Penalty for use of goods under the operative registration certificate is not sustainable, and the penalty order remains appealable.

Penalty under section 10(d) read with section 10-A of the Central Sales Tax Act was not sustainable where the dealer acted in accordance with the registration certificate actually issued and in force, even though the certificate reproduced the pre-amendment form and no fresh amended certificate had been issued. The legal position is that failure without reasonable excuse cannot be inferred when the dealer follows the operative certificate. The penalty order was also treated as appealable because the corresponding State sales tax provisions provided for penalty and an appellate remedy against such orders.

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Issues: (i) Whether penalty could be imposed under section 10(d) read with section 10-A of the Central Sales Tax Act, 1956, when the dealer acted in accordance with the registration certificate issued in the pre-amendment form under section 8(3)(b); (ii) Whether the order levying penalty was appealable.

Issue (i): Whether penalty could be imposed under section 10(d) read with section 10-A of the Central Sales Tax Act, 1956, when the dealer acted in accordance with the registration certificate issued in the pre-amendment form under section 8(3)(b).

Analysis: The registration certificate issued to the dealer reproduced the pre-amendment form of section 8(3)(b) and permitted use of the goods for execution of contracts. The amendment enlarging and altering the permissible purposes had come into force later, but no fresh certificate in the amended form had been issued to the dealer. In those circumstances, the dealer could not be said to have failed, without reasonable excuse, to use the goods for the purposes stated in the certificate actually in force against him.

Conclusion: Penalty under section 10(d) read with section 10-A was not sustainable against the assessee.

Issue (ii): Whether the order levying penalty was appealable.

Analysis: The Central Sales Tax Act operates through the corresponding machinery of the State sales tax law. The provision corresponding to section 10(d) and section 10-A was treated as section 45(2)(e) and section 23 of the Madras General Sales Tax Act, 1959. Since section 23 provided for penalty and section 31 conferred a right of appeal against an order under section 23, the penalty order had to be regarded as appealable.

Conclusion: The penalty order was appealable.

Final Conclusion: The penalty orders were set aside and the assessee succeeded on the merits as well as on the preliminary objection to maintainability.

Ratio Decidendi: Penalty for failure to use goods for the declared purpose cannot be imposed where the dealer acted consistently with the certificate of registration actually issued and in force, and an order levying such penalty is appealable if the corresponding State sales tax provision confers an appellate remedy.

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