2014 (11) TMI 1056 - HC - VAT and Sales Tax

Levy of penalty - Section 10(b) read with section 10A of the Act - Whether the assessee a registered dealer made false representation in the declaration in form C issued by him - Held that - in the application the assessee made it clear that he wanted a certificate in respect of the goods for use in the construction of the bridge. According to him he thought that etc. would cover all those articles which may be required for storage of goods used in construction. It is not necessary to decide whether etc. would actually cover all those articles. It will suffice to say that the assessee could possibly have formed the belief and quite honestly that etc. would cover those articles. Section 10(b) is a penal provision and where a question arises whether an offence has been committed or not the dealer who is accused of the offence is entitled to the benefit of the doubt. This is not a case where it can be said that the dealer with the full knowledge of the falsity of the representation made the declaration in the form C issued by him. Therefore in the light of the language employed in the section and the nature of penalty contemplated it is difficult to say that all types of omission or commission in the use of form C will be embraced in the expression false representation . Finding of mens rea is necessary for levy of penalty under section 10(b) read with section 10A of the Act. - Decided in favour of assessee

Summary

Issues:
1. Imposition of penalty under section 10A of the C. S. T. Act for issuing form C for purchases of goods.
2. Infringement of section 10(b) of the C. S. T. Act.
3. Materiality of false representation while issuing form C.

Analysis:
The case involves a revisionist, a foreign company, penalized for purchasing "hut material" for a construction project using form C. The assessing authority imposed a penalty under section 10A of the Central Sales Tax Act, 1956. The key question is whether the revisionist made a false representation in the form C issued. The Tribunal upheld the penalty, emphasizing the need for mens rea for penalty under section 10(b) of the Act. The Supreme Court precedent in Commissioner of Sales Tax v. Sanjiv Fabrics highlighted that a deliberate act against the law is required for penalty under section 10(b). The court in Spring Valley Fruits Product Co. Ltd., Bareilly v. Commissioner of Sales Tax, U. P., Lucknow also emphasized the need for false representation with knowledge for penalty imposition.

The Tribunal's decision was based on the belief that the revisionist falsely represented goods covered by the registration certificate. The court analyzed the use of the term "etc." in the registration certificate, suggesting it could have led the revisionist to believe the goods were covered. The court highlighted that in penal provisions like section 10(b), the accused dealer is entitled to the benefit of the doubt when determining if an offense was committed. The court set aside the Tribunal's order, emphasizing the lack of full knowledge of falsity in the representation made by the revisionist in the form C.

In conclusion, the court allowed the revision, setting aside the Trade Tax Tribunal's order without imposing any costs. The judgment focused on the necessity of proving mens rea for penalty under section 10(b) of the Act and highlighted the importance of genuine belief in representations made by dealers to avoid penal consequences.