TMI Blog1991 (4) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... - 3,00,881.88 ----------- The assessing authority found that the purchase of the aforesaid goods on the basis of C forms, had been made by the assessee by false representation to the effect that the goods in question were covered by the registration certificate when they were not so covered. The assessing authority, therefore, opined that the dealer had committed an offence under section 10(b) of the Act. It was proposed to levy a penalty of Rs. 45,132 under section 10A of the Act, calculated at one and a half times the tax due, at 10 per cent on the aforesaid purchases. The assessee was consequently called upon to file its objections to the proposed levy of penalty. The assessee, after obtaining extension of time to file objections, filed the same on September 14, 1979. In its objections, the assessee first stated that the value of different commodities, as given in the notice, was wrong. The assessing authority, however, found that the figures which had been arrived at in the noticerelating to the proposed levy of penalty was on the basis of the accounts maintained by the assessee and with reference to form 8 register maintained by it. The objection regarding the alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the C forms. Penalty was, therefore, levied on the turnover of Rs. 17,649 at 10 per cent being equal to the tax due at the enhanced rate of 10 per cent. So far as the penalty on "ball-bearings, rubber beltings, buckets and pipe fittings and huller parts", amounting to a total turnover of Rs. 3,00,881.88 was concerned, the appellate authority found that the assessee was under a bona fide impression that the expression "machinery" occurring in the registration certificate issued to it included the machinery parts also and, therefore, no mens rea could be attributed to the action of the assessee, since the representation made by it was under a bona fide belief and, therefore, the penalty levied by the assessing authority was not sustained and was set aside. 4.. The Joint Commissioner took up the matter in suo motu revision. During the proceedings before the Joint Commissioner, it appears, the controversy was restricted to the levy of penalty only on the purchase of ball-bearings by issue of C forms to the extent of Rs. 2,30,758.90. The other goods, viz., rubber beltings, buckets and pipe fittings and huller parts, do not appear to have been made a subject of the suo motu revision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur, nor the Joint Commissioner had returned any positive finding about the existence of mens rea on the part of the assessee, no resort could be had to the penalty proceedings. Argued Mr. Inbarajan that the plain phraseology of section 10(b) of the Act clearly indicated that mens rea is an important ingredient for the offence contemplated therein and since the assessee had acted bona fide, there could be no mens rea on its part and consequently, it could not be subjected to the penalty proceedings. Learned counsel relied upon certain judgments, which we shall refer to during the course of our discussion. 7. The facts are not in dispute. The registration certificate of the assessee authorised it to purchase "machinery and electrical goods only". Ball-bearings, which were purchased by the assessee of the value of Rs. 2,30,758.90, were rightly found by the assessing authority as also by the Joint Commissioner as not covered by the registration certificate. Ballbearings purchased by the assessee on the basis of C forms could neither be construed as "machinery" nor as "electrical goods". The assessee could not be said to bona fide belief that "ball-bearings" are "machinery". The ple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent on to hold that in the absence of mens rea a dealer cannot be penalised for contravention of clause (b) of section 10. In arriving at this conclusion, the Bench relied upon the judgment of the Kerala High Court, reported in Varghese v. Sales Tax Officer [1965] 16 STC 323. The penalty was set aside on the ground that no finding had been recorded by the authorities to the effect that the assessee in that case had made any false representation and that he had the requisite mens rea. 10.. Reliance was also placed on Sri Lakshmi Machine Works v. State of Madras [1973] 32 STC 407 (Mad.) wherein it was held that section 10(b) of the Act specifically uses the words "falsely represents", which shows that mere representation based on a bona fide belief would not bring an assessee within the mischief of that provision. Merely because the plea entertained by the assessee turned out to be not proper or correct, it did not imply that the issue of C form certificate was on the basis of a false representation. The Bench then opined that whether there is mens rea or not in a given case, is a question of fact, to be decided on the facts of each case, but since no finding had been recorded that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an equation of a false representation and, therefore, the plea of bona fides, set out by the assessee was not a justifiable contention and the finding recorded by the authorities that false representation had been made by the assessee justified the penalty proceedings. 14.. Reliance was also placed on the judgment of a Division Bench of the Kerala High Court in Integrated Enterprises v. State of Kerala [1980] 46 STC 103. In that case, the certificate of registration of the assessee did not include bottle coolers but, despite this, the assessee certified in the relative C forms that bottle coolers purchased by them by the issuance of C forms were covered by the certificate of registration. This representation was found to be a false representation and the explanation of the assessee that they bona fide believed that the registration certificate was comprehensive enough to include all categories and classes of goods relating to their business and that the sale and purchase of bottle coolers were part of their business could afford no valid defence. The Bench found that there was no basis for the plea of "bona fide belief" that the certificate of registration which contained only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 10(b) of the Act. In our opinion, there is nothing in section 10A which requires that mens rea must be proved before penalty can be levied under that provision if on facts, it is found that the assessee had made a "false representation". It is the making of a "false representation" which is, indeed the sine qua non for invoking the provisions of section 10(b) of the Act. Once a finding is recorded by the competent authority that the assessee has made a false representation, that would clearly attract the provisions of section 10(b) of the Act and, in our opinion, no further finding is required that the assessee had also the mens rea. The statute does not contemplate that. Even otherwise, mens rea is a state of mind. Under the criminal law, mens rea is considered as the "guilty intention", but when it is relatable to tax delinquency, which is a civil obligation, it implies a "blameworthy conduct". Therefore, unlike in criminal cases, where it is essential for the prosecution to establish that the accused had a guilty intention or, in other words, the requisite mens rea before recording conviction, the obligation on the part of the Revenue, in cases of tax delinquency, would be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar-fetched. 17.. Of course, in the judgments relied upon by the learned counsel for the assessee, which have been dealt with by us elsewhere, it has been stated that mens rea is an essential ingredient to establish an offence under section 10(b) of the Act and in each one of those cases, the penalty proceedings were set aside. We are, however, relieved of the necessity to deal with those judgments in extenso for, in each one of those cases, it was found that the statutory authority had not returned any finding either as regards the existence of mens rea or even to the extent that the assessees in those cases could be said to have made any "false representation". Since the making of a false representation, whether expressly or impliedly, is the sine qua non for invoking the provisions of section 10(b) of the Act, the absence of a finding from the statutory authority in that behalf would necessarily lead to the conclusion that the provisions of section 10(b) of the Act are not attracted. None of those judgments is any authority for the proposition that in addition to recording a finding that the assessee had made a "false representation", an additional finding to the effect that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom May 18, 1980, as is apparent from the amendment made to the certificate of registration by the Deputy Commercial Tax Officer, dated July 5, 1980 (available at page 29 of the typed set), goes to show that the assessee could not be said to have earlier acted in good faith when it purchased the ballbearings on furnishing C form declarations. Though there is some variance about the concept of "good faith" in criminal law from that under the civil law, but we find that under the Madras General Clauses Act also the expression "good faith" has been defined in the same manner as in the Indian Penal Code, unlike in the Central General Clauses Act of 1897 and it insists on due care and attention as an indispensable element for acting in "good faith". In the facts and circumstances of this case, the assessing authority rightly found, on facts, that the representation made by the assessee at the time of purchasing ball-bearings was a "false representation" and that the plea of acting "bona fide" was unsustainable. The Joint Commissioner, in the suo motu revision proceedings also concurred with the findings of fact and found that since there are separate entries in the First Schedule to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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