Reasonable excuse defeats section 10(d) penalty where Form C goods were sold as unusable stock, not diverted for evasion.

Penalty under section 10(d) of the Central Sales Tax Act was held unsustainable where goods purchased against Form C were not used in manufacture but were sold as such because they were not usable and were likely to be damaged. The assessing authority accepted that explanation as a technical default, found no intention to evade tax or violate the Act, and treated the lapse as supported by reasonable excuse. On those findings, the statutory condition for penalty was not met, and restoration of the full penalty was rejected.

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Issues: Whether penalty under section 10(d) of the Central Sales Tax Act, 1956 was leviable when goods purchased against Form C were not used in manufacturing and were sold as such, and whether the assessee had shown reasonable excuse for the non-use.

Analysis: The assessee had purchased raw material for use in manufacture of insecticides and pesticides but sold it as such because it was not usable and was likely to be damaged. The assessing authority accepted the explanation, treated the lapse as a technical default, and recorded that there was no intention to evade tax or violate the Act. Section 10(d) permits penalty only where the purchaser fails, without reasonable excuse, to make use of the goods for the specified purpose. On those findings, the case fell within reasonable excuse and did not warrant the restoration of the full penalty.

Conclusion: Penalty under section 10(d) was not sustainable and the assessee succeeded on the issue.

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