1987 (10) TMI 382 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of penalty under Section 10 (b) of the Central Sales Tax Act, 1956 for import of machinery not covered by registration certificate.

Detailed Analysis:

Issue 1: Assessment of Penalty
The case involves a revision for the assessment year 1973-74 by an assessee, a Rice Mill business, challenging the Tribunal's order upholding a penalty of Rs. 12,000 imposed by the Sales Tax Officer under Section 10 (a) read with Section 10 (b) of the Central Sales Tax Act, 1956. The penalty was imposed for importing machinery worth Rs. 1,70,035 under Form 'C' in contravention of the registration certificate, which authorized import of 'mill stores.'

Issue 2: Mens Rea Requirement
The Assistant Commissioner (Judicial) held that there was no mens rea on the part of the assessee as the term 'mill stores' was understood to include the imported machinery. However, the Tribunal, without determining if the assessee had full knowledge that the machinery was not covered by the certificate, reduced the penalty to Rs. 12,000. The question arose whether mens rea is necessary for levying penalty under Section 10 (b) of the Act, 1956.

Issue 3: Legal Precedents
Citing legal precedents, the Court emphasized that for an offense under Section 10 (b), mens rea is essential. The Court referred to cases where a bona fide belief that goods are covered by the registration certificate does not attract penalty under Section 10 (b). The representation must be knowingly false to constitute an offense. The Court agreed with the authorities that no false representation was made by the assessee, thereby negating the need for a penalty.

Issue 4: Bona Fide Belief
The assessee consistently maintained a bona fide belief that the imported machinery fell under the term 'mill stores' authorized by the registration certificate. The Court accepted this explanation, supported by the fact that the assessee promptly amended the registration certificate when the discrepancy was discovered, indicating an absence of mens rea.

Conclusion
The Court held that the Tribunal erred in confirming the partial penalty imposed by the Sales Tax Officer. The revision was allowed, setting aside the Tribunal's order and restoring the cancellation of the entire penalty by the Assistant Commissioner (Judicial). No costs were awarded in the matter.