Schedule classification and penalty require proper reasoning and foundational allegations before higher tax or levy can stand.

Classification under the sales tax schedule requires a reasoned determination of the applicable entry; where the revision order gave no basis for treating the product as residuary and did not engage with the assessee's claim that it contained electronic integrated circuits and micro-assemblies, the higher residuary rate could not be sustained. Penalty under section 12(3)(b) cannot be imposed without the foundational allegation of suppression or non-disclosure of turnover in the notice. The revision assessment and consequential penalty were set aside, with liberty to proceed afresh in accordance with law if classification needs reconsideration.

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Issues: (i) Whether the commodity sold by the assessee was correctly classifiable under Entry 18 of Part B of the First Schedule or liable to be assessed under the residuary entry in Part D; (ii) whether penalty could be sustained under section 12(3)(b) of the Act in the absence of an allegation of suppression of turnover.

Issue (i): Whether the commodity sold by the assessee was correctly classifiable under Entry 18 of Part B of the First Schedule or liable to be assessed under the residuary entry in Part D.

Analysis: The impugned revision order contained no discussion as to why the product was treated as a residuary commodity. The assessee's case that the product contained electronic integrated circuits and micro-assemblies, and therefore fell within the relevant schedule entry attracting tax at 4%, was not considered. The notice also did not dispute the factual assertion that the product contained electronic integrated circuits and assemblies. On that basis, the higher rate under the residuary entry could not be sustained without proper examination of the classification issue.

Conclusion: The classification adopted in the revision order was unsustainable and was held to be bad in law, in favour of the assessee.

Issue (ii): Whether penalty could be sustained under section 12(3)(b) of the Act in the absence of an allegation of suppression of turnover.

Analysis: The penalty was imposed in a proceeding that was only a revision of assessment, and the show-cause notice did not allege non-disclosure of turnover. In the absence of the foundational allegation required for penalty, the levy could not stand.

Conclusion: The penalty was deleted, in favour of the assessee.

Final Conclusion: The assessment revision and consequential penalty were set aside, while leaving it open to the revenue to proceed afresh in accordance with law if correct classification required reconsideration.

Ratio Decidendi: A revised assessment on classification cannot be sustained without a reasoned determination of the applicable schedule entry, and penalty cannot be imposed absent the necessary allegation and foundation in the notice.

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