TaxTMI 
TaxTMI 
1977 (11) TMI 65
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....re converted into bars and angles. While making the assessments, the STO held that the sales of bars and angles were really resales of the goods purchased in view of s. 2(26)(iii) of the Gujarat ST Act, 1969 (hereinafter referred to as the Act). He, therefore, held that those sales were not liable to tax being R.D. resales. The STO, therefore, held that the appellant had recovered the tax from the buyers on these sales illegally and in that way the appellant had contravened the provisions contained in s. 56 of the Act and as such penalty of the amount so collected by way of tax was levied under s. 46(1)(ii) of the Act in all the periods. We may note that while issuing sale bills, tax was not separately mentioned therein but the appellant, in the sales tax register, had shown the sales tax separately every month for the sales made in hat month, and the amount of sales tax was also paid along with the returns filed at the end of every quarter. The contention of the appellant was that it had not recovered the tax from the buyers and as such penalties cannot be levied under s. 46 of the Act. But that contention was not accepted by the STO. Against these orders of the STO, the appellant....
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.... it was done for the sales effected in the course of every month at the end of the month and the amount of sales tax was paid up along with the returns filed at the end of each quarter. He said that the lower authorities have drawn an inference from this fact that the appellant had collected the tax so as to contravene the provisions contained in s. 56 of the Act. Now, we may note that the appellant had purchased ingots, billets, scrap of iron and steel, etc. from the registered dealers and from these goods it had manufactured iron bars and angles which were subsequently sold. In this connection, we would refer to definition of "resale" given in s. 2(26)(iii) of the Act which is relevant. Sec. 2(26)(iii) of the Act is in the following terms : "2. (26) "Resale" for the purpose of ss. 7,8,10,13 and 15 means a sale of purchased goods : (iii) being goods specified in entries 1 to 3 in Part A of Sch. II and in entries 1 to 6 in Part B of Sch. II without doing anything to them which takes them out of the description thereof in those entries." Entry 3 of Sch. II Part A to the Act is with respect to iron and steel. Now, the goods purchased from registered dealers by the appellant ....
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....he present case. In this case also the appellant had not recovered the tax separately from the buyers and that can be seen from the sale bills issued by the appellant. No doubt, the appellant was under an impression that the sales made by it were liable to sales tax at the rate of 3 per cent. It seems that the appellant had fixed up the sale price in such a way that sales tax at the rate of 3 per cent could be merged in the sale price and at the end of every month it had separated the amount of tax from the sale price realised in the sales register and that amount of tax which was separated from the sale amount was ultimately paid up along with the quarterly returns. The question is whether from these facts one can say that the appellant had recovered tax from the buyers so as to attract the provisions contained in s. 56 of the Act. Mr. Vakil said that what the appellant had recovered from the buyers it the sale price which is composed of the cost of raw materials used in the manufacture, other costs, and the profit. He said that in other costs, the tax-element would also be there. But from that fact we cannot any that the appellant had recovered any amount by way of tax from the b....
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....n of the Supreme Court, we are told that a Circular has been issued by the Government to grant administrative relief of the dealers for the sales made before the aforesaid decision of the Supreme Court was rendered. Now, if the decision of the Supreme Court has been rightly interpreted by State Government that the definition of 'resale' given in s. 2(26)(iii) would be applicable only when the goods purchased and the good sold being of 'iron and steel' would fall under the same sub item of Entry 3 of Sch. II-part A to the Act and not otherwise, then the position would be that the sales made by the appellant in the three periods of assessment would be liable to sales tax, they being not R.D. resales because the goods purchased and goods sold would not fall in the same sub-item of Entry 3 of Sch. II Part A. In that case the question of applying the provisions of s. 46 of the Act would not arise because in that case the appellant cannot be held to have recovered any amount by way of tax illegally (even assuming that the amount which has been split up as sales tax and which has been paid along with the quarterly returns in held to have been recovered from the buyers by the appellant. Wh....
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....he Act would be applicable only when the goods purchased and the goods sold would fall under the same sub-item of Entry 3 of Sch. II-Part A to the Act, then the position then would be that in this case even assuming that the appellant had recovered the tax on the sales made by it from the buyers, that tax has been rightly recovered and the appellant had rightly paid up that tax along with the returns. In that case, the question of penalty would not arise at all. The question of penalty is dependent upon the fact as to whether the amount of tax said to have been recovered has been recovered illegally. So, the question of legality of tax recovered and the question of penalty are interwoven. The question of penalty is absolutely dependent upon the question of legality. of tax said to have been recovered. Hence, the question of penalty cannot be isolated from the question of legality of tax recovered. If the tax said to have been recovered is found to have been recovered in accordance with law, then the question of penalty would not survive at all. Looking to the decision of the Supreme Court referred to above, prima facie one would be inclined to hold that the tax said to have been re....