Form C use for generator linked to manufacturing plant held protected absent knowingly false representation.

Penalty under Section 10-A of the Central Sales Tax Act was held unsustainable for purchase of a diesel generating set against Form C where the dealer's registration certificate authorised plant and machinery and the generator was claimed to be used for running the manufacturing plant. Rule 13 of the Central Sales Tax (Registration and Turnover) Rules permits purchase of machinery, plant, equipment and goods used in manufacture or in generation of power, and the record did not show any collateral or residential use of the electricity generated. The penalty provision was treated as inapplicable because the Form C representation was not shown to be knowingly false. Penalty on the generator was set aside; penalty on the remaining items was left undisturbed.

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Issues: Whether penalty under Section 10-A of the Central Sales Tax Act was sustainable on the purchase of a diesel generating set against Form C, where the dealer claimed the item fell within the authorised category of plant and machinery and the generator was used for running the plant.

Analysis: Rule 13 of the Central Sales Tax (Registration and Turnover) Rules, 1957 permits a registered dealer to purchase goods intended for use as machinery, plant, equipment, tools, stores, spare parts, accessories, fuel or lubricants in manufacture or processing, or in the generation or distribution of electricity or other power. The registration certificate authorised purchase of plant and machinery and related items. The generator was asserted to have been purchased for running the plant, and the record did not show that the electricity generated was diverted for any collateral use such as residential consumption. Penalty under Section 10-A is not attracted unless the representation made through Form C is false to the knowledge of the dealer. The issue was treated as covered by earlier decisions applying the same principle to generators used for running manufacturing plant.

Conclusion: Penalty on the purchase of the diesel generating set against Form C was not sustainable and was set aside, while the penalty on the remaining items was not disturbed.

Ratio Decidendi: Penalty under Section 10-A cannot be imposed where Form C is used for a generator purchased in a bona fide belief that it is covered by the registration certificate and the representation is not shown to be knowingly false.

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