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Issues: Whether penalty under section 4B(5) of the U.P. Trade Tax Act, 1948 was sustainable when the assessee had an eligibility certificate under section 4A and the stock transfer of notified goods was supported by the available packing material purchased against form IIIB and form C.
Analysis: The assessee had obtained exemption under section 4A of the U.P. Trade Tax Act, 1948, and the figures relating to production, stock transfer, and packing material were not in dispute. The record showed that the stock transferred outside Uttar Pradesh was only 39 per cent of production, while packing material purchased from outside the State constituted 57 per cent of the total packing material. On those facts, the conclusion was that the material brought from outside the State remained available and no evasion was established. Penalty could arise only if the transfer exceeded the permissible balance supported by the material position on record.
Conclusion: The penalty was not legally sustainable and the issue was decided in favour of the assessee.
Ratio Decidendi: Where exemption is available and the factual material shows that stock transfer is supported by the available purchased inputs, penalty for alleged contravention of the stock transfer conditions cannot be sustained in the absence of tax evasion.
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