JUDGMENT P.K. Jain, J.
1. Both these revisions arise out of the common judgment of the Sales Tax Tribunal, Moradabad, whereby Second Appeal No, 650 of 1990 of the revisionist was partly dismissed by the Tribunal and Second Appeal No. 798 of 1990 of the Revenue was partly allowed by the Tribunal and the order of the assessing authority was restored. Since identical questions of law are involved in both the revisions, the same have been heard together and are being decided by a common judgment.
2. The revisionist is a company registered under the Companies Act, 1956, and is engaged in the manufacture, and sale of vinyl acetate monomer and intermediary products like acetic acid, acetic anhydride and acetaldehyde (hereinafter called as "the notified goods"). The company has its registered office as well as works located at Bhartiagram, Gajraula, District Moradabad (now Jyotibafulenagar). The revisionist is a registered dealer in the State of U.P. both under the Sales Tax Act and under the Central Sales Tax Act for manufacture of notified goods. The company uses molasses purchased locally from within the State of U.P. as basic raw material besides various other chemicals. With effect from May 14, 1980 the revisionist was granted recognition certificate under Sub-section (2) of Section 4-B of the then U.P. Sales Tax Act, 1948 for purchase of molasses, one of the raw materials on the concessional rate of tax at the rate of 4 per cent
3. The present dispute relates to the assessment years 1982-83 and 1983-84. For its entire purchases of molasses from within the State of U.P. in the above assessment years the revisionist furnished declaration in form III-B. Other chemicals purchased for production of the notified goods were purchased on payment of normal sales tax. Out of the entire products for the assessment years under consideration the revisionist transferred the goods out of the State on consignment basis as mentioned below :
4. Assessment for the year 1982-83 was completed vide order dated February 22, 1989. The assessing authority, viz., the Sales Tax Officer issued a show cause notice dated March 27, 1989 drawing the attention of the revisionist that the transfer of the notified goods otherwise than by way of local sales or inter-State sale or export outside India, was in contravention of Sub-section (2) of Section 4-B of the U.P. Sales Tax Act, 1948 and consequently, the revisionist was required to show cause as to why penalty under Sub-section (6) of Section 4-B of the Act be not imposed. Similar notice was served for the assessment year 1983-84 also. The revisionist filed show cause to the said notices and was also heard in person. The assessing authority however, passed two penalty orders for the two assessment years imposing penalty at Rs. 21,75,000 and Rs. 5,75,000 respectively. The revisionist filed two appeals before the Assistant Commissioner (Appeals), Moradabad. The Assistant Commissioner (Appeals) vide order dated May 28, 1990 partly allowed the appeal for the assessment year 1982-83 and reduced the penalty to Rs. 12,75,000. Appeal for the assessment year 1983-84 was allowed and the penalty order was knocked off. Thereafter the dealer felt aggrieved by part dismissal of the first appeal for the assessment year 1982-83 and filed Second Appeal No. 550 of 1990 before the Tribunal. The department feeling aggrieved by the part acceptance of appeal for the assessment year 1982-83 and acceptance of the appeal for the assessment year 1983-84 filed two Second Appeals being S.A. Nos. 797 of 1990 and 798 of 1990 respectively. The Tribunal dismissed the dealer's Second Appeal No. 550 of 1990 and department's Second Appeal No. 797 of 1990. It however, partly allowed the department's Second Appeal No. 798 of 1990 for the assessment year 1983-84 and imposed penalty to the tune of Rs. 2,38,464.
5. Aggrieved by the judgment and order of the Tribunal the dealer has filed these two revisions.
6. Shri Bharatji Agrawal, learned Senior Counsel assisted by Sri Piyush Agrawal, learned counsel for the revisionist and Sri R.D. Gupta, learned Standing Counsel for the Revenue have been heard at length.
7. As per directions of the court the parties have also filed copy of the eligibility certificate as well as the recognition certificate relevant for the purposes of disposal of these revisions.
8. Sri Bharat Ji Agrawal, learned Senior Counsel appearing for the revisionist referring to the provisions contained in Sub-section (6) of Section 4-B as contained prior to November 1, 1978 and as were amended with effect from November 1, 1978 has submitted that earlier the liability for penalty arose when the dealer sold the notified goods otherwise than in the State of U.P. or in the course of inter-State trade and commerce or in course of export out of India or has dispatched such goods to a place outside the State except as a direct result of the sale or purchase in the course of inter-State trade or commerce or in the course of export out of India, whereas after amendment effective from November 1, 1978 the liability for penalty arose when a dealer sold or "otherwise disposed of the notified goods, the raw material of which he has been granted such eligibility certificate as provided under Section 4-B. His submission is that expression "otherwise disposed of substituted in the amended provision with effect from November 1, 1978 did not cover the cases of stock transfer which was earlier included in the expression, "has dispatched such goods to a place outside the State" except as a direct result of sale or purchase in the course of inter-State trade or commerce or in the course of export out of India. His submission is that in view of amended provisions mere dispatch of the goods by a dealer to itself does not amount to disposal otherwise, Therefore, the penalty under the provisions as contained in Sub-section (6) of Section 4-B on the date of alleged stock transfer cannot be imposed. Next argument of Sri Bharat Ji Agrawal is that the revisionist was granted eligibility certificate with effect from December 2, 1982, which was the date of first production. In view of the eligibility certificate granted to the revisionist there was no liability for payment of sales tax on sale within the State or sales made during the course of inter-State trade or commerce. It is submitted that subsection (6) of Section 4-B as was enforced with effect from November 1, 1978 provided that the penalty amount shall not be less than the amount of tax that would have been payable under the provisions of the Act on the sales of such notified goods. The submission is that when the notified goods were exempt from payment of sales tax in view of the grant of eligibility certificate, and the amount of penalty was relatable to the amount of sales tax which would have been payable by the dealer, no amount of penalty could be imposed.
9. Sri R.D. Gupta, learned Standing Counsel has submitted that the recognition certificate is granted on specific conditions that the notified goods manufactured from the raw material purchased on concessional rates or enjoying full exemption from purchase tax, shall be sold by the dealer in the State or in the course of inter-State trade and commerce or in the course of export out of India. On violation of any such condition of the recognition certificate the dealer is liable to penalty under Sub-section (6) of Section 4-B of the Act. It is submitted that once it is proved that the conditions on which recognition certificate was granted have been violated, penalty could be imposed under Sub-section (6) of Section 4-B of the Act. On the facts of the present case it is submitted that so far as assessment year 1982-83 is concerned, even though the eligibility certificate was granted with effect from December 2, 1982 but the benefit of the eligibility certificate was deferred till March 31, 1983 the revisionist, therefore, cannot take advantage of the eligibility certificate granted to him. As regards the assessment year 1983-84 it is submitted that the expression otherwise disposed of is wide enough to cover the cases of stock transfer since the stock transfer does not amount to sale within the State or sale in the course of inter-State trade or commerce or in the course of export out of India. It is further submitted that exemption from purchase tax or purchase on payment of purchase tax on concessional rate is permissible only in the cases where the goods are intended to be sold within the State or in the course of inter-State trade or commerce or in the course of export out of India and if the goods are not sold in the manner provided under Sub-section (2) of Section 4-B of the Act, it would amount to "dispose of otherwise" which would be contravention of the conditions to the recognition certificate. As to the argument that amount of penalty is relatable to the amount of tax that would have been payable under the provisions of the Act on the sale of such notified goods in the State, the submission of Sri Gupta is that this is generally with regard to tax on sale which a dealer is liable to pay on the sales of notified goods and it has nothing to do with the eligibility certificate granted to the dealer. It is submitted that the purpose of granting exemption on purchase tax under Section 4-B is to encourage the sales within the State, in the course of inter-State trade or commerce or in the course of export out of India by enabling the manufacturers or the dealers to increase competitive capacity;
10. Before the rival submissions are considered, it is necessary to reproduce sub-sections (2) and (6) of Section 4-B as they stood during the assessment years 1982-83 and 1983-84.
Sub-section (2) of Section 4-B :
"A dealer, who requires any goods referred to in Sub-section (1) for use as raw material for the purposes of manufacture in the State of Uttar Pradesh of any notified goods, and such notified goods, are intended to be sold by him in the State or in the course of inter-State trade or commerce or in the course of export out of India, may apply within such period, and in such form and manner, as. may be prescribed, to the assessing authority for the grant of a recognition certificate in respect thereof and if the applicant satisfies such requirements and conditions as may be prescribed, the assessing authority shall grant to the dealer in respect of such goods a recognition certificate in such form, and subject to such conditions as may be prescribed.
Explanation.--For the purposes of this sub-section--
(a) accessories and component parts or containers or packing materials used in the manufacture or, as the case may be, packing of notified goods for sale and, in the case of the new units the date of starting production whereof falls on or after October 1, 1982, the consumable stores and sub-assemblies required for use in such manufacture by a dealer shall also be treated as raw material of such notified goods ;
(b) 'notified goods' means such goods as may, from time to time, be notified in the gazette by the State Government in that behalf."
Sub-section (6) of Section 4-B :
"Where a dealer, in contravention of the terms and conditions laid down in Sub-section (2) for the grant of a recognition certificate, sells or otherwise disposes of the notified goods, for the raw material of which he has been granted such certificate, he shall be liable to pay as penalty such amount, as the assessing authority may fix, which shall be not less than the amount of tax that would have been payable under the provisions of this Act on the sale of such notified goods in the State and not more than three times the amount of such tax."
Prior to amendment with effect from November 1, 1978, Sub-section (6) of Section 4-B stood as follows :
"Where a dealer in whose favour a recognition certificate has been granted under Sub-section (2) has sold the notified goods otherwise than in the State of Uttar Pradesh or in the course of inter-State trade or commerce or in the course of export out of India or had despatched such goods to a place outside State except as a direct result of sale or purchase in the course of inter-State trade or commerce or in the course of export out of India, such dealer shall be liable to pay an amount, which shall be equal to the difference between the amount of tax on the sale or purchase of such goods payable under Section 3, Section 3-A, Section 3-AA or Section 3-D, as the case may be, and the amount of the tax payable at concessional rate under this section, where the goods are purchased at the concessional rate, or which shall be equal to the tax payable under Section 3, Section 3-A, Section 3-AA or Section 3-D, as the case may be, where the goods are purchased without payment of the tax."
11. There is no dispute that the revisionist was holding recognition certificate granted to it under the provisions of Section 4-B of the Act and such certificate was effective from May 14, 1980. There is also no dispute that the eligibility certificate under Section 4-A of the Act was granted to the revisionist with effect from December 2, 1982. As pointed out by Sri R.D. Gupta that even though eligibility certificate was granted with effect from December 2, 1982 there is no dispute that the benefit of the eligibility certificate was deferred till March 31, 1983. The recognition certificate was granted under Sub-section (2) of Section 4-B of the Act on the dealer's making an application for grant of such certificate on the ground that he required the goods referred to in the application covered by Sub-section (1) of Section 4-B of the Act for certain specific purposes which are used as raw materials for the purposes of manufacture in the State of Uttar Pradesh of any of the notified goods and also on condition that such notified goods are intended to be sold by him in the State of Uttar Pradesh or in the course of inter-State trade or commerce or in the course of export out, of India. The question however is, whether violation of such conditions will attract the penalty provisions under Sub-section (6) of Section 4-B of the Act. The provisions of Sub-section (6) of Section 4-B of the Act have been reproduced above. A dealer is liable to pay penalty where he "sells or otherwise disposes of notified goods" in contravention of terms and conditions laid down in subsection (2). Therefore, normally to attract penalty proceedings two conditions must be satisfied, one is that there is contravention of the terms and conditions laid down in Sub-section (2) for the grant of recognition certificate and other is that such contravention should be by selling or otherwise disposing of the notified goods for the raw material of which the dealer has been granted recognition certificate.
12. In the instant cases, there is no dispute that the revisionist manufactured notified goods from the raw materials procured by it on payment of purchase tax at concessional rates in view of the fact that it was holding recognition certificate but instead of selling the notified goods within the State of Uttar Pradesh or during the course of inter-State trade or commerce or in the course of export put of India, the dealer transferred the goods out of the State on stock transfer or on consignment basis and thus contravened the terms and conditions laid down in Sub-section (2) for the grant of recognition certificate. However, the submission of Sri Agrawal, learned counsel for the revisionist, is that the penalty provisions as contained in Sub-section (6) of Section 4-B of the Act shall be attracted only when the second condition in Sub-section (6) is also fulfilled, His submission is that the goods were not sold by the assessee and transfer of the goods out of the State would not amount to "otherwise disposal of the notified goods. His submission is that since the goods have not been sold in contravention of the terms and conditions laid down in Sub-section (2) and the goods have also not been "otherwise disposed of no penalty could be imposed upon the dealer. It may be seen that prior to amendment of Sub-section (6) with effect from November 1, 1978 the provisions of Sub-section (6) provided for penalty in case the dealer holding recognition certificate sold the notified goods otherwise than in the State of U.P. or in the course of inter-State trade or commerce or in the course of export out of India or had dispatched such goods to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce or in the course of export out of India. In amended Sub-section (6) of Section 4-B of the Act as it stood after amendment from November 1, 1978 the words "has sold the notified goods otherwise than in the State of Uttar Pradesh or in the course of inter-State trade or commerce or in the course of export out of India or had dispatched such goods to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce or in the course of export out of India" have been deleted and have been substituted by the words "in contravention of the terms and conditions laid down in Sub-section (2) for the grant of a recognition certificate, sells or otherwise disposes of notified goods". The submission of Sri Agrawal is that the expression "otherwise disposes of is not synonymous to "dispatch" such goods to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce or in the course of export out of India. His submission is that the expression "had dispatched" included stock transfer as well as consignment sale but the term or expression "otherwise disposes of does not include within its purview stock transfer.
13. Such a submission was made before the Tribunal also and reliance was placed upon certain decisions, viz., Goodyear India Ltd. v. State of Haryana [1990] 76 STC 71 (SC) ; 1990 UPTC 198, Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Thomas Stephen & Co. Ltd. [1988] 69 STC 320 (SC) ; 1988 UPTC 964 and Mukerian Papers Ltd. v. State of Punjab [1991] 81 STC 152 (SC) ; (1991) 39 STL 48 (SC). The Tribunal had observed in its judgment as follows :
"The words 'disposes of so used in Sub-section (6) of Section 4-B are to be interpreted with reference to penalty proceedings and not with reference to leviability to tax. The word 'disposal' may mean transfer of title in goods to any other person attracting tax liability as held by the honourable Supreme Court in the case of Thomas Stephen & Co. [1988] 69 STC 320 ; 1988 UPTC 964 but it is also notable that the word 'disposal' is not synonymous to the word 'sale'. Rather the word 'disposal' is something different from 'sale'. 'Disposal' means bestowing the goods to an other person for the purpose of sale or otherwise and interpretation should be based in consonance to the spirit of the statute. The mere 'dispatch' to agent for sale by way of stock transfer may not attract tax liability but it may make the consignor liable for penalty because stock transfer is nothing but deferred sale and therefore, it is covered by the word disposal used in Sub-section (6) of Section 4-B of the Act, Here the goods are dispatched out of the State for ever and finally while making deduction in the stock in hand. There is nothing on record to show that goods in question sent out of the State were ever coveted to be returned back to the assessee. Rather they were sent out of the State for sale and they were actually sold there. The dispute is related to the years 1982-83 and 1983-1984. If the goods were not sent for disposal finally then certainly they would have been returned back, Since they were disposed of out of the State and the assessee might have received the sale note thereof, by now, then there is no room to argue that the goods were not sent for final disposal. Thus the principle laid down in the said three decisions by the honourable Supreme Court is not applicable in the case of penalty proceedings. Section 4-B grants certain concessions to the recognized units and penalty proceedings under Section 4-B(6) are to check the misuse of the said concession and it is misuse of the concession so granted if the goods are sent out of State on consignment or by way of stock transfer."
14. While arriving at the above conclusion the Tribunal has placed reliance upon a division Bench decision of this Court in Commissioner of Sales Tax v. Uma Shankar Oil Mills 1983 UPTC 1097 and had observed as follows :
"Under Sub-section (2) that assessee is required to make an application for grant of recognition certificate in case he requires any goods referred to in Sub-section (1) for certain specific purposes which are for use as raw material for the purposes of manufacture in the State of Uttar Pradesh of any notified goods and such notified goods are intended to be sold by him in the State or in the course of inter-State trade or commerce or in the course of export out of India. In case a dealer in whose favour a recognition certificate has been granted under Sub-section (2) has sold that notified goods otherwise than for the purposes stated above, then provision is made under Sub-section (6) that such dealer shall be liable to pay an amount which shall be equal to difference between the amount of the tax on the sale or purchase of such goods payable under sections 3, 3-A, 3-AA, 3-D as the case may be. Admittedly in the present case the assessee held a recognition certificate issued under Section 4-B(2). During the years under consideration it purchased oil seeds which are notified goods, both from registered and unregistered dealers. Apart from that inasmuch as some of the self-manufactured oil was sold on consignment basis outside the State, it committed a breach of the certificate attracting the application of Sub-section (6)."
15. There is yet another division Bench decision of this Court in J.S. Rice Mill, Bilaspur, District Rampur v. State of Uttar Pradesh reported in 1987 UPTC 265. That was a case in which in the assessment years 1980-81 and 1981-82 and onwards the petitioners holding recognition certificate had despatched rice for sale on consignment basis and obtained the prescribed form No. "F" for each such consignment sales. The court while dealing with the provisions of Sub-section (6) of Section 4-B of the Act as it stood after the amendment from November 1, 1978 held that "in the instant case, the recognition certificates were obtained by the petitioners for purchasing paddy which, already said, was a notified goods. The conditions imposed for granting recognition certificate have already been narrated by us in the beginning of this judgment. The petitioners committed a breach of the conditions by sending goods on consignment basis, as a result of which the proceedings under Sub-section (6) of Section 4-B were liable to be taken against the petitioners.
The petitioners admitted that they dispatched the goods for sale outside the State on consignment basis through commission agents. This amounted to breach of the condition, of the recognition certificate. In that view of the matter, Sub-section (5) of Section 4-B was attracted and the proceedings under Sub-section (6) of Section 4-B in that event are justified".
16. In both the decisions referred by the High Court, viz., in the case of Commissioner of Sales Tax v. Uma Shankar Oil Mills 1983 UPTC 1097 and J.S. Rice Mill v, State of Uttar Pradesh 1987 UPTC 265 the court has not considered as to how the expression "otherwise disposes of" as employed in Sub-section (6) of Section 4-B should be interpreted. The honourable Supreme Court, however, in the case of Deputy Commissioner of Sales Tax (Law) v. Thomas Stephen & Co. Ltd. [1988] 69 STC 320 (SC) ; 1988 UPTC 964 had occasion to interpret the following provisions of Section 5A of the Kerala General Sales Tax Act, 1963 :
"5A. Levy of purchase tax.--(1) Every dealer who, in the course of his business, purchases from a registered dealer or from any other person any goods, the sale or purchase of which is liable to tax under this Act, in circumstances in which no tax is payable under Section 5, and either--
(a) consumes such goods in the manufacture of other goods for sale or otherwise ; or
(b) disposes of such goods in any manner other than by way of sale in the State ; or
(c)..........................................................................
shall, whatever be the quantum of the turnover relating to such purchase for a year, pay tax on the taxable turnover relating to such purchase for the year at the rates mentioned in Section 5."
17. The assessee in that case had also purchased during the relevant years in question, lime shell and certain stores described as consumed which had been used in the maintenance of the kiln and the factory. These purchases were claimed as non-taxable. The assessee had also purchased cashew shells which were used by them as fuel for manufacturing products. The claims of the assessee that such purchases of cashew shells which were used as fuel in the kiln for manufacture and purchases of lime shells which were used for maintenance of the kiln and the factory were not taxable under Section 5-A were turned down by the assessing authority as well as by the Tribunal. The Tribunal held that the cashew shells were used for manufacture and further held that there was no disposal of lime shells or the consumed stores which were used up for the maintenance of the factory and the kiln. The honourable Supreme Court while interpreting the provisions of Sub-section (1)(a) and (b) of Section 5-A of the Kerala General Sales Tax Act, 1963 held that "the cashew shells in the instant case, had been used as fuel in the kiln. The cashew shells did not get transformed into the end-product. These have not been used as raw materials in the manufacture of the goods. These have been used only as an aid in the manufacture of the goods by the assessee. Consumption must be in the manufacture as raw material or of other components which go into the making of the end-product to come within the mischief of the section. Cashew shells do not tend to the making of the end-product. Goods used for ancillary purposes like fuel in the process of the manufacture, do not fall within Section 5A(1)(a) of the Act."
18. In para 12 of the judgment (page 324 of STC) the honourable Supreme Court has held that ".................the question, therefore, is whether there is any disposal of these goods in any manner otherwise than by way of sale within the State. Disposal means transfer of title in the goods to any other person. The expression 'dispose' means to transfer or alienate. It was formerly an essential word in any conveyance of land. See Jowitt 'The Dictionary of English Law' and also Webster Comprehensive Dictionary (International Edition)--Vol. 1, page 368. Clause (b) of the section requires that the goods in question should be transferred to some person otherwise than by way of sale. In this case, there was no evidence of any transfer at all, therefore, there was no 'disposal' of the goods as known to law. The High Court records that admittedly there was no transfer of the cashew shells, the lime shells or the consumed stores in this case. These were used by the assessee himself as fuel in the case of cashew shells for the maintenance of kiln. Sub-clause (b) of Section 5A(1) was, therefore, not applicable".
19. The expression "disposes of in any manner otherwise than" was also employed in Section 9(a)(ii) of the Haryana General Sales Tax Act, 1973 and came up for interpretation before a division Bench of the Punjab and Haryana High Court in the case of Goodyear India Limited v. State of Haryana reported in [1983] 53 STC 163. The facts of that case were that the appellant Goodyear India Ltd., was engaged at the relevant time in the manufacture and sale of automobile tyres and tubes. It manufactured the said tyres and tubes at its factory at Ballabhgarh in the district of Faridabad in the State of Haryana. For the said manufacturing activity, the appellant had, from time to time, to purchase various kinds of raw materials both within the State and outside the State. According to the case of the appellant about 7 to 10 per cent of the total needs of raw materials on an all India basis were locally procured by the appellant. The rest of the requirements were imported from other States. The appellant had its depots at different places in the State of Haryana as well as in other States. After manufacturing the said tyres and tubes, about 10 to 12 per cent of the total manufactured products used to be sold in the State of Haryana either locally or in the course of inter-State trade and commerce or in the course of export outside the country. In the year 1979 the assessing authority Faridabad, imposed upon the appellant the purchase tax under Section 9 of the Act for the assessment years 1976-79 and 1979 to 1980 and for subsequent years on the despatches made by the appellant on the manufactured goods to its various depots outside the State. Subsequently, the relevant revenue authorities sought to impose purchase tax under Section 9(1) of the Act and imposed purchase tax on despatches of manufactured goods, namely, tyres and tubes to its various depots in other States. The Punjab and Haryana High Court decided the writ petition in favour of the appellant Goodyear India Limited. The relevant provisions of Section 9(a)(ii) of the Haryana General Sales Tax Act, 1973 were as follows :
"9. Where a dealer liable to pay tax under this Act purchases goods other than those specified in Schedule B from any source in the State and--
(a) uses them in the State in the manufacture of,--
(i)................................
(ii) any other goods and disposes of the manufactured goods in any manner otherwise than by way of sale whether within the State or in the course of inter-State trade or commerce or within the meaning of subsection (1) of Section 5 of the Central Sales Tax Act, 1956, in the course of export out of the territory of India,
(b)..................................."
20. Interpreting the expression "disposes of as contained in Section 9(a)(ii) the High Court held that "the expression 'disposes of was not basically a term of legal art and therefore, it was proper and necessary to first turn to its ordinary meaning in order to determine whether a mere despatch of goods by a dealer to himself would connote disposal of such goods by him". The High Court referred to the dictionary meaning of "disposes of in Webster's Third New International Dictionary. Reference was also made to 27 Corpus Juris Secundum p. 345, and ultimately it came to the conclusion that the phrase "disposes of" or "disposal" cannot be possibly equated with the mere despatch of goods by a dealer to himself. Similarly the expression "disposes of otherwise than by way of sale" came up for interpretation before the Punjab and Haryana High Court in the case of Bata India Limited v. State of Haryana reported in [1983] 54 STC 226. The High Court held that "mere despatch of goods to a place outside the State in any manner otherwise than by way of sale in the course of inter-State trade or commerce' is synonymous with or is in any case included within the 'ambit of the consignment of goods either to the person making it or to any other person in the course of inter-State trade or commerce' ". The High Court further held that mere manufacture and consignment of goods outside the State to himself by a manufacturer is not a sale or disposal thereof and an attempt to tax the mere consignment or despatch of manufactured goods outside the State in the course of inter-State trade or commerce is not within the competence of the State Legislature. It appears aggrieved by the judgment of the Punjab and Haryana High Court reported in Goodyear India Limited v. State of Haryana [1983] 53 STC 163 the State of Haryana filed special leave petition. The honourable Supreme Court while referring to its earlier decision in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Thomas Stephen & Co. Ltd. [1988] 69 STC 320 ; 1988 UPTC 964 held that "disposal means transfer of title in the goods to any other person" and therefore, it would not include mere despatch to own self or to its agents or its branch offices or depots. The Supreme Court therefore, held that the decision of the Punjab and Haryana High Court in Goodyear India Limited v. State of Haryana [1983] 53 STC 163 is correct on the merits as well.
21. It may be pointed out here that even though the Tribunal referred to the judgment of the Supreme Court in Thomas Stephen & Co. Ltd.'s case [1988] 69 STC 320 ; 1988 UPTC 964 but has observed that the word "disposal" is not synonymous to the word "sale". It held that "disposal" means bestowing the goods to another person for the purpose of sale or otherwise and interpretation should be based in consonance with the spirit of the statute. Even though it held that mere "dispatch" to agent for sale by way of stock transfer may not attract tax liability but it held that it may make the consignor liable for penalty because stock transfer is nothing but deferred sale. The Tribunal also observed that here the goods are dispatched out of the State forever and finally while making deduction, in the stock in hand, the goods were sent out of the State for sale and they were actually sold there. The above observations of the Tribunal do not appear to have been made on the basis of any material before it. There is no finding of the authorities below that after the stocks were transferred by the revisionist to its depot at outside the State of U.P., the same were actually sold by the assesses. There is distinction between the "dispatch of the goods" by the assessee to its own office or depots or its agents and the expression "disposal of the goods". The provisions of penalty as contained in Sub-section (6) would be attracted only on the occurring of the event of sale of goods or their disposal otherwise which is synonymous to transfer of title in the goods in any manner whatsoever. So long as the dealer retains the title of the goods, the event of "otherwise disposal" of the notified goods manufactured by the dealer otherwise than by way of sale in the State of U.P. or in the course of inter-State trade or commerce or in the course of export out of India would not arise. It may be seen that in Sub-section (6) as it stood prior to the 1978 amendment the expression used was "had despatched such goods to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce or in the course of export out of India" and such expression was wide enough to cover the mere dispatch of the notified goods to the depot of the dealer situated outside of U.P. After amendment in Sub-section (6) with effect from November 1, 1978 the above expression was deleted and in its place the expression substituted was "sales or otherwise disposes of goods". It may be noted here that in the decisions referred to by this Court in Commissioner of Sales Tax v. Uma Skankar Oil Mills 1983 UPTC 1097 and J.S. Rice mil's case 1987 UPTC 265 the distinction between the expression used in Sub-section (6) of Section 4-B prior to the amendment of 1978 and subsequent to the amendment was not considered. The court had also not taken into consideration the decisions rendered by the Supreme Court in Thomas Stephen & Co. Ltd. [1988] 69 STC 320 ; 1998 UPTC 964 and in Goodyear India Ltd. v. State of Haryana [1990] 76 STC 71 (SC) ; 1990 UPTC 198.
22. There cannot be a dispute that the intention of the revisionist while making stock transfer to its depot outside the State was not to retain the goods with it or consume the same by itself or to return back to the State subsequently but the goods were transferred to the depots outside the State for the purposes of sale in the State where the depots were situated or to some other States from the said depot. As already pointed out above the liability for penalty arises only on the happening of such event whereby the goods are sold or otherwise disposed of in contravention of the terms and conditions of the recognition certificate. The Supreme Court in the case of Goodyear India Ltd. v. State of Haryana [1990] 76 STC 71 (SC) ; 1990 UPTC 198 has held that "it is well-settled that the main test for determining the taxable event is that on the happening of which the charge is affixed..................Taxable event is that which on its occurrence creates or attracts the liability to tax. On the same principle the main test for determination the penal event is on the happening of such event or occurring of an event which creates and attracts the penal provision. Such liability does not exist or accrue at any earlier or later point of time. The identification of the subject-matter of a tax is to be found in the charging section". In the instant case it has been found above the liability for penalty arises on the sale or otherwise disposal of the notified goods in contravention of the terms and conditions of the recognition certificate granted under Sub-section (2) of Section 4-B of the Act. Therefore, the Tribunal instead of finding it as a fact that the goods were actually sold outside the State after transfer of the stock by the revisionist to its depot only observed that rather they were sent out of the State for sale and they were actually sold there. The penal event would occur only when the goods are actually sold after transfer of the stock. Therefore, the Tribunal ought to have recorded as a finding of fact on the material before it as to when the goods were actually sold after their transfer by way of stock transfer. In view of the aforesaid discussions the finding of the Tribunal as reproduced above cannot be sustained.
23. The next argument of Sri Bharatji Agrawal is that in the instant cases the revisionist was holding eligibility certificate with effect from December 2, 1982 and, therefore, there was no liability for payment of tax on sales. His submission is that under Sub-section (6) the amount of penalty is relatable to amount of tax that would have been payable under the provisions of the Act on sale of such notified goods. His submission is that even though there was no liability for payment of tax on the sale of goods, no amount of penalty could have been imposed. Sri Gupta on the other hand has submitted that so far as the assessment year 1982-83 is concerned the benefit of the eligibility certificate was deferred till April 1, 1983. The dealer had realised the tax from the customers and had also deposited it. Therefore, so far as assessment year 1982-83 is concerned, this submission is not sustainable. As regards assessment year 1983-84 it is submitted that the provisions contained in Sub-section (6) with regard to the quantum of penalty are relatable to tax which is payable on the sale of notified goods and it has nothing to do with the eligibility certificate granted to the dealer. Sri Agrawal has submitted that even though the benefit of eligibility certificate was deferred till April 1, 1983, yet it was effective from December 2, 1982. In support of his submission Sri Agrawal has relied upon a decision rendered in Subhash Chandra Ghosh v. State of Orissa by a division Bench of the High Court of Orissa reported in [1970] 26 STC 211.
24. It would appear from the perusal of the order passed by the Tribunal that similar submissions were made before the Tribunal. The Tribunal repelled the submissions on the grounds that--
1. Eligibility certificate was granted vide notification dated March 17, 1988 with a condition (as contained in condition No. 3) that the exemption shall not be available in respect of the turnover relating to such sales on which the unit has realised or realises sales tax from the purchasers. This condition was flouted by the assessee and the assessee is not entitled to get any benefit from exemption granted under Section 4-A of the Act.
2. In Section 4-B(6) nowhere it is mentioned that units exempted under Section 4-A are out of purview of Section 4-B(6) otherwise mischievous units would be set free to flout the conditions of Section 4-B(2) while enjoying all the benefits of Section 4-B, purchasing raw material on exemption from payment of purchase tax or on payment of concessional rate which is not the spirit of the Section 4-B.
3. The eligibility certificate under Section 4-A with reference to Central sales tax was made effective in the year 1988 only whereas the present cases relate to stock transfer of 1982-83 and 1983-84. The argument of the assessee that there is no loss to the exchequer as the appellant had paid the tax on his total sales is not acceptable because he saved the tax which would have come due to State revenue if the notified goods were sold in the State instead of dispatching to depot by stock of transfer, and ;
4. The Tribunal was of the view that the penalty is imposed due to the fact that the assessee purchased raw material, i.e., molasses against form III-B on concessional rate of Rs. 4 per cent against the normal tax rate of Rs. 12 per cent and therefore, he was bound to follow the conditions imposed under Section 4-B. The Tribunal took the view that the difference of purchase tax so saved by the assessee while sending the goods out of State on stock transfer or on consignment is to be paid in the form of penalty under Section 4-B(6) of the Act. In support of this ground the Tribunal placed reliance upon a decision of this Court in Saraswati Rice Mill v. Commissioner of Sales Tax, U.P. [1991] 82 STC 402 ; 1989 UPTC 1295.
The above grounds taken by the Tribunal while repelling the contention on behalf of the dealer shall have to be considered in the light of the arguments advanced by the learned counsel for the parties.
25. At the outset it may be pointed out that the Tribunal has wrongly placed reliance rendered in Saraswati Rice Mill v. Commissioner of Sales Tax [1991] 82 STC 402 (All.) ; 1989 UPTC 1295. The controversy in that case was not identical to the controversy in hand. That was a case where the amount of penalty imposed by the Tribunal was equivalent to the tax payable on the purchase. Later on the assessing authority corrected the order under Section 22 on the ground that there was mistake apparent on the face of record inasmuch as in Sub-section (6) of Section 4-B of the Act penalty imposed should not be less than the amount of tax payable on the sale of notified goods. There was no question as to what would happen on sale of goods in contravention of recognition certificate in case the assessee enjoyed the benefit of the eligibility certificate. Therefore, the said case has no bearing on the facts of the present case.
26. As to the quantum of penalty which could be imposed in view of the provisions contained in Sub-section (6) of Section 4-B of the Act as was enforced during the relevant period, it may be pointed out that Sub-section (6) provided that the amount of penalty shall not be less than the amount of tax that would have been payable under the provisions of this Act on the sale of such notified goods in the State and not more than three times of the amount of such tax. Thus the quantum of penalty was relatable to the amount of tax payable on the sale of such notified goods in the State of Uttar Pradesh. The question that arises for determination is whether the sales tax payable on such notified goods as provided in the notification issued by the State of U.P. from time to time is to be considered or whether it is to be relatable to the liability of the dealer to pay sales tax and in cases where he has been granted exemption under Section 4-A of the Act then he being not liable to pay any sales tax, no amount of penalty could be levied upon the assessee. Shri Bharatji Agrawal has strenuously argued that since the revisionist was exempt from payment of sales tax on sale of such notified goods in view of the eligibility certificate granted to it, he was not liable to pay any amount of sales tax and consequently, no penalty could have been imposed. In support of his submission Sri Agrawal has placed reliance upon the decision in the case of Jain Shudh Vanaspati Ltd. v. State of U.P. reported in [1983] 53 STC 54 (All.) ; 1983 UPTC 198. That was a case in which the court, was considering the expression "any goods liable to tax" employed in Section 28-A(l) of the Act. In para 16 of the judgment (page 64 of STC) the division Bench of this Court held as follows :
"There has been some controversy before us with regard to the meaning, scope and ambit of the expression 'any goods liable to tax' used in Section 28-A(l) of the Act. Use of the expression appears to be unhappy inasmuch as there is no provision in the Act which makes any particular goods as such liable to tax under the Act. A perusal of sections 3-A to 3-D of the Act shows that it is a dealer who has been made liable to pay tax on the turnover of his sales or purchases of goods. Section 4 of the Act makes a provision for exempting, in certain circumstances, the turnover of sale and purchase of goods from payment of tax. It, inter alia, provides that sale or purchase of any goods by All India Spinners' Association or Gandhi Ashram, Meerut, and their branches, or by such other persons or class of persons as the State Government may, by notification in the Gazette, shall be exempt. It thus appears that the Act contemplates that even though the turnover of sale or purchase of goods may be taxable in the hands of a particular dealer, the same goods may not be so taxable in the hands of another dealer. In the circumstances, 'any goods liable to tax under the Act' cannot be identified as any particular goods in respect whereof tax can be levied under the U.P. Sales Tax Act. In the circumstances the said provision has necessarily to be understood in the context of turnover of goods and the person in whose hands such turnover becomes liable to be taxed under the Act."
27. If the argument of Shri Bharatji Agrawal is considered in the light of the above observation of the division Bench of this Court, even though the revisionist had sold the goods inside the State or in the course of inter-State trade and commerce or in the course of export out of India, he would not have been liable to pay tax on the sale of such notified goods under the provisions of the Act in view of the fact that he was holding eligibility certificate and consequently he would not be liable to pay any amount of penalty. The view taken by the Tribunal was that the language in Section 4-B(6) of the Act does not take such a contingency out of the purview of Section 4-B(6) of the Act otherwise mischievous unit would be set free to flout the condition of Section 4-B(2) while enjoying all the benefits of Section 4-B by purchasing raw material on exemption from payment of tax or on payment of tax at concessional rate. This view of the Tribunal does not appear to be correct in view of the fact that the Legislature has employed the words "that would have been payable under the provisions of this Act on the sale of such notified goods". Exemption is also granted under the provisions of the Act, viz., under Section 4-A after eligibility certificate is granted to a dealer. The goods as such on their sale are not liable to be taxed. But the notified goods are liable to be taxed in accordance with the various provisions of the Act. Therefore, if the goods are sold by the dealer who enjoys the benefit of eligibility certificate, he is not liable to pay any tax because of the provisions of the Act coupled with the fact that he has been granted eligibility certificate. There can be no dispute that the purpose of granting the recognition certificate and exemption from payment of purchase tax is to encourage the sales within the State of U.P., in the course of inter-State trade or commerce or in the course of export out of India and further to increase competitive capacity of the manufacturers in the State of U.P. If the law permits them or allows them exemption from payment of sales tax then the goods sold by them shall not be liable for payment of sales tax. In Jain Shudh Vanaspati Ltd. v. State of U.P. [1983] 53 STC 54 (All.) ; 1983 UPTC 198 also the division Bench has held that--
"It thus appears that one of the necessary conditions for applicability of Section 28-A(l) and for obliging the persons importing goods to obtain requisite declaration is that such person should be importing into or otherwise receiving in the State goods which are intended to be sold inside the State in such circumstances that the turnover thereof can be taxed in accordance with the provisions of the Act. This conclusion is strengthened by the provision made in the section to the effect that for its applicability the concerned goods should not only be liable to tax under the Act but they should also have been imported by such person in connection with his business."
Liability for payment of trade tax on the goods sold in the State arises only in the contingency envisaged under the Act. If under certain contingencies on the sale of the goods no tax is payable by the dealer and the amount of penalty is relatable to the amount of tax which would otherwise have been payable by the dealer but for enjoying the benefit of eligibility certificate no amount of penalty can be imposed.
28. The question can be gone into from another angle. It may be seen that prior to amendment of November 1, 1978 the amount of penalty which the dealer was liable to pay was an amount equal to the difference between the amount of tax on the sale or purchase of such goods payable under Section 3, Section 3-A, Section 3-AA or Section 3-D and the amount of tax payable at concessional rate under Section 4-B of the Act as the case may be. After amendment effective from November 1, 1978 the words "employed in Sub-section (6)" were "shall be liable to pay as penalty such amount ...........which shall not be less than the amount of tax that would have been payable under the provisions of this Act on the sale of such notified goods in the State". Section 4-B of the Act was again amended by the Legislature and it was renumbered as Sub-section (5) and it was provided that such dealer shall be liable to pay as penalty.......which shall not be less than the difference between the amount of tax on the sale or purchase of such goods payable under this section and the amount of tax payable under any other provisions of this Act. It appears that while carrying amendment with effect from November 1, 1978 the contingency which is in hand was not foreseen. It was not foreseen that by making the penalty amount relatable to the amount of tax that would have been payable under the provisions of this Act on the sale of such notified goods would create undesired results and the person enjoying the benefit under the certificate of eligibility would go beyond the purview of the penal provisions contained in Sub-section (6) of the Act. It appears that realising such a defect the Legislature introduced subsequent amendment as it exists now amending Sub-section (6) of Section 4-B as it existed on November 1, 1978. Subsequent amendment in the Act as contained in Sub-section (5)(b) of Section 6 was brought in force. Therefore the view taken by the Tribunal was not correct.
29. Another ground on which the Tribunal repelled the contention of the assessee was that the eligibility certificate was granted by notification dated March 17, 1988 whereas the present cases relate to stock transfer for the assessment years 1982-83 and 1983-84. The submission of Sri Agrawal is that the eligibility certificate was effective from December 2, 1982. Benefit granted to the dealer could not have been denied on the ground that the notification granting eligibility certificate was issued at a much later date. Reliance is placed on the case of Subhash Chandra Ghosh v. State of Orissa [1970] 26 STC 211 (Orissa) rendered by a division Bench of the Orissa High Court. There cannot be a dispute that if a recognition certificate or eligibility certificate is granted on a date much after the date of the application, the benefit of such certificate or exemption granted shall be effective with effect from the date from which the certificate was granted and not with effect from the date of its notification in the official gazette. The argument of Sri Agrawal is however, partially correct so far as the assessment year 1982-83 is concerned. It is not disputed that even though the eligibility certificate was effective with effect from December 2, 1982 its benefit was deferred till April 1, 1983. Therefore, if any sale of the notified goods is made in contravention of the terms and conditions of the recognition certificate as provided in Sub-section (2) of Section 4-B, the dealer shall make himself liable to penal provision. In the instant cases since the benefit of the eligibility certificate though granted with effect from December 2, 1982, it was deferred till April 1, 1983, any violation of the recognition certificate shall attract the penal provision and liability for penalty cannot be escaped on the ground that the dealer was not liable to pay tax on the sale of notified goods.
30. In view of the finding of this Court that in the assessment year 1982-83 the liability for penalty shall not arise on a mere transfer of goods by the assessee to its own depots outside the State and it would arise only on occurring of the penal event that is, disposal of the goods otherwise than by way of sale inside the State, in the course of inter-State trade or commerce or in the course of export out of India. It would be just and proper to direct the Tribunal to find out if in the assessment year 1982-83 the penal event had actually occurred by sale of the notified goods by the dealer in contravention of the terms and conditions of the recognition certificate. If it is found as a fact that such an event had occurred within the assessment year 1982-83 then the penalty in accordance with law could be imposed. However, in case no such penal event occurred in the assessment year 1982-83 then no penalty could be imposed. The matter for the assessment year 1982-83 therefore, deserves to be remanded.
31. As regards the assessment year 1983-84 in view of the discussions made above it is held that the revisionist is not liable to pay any amount of penalty. The revision for the assessment year 1983-84 deserves to be allowed.
32. Sales Tax Revision No. 1476 of 1992 : Assessment year 1982-83 is hereby allowed. The order of the Tribunal is quashed and the matter is remanded to the Tribunal to decide the question of fact as indicated above and decide the Second Appeal afresh in the light of the findings of fact arrived at by the Tribunal.
33. Sales Tax Revision No. 1511 of 1992 : Assessment year 1983-84 is allowed and the order of the Tribunal is set aside. Any amount of penalty paid or deposited by the revisionist shall be refunded in accordance with law.
The parties will bear their own costs.