Penalty for breach of declaration fails where inputs are not shown to be used contrary to declared conditions.

Penalty under the concessional input provision was unsustainable because the material did not show any violation of the statutory declaration or use of inputs contrary to the declared conditions. The assessee operated a manufacturing unit and sold processed granite; even if that processing did not amount to manufacture, the record did not establish the kind of breach required to attract penalty under section 5A(3). The provision applies only where a false declaration secures concessional treatment or where inputs are later used or disposed of inconsistently with the declaration. On that basis, the penalty order could not be sustained.

---

---

Issues: Whether the assessee had violated the declaration furnished under the Karnataka Sales Tax Act so as to attract penalty under section 5A(3).

Analysis: Section 5A(3) applies in two situations: where a person without a manufacturing unit obtains concessional treatment by a false declaration, or where a person having a manufacturing unit purchases inputs on declaration and later uses or disposes of them contrary to that declaration. The assessee had a manufacturing unit and sold granite after processing. Even if the processing of granite did not amount to manufacture, the material on record did not show breach of the declaration or use of inputs contrary to the conditions of section 5A(1) and section 5A(3)(ii). The basis for invoking penalty was therefore absent.

Conclusion: The assessee had not violated the declaration, and penalty under section 5A(3) was not sustainable.

Final Conclusion: The penalty order could not be sustained in law, and the assessee succeeded in the appeal.

Ratio Decidendi: Penalty under the concessional input provision cannot be imposed unless the statutory declaration is actually violated or the inputs are used contrary to the declared conditions.

---