Raw material finding and constitutional validation under sales tax law required fresh Tribunal reconsideration of penalty and canteen levy.

Penalty under section 5C(2) of the Rajasthan Sales Tax Act could not be sustained without a clear finding that the purchased commodities formed ingredients of the finished products and therefore qualified as raw material under section 2(mm); the matter required fresh factual examination by the Tribunal. Tax and penalty on canteen sales also had to be reconsidered because the Tribunal had not examined the effect of section 6 of the Constitution (Forty-sixth Amendment) Act, 1982, including its validating and exemption provisions. The order was set aside and the matter remitted for fresh decision after hearing the parties and considering relevant material.

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Issues: (i) Whether the penalty under section 5C(2) of the Rajasthan Sales Tax Act could be sustained without a finding that the purchased commodities formed ingredients of the finished products and were therefore raw material; (ii) whether the tax and penalty relating to canteen sales could be upheld without examining the effect of section 6 of the Constitution (Forty-sixth Amendment) Act, 1982.

Issue (i): Whether the penalty under section 5C(2) of the Rajasthan Sales Tax Act could be sustained without a finding that the purchased commodities formed ingredients of the finished products and were therefore raw material.

Analysis: The finding recorded by the appellate authority and the Tribunal did not specifically determine whether silicate, tinopole and caustic soda became ingredients of the finished products. In the absence of such a finding, the commodities could not be treated as raw material within the meaning of section 2(mm) of the Rajasthan Sales Tax Act. The applicability of section 5C(2) depended upon that foundational factual determination, which had not been properly examined.

Conclusion: The question required fresh examination by the Tribunal and the penalty could not be finally affirmed on the existing findings.

Issue (ii): Whether the tax and penalty relating to canteen sales could be upheld without examining the effect of section 6 of the Constitution (Forty-sixth Amendment) Act, 1982.

Analysis: The Tribunal had proceeded only on an earlier decision without considering the effect of section 6 of the Constitution (Forty-sixth Amendment) Act, 1982. That provision contains validation, exemption and removal-of-doubts clauses which could materially affect the levy of tax and penalty on canteen sales. The factual matrix relevant to those issues also needed to be placed before the Tribunal for proper adjudication.

Conclusion: The levy on canteen sales required reconsideration in the light of section 6 of the Constitution (Forty-sixth Amendment) Act, 1982.

Final Conclusion: The revision succeeded, the Tribunal's order was set aside, and the appeal was remitted for fresh decision in accordance with law after hearing the parties and permitting them to place relevant material before the Tribunal.

Ratio Decidendi: A penalty under section 5C(2) cannot stand unless there is a clear finding that the goods are raw material because they became ingredients of the finished product, and sales-tax liability on canteen sales must be examined in the light of the validating and exempting effect of section 6 of the Constitution (Forty-sixth Amendment) Act, 1982.

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