Hon'ble Dr. Satish Chandra, J.
(Per: Tarun Agarwala,J.) All the three writ petitions raise a common question and are being decided together. For facility, the facts of Writ Petition (Tax) No.337 of 2008, M/s Sadbhav Engineering Ltd. vs. State of U.P. and others, are being taken into consideration.
The petitioner is a Limited Company and undertakes works contract for different companies. Northern Coalfields Ltd., Sonebhadra (hereinafter referred to as "NCL") has an open cast coal mines and pays royalty to the State Government. Open cast mine is a different method on extracting rock or minerals from the earth by their removal from an open pit or burrow. This is different from the mining of minerals, which requires tunneling into the earth. Open pit mines are used where deposits of minerals is found near the surface, i.e., where the over burden (surface material covering the valuable deposit) is relatively thin or the material of interest is structurally unsuitable for tunnelling.
NCL have open cast mines and, consequently, the first primary steps to extract the mineral, namely, coal is to remove the over burden, i.e., the survey material covering the valuable deposits of coal. For this purpose, NCL floated a tender inviting offers from various contractors. The scope of the work was removal of overburden by hiring of equipments such as excavators, tippers, dumpers, etc. The petitioner applied and gave his bid which was accepted and a letter of acceptance dated 20.9.2007 was issued. The scope of work as defined in the letter of acceptance was hiring of equipment for overburden removal.
Based on the letter of acceptance in favour of the petitioner, the petitioner applied for registration under the U.P. as well as under the Central Sales Tax Act. While applying for registration under the Central Sales Tax Act, the petitioner disclosed in the application its nature of business as "earth work, civil works, over burden removal contract". The petitioner also disclosed in his application that goods such as "heavy earth movers, excavators, tippers, dumpers, etc." would be used in mining activities.
The respondents, after verifying the scope of work, granted registration to the petitioner under the U.P. as well as under the Central Sales Tax Act for the works contract. Form-15 and Form-B were issued to the petitioner under the U.P. and Central Sales Tax Act. While issuing the certificate of registration in Form-B the Assistant Commissioner, Commercial Tax Department, respondent No.3, granted facility to the petitioner to purchase goods, namely, heavy earth movers, excavators, dumpers, tippers, etc. at concessional rate of tax against Form-C.
The petitioner started executing the works contract and, for the purpose of removing the over burden, required machineries for the execution of the works contract. Since the petitioner was eligible to purchase the same from outside the State of U.P. at concessional rate of tax, the petitioner applied for issuance of Form-C from the office of respondent No.3. In the application, the petitioner categorically stated that Form-C would be required for the purchase of machinery such as excavators from outside the State of U.P. for use in the works contract at the site of NCL. The respondent No.3, after verifying the contents issued requisite Form-C to the petitioner. The petitioner thereafter purchased machineries from outside the State worth Rs.10,40,40,000/- at concessional rate of tax against Form-C. According to the petitioner, these machineries are being used in the execution of the works contract and is not being used for any other purpose.
The respondent No.3 issued a notice to the petitioner under Section 10 read with Section 10-A of the Central Sales Tax Act to show cause as to why penalty under Section 10-A of the Central Sales Tax Act may not be imposed as the petitioner had purchased machineries at concessional rate of tax by using Form-C when the petitioner does not have any liability of tax and was only involved in the execution of job work. The petitioner submitted a detailed reply stating that the petitioner was involved in the execution of works contract and that pursuant to the registration granted to him under the Central Sales Tax Act, the petitioner was entitled to purchase machinery at concessional rate of tax for the purpose of executing the works contract.
The Assistant Commissioner, Commercial Tax Department, respondent No.3, by the impugned order imposed a penalty to the tune of Rs.1,56,00,000/- holding that since the petitioner had not admitted any tax liability on the work done by it for NCL, the petitioner had contravened the provisions of Section 10-A of the Act. The petitioner, being aggrieved by the said order of penalty, has filed the present writ petition.
We have heard Sri S.D.Singh, the learned senior counsel along with Sri Nishant Mishra for the petitioner and Sri C.B.Tripathi, the learned counsel for the State.
A preliminary objection was raised that the petitioner has an efficacious remedy of filing an appeal against the order of penalty and, consequently, the writ petition should be dismissed on the ground of alternative remedy.
We have given our thoughtful consideration on this aspect and we find that the writ petition was entertained in the year 2008 and affidavits have been exchanged and, consequently, we are of the opinion, that at this stage it will not be appropriate or conducive to relegate the petitioner to the remedy of an appeal. Further, we find that there is no factual controversy involved and that only a pure question of law is required to be decided. Consequently, the preliminary objection is over ruled and the writ petition is being decided on merits.
Under Section 8(3)(b) of the Central Sales Tax Act a registered dealer can purchase goods at concessional rate of tax for use of the purposes specified therein. For facility, the said provision is extracted hereunder:-
"8. Rates of tax on sales in the course of inter-State trade or commerce.- (1) Every dealer, who in the course of inter-State trade or commerce, sells to a registered dealer goods of the description referred to in sub-section (3), shall be liable to pay tax under this Act, which shall be (two per cent) of his turnover or at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sales tax law of that State, whichever is lower:
.......
(3) The goods referred to in sub-section (1) -
[***]
(b) [***] are goods of the class or classes specified in the certificate of registration of the registered deal purchasing the goods as being intended for resale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or in the telecommunications network or in mining or in the generation or distribution of electricity or any other form of power ;
A perusal of the aforesaid indicates, that the goods at concessional rate of tax for use in mining can be purchased at concessional rate of tax.
The petitioner applied for registration under Section 7 of the Act, which was duly granted. While granting the registration, the Assistant Commissioner, Commercial Tax Department specifically allowed the petitioner the facility to purchase heavy earth mover, excavators, dumpers etc. at concessional rate of tax against Form-C. The petitioner applied for Form-C, which was duly granted to him and thereafter purchased the excavators etc. for the purpose of execution of the works contract on concessional rate of tax against Form-C duly issued by respondent No.3.
The penalty has been imposed under Section 10-A(1)of the Act, which reads as under:
"10A. Imposition of penalty in lieu of prosecution- (1) If any person purchasing goods is guilty of an offence under clause (b) or clause (c) or clause (d) of section 10, the authority who granted to him or, as the case may be, is competent to grant to him a certificate of registration under this Act may, after giving him a reasonable opportunity of being heard, by order in writing, impose upon him by way of penalty a sum not exceeding one-and-a-half times the tax which would have been levied under sub-section (2) of section 8 in respect of the sale to him of the goods, if the sale had been a sale falling within that sub-section.:
Provided that no prosecution for an offence under section 10 shall be instituted in respect of the same facts on which a penalty has been imposed under this section."
The aforesaid provision indicates that where a person purchasing goods is guilty of an offence under Clause (b), (c) or (d) of Section 10, the competent authority may impose a penalty of a sum not exceeding one and half times the tax which would have been levied under Sub Section (2) of Section 8 of the Act in respect of the sale to him of the goods. For facility, Section 10 (b), (c) and (d) is extracted here under:
"10. Penalties.-- If any person--
(a) .........
(aa) .........
(b) being a registered dealer, falsely represents when purchasing any class of goods that goods of such class are covered by his certificate of registration ; or
(c) not being a registered dealer, falsely represents when purchasing goods in the course of inter-State trade or commerce that he is a registered dealer ; or
(d) after purchasing any goods for any of the purposes specified in clause (b) or clause (c) or clause (d) of sub-section (3) or sub-section (6) of section 8 fails, without reasonable excuse, to make use of the goods for any such purpose;"
The impugned order indicates the reason for imposition of penalty, namely, that since the petitioner has not admitted any tax liability on the execution of the works contract, hence the petitioner has contravened the provisions of Section 10-A of the Act. Such reasoning is patently perverse and does not come within the parameters of imposition of penalty under clause (b), (c) and (d) of Section 10 of the Act. The learned standing counsel, however, submitted that penalty has been imposed under clause (d) of Section 10 of the Act, which stipulates that if a person after purchasing any goods for any of the purposes specified in clause (b), (c) or (d) of sub-Section (3) or sub-Section (6) of Section 8 fails without any reasonable excuse to make any use of goods for any such purpose in which case penalty under Section 10-A of the Act could be imposed.
The submission of the learned standing counsel is patently erroneous. From a perusal of Section 8(3)(b) of the Act, as extracted above, clearly indicates that the goods have been purchased for the purpose of mining. The petitioner has been given a works contract for removal of the over burden, which means the removal of the surface material covering the valuable deposit of coal, which is nothing but a form of mining as is clear from the works contract.
The petitioner was granted a registration for the purpose of execution of the works contract or removal of the over burden while issuing the certificate of registration in Form-B. The respondent No.3 granted the facility to the petitioner to purchase at concessional rate of tax against Form-C on the goods, namely, heavy earth movers, excavators, dumpers, etc. The petitioner purchased these equipments on the basis of Form-C issued by respondent No.3 for the purpose of execution of the works contract.
We find from a perusal of the counter affidavit that nothing has been indicated that the equipment so purchased was not in consonance with the declaration given in Form-B nor it has been disclosed that the equipments so purchased are not being used by the petitioner.
In the light of the aforesaid, we find that the imposition of penalty was wholly illegal and without any basis. The reasoning mentioned in the impugned order is in gross violation of the provisions of Section 10-A of the Act. Consequently, the impugned orders imposing penalty cannot be sustained and are quashed.
All the writ petitions are allowed.
Dated:25.8.2014.
AKJ.