2022 (7) TMI 452 - HC - VAT and Sales Tax

Levy of penalty imposed under Section 10A read with Section 10(b) of the Central Sales Tax Act, 1956 - absence of burden discharged by the revenue to establish false representation on part of the assessee - HELD THAT - While all false declarations are wrong, all wrong declarations are not false. Penalty under Section 10A read with Section 10(b) of the Act is imposable only upon issuance of a false declaration and not on a mere wrong declaration. The burden to establish issuance of false declaration would always remain on the revenue. It is so because in the context of penalty proceedings, the charge has to be proven by the revenue. Therefore, the merit of the defence set up by the assessee would not be decisive in a case such as this where the revenue has failed to lead any evidence in support of the charge levelled by it that the assessee had made a false declaration. The allegation that the commodities electrical goods, Restolene paste and Chemicals are not industrial stores is not found to have been proven. The issue is not to be decided on a common sense perspective of the matter. Once the charge had been levelled, it became the burden of the revenue to prove it. If some evidence had been led whether documentary or oral, the onus may have shifted on the assessee to lead evidence in rebuttal. That was not done - the merit of the explanation furnished by the assessee cannot be relied by the revenue to sustain the penalty. Revision allowed.

Summary

Issues:
Challenge against imposition of penalty under Section 10A of the Central Sales Tax Act, 1956 for false representation by the assessee in purchasing goods against Form C.

Analysis:
The revisionist challenged the order of the Commercial Tax Tribunal imposing a penalty of Rs.47,316 under Section 10A of the Act for false representation in purchasing goods against Form C. The key issue revolved around whether the revenue had discharged the burden to establish false representation by the assessee to levy the penalty.

The assessee had a registration certificate authorizing it to deal in industrial stores and had purchased electrical goods, Restolene paste, and Chemicals against Form C. The assessing authority alleged false declarations by the assessee, leading to the penalty imposition. The assessee claimed a bonafide dispute, stating that the purchased items were considered industrial stores. The Deputy Commissioner (Appeal) allowed the assessee's appeal, but the Tribunal modified the penalty to Rs.41,716.

The High Court referred to precedents to interpret the term "falsely represents" in Section 10(b) of the Act. It emphasized that false representation requires a deliberate act done knowingly, distinct from wrong representation due to inadvertence. The Supreme Court further clarified that the burden to prove the offense under Section 10(b) lies on the revenue, necessitating the existence of mens rea for penalty imposition under Section 10A.

The Court highlighted that penalty under Section 10A is applicable only for false declarations, not wrong ones, and the burden to establish false declaration rests with the revenue. As the revenue failed to provide evidence supporting the charge of false declaration by the assessee, the penalty could not be sustained solely based on a wrong declaration. The Tribunal's decision was deemed erroneous, and the revision was allowed in favor of the assessee.

In conclusion, the Court answered the question of law in favor of the assessee, setting aside the Tribunal's order and emphasizing the revenue's failure to discharge the burden of proving false representation. No costs were awarded in the judgment.