Rajes Kumar, J.
1. Present revision under Section 11 of the U.P. Trade Tax Act, 1948 (hereinafter referred to as 'the Act') is directed against the order of the Tribunal dated July 17, 2006, relating to the assessment year 1998-99.
2. Brief facts giving rise to the present revision are that the applicant established a new unit for the manufacturing of insecticides and pesticides and was holding eligibility certificate under Section 4A of the Act and, therefore, its turnover of insecticides and pesticides were exempted. The applicant was also registered under the Central Sales Tax Act, 1956 (hereinafter referred to as 'the Central Act') and was entitled to purchase raw material at concessional rate of tax after issuing form C. During the year under consideration, the applicant had purchased isoprotone and melathine for Rs. 14,16,920 from outside the State of U.P. Instead of using such isoprotone and melathine in the manufacturing of insecticides and pesticides, the applicant had sold such isoprotone and melathine as such for Rs. 17,81,051 against from IIIB and deposited the tax on such sales. The assessing authority issued the notice under Section 10A of the Central Act with the allegation that the applicant had violated the provisions of Section 10(d) of the Central Act. The assessing authority was of the view that the applicant was issued registration certificate for using such raw material in the manufacturing of insecticides and pesticides while the raw material have been sold as such. The applicant filed reply and submitted that isoprotone and melathine were sold as such because such raw materials were not useable and they were likely to be damaged and, therefore, they were sold. It was submitted that the sales were voluntarily disclosed and the tax had been paid. It was further submitted that in case, raw material had been used in the manufacturing of insecticides and pesticides, the manufactured product would not be liable to tax because the applicant was holding the eligibility certificate under Section 4A of the Act.
3. In view of the above, it was submitted that there was no bad intention on the part of the applicant and the reasons given above, amount to the reasonable excuse and, therefore, penalty was not leviable. The assessing authority though accepted the explanation of the applicant and the reasons for the sale of the aforesaid raw material and had also held that the default was a technical default, still had levied the penalty of Rs. 85,000 being six per cent, which was minimum penalty leviable. Being aggrieved by the order, the applicant filed an appeal before the Deputy Commissioner (Appeals), who vide order dated June 11, 2002 allowed the appeal in part. Though the levy of penalty has been upheld but it was reduced to Rs. 5,000 as token penalty. The first appellate authority has accepted the explanation of the applicant and held the default as a technical default only. Being aggrieved by the order of the Deputy Commissioner (Appeals), Commissioner of Trade Tax filed appeal before the Tribunal. The applicant has not filed any appeal. The Tribunal by the impugned order allowed the appeal and set aside the order of the first appellate authority and restored the order of the assessing authority. As a result of the Tribunal order, penalty levied by the assessing authority at Rs. 85,000 has been restored.
4. Heard Sri Alok Kumar, learned Counsel for the applicant and Sri Nimai Das, learned Standing Counsel.
5. With the consent of both the parties, the present revision is being disposed of at the stage of admission itself.
The learned Counsel for the applicant submitted that the applicant had sold such raw materials purchased against form C under compulsion as they were not useable in the manufacturing and paid the tax on such sales. If such raw material would have been used in the manufacturing of insecticides and pesticides even the tax paid on the sale of such raw material could have been saved, inasmuch as the manufactured product was not liable to tax, the applicant being eligibility certificate holder under Section 4A of the Act. In view of the above, there was only technical default on the part of the applicant and there was no deliberate defiance of the provisions of the Act. He submitted that the assessing authority had accepted the plea of the applicant and treated such default as technical default and levied minimum penalty. He submitted that once the explanation of the applicant had been accepted that there was reasonable cause in selling the raw materials and there was no deliberate default, penalty should not be levied. However, since the quantum of penalty sustained by the first appellate authority was small.
6. Therefore, the applicant could not file any appeal before the Tribunal, otherwise, the penalty levied by the first appellate authority is also not liable to be sustained. Learned Standing Counsel relied upon the order of the Tribunal. He however, submitted that the applicant was authorised to use the raw materials only in the manufacturing of insecticides and pesticides and was not authorised to sell such raw materials. The action of the applicant was a clear case of violation of the provisions of Clause (d) of Section 10 of the Central Act.
7. Having heard learned Counsel for the parties, I have perused the order of the Tribunal and the authorities below.
Section 10(d) of the Central Act read as follows:
10. Penalties--If any person--(a) to (c) ...
(d) after purchasing any goods for any of the purposes specified in Clause (b) or Clause (c) or Clause (d) of Sub-section (3) of Section 8 fails, without reasonable excuse, to make use of the goods for any such purpose.
8. There is no dispute that the applicant had sold the raw material in violation of Section 8(3) of the Central Act but the penalty under Section 10(d) of the Central Act is leviable if the goods are not used for any such purpose without reasonable excuse. Thus, the question for consideration is whether on the facts and circumstances there was any reasonable excuse. Perusal of the penalty order reveals that the assessing authority had accepted the explanation of the applicant and the reasons given therein for the sales of the raw materials. The assessing authority had also accepted that there was no intent to evade the tax and to violate the provisions of the Act.
9. In my opinion, having regard to the aforesaid finding there was no reason to levy the penalty. Applicant was able to make out a case that there was a reasonable excuse in selling the raw materials after purchasing the same from outside the State of U.P. against form C. In view of the above, the Tribunal is not justified in restoring the order of the assessing authority. The order of the Tribunal is not sustainable and is liable to be set aside.
In the result, revision is allowed. The order of the Tribunal is set aside.