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2014 (5) TMI 211 - MADRAS HIGH COURTRevision against dismissal of Second Appeal by Tribunal - Levy of penalty u/s Section 10(b) of the Central Sales Tax Act,1956 - Whether mens rea is essential part for levy of penalty - Held That:- Judgment in The State of Tamilnadu rep. by the Deputy Commissioner of Commercial Taxes Versus Nu Tread Tyres [2006 (7) TMI 578 - MADRAS HIGH COURT] followed - Section 10(b) of the Act provides for an offence if any person being registered dealer falsely represents when purchasing any class of goods that goods of such class are covered by his Certificate of Registration - The expression "falsely represents" clearly shows that the element of mens rea is the necessary component of the offence - In the absence of mens rea, resort to penal provision would not be proper unless it is established that the conduct of the dealer was contumacious or that there was deliberate violation of the statutory provision or wilful disregard thereof - If the registered dealer honestly believes that any particular goods are embraced by the Certificate of Registration and on that belief makes a representation, he cannot be held guilty of the offence under Section 10(b) of the Act and no penalty can be imposed under Section 10-A of the Act - The question whether the assessee acted under the honest belief is a question of fact - Thus, "mens rea" is an essential ingredient for the levy of penalty under Section 10(b). In dealing with the question of levy of penalty u/s 10(b) is one has to necessarily keep in mind the nature of the business of the assessee -The nature of the business would not justify the purchase of diesel generator sets as forming part of the machinery to be used in the manufacture - Admittedly, the purchase of the generator set was only a standby to supply electricity whenever there was power failure - The assessee pointed out, in its reply that they were in the first year of business and they had commenced operations in India for the first time in the year 2002 and they had no previous knowledge of tax laws in India and there were none in their pay rolls to advise them on tax matters and they placed reliance on purchase department in-charge, who was an engineering graduate, hence, their bona fides could not be doubted - as against the penalty levied at 150%, the same could be reduced to 50% of the tax due - Confirming the levy of penalty imposed by the AO, the same is reduced to 50% of the tax due - The order of the Tribunal is set aside – Decided partly in favour of assessee.
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