1. On application made under section 69 of the Gujarat Sales Tax Act, 1969, hereinafter referred to as "the said Act", the Gujarat Sales Tax Tribunal has referred the following questions of law for our decision :

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the exercise of revisional jurisdiction by the Assistant commissioner of Sales Tax to levy purchase tax under section 16(1) of the Gujarat Sales Tax Act, 1969, was legal and valid ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Assistant Commissioner of Sales Tax had correctly levied purchase tax under section 16(1)(a) of the Gujarat Sales Tax Act, 1969, on 30 per cent of the purchases of hexine oil made by the applicant-company against certificates in form 19 from dealers inside the State of Gujarat on the presumption that the hexine oil so purchased was not used in the manufacture of goods for sale ?

(3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the imposition of penalty under section 45(1)(b) of the Gujarat Sales Tax Act, 1969, by the learned Assistant Commissioner in suo motu revision was legal and valid (although the assessing officer had not imposed any penalty under the said provisions of law) ?"

2. Relevant facts giving rise to the present reference are required to be stated and are as under :

(i) The applicant is a public limited company carrying on business of extraction of oil from oil-cakes by solvent extraction process and of selling the oil so extracted. It is registered both under the Gujarat Sales Tax Act, 1969 and under the Central Sales Tax Act, 1956. During the calendar year 1973, the applicant had purchased certain quantity of hexine oil both from the State of Gujarat as well as from outside the State of Gujarat for use in the process of extraction of oil. The quantities of hexine oil so purchased were admittedly stored in the same containers and from the same containers the oil was used in the process of extraction of oil.

(ii) Being a manufacturer the applicant holds recognition under section 7 read with section 13(1)(B) of the said Act, and had accordingly purchased hexine oil during the said year without payment of any tax from the locally registered dealers by issuing certificate in form 19 and declaring therein that it will use that oil in the manufacture of de-oiled cakes for sale by it.

(iii) The applicant is also registered as a dealer under the Central Sales Tax Act, 1956 and it had similarly purchased hexine oil from outside the State of Gujarat against form "C" in order to use the said oil for manufacturing of de-oiled cakes for sale by it.

(iv) After purchasing the hexine oil admittedly the applicant had mixed up and stocked the same in a single storage tank. Out of the said stock the applicant had used certain quantity of hexine oil in the manufacture and sale of its own de-oiled cakes. A part of said hexine oil was also used by the applicant to manufacture de-oiled cakes for third parties on whose behalf the applicant has undertaken job-work contract. Said de-oiled cakes which were manufactured for third parties were meant for sale by such third parties and not by the applicant itself.

(v) From the above facts, it becomes clear that the applicant had committed breach of recitals contained in the declaration in form 19 inasmuch as the applicant had failed to use hexine oil in the manufacture and sale of its own de-oiled cakes as declared, and secondly it had used such hexine oil in a job-work of third parties while manufacturing de-oiled cakes for such third parties. The applicant had, thus, committed breach of recitals contained in form 19 and, therefore, it had become liable to pay purchase tax on the purchase of hexine oil as required under section 16(1)(a) of the said Act.

(vi) The applicant was thereafter by the Sales Tax Officer vide his order, dated 20th January, 1976. The Sales Tax Officer vide his above order, dated 20th January, 1976, assessed the liability of the applicant to an extent of Rs. 1,50,306.14 and found that as against the said liability the applicant had paid an amount of Rs. 1,39,683.29 and therefore, found that there was recovery of Rs. 10,622.85.

(vii) On scrutiny of the order passed by the Sales Tax Officer and the record pertaining to such assessment the Assistant Commissioner found that although certain quantity of hexine oil purchased and covered by certificate issued in form 19 under the said Act and in form "C" under the Central Act was used for purpose other than that of extraction of oil for the purpose of the company, the assessing officer had failed to notice that there was liability of applicant to pay purchase tax under section 16(1)(a) of the said Act. The Assistant Commissioner, therefore, invoked his revisional power under section 67 of the said Act, and after issuing notice to the applicant proceeded to pass the order to levy purchase tax of Rs. 14,362.08 under section 16(1)(a) of the said Act, and he also imposed penalty of Rs. 1,436.20 under section 45(1)(b) of the said Act.

(viii) Being aggrieved by the said order of the Assistant Commissioner, the applicant carried the matter to the Tribunal in further revision and the Tribunal by its judgment and order dated 29th December, 1979, confirmed the order passed by the Assistant Commissioner.

(ix) When the Tribunal was, thereafter, moved by the applicant under section 69 to refer certain questions of law for our decision, the Tribunal has referred the above referred questions of law for our decision.

3. In order to answer question No. 1 it would be necessary for us to refer to certain findings of fact reached by the Assistant Commissioner while exercising his revisional power, and also the findings of fact reached by the Tribunal. There is no dispute about the fact that the applicant had purchased hexine oil during relevant period, both against form No. 19 under the said Act as well as against form "C" under the Central Sales Tax Act. It is also undisputed that hexine oil so purchased was mixed up and was stored in a single storage tank. There is no dispute about the fact that certain quantity of hexine oil out of the said quantity stored in single storage tank is used by the applicant in the manufacture and sale of its own de-oiled cakes. It is also undisputed that part of the quantity of said hexine oil is used by the applicant in manufacture of de-oiled cakes of third parties on whose behalf the applicant has on job-work basis manufactured de-oiled cakes. Said de-oiled cakes were to be sold by third parties. Therefore, to that extent the said hexine oil was used by the applicant for the manufacture of de-oiled cakes of third parties for whom the applicant has worked on job-work basis. Admittedly, the applicant has acted contrary to the recitals contained in the certificate issued in form 19. On these admitted facts, therefore, liability to pay purchase tax would arise under section 16(1)(a). However, dispute this position which emerges from the record before the Sales Tax Officer, he failed to levy purchase tax under section 16 of the said Act. The Assistant Commissioner invoked his revisional powers under section 67. Section 67 of the said Act, in so far it is relevant, is reproduced hereinbelow :

"67 (1)(a). the Commissioner of his own motion within three years (or on applicant made to him within one year) from the date of any order passed by any officer appointed under section 27 to assist him, may call for and examine the record of any such order and pass such order thereon as he thinks just and proper."

From the language of the said provision it becomes clear that the jurisdiction of the authority to revise the order of lower authority is couched in wider words. In this case the Assistant Commissioner while examining the legality, propriety, correctness or otherwise of the order of the Sales Tax Officer found that from the record before the Sales Tax Officer, the applicant has incurred liability to pay purchase tax under section 16(1)(a) of the said Act, and that the Sales Tax Officer had failed to levy purchase tax. Mr. R. D. Pathak, learned counsel for the applicant, submits that the Sales Tax Officer has not considered the liability of the applicant to pay purchase tax under section 16(1)(a) and since the question of liability to pay purchase tax was not at all considered by the Sales Tax Officer, the said liability could not have been fastened by the Assistant Commissioner while exercising his revisional powers. We are afraid we cannot accept such a specious contention. From the language of section 67 it becomes clear that the revisional authority has power to revise the order of the subordinate officer and to pass any order which such authority thinks to be just and proper. Such a revisional power cannot be restricted to a case where the subordinate authority has positively exercised power and has committed some error or illegality in exercise thereof. Even in cases where the authority has either failed or omitted to exercise power to levy tax, the revisional authority can exercise its power. The order of assessment is one composite whole and from the material before the Sales Tax Officer it is abundantly clear that there was breach of recitals contained in certificate issued under form 19. To that extent there was liability to pay purchase tax. Therefore, from the said material when it is noticed by the revisional authority that the Sales Tax Officer has omitted to fasten the liability to pay purchase tax under section 16(1)(a) of the said Act, the Assistant Commissioner was justified in exercising revisional power. Therefore, we are of the opinion that the Assistant Commissioner, was justified in invoking revisional jurisdiction and the Tribunal was right in holding that exercising of revisional jurisdiction by the Assistant Commissioner of Sales Tax to levy purchase tax under section 16(1) of the said Act is valid.

4. The decision on second question mainly depends on the concurrent findings of fact reached by the Assistant Commissioner of Sales Tax and by the Gujarat Sales Tax Tribunal. We have already referred to admitted or undisputed facts while answering question No. 1. From the said facts it clearly emerges that the applicant had committed breach of recitals contained in certificate issued under form 19. The applicant had purchased hexine oil (taxable goods) under a certificate given by it under section 13(1)(B) of the said Act. As per the said certificate given in form 19 the applicant was required to use the said hexine oil in the manufacture and sale of its own de-oiled cakes as declared by it, and secondly such goods purchased by it were to be used by it in the manufacture of taxable goods for sale by it. The Assistant Commissioner of Sales Tax and the Tribunal concurrently found that the hexine oil purchased by the applicant against form 19 was mixed by it with hexine oil purchased by it against form "C" under the Central Sales Tax Act. Such mixed hexine oil was kept in common storage tank. From such storage tank the hexine oil was partly used by the applicant for the purpose of manufacturing its own de-oiled cakes for sale. What part of such hexine oil was used by it for manufacturing of de-oiled cakes for sale by it cannot be stated by the applicant. In fact, both the lower authorities have found that there was no documentary evidence to support the oral submission of the Advocate for the applicant that the hexine oil purchased by the applicant against form 19 was used by the applicant itself for manufacturing de-oiled cakes for sale by itself. In the absence of any satisfactory evidence on this aspect and failure of the applicant to establish that there was no contravention of any of the recitals contained in the certificate of form 19 we are of the opinion that it could not be said that the lower authorities were wrong in levying purchase tax on 30 per cent of the purchase of hexine oil made by the applicant-company against certificate in form 19 from the dealers inside the State of Gujarat. It is undoubtedly true that while fixing the liability the Assistant Commissioner of Sales Tax has adopted a rough and ready formula. He has, in fact, found that hexine oil which was purchased against form 19 and against form "C" was kept in common storage tank. The applicant was not in a position to state as to which quantity of hexine oil out of the said mixed up quantity of hexine oil was used for manufacturing de-oiled cakes for third parties on job-work basis. He, therefore, applied the method of proportion. He found that the goods manufactured by the applicant during the relevant year for third parties on job-work basis worked out to approximately 30 per cent of the total production of de-oiled cakes by the applicant. Therefore, he found that at least 30 per cent of hexine oil purchased by the applicant against form 19 was used by it for manufacturing de-oiled cakes for third parties on job-work basis, and that extent there was breach of terms of certificate under form 19 and consequent liability to pay purchase tax under section 16(1)(a) of the said Act. We, therefore, find that since there was breach of recitals contained in certificate under form 19 there was liability to pay purchase tax and the same was rightly worked out by the Assistant Commissioner of Sales Tax at 30 per cent of the purchase of hexine oil made by the applicant against certificate under form 19.

5. In order to answer question No. 3 we shall have to keep in mind the fact that the Assistant Commissioner of Sales Tax exercised his revisional jurisdiction under section 67 of the said Act suo motu and while exercising said jurisdiction he also imposed penalty under section 45(1)(b) of the said Act. The question framed by the Tribunal for our decision is not properly drafted, and the same is required to be restated or reframed in order to answer the said question in proper perspective. We, therefore, reframe the third question as under :

"Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the imposition of penalty under section 45(1)(b) of the Gujarat Sales Tax Act, 1969, by the learned Assistant Commissioner in suo motu revision was legal and valid, when the assessing authority had no occasion or cause to consider the question of penalty ?"

6. Mr. R. D. Pathak, learned counsel for the applicant, submits that the Assistant Commissioner of Sales Tax acted beyond his revisional jurisdiction in imposing penalty under section 45(1)(b) of the said Act. In his submission, when the Assistant Commissioner of Sales Tax issued notice to exercise his suo motu revisional power he could have only revised the assessment order passed by the Sales Tax Officer, but he could not have, in the revisional jurisdiction, imposed penalty under section 45(1)(b) of the said Act. On the other hand, the learned Assistant Government Pleader submits that while exercising revisional power the entire record along with the order passed by the Sales Tax Officer was before the Assistant Commissioner of Sales Tax and from the said record the Assistant Commissioner of Sales Tax found out that there was breach of recitals contained in the certificate in form 19. In his submission, once the breach was noticed, the liability to pay purchase tax arises under section 16(1)(a) of the said Act. He submits that, in fact the Sales Tax Officer has issued notice for initiation of penalty proceedings, and therefore, it could not be said that penalty proceedings were not initiated by the Sales Tax Officer. He submits that simply because he has failed to assess the applicant to purchase tax and to impose penalty it could not be said that the revisional authority thereafter has no power to impose penalty while exercising revisional jurisdiction.

7. Before we proceed to deal with these rival submissions, and to answer the third question referred to us for our decision, it would be necessary for us to state that from the record of the case, the learned Assistant Government Pleader was in a position to show to us the notice issued by the Sales Tax Officer to the applicant under section 45(1)(b) of the said Act. The said notice is dated 28th October, 1975 and it specifically calls upon the applicant to show cause as to why the penalty should not be imposed upon it under section 45(1)(b) of the said Act. Section 45, in so far it is material is reproduced hereinbelow :

"45. Imposition of penalty in certain case and bar to prosecution. - (1) Where any dealer or commission agent becomes liable to pay purchase tax under the provisions of sub-section (1) or (2) of section 16, then, the Commissioner may impose on him, in addition to any tax payable -

(a) .........

(b) if he has not so included the purchase price as aforesaid, a sum by way of penalty not exceeding twice the amount of tax."

It thus, becomes clear that while issuing notice under section 45(1)(b) the Sales Tax Officer was alive to the fact that there was breach of recitals contained in form 19, and therefore the liability to pay purchase tax. He was also conscious of the fact that because of the failure of the applicant to pay purchase tax there was further liability of the applicant to pay penalty. The Sales Tax Officer was definitely alive to this liability and he was also alive to the requirement to initiate penalty proceedings. He, in fact, initiated penalty proceedings by issuing show cause notice referred to hereinabove.

8. Mr. Pathak, learned counsel for the applicant, relies upon the reported decision of this Court in the case of Bhavnagar Vegetable Products v. State of Gujarat in Sales Tax Reference No. 33 of 1973 decided on 4th July, 1975 by the Division Bench (Coram : J. B. Mehta and T. U. Mehta, JJ.). In the case before the Division Bench a question was raised as to whether the penalty could be levied in revisional proceedings in respect of purchase concerned with penalty under section 36(1) of Bombay Sales Tax Act. The provisions of the said section are in pari materia with the provisions of section 45 of the Act before us. The court found that the jurisdiction of revisional authority is very wide and it is entitled to examine the correctness, legality and propriety of the order. If necessary, the revisional authority can make an additional enquiry to arrive at just decision. However, the court found that the revisional authority cannot go absolutely outside the order passed by the lower authorities and the record before the lower authorities and cannot launch enquiry upon subject which was not before the subordinate officer. Inherent limitation of power on the revisional authority is that it cannot encroach upon the field of another authority. However, that would not mean that there is total bar on exercising revisional power on proper enquiry being made by the revisional authority into the order passed by the subordinate authority or into the facts arising form the record and material before the subordinate authority. Before the said Division Bench it was found that the Sales Tax Officer had not issued any show cause notice to impose penalty under section 36(1) of the Bombay Sales Tax Act and not purported to invoke the original penalty jurisdiction. The Division Bench, therefore, found that the Assistant Commissioner while exercising revisional power could not exercise penalty jurisdiction when Sales Tax Officer has not invoked that power at all. The Division Bench also referred to the Division Bench judgment of the Madras High Court in the case of Ramaswamy Pillai reported in [1968] 22 STC 224. In the case before the Madras High Court original authority had issued show cause notice for penalty. However, while passing the order of assessment, it was absolutely silent as regards imposition of penalty. Even if no penalty was imposed, the order of original authority was construed to be an implied order passed by the authority on the matter of penalty. Such an order can be revised by the revisional authority because penalty jurisdiction was already invoked by the original authority and it has either failed or omitted to pass the order of penalty. Penalty jurisdiction having already been invoked by the original authority we are of the opinion that the revisional authority could very well exercise that power of imposing penalty.

9. What would be the position when the original authority does not initiate penalty proceedings whatsoever ? It even does not expressly or impliedly exercise its jurisdiction of imposing penalty. In such an eventuality,

"is it open to the revisional authority to impose penalty in the exercise of its revisional jurisdiction ?"

is the question which we are required to answer. We are of the opinion that when the original authority, namely, the Sales Tax Officer, had not commenced the proceedings for penalty and when it was not alive to its penalty jurisdiction it could not be said that it has exercised its original jurisdiction of imposition of penalty. Therefore, if the original authority has not passed any penalty order either expressly or impliedly by invoking its penalty jurisdiction, the revisional authority could not pass such an order of penalty in exercise of its revisional jurisdiction. This position of law emerges from the clear distinction that exists between the assessment jurisdiction and the penalty jurisdiction. The distinction between the two is now accepted by the judicial pronouncement. In the case of Dhanvantrai Ratilal Shah v. Sales Tax Officer, in Spl. C.A. No. 4650 of 1984 decided on 5th March, 1987 by the Division Bench of this Court, to which one of us (G. T. Nanavati, J.) was a party, the Division Bench referred to decisions reported in [ 1961] 41 ITR 425 (SC) (Abraham v. Income-tax Officer), [ 1961] 42 ITR 123 (SC) (Commissioner of Income-tax v. Bhikaji Dadabhai & Co.), [1970] 77 ITR 107 ( SC) (Jain Brothers v. Union of India) and found that imposition of penalty can take place only after the assessment has been completed. Thought penalty has been regarded as additional tax in certain sense and for certain purposes penalty proceedings are not essentially continuation of proceedings relating to assessment. The assessment proceedings and the penalty proceedings are quite distinct and different.

10. Keeping this distinction in mind we shall have to decide as to whether the revisional authority can impose penalty, and if so, under what circumstances. We are of the opinion that the proceedings to levy penalty under section 45 of the said Act are independent and distinct proceedings. Language of section 45 suggests that the authority empowered to impose penalty has discretion. He may or may not impose penalty. He may impose any amount of penalty so as not to exceed the limit prescribed by section 45(1)(b). Penalty will not be imposed merely because it is lawful to do so. In fact, it is the exercise of quasi-judicial powers by quasi-judicial authority. In the case of Nowroji N. Vakil & Co, v. State of Gujarat [1979] 43 STC 238, the Division Bench of this court with reference to penalty proceedings observed as under :

"An order imposing penalty under section 45(1) is the result of a quasi-criminal proceeding and penalty will not ordinarily be imposed thereunder unless the concerned dealer either acted deliberately in contravention of the certificate or in conscious disregard of the declaration or was guilty of conduct contumacious or dishonest. Section 45(1) confers the power in relation to imposition of penalty on a high officer and it is a discretionary power to be exercised judicially on a consideration of all the relevant circumstances. [See Hindustan Steel Ltd. v. State Of Orissa†. [1970] 25 STC 211 (SC)]. It would thus appear that even in cases where a dealer becomes liable to pay purchase tax under sub-section (1) of section 16, for having acted in contravention of the certificate issued at the time of purchase of any taxable goods, the authority will have to consider all the facts and circumstances of the case and act judicially in the exercise of his discretion before imposing penalty. This discretion, like other judicial discretions, will have to be exercised with vigilance and circumspection according to justice, common-sense and sound judgment."

From the said observations, it becomes clear that the penalty proceedings being independent and distinct from the assessment proceedings, if the original authority has expressly or impliedly not at all exercised jurisdiction of penalty, in our opinion the revisional authority cannot proceed to impose penalty for the first time. However, when the original authority has taken action for imposition of penalty by initiating penalty proceedings as in the case before us, i.e., by issuing notice under section 45(1)(b) to impose penelty, it is open to the revisional authority to impose penalty,if the original authority has either refused to imposed penalty or omitted or failed to impose penalty. In case where it has omitted to impose penalty despite initiation of penalty proceedings, it can be said that impliedly it has not imposed penalty and the order of noiy imposing penalty is revisable under section 67 of the said.

11. We are, therefore, of the opinion that the Tribunal was right in holding that the imposition of penalty under section 45(1)(b) of the said Act by the Assistant Commissioner in suo motu was legal and valid.

12. In the result, we answer all the three questions referred to us in the affirmative, i.e., in favour of the State and against the applicant. There shall be no order as to costs.

13. Reference answered in the affirmative.