Penalty under CST Act section 10(d) requires proof of misuse without reasonable excuse, not mere diversion of goods.

Penalty under section 10(d) of the Central Sales Tax Act, 1956 is not automatic and can be imposed only where goods purchased for a permitted purpose are later used for another purpose without reasonable excuse. The court noted that, although the amended section 8(3)(b) did not permit use of the goods in works contracts, the assessee had received forms under the earlier regime and may have acted under a bona fide misapprehension. That circumstance was material because the statutory requirement of absence of reasonable excuse had to be established before penalty could be sustained, and the penalty was therefore held unsustainable.

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Issues: Whether penalty under section 10(d) of the Central Sales Tax Act, 1956 was leviable when the assessee used goods in execution of works contracts after obtaining C forms that had been issued in the earlier form, and whether the existence of a reasonable excuse negatived the penalty.

Analysis: Liability under section 10(d) is not automatic. It arises only where, after purchasing goods for a purpose specified in section 8(3)(b), the purchaser uses them for another purpose without reasonable excuse. The amended section 8(3)(b), effective from 1 October 1958, did not permit use in execution of contracts, but the assessee had been supplied forms in the earlier regime and may have acted under a bona fide misapprehension. In penalty proceedings, that circumstance is material because the statutory condition of absence of reasonable excuse must be satisfied before penalty can be imposed.

Conclusion: The penalty was not sustainable, and the petition was allowed in favour of the assessee.

Final Conclusion: Penalty under section 10(d) could not be imposed in the absence of proof that the misuse of the goods was without reasonable excuse.

Ratio Decidendi: Penalty under section 10(d) of the Central Sales Tax Act, 1956 is imposable only when the goods purchased for a permitted purpose are diverted to another use without reasonable excuse.

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