the Tribunal is correct in law?
iii) Whether on the facts and in the circumstances of the case, the Tribunal was legally correct in confirming the imposition of maximum penalty by the assessing officer without taking into consideration the decisions relied on by the petitioner rendered in the case of Union of India Vrs. Rajasthan Spinning & Weaving Mills reported in (2010) 1 GSTR 66 (SC) = 2009 (238) ELT 3 (SC), which has been relied on by the Hon’ble Supreme Court in the case of Commissioner of Central Excise, Chandigarh Vrs. Pepsi Foods Ltd. reported in 2010 (260) ELT 481 (SC)?”
1.1. Since questions of law raised in both these revision petitions are similar, they are heard analogously and disposed of by this common Judgment.
Facts of Maa Santoshi Engineering:
2. Audit Assessment was framed under Section 42 of the Odisha Value Added Tax Act, 2004 (for short referred to as “OVAT Act”) by the learned Assistant Commissioner of Sales Tax, Kalahandi Circle, Bhawanipatna pertaining to the tax periods from 01.04.2005 to 31.03.2011 raising a demand to the tune of Rs.3,77,439/- [Tax = Rs.1,25,813/- + Penalty = Rs.2,51,626/-] vide Order dated 20.06.2012.
2.1. Being aggrieved by said order of assessment, the petitioner filed appeal being Case No. AA-09(KA) of 2013-14 under Section 77 of the OVAT Act before the Joint Commissioner of Sales Tax, Balangir Range, Balangir (herein after referred to as “Appellate Authority”). The Appellate Authority observed that the petitioner, being a manufacturer of tractor-trolley, does not sell tyres and tubes independently, but the same are sold as integral part of tractor-trolley “as single unit”. Therefore, notwithstanding that Entry 119 of Part-II of Schedule B appended to the OVAT Act specifically excluded tyres and tubes from its purview, the rate of tax on sale of tractor-trolley would attract tax @ 4% including tyres and tubes, but these items cannot be taxed at separate rate of tax @ 12.5% as per Part-III of Schedule B.
2.2. The State of Odisha being aggrieved by erroneous approach by the Appellate Authority, preferred second appeal being S.A. No.73(V) of 2014-15 wherein the learned Odisha Sales Tax Tribunal framed the following question:
“7. Therefore, the solitary point to decide at this forum is to whether tyres and tubes of tractor-trailer (trolley) are to be taxed @ 4% as integral part of tractor-trailer manufactured by the respondent or to be taxed @ 12.5% as unspecified goods?”
The learned Tribunal recorded the following finding of fact on interpretation of Entry 119, Part-II of Schedule B to the OVAT Act while disposing of second appeal vide Order dated 14th March, 2016:
‘7. The answer to this question in our opinion rests in Sl. No.119 of Part-II goods taxable at the rate of 4% in the OVAT Act. It is very relevant here to quote Sl. No.119 which reads as follows:
‘119. Tractors, Threshers, harvesters, and attachments and parts thereof excluding tyres, tubes and flaps.”
8. This Entry 119 makes it clear that tractors, threshers, harvesters and attachments and parts thereof are to be taxed @ 4%. As the said Entry specifically excluded tyres, tubes and flaps those are to be taxed @ 12.5% as unspecified goods. The statute in Sl. No.119 above has neither imposed nor pressed upon any conditions that the rate in the Sl. No. be applicable to traders and not to manufacturers when he sells his finished products. In the event of clarity in law in our considered opinion tractor-trailers are to be taxed @ 4% but not tyres, tubes and flaps etc. These goods (tyres, tubes, flaps) are to be taxed @ 12.5% in the tax rate schedule C of the OVAT Act.”
2.3. Against this Order of the learned Tribunal the petitioner-dealer has approached this Court in revision invoking provisions under Section 80 for adjudication of questions of law as posed supra.
Facts of R.K. Engineering:
3. Audit Assessment was framed under Section 42 of the OVAT Act by the learned Sales Tax Officer, Kalahandi Circle, Bhawanipatna pertaining to the tax periods from 15.01.2009 to 30.06.2011 raising a demand to the tune of Rs.5,28,215/- [Tax =
Rs.1,76,072/- + Penalty = Rs.3,52,143/-] vide Order dated 11.02.2013 by holding that the tyres and tubes of tractor-trolley manufactured by the petitioner is subject to tax @ 12.5% [for the tax period upto 31.03.2011] and @ 13.5% after 01.04.2011 as per Part-III of Schedule B to the OVAT Act.
3.1. As the First Appeal bearing Case No. AA-11(KA) of 201314 preferred by the dealer under Section 77 of said Act stood allowed, being aggrieved State of Odisha approached the Odisha Sales Tax Tribunal in Second Appeal being S.A.No.71(V) of 2014-15. Said second appeal being decided in favour of Revenue, the petitioner-dealer invoked provisions of Section 80 of the OVAT Act and preferred this revision.
The contentions of the counsel for the petitioner:
4. Sri Siba Prasad Dalai, learned counsel for the petitioner submitted that without tyres and tubes, the product “tractor-trolley (trailer)” cannot be sold and the manufactured item can only be sold tyres and tubes accompanied therewith. Therefore, the learned Tribunal erred in considering true purport of Entry 119, Part-II of Schedule B to the OVAT Act. Sri Dalai reiterated that since tyres and tubes are integral part of tractor-trolley, even as Entry 119 of Part-II of Schedule B excludes from its scope “tyres, tubes and flaps” to be taxed at the rate of 4%, tractor-trolley being attachment to tractor, the said commodities supplied along with the goods manufactured by the petitioner is liable to be taxed at 4%, but not at 12.5% / 13.5% as per residuary entry, e., Part-III of Schedule B as held by the learned Tribunal.
The contentions of the opponent-Revenue:
5. Per contra, Sri Sunil Mishra, learned Additional Standing Counsel for the CT & GST Organisation submitted that in view of specific exclusion of the goods namely “tyres, tubes and flaps” from the ambit of Entry 119, Part-II of Schedule B, there is no ambiguity so as to call for any interpretation. When language of the statute is clear and loud, the entries in the Schedule are to be read as such and strict interpretation of Entry 119, Part-II of Schedule B does not warrant interference by this Court in the revision.
Discussions as to question No.(i):
6. From the above, this Court is called upon to decide whether tyres and tubes used in tractor-trolley manufactured by the petitioner is liable to be taxed separately @ 12.5% for the tax periods up to 31.03.2011 and @ 13.5% after 01.04.2011 as per Part-III of Schedule B or @ 4% in terms of Entry 119 of Part-II of Schedule B appended to the OVAT Act.
6.1. It is not in dispute that Entry 119 of Part-II specifically carves out exception. The goods “tyres, tubes excluded from the words “Tractors, threshers, and flaps” are harvesters and attachments and parts thereof” used in the said entry. It is stated in Deepak Agro Solution Ltd. Vrs. Commissioner of Customs, (2008) 8 SCC 358 that what is not excluded would be held to be included. In CCE Vrs. Shree Baidyanath Ayurved Bhawan Ltd., (2010) 1 GSTR 1 (SC) it is laid down that specific entry must prevail over a general entry. This Court in State of Odisha Vrs. Bharat Store, (2002) 127 STC 333 (Ori) held that it is a settled position of law that a taxing statute is to be strictly construed and the words used are to be given their natural meaning. It is also the settled position that entries in the Schedule are to be interpreted in their popular sense unless they are expressly defined in the enactment.
6.2. In Raj Brothers Agencies Vrs. State of TN, (1977) 39 STC 191 (Mad) it has been stated that a special entry overrides a general provision. If main article to which the item in question is accessory or component part is taken out of that item, its accessories and component parts could not be said to have been left untouched. Though batteries may be electrical goods and battery plates are accessories or component parts of such batteries, in view of the specific entry, batteries as such were excluded from general entry.
6.3. Reference may also be had to Reliance Trading Co. Vrs. State of Kerala, (2000) 119 STC 321 (Ker) and Speedway Rubber Co. Vrs. CCE, (2004) 137 STC 503 (SC) whereby it is held that if there are two entries, one general and the other specific, the ordinary rule of construction that a general entry must give way to a specific entry is to be followed. The authority is to see that if two entries are apparently in conflict with one another, an attempt must be made to construe them harmoniously and not to treat them repugnant to each other. A commodity falling under the general entry as also a specific entry has to be taxed in terms of special entry as the same is to prevail over the general entry. In other words, the specific entry should override the general entry.
6.4. Applying the above principles to the present context, it may safely be stated that since “tyres, tubes and flaps” are specifically excluded from the items enumerated in said entry, the said commodities are liable to be taxed as per rate of tax specified under Part-III of Schedule B appended to the OVAT Act.
6.5. This Court in Madras Rubber Factory Ltd. Vrs. State of Odisha, (1994) 92 STC 171 (Ori) was called upon to resolve issue whether tractor tyres and tubes would fall within the sweep of expression “automobile tyres and tubes” or “spare parts of tractors and trailers”. It was held in the said case that “automobile tyres and tubes” constitute a separate taxable entry. It has been observed in the said case as follows:
“4. It is not disputed that tractor and its trailer are motor vehicles. That being so, spare parts and components of tractor and its trailer were taxable as in Sl.2 from May 1, 1976 to August 31, 1978 and as in Sl.4 from September 1, 1978, till a specific entry as in Sl. 6 relating to spare parts and component parts of tractor and its trailer was prescribed to take effect from June 1, 1980. In other words, although with effect from May 1, 1976, tractor and its trailer became taxable as in Sl. 3 at a lower rate of 4 per cent their component parts continued to be taxed as in sl.2 at higher rate of 13 per cent from January 1, 1978, till the entry as in Sl.6 came into effect from June 1, 1980 prescribing rate of 4 per cent. Considering the above taxing history, it is apparent that component parts of tractor and its trailer were considered separate from tyres and tubes of tractor and its trailer, while carving out from sl. 2 automobile tyres_ and tubes as in Sl.5 with effect from September 1, 1978 and from Sl.4 component parts of tractor and its trailer as in Sl. 6 with effect from June 1, 1980. Consequently, the argument of the learned counsel for the dealer that tractor tyres and tubes are taxable as component parts of tractor is without any substance.”
(Emphasis supplied).
6.6. This Court while dealing with whether “flap” is “component part of motor vehicle” in the case of State of Odisha Vrs. Dunlop India Ltd., (1993) 90 STC 379 (Ori) observed as follows:
“3. *** As the user of the flap being limited for the purpose indicated above, it cannot be said to be a component part of tyres and tubes. It is also not an accessory to tyres and tubes in view of the test laid down by the Apex Court in the case of M/s. Mehera Brothers v. The Joint Commercial Officer, Madras, AIR 1981 SC 1017. The Court has observed in paragraph 5 of the judgment that the correct test would be whether an article or articles in question would be an adjunct or an accompaniment or an addition for the convenient use of another part of the vehicle or adds to the beauty, elegance or comfort for the use of the motor vehicle or a supplementary or secondary to the main or primary importance. Whether an article or a part is an accessory cannot be decided with reference to its necessity to its effective use of the vehicle as a whole.
Flap is commercially a distinct identifiable commodity available for sale in automobile market. The framers when issued the notification with regard to automobile tyres and tubes indicating the rate of tax payable as such goods, it has to be assumed that they were aware of the fact that flap was one of the items of goods determined as the first point taxable goods and it having not been mentioned in the notification as to the rate of tax payable on it, cannot be said that the framers of notification intended or intend to charge the rate of tax on flap as payable on automobile tyres and tubes. In absence of any rate of tax payable on flap it has to be taken under the residual item of goods mentioned in the list of goods subject to sales tax and as such it is exigible to tax at the rate of 7% and 8% as it stood then for both the years in question.”
(Emphasis supplied)
6.7. The decision in Shanker Rubber Industries Vrs. The State of Andhra Pradesh, (1977) 39 STC 415 (AP) is apt to be noted. In the said case in Schedule-I of the Andhra Pradesh General Sales Tax Act, there were two items, 15 and 17.
Item 15 read as follows:
“Tyres and Tubes and accessories and parts”
Item 17 read as follows:
“Cycles, their accessories and parts.”
The Court held that:
“The goods that are not specifically covered by item 17 will be covered by item 15. Item 17… deals with only cycles, their accessories and parts and not tyres and tubes referred to in item 15.”
6.8. As such there cannot be any different set of rate of tax for same commodity. Same rate of tax is applicable to the manufacturer as also the trader. In Plasmac Machine Manufacturing Vrs. Collector of Central Excise, AIR 1991 SC 999 it has been rendered with regard to classification of commodity vis-à-vis use of such commodity as follows:
“7. *** In Bhor Industries Ltd., Bombay Vrs. CCE, (1989) 1 SCC 602, the crude PVC films as produced by the appellants were not known in the market nor could they be sold in the market. Sabyasachi Mukharji, J., as he then was, while considering the submission that it was only the goods as specified in the schedule to the Act that could be subjected to the duty in para 6 observed: (SCC p. 607, para 6)
‘For articles to be goods these must be known in the market as such or these must be capable of being sold in the market as goods. Actual sale in the market is not necessary, user in the captive consumption is not determinative but the articles must be capable of being sold in the market or known in the market as goods. That was necessary.’
The appellants themselves have called the goods ‘Tie Bar Nuts’ and those are admittedly used for fixing platens at appropriate distances. It cannot be said that the Tie Bar Nuts after their manufacture did not constitute goods; their actual sale in the market was not necessary.
***
16. In the instant case there is no dispute that Tie Bar Nuts conform to the popular idea of nuts. In Indo International Industries Vrs. CST, (1981) 2 SCC 528 this Court observed that in interpreting items in statutes like the Excise Act or Sales Tax Act, whose primary object was to raise revenue and for which purpose to classify diverse products, articles and substances, resort should be had not to the scientific and technical meaning of the terms or expressions used but to their popular meaning, that is to say, the meaning attached to them by those dealing in them. The fact that in the instant case the learned Technical Member of the Tribunal held in dissent that the Tie Bar Nuts are not fastening nuts would therefore be of no avail to the appellant.”
6.9. Taking cue from aforesaid Judgments, this Court is of the considered opinion that “tyres, tubes and flaps” being excluded from the purview of preceding words, namely “Tractors, Threshers, harvesters, and attachments and parts thereof” as contained in Entry 119 of Part-II of Schedule B appended to the OVAT Act, the subject-goods do not fall within ambit of said entry. No specific entry being available, “tyres, tubes and flaps” are, thus, subject to tax @ 12.5% up to tax period ending on 31.03.2011 and @ 13.5% after 01.04.2011 as per Part-III of Schedule B to the OVAT Act. For the aforesaid reasons, the interpretation as suggested by the learned counsel for the petitioner cannot be acceded to.
Discussions as to question Nos.(ii) and (iii):
7. The question as to imposition of penalty under Section 42(5) of the OVAT Act, has already been set at rest by this Court on earlier occasion in case of State of Odisha Vrs. Chandrakanta Jayantilal & Another, STREV No.69 of 2012, disposed of vide Order dated 5th July, 2022. Relevant portions of said Order is reproduced hereunder:
“11. At the outset, it requires to be noticed that this Court in Jindal Stainless Limited Vrs. State of Odisha (2012) 54 VST 1 (Orissa) upheld the constitutional validity of Section 42(5) of the OVAT Act. The observations of this Court in the said decision, which are relevant in the present context, were as under:
“31. VAT is indirect tax on consumption of goods. It is the form of collecting sales tax under which tax is collected in each stage on the value added to the goods. The basic object of VAT Scheme is to provide voluntary and self compliance. It goes without saying that to plug the leakage of revenue, the Legislature enacted law authorizing imposition of penalty for infraction of any statutory provision. We are conscious that generally penalty proceedings are quasi judicial in nature. Therefore, before imposing penalty, opportunity of hearing should be provided to the affected assessee- dealer. In the OVAT Act, various Sections provide for imposition of penalty for infraction of statutory provisions. In most of those Sections opportunity of being heard is provided to a dealer before imposition of penalty. Those Sections are Section 28(1), Section 31(9), Section 34(3), Section 54(6), Section 61(5), Section 62(6), 65(2), Section 73(10), Section 73(12)(e), Section 73(13), Section 76(3), Section 76(8), Section 101(4) and Section 107(4). The present position is entirely different. Quantification of penalty is dependant on the tax assessed under Section 42 of the OVAT Act. For the purpose of assessing tax, opportunity of hearing was afforded to the assessee, the explanation of the assessee and its books of account were examined and considered. Penalty is only quantified on the basis of the tax assessed. No discretion is left with the Assessing Officer for levying any lesser amount of penalty. Therefore, even if further opportunity will be given to the assessee before imposing penalty that will be a futile exercise. Penalty is not independent of the tax assessed. If the tax is assessed, imposition of penalty under 42(5) is warranted.
***
35. In view of the above, we are of the considered view that Section 42(5) of the OVAT Act authorizing imposition of penalty equal to twice the amount of tax assessed under Section 42(3) or (4) of the OVAT Act is constitutionally valid. It is not arbitrary, unreasonable, oppressive, or hit by Article 14 or in any way ultra vires the Constitution of India.”
12. The question is whether there is any discretion in the STO not to impose the penalty under Section 42(5) of the OVAT Act? In this context, it may be noticed that this Court in M/s. National Aluminium Company Ltd. Vrs. Deputy Commissioner of Commercial Taxes, 2021 (I) OLR 828 noticed the distinction between the penalty imposable under Section 43(2) of the OVAT Act and the default penalty that stands attracted under Section 42(5) of the OVAT Act. The discussion in this regard in the said decision reads as under:
“11. The Court notes that under Section 42(5) of the OVAT Act the penalty levied is “equal to twice the amount of tax assessed” under Section 42(3) or 42(4) pursuant to an audit assessment. There is no discretion with the Assessment Officer (AO) to reduce this amount of penalty. On the other hand, Section 43(2) of the OVAT Act is under the heading “Turnover escaping assessment” and is differently worded. It reads thus:
“43(2) If the assessing authority is satisfied that the escapement or under assessment of tax on account of any reason(s) mentioned in sub-section (1) above is without any reasonable cause, he may direct the dealer to pay, bay way of penalty, a sum equal to twice the amount of tax additionally assessed under this section.”
13. In the present case, there is no manner of doubt that the assessment was as a result of the AVR and was made under Section 42(4) of the OVAT Act. The consequence of the penalty attracted under Section 42(5) of the OVAT Act was automatic. For ready reference, Section 42 of the OVAT Act reads as under:
“42. Audit assessment.
(1) Where the tax audit conducted under sub-section (3) of section 41 results in the detection of suppression of purchases or sales or both, erroneous claims of deductions including input tax credit evasion of tax or contravention of any provision of this Act affecting the tax liability of the dealer, the assessing authority may, notwithstanding the fact that the dealer may have been assessed under Section 39 or Section 40, serve on such dealer a notice in the form and manner prescribed along with a copy of the Audit Visit Report, requiring him to appear in person or through his authorized representative on a date and place specified therein and produce or cause to be produced such books of account and documents relying on which he intends to rebut the findings and estimated loss of revenue in respect of any tax period or periods as determined on such audit and incorporated in the Audit Visit Report.
(2) Where a notice is issued to a dealer under sub-section (1), he shall be allowed time for a period of not less than thirty days for production of relevant books of account and documents.
(3) If the dealer fails to appear or cause appearance, or fails to produce or cause production of the books of account and documents as required under sub-section (1), the assessing authority may proceed to complete the assessment to the best of his judgment basing on the materials available in the Audit Visit Report and such other materials as may be available and after causing such enquiry as he deems necessary.
(4) Where the dealer to whom a notice is issued under sub-section (1), produces the books of account and other documents, the assessing authority may, after examining all the materials as available with him in the record and those produced by the dealer and after causing such other enquiry as he deems necessary, assess the tax due from that dealer accordingly.
(5) Without prejudice to any penalty or interest that may have been levied under any provision of this Act, an amount equal to twice the amount of tax assessed under subsection (3) or sub-section (4) shall be imposed by way of penalty in respect of any assessment completed under the said sub-sections.
(6) Notwithstanding anything contained to the contrary in any provision under this Act, an assessment under this section shall be completed within a period of six months from the date for Audit Visit Report:
Provided that if, for any reason, the assessment is not completed within the time specified in this sub-section, the Commissioner may, on the merit of each such case, allow such further time not exceeding six months for completion of the assessment proceeding.
(7) No order of assessment shall be made under sub-section (3) or sub-section (4) after the expiry of one year from the date of receipt of the Audit Visit Report.”
14. It will be straightway noticed that the very wording of Section 42(5) indicates that once as assessment is completed under Section 42(4) of the OVAT Act, the penalty leviable under Section 42(5) automatically follows. There is no discretion in the STO unlike the penalty imposable under Section 43(2) of the OVAT Act. This was what explained by this Court in M/s. National Aluminium Company Limited (supra).”
[Emphasis supplied]
7.1. With regard to applicability of ratio of decision in Union of India Vrs. Rajasthan Spinning & Weaving Mills reported in (2010) 1 GSTR 66 (SC), which has been relied on by the Hon’ble Supreme Court in the case of Commissioner of Central Excise, Chandigarh Vrs. Pepsi Foods Ltd., 2010 (260) ELT 481 (SC), needless to say that since they are rendered in different context and under different statutory setting of words, the reliance placed by the petitioner is misplaced.
7.2. It may be worthwhile to keep in mind the following dicta of Vrs. Arulmozhi Iniarasu, (2011) 7 SCC 397:
“14. Before examining the first limb of the question, formulated above, it would be instructive to note, as a preface, the well-settled principle of law in the matter of applying precedents that the Court should not place reliance on decisions without discussing as to how the fact situation of the case before it fits in with the fact situation of the decision on which reliance is placed. The observations of the courts are neither to be read as Euclid’s theorems nor as provisions of statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Disposal of cases by blindly placing reliance on a decision is not proper because one additional or different fact may make a world of difference between conclusions in two cases. [Ref. Bharat Petroleum Corpn. Ltd. Vrs. N.R. Vairamani, (2004) 8 SCC 579; Sarva Shramik Sanghatana (KV) Vrs. State of Maharashtra, (2008) 1 SCC 494 and Bhuwalka Steel Industries Ltd. Vrs. Bombay Iron & Steel Labour Board, (2010) 2 SCC 273].”
7.3. This Court, as regards applicability of Rajasthan Spinning & Weaving Mills (supra), in the case of Jai Jagannath Marble Vrs. Commissioner of Commercial Taxes, (2011) 39 VST 312 (Ori) held as follows:
“11. In this respect, reliance was placed by the Revenue on the decision of the honourable Supreme Court in the case of Union of India Vrs. Dharamendra Textile Processors, (2008) 18 VST 180 (SC) wherein the honourable Supreme Court while considering Section 11AC of the Central Excise Act, 1944 (levy of penalty) determined that the application of the aforesaid section would depend upon the existence or otherwise of all the conditions stated in the section. Once the section is found to be applicable in a case, the concerned authority would have, no discretion in quantifying the amount and penalty must be imposed as stipulated under sub-section (2) of Section 11A of the Central Excise Act. This view has been re-affirmed by the honourable Supreme Court in the case of Union of India Vrs. Rajasthan Spinning & Weaving Mills, (2010) 1 GSTR 66.”
7.4. The Hon’ble Supreme Court in Division Bench vide Order dated 05.05.2009 in the case of Union of India Vrs. Krishna Processors, (2009) 15 SCC 58 made the following observation:
“Subsequently, the controversy is put to rest by the Judgment of a three-Judge Bench of this Court (in which one of us, Brother Alam was a party) in the case of Union of India Vrs. Dharmendra Textile Processors which is reported in (2008) 18 VST 280 (SC). It has been held, inter alia, in the said decision that the impugned Rule 96ZQ is mandatory.”
7.5. Be that as it may, in view of enunciation of law by this Court in the case of Chandakanta Jayantilal (supra) taking cognizance of language of the provisions contained in Section 42(5), the questions of law Nos. (ii) and (iii) are answered in favour of the Revenue and against the petitioner-dealer.
Conclusion and decision:
8. For the discussions made in the foregoing paragraphs and the reasons enumerated supra, it is held as under:
A. The question whether the Tribunal was legally justified to tax tyre, tube and flaps when sold along with tractor-trolley as a single unit to be taxed separately @ 12.5% [up to 31.03.2011] and 13.5% [after 01.04.2011] and tractor-trolley without tyre, tube and flaps will be sold @ 4% is answered in the positive, i.e., in favour of the opposite party-Revenue and against the petitioner-dealer.
B. The question whether the dispute being the rate of tax the confirmation of penalty by the Tribunal is correct in law is answered in the positive inasmuch as the penalty is imposed on the tax assessed invoking Section 42(5) of the OVAT Act, e., in favour of the opposite party-Revenue and against the petitioner-dealer.
C. The question whether the Tribunal was correct in confirming the imposition of maximum penalty by the assessing officer without taking into consideration the decisions relied on by the petitioner rendered in the case of Union of India Vrs. Rajasthan Spinning & Weaving Mills, (2010) 1 GSTR 66 (SC), which has been relied on by the Hon’ble Supreme Court in the case of Commissioner of Central Excise, Chandigarh Vrs. Pepsi Foods Ltd., 2010 (260) ELT 481 (SC), is answered in favour of opposite party-Revenue and against the opposite party.
8.1. In the result, both the revision petitions are dismissed, but, in the circumstances, with no order as to costs.
