Stock transfer of notified goods does not itself trigger penalty; actual sale or taxable disposal must be proved.

Under the amended penalty provision, mere stock transfer or consignment of notified goods to a dealer's own depots outside the State did not amount to "sale or otherwise disposal" because the phrase required an act transferring title to another person. Penalty could therefore arise only if an actual sale or legally cognisable disposal was established. The provision also tied the quantum of penalty to tax that would have been payable on a sale in the State; where the dealer held an eligibility certificate and no sales tax liability arose, penalty could not be levied for that period. The later assessment year attracted deletion of penalty, while the earlier year required fresh factual determination.

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Issues: (i) Whether transfer of notified goods to the assessee's own depots outside the State by way of stock transfer or consignment amounted to "sells or otherwise disposes of" the goods so as to attract penalty under the recognition certificate conditions. (ii) Whether the quantum of penalty could be levied when the assessee had the benefit of an eligibility certificate and no sales tax would otherwise have been payable on the sale of the notified goods.

Issue (i): Whether transfer of notified goods to the assessee's own depots outside the State by way of stock transfer or consignment amounted to "sells or otherwise disposes of" the goods so as to attract penalty under the recognition certificate conditions.

Analysis: The penalty provision applied only when there was both a breach of the certificate conditions and a sale or other disposal of the notified goods. The amended language of the provision was narrower than the earlier one and did not treat mere dispatch or internal transfer as equivalent to disposal. "Otherwise disposes of" required an act amounting to transfer of title to another person, not merely movement of goods to the assessee's own depots. The Tribunal's assumption that stock transfer necessarily meant final disposal was unsustainable without a factual finding that the goods were actually sold after transfer.

Conclusion: Mere stock transfer or consignment to own depots did not by itself attract penalty; the penal provision would arise only if an actual sale or legally cognisable disposal otherwise than by sale was established.

Issue (ii): Whether the quantum of penalty could be levied when the assessee had the benefit of an eligibility certificate and no sales tax would otherwise have been payable on the sale of the notified goods.

Analysis: The statutory measure of penalty was linked to the tax that would have been payable on a sale of the notified goods in the State. Where the dealer enjoyed exemption under the eligibility certificate, no sales tax liability arose on such sale. The later legislative position also indicated that the earlier form of the provision did not adequately cover this contingency. On the facts, the assessee could not be fastened with penalty for the assessment year in which the goods were covered by the eligibility certificate, though the deferred commencement of that benefit meant that factual breach still had to be examined for the earlier period.

Conclusion: For the later assessment year, no penalty was leviable. For the earlier assessment year, the matter required factual determination whether the penal event had in fact occurred after the eligibility certificate became operational.

Final Conclusion: The revisions were disposed of in different ways: one assessment year resulted in deletion of penalty, while the other was sent back for fresh factual determination on whether an actual penal event had occurred.

Ratio Decidendi: Under the amended penalty provision, mere stock transfer to the dealer's own depots is not enough; penalty arises only upon actual sale or disposal amounting to transfer of title, and the penalty cannot be computed where the dealer is not liable to pay sales tax on the relevant sale by reason of exemption.

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