Recognition certificate breach and year-specific penalty ceiling require strict compliance with the applicable statutory conditions.

A recognition certificate under section 4-B conditioned tax exemption on notified goods being sold in the State, in inter-State trade or commerce, or exported, and despatch of manufactured rice outside the State on consignment basis did not satisfy that requirement. The breach of the certificate conditions was therefore established. The applicable penalty provision for the relevant assessment year prescribed a minimum equal to the tax and a maximum of twice that amount, so a penalty worked out on a three-times basis was inconsistent with the statute. The penalty quantification was required to be reconsidered on the correct year-specific legal footing.

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Issues: (i) Whether the dealer violated the conditions attached to the recognition certificate by despatching manufactured rice outside the State on consignment basis after availing tax exemption on paddy purchases. (ii) Whether the penalty imposed for the breach required reconsideration with reference to the correct statutory maximum applicable for the relevant assessment year.

Issue (i): Whether the dealer violated the conditions attached to the recognition certificate by despatching manufactured rice outside the State on consignment basis after availing tax exemption on paddy purchases.

Analysis: The dealer held a recognition certificate under section 4-B and had availed exemption on the entire purchases of paddy. The finding recorded was that no tax had been paid on those purchases. Under section 4-B(2), the notified goods were required to be sold in the State, in inter-State trade or commerce, or by export. Despatch of rice outside the State for consignment sale did not satisfy that condition.

Conclusion: The violation of section 4-B(2) was established and the contention that there was no default was rejected.

Issue (ii): Whether the penalty imposed for the breach required reconsideration with reference to the correct statutory maximum applicable for the relevant assessment year.

Analysis: The applicable provision for the relevant year prescribed a minimum penalty equal to the tax and a maximum penalty not exceeding double the amount of such tax. The Tribunal had proceeded on the basis that the maximum was three times the tax, which was not in accordance with the provision applicable for the assessment year 1982-83. The quantum therefore required fresh consideration on the correct legal footing.

Conclusion: The penalty determination was set aside for reconsideration by the Tribunal.

Final Conclusion: The finding of breach was maintained, but the penalty order did not stand as fixed and the matter was sent back for fresh quantification of penalty in accordance with the applicable provision.

Ratio Decidendi: Where exemption under a recognition certificate is conditioned on sale or permissible disposal of notified goods and the statutory ceiling for penalty is year-specific, the breach may stand while the quantum of penalty must be determined strictly under the provision in force for the relevant assessment year.

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