1999 (11) TMI 841 - HC - VAT and Sales Tax

High Court Upholds Penalty for Modular Furniture Purchase as Capital Asset

Motorola India Electronics Private Limited Versus State of Karnataka

Motorola India Electronics Private Limited Versus State of Karnataka - [2000] 118 STC 560 (Kar) Issues:1. Levying of penalty under section 10(b) of the Central Sales Tax Act for purchase of modular furniture considered a capital asset.2. Validity of penalty imposition due to misuse of 'C' forms for purchases made between November 26, 1991, and March 26, 1992.3. Competency of the Assistant Commissioner of Commercial Taxes to levy penalty instead of the Assistant Commercial Tax Officer.4. Reduction of penalty from 19.5% to 6% by the Tribunal for an export-oriented unit.Analysis:1. The case involved challenging the order of the Karnataka Appellate Tribunal regarding the imposition of a penalty under section 10(b) of the Central Sales Tax Act for the purchase of modular furniture considered a capital asset. The penalty was levied due to the misuse of 'C' forms for purchases totaling Rs. 42,45,428 made between November 26, 1991, and March 26, 1992.2. During the appeal, it was discovered that there was an amendment in the Central sales tax registration valid from July 20, 1992. The modular furniture was used to support computer systems and programmers, partition factory space, and ensure privacy and concentration. Despite being an export-oriented unit entitled to a refund of Central sales tax, the goods were not covered under the registration certificate at the time of purchase, leading to the penalty being upheld.3. The contention was raised before the Tribunal that the Assistant Commissioner of Commercial Taxes, who levied the penalty, was not competent as the registration certificate was granted by the Assistant Commercial Tax Officer. However, the Tribunal found that the Assistant Commissioner was the appropriate authority to issue the certificate of registration, dismissing the first contention. The penalty amount was reduced to 6% of the total purchase.4. The Tribunal reduced the penalty from 19.5% to 6% considering the entity as an export-oriented unit. Despite arguments regarding the issuance of 'C' forms post-purchase and the first year of business, the penalty was maintained as the items were not covered by the registration certificate at the time of purchase. The Tribunal's decision to reduce the penalty was upheld, leading to the dismissal of the revision petition.In conclusion, the High Court dismissed the revision petition as it found no illegality in the Tribunal's order regarding the penalty imposition under the Central Sales Tax Act. The reduction of the penalty to 6% for an export-oriented unit was deemed appropriate, and further relief was denied due to the circumstances surrounding the purchase and registration of the goods.