Supreme Court Allows State's Appeals in Central Sales Tax Penalty Jurisdiction Case. Sales Tax Officer Who Granted Certificate of Registration Retains Competence to Impose Penalty Under Section 10-A of Central Sales Tax Act, 1956, Even After Dealer's Registration Transferred.

Civil appeals by special leave against the Allahabad High Court judgment in a sales tax reference concerning penalty proceedings under the Central Sales Tax Act, 1956.

State of U.P. sought to set aside the High Court judgment holding that the Sales Tax Officer, Ghaziabad lacked jurisdiction to impose penalty; the assessee sought to uphold the High Court decision and challenge the penalty.

The assessee misused 'C' forms to purchase goods not covered by the registration certificate during assessment years 1958-59 and 1959-60; the Sales Tax Officer, Ghaziabad initiated penalty proceedings; subsequently the registration was transferred to Lucknow; the assessee challenged the jurisdiction of the Ghaziabad officer.

Sales Tax Officer, Ghaziabad imposed penalties of Rs. 1,000 and Rs. 23,000; Assistant Commissioner (Judicial) reduced them to Rs. 750 and Rs. 17,000; Revisional Authority dismissed the revision for 1958-59 and reduced the 1959-60 penalty to Rs. 15,000; Allahabad High Court answered the first referred question in favour of the assessee, holding that the Ghaziabad officer lacked jurisdiction, and left the remaining two questions unanswered.

Whether the Sales Tax Officer, Ghaziabad, had jurisdiction to initiate and complete penalty proceedings under Section 10-A of the Central Sales Tax Act, 1956 after the assessee's registration was transferred to Lucknow on 28-3-1960. Whether the additional Revising Authority was justified in holding that the assessee made representations with a guilty mind fraudulently and falsely, with full knowledge that the purchased goods were not covered by the registration certificate. If the answer to question 2 is in the negative, whether the imposition of penalty under Section 10(b) of the Central Sales Tax Act was justified and right in law.

For the appellant State: The Sales Tax Officer, Ghaziabad had granted the certificate of registration and assessed the assessee for the relevant years, so he was competent to levy penalty under Section 10-A; the penalty is one form of levying tax; the transfer of registration on 28-3-1960 did not divest the officer of jurisdiction for offences committed earlier. For the respondent assessee: After 28-3-1960, the registration before the Sales Tax Officer, Ghaziabad stood cancelled and the assessee was registered before the Sales Tax Officer, Lucknow, so the Ghaziabad officer had no jurisdiction; the assessee's head office was at Lucknow and registration at Ghaziabad was invalid as double registration; the penalty was not justified because defaults were committed due to ignorance of law and the assessee offered to compound; subsequent notices terminated earlier proceedings.

Under Section 10-A of the Central Sales Tax Act, 1956, the authority who granted the certificate of registration to an assessee is one of the authorities competent to levy penalty, even if the registration is subsequently transferred, because the levy of penalty is one form of levying tax; if the Sales Tax Officer was competent to levy sales tax for the relevant assessment years, he was equally competent to levy penalty for offences committed during those years. The show cause notice under Section 10-A requires only reasonable opportunity; subsequent notices are not statutory notices and do not terminate earlier proceedings.

Section 10-A definitely says that the authority who granted the certificate of registration to an assessee is one of the authorities competent to levy penalty. In fact the levy of penalty is one form of levying tax. If the Sales Tax Officer was competent to levy sales tax on the assessee in respect of those assessment years, he was equally competent to levy penalty on the assessee in respect of the offences committed during those years. The notices issued by him are not statutory notices. Under Section 10-A of the Act the Sales Tax Officer was only required to give reasonable opportunity to the assessee to show cause why penalty should not be imposed on him.

The assessee was registered as a dealer under the Central Sales Tax Act, 1956 at Ghaziabad. For assessment years 1958-59 and 1959-60, it filed returns and was assessed by the Sales Tax Officer, Ghaziabad. On January 8, 1960, the Sales Tax Officer issued a show cause notice under Section 10-A for misuse of 'C' forms. The assessee's condonation application was rejected. On October 31, 1960, a notice under Section 10(b) was issued; the assessee offered to compound for Rs. 7,000, which was not accepted. On January 23, 1961, another show cause notice was issued. The Sales Tax Officer imposed penalties of Rs. 1,000 and Rs. 23,000. The Assistant Commissioner (Judicial) reduced the penalties to Rs. 750 and Rs. 17,000. The Revisional Authority dismissed the revision for 1958-59 and reduced the 1959-60 penalty to Rs. 15,000. At the assessee's instance, three questions were referred to the Allahabad High Court under Section 11(1) of the U.P. Sales Tax Act. The High Court answered the first question in favour of the assessee, holding that the Ghaziabad officer lacked jurisdiction, and did not answer the remaining two. The State of U.P. appealed by special leave to the Supreme Court. The Supreme Court allowed the appeals and remanded the remaining questions to the High Court.

• Central Sales Tax Act, 1956: Section 10, Section 10(b), Section 10-A
• U.P. Sales Tax Act: Section 11(1)