TMI Blog1993 (5) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... henkanal Circle, Angul, issued a notice to show cause as to why penalty will not be levied upon the petitioner under section 10-A of the Central Sales Tax Act (hereinafter referred to as "the CST Act") alleging that there has been no inter-State trade between the petitioner and B.H.E.L., Trichy, and yet the petitioner had issued three "C" declaration forms in favour of M/s. B.H.E.L., Trichy, purporting the sale to be an inter-State sale. The said notice is dated July 25, 1986, annexed as annexure 5 to the writ application. The said Sales Tax Officer issued another notice dated December 15, 1986, annexed as annexure 6/A calling upon the petitioner to produce the bill statements along with challans, way-bills and supporting documents for the petitioner's transactions with M/s. B.H.E.L. for use of the "C" declaration forms as mentioned in the notice and a list of 10 "C" declaration forms was given including the three forms which were the subject-matter of notice under annexure 5. The Sales Tax Officer levied penalty to the tune of Rs. 8,37,04,819 for the alleged contravention of section 10(d) of the CST Act and being aggrieved by the said order the petitioner filed a revision before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les Tax Officer issued a fresh notice to show cause by letter dated March 5, 1989, annexed as annexure 6, and in the said notice five charges were levelled against the petitioner. The gravamen of those charges are: "Firstly, though the certificate of registration under section 7(2) of the CST Act was granted on August 16, 1982, but the petitioner utilised the certificate in respect of purchases made prior to August 16, 1982, thereby committed an offence under section 10(c) of the Act; Secondly, the registration certificate granted under the Orissa Sales Tax Act had not been renewed from February 7, 1985 to July 1, 1985 and September 1, 1985 to October 13, 1986, and under section 7(2) of the CST Act the validity of the registration being dependent upon the certificate issued under the Orissa Sales Tax Act, purchases made during the aforesaid interregnum on a false representation that the petitioner continues to be a registered dealer constitute an offence under section 10(c) of the CST Act; Thirdly, though the certificate of registration stipulates that the business of the petitioner is generation of electricity only, but the petitioner has utilised the goods purchased after i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, 2 and 5, but so far as charges Nos. 3 and 4 are concerned which were taken up together, though the revisional authority affirmed the conclusion of the Sales Tax Officer that there has been violation of section 10(b) and (d) of the CST Act, but on examining the "C" declaration forms, he came to the conclusion that in respect of 33 transactions amounting to Rs. 3,90,96,010, no penalty could be levied as those goods were covered by the certificate of registration. He accordingly excluded those amounts and reduced the penalty amount to Rs. 60,24,26,795. 3.. Dr. Pal appearing for the petitioner assails the legality of the order of the revisional authority affirming the findings of the Sales Tax Officer on the ground that the said authorities erroneously found the petitioner guilty of the five charges which cannot stand a moment's scrutiny and, therefore, the levy of penalty is bad. He further contends that an authority before levying any penalty on a finding that the dealer is guilty of offence under section 10(b), (c) or (d) of the CST Act must be satisfied that there has been a deliberate contravention by the dealer and there was no reasonable excuse for the dealer in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or omissions which go to constitute the offence and the burden would be on the department to prove the existence of such circumstances. Thus, in a proceeding for levy of penalty under section 10-A the department must prove the existence of facts and circumstances constituting the offence in question. Bearing in mind the aforesaid position, we would now proceed to examine the contentions of Dr. Pal appearing for the petitioner in respect of the different charges in seriatim. 5.. Charge No. 1 is to the effect that though the petitioner obtained the certificate of registration under section 7(2) of the CST Act with effect from August 16, 1982, but it had purchased articles prior to that date as is apparent from annexure 1 to the notice issued to the petitioner and thereby it has committed offence under section 10(c) of the CST Act. If a person not being a registered dealer falsely represents when purchasing goods in the course of inter-State trade that he is a registered dealer, then penalty is leviable under section 10(c) of the CST Act. Undisputedly, the petitioner was registered under the CST Act with effect from August 16, 1982. But the question that arises for consideration is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner. The Sales Tax Officer as well as the Additional Commissioner of Sales Tax committed apparent error on the face of their orders in taking the date of the purchase order into consideration and on that basis holding that the transaction is liable for levy of penalty under section 10(c) of the CST Act. In order to avoid the higher rate of tax prescribed under section 8(2) if a purchaser, while he is not a registered dealer, falsely represents that he is a registered dealer and entitled to the benefits of section 8(1)(b), then his positive action of making such a false representation would constitute an offence under section 10(c). But the aforesaid contingency does not arise in the present case, where the petitioner as a registered dealer has purchased the goods under the three "C" declaration forms referred to by the Sales Tax Officer subsequent to the date of its registration. In our considered opinion all the three transactions having been made subsequent to the petitioner's certificate of registration and placing an order of purchase not being purchase of the commodity, there has been no false representation by the petitioner while purchasing the goods in the course of inter-S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er sub-section (2) has ceased to be liable to pay tax under the sales tax law of the appropriate State or for any other sufficient reason. In the present case neither the registration certificate has been cancelled by the appropriate authority in exercise of power under section 7(4)(b) nor has it been amended under section 7(4)(a). There is no provision which invalidates a registration certificate granted under the CST Act, for the period or the moment the dealer does not get a renewal of his registration certificate under the Orissa Sales Tax Act, nor is there any provision for automatic cancellation of the registration certificate under the CST Act for not being a dealer for any specified period under the Orissa Sales Tax Act. The certificate of registration granted in favour of the petitioner under section 7(2) of the CST Act has been annexed as annexure 3 to the writ petition and it clearly mentions that the certificate is valid from August 16, 1982, until cancelled. In this view of the matter, and in the absence of either factual cancellation of the said certificate of registration or any fictional cancellation under law by application of any provision, the conclusion of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power." Section 8(3) itself refers to goods referred to in clause (b) of sub-section (1) which provides that a dealer who in course of inter-State trade or commerce sells to a registered dealer other than the Government goods of the description referred to in sub-section (3) shall be liable to pay tax under the Act which shall be four per centum of his turnover. Section 8(3)(b) provides goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale by him or subject to any rules made by the Central Government in this behalf for use by him in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power. The goods purchased by the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioner, is a conclusion based on no evidence and is wholly unsustainable and, in fact, it was not the charge levelled against the petitioner in charge No. 3. The learned Standing Counsel appearing for the department, on the other hand, contends that it is true that there has been no detailed discussion by the Additional Commissioner so far as charge No. 3 is concerned, but the Sales Tax Officer has discussed the said charge in detail and has recorded his finding in the order levying penalty. He found that the purchase of road rollers utilised for construction of roads, sodium vapour lamps for lighting the work-sites, drafting machines for drawing the plans, bulldozers for levelling the earth, telephone for easy functioning of multifarious items of jobs at various work-sites, cranes, lifts meant for shifting, loading and unloading of the plant and machinery, heavy earthmoving machineries for levelling of land, machine tools for maintenance of equipments, safety helmets, fire-extinguishers, fire buckets and pumps for the purpose of fire-fighting, welding and gas-cutting equipments for fabrication and maintenance works, lifting equipments for construction and maintenance of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional authority vitiates the order of the revisional authority. In the aforesaid J.K. Cotton Spinning Weaving Mills' case [1965] 16 STC 563, their Lordships of the Supreme Court observed: ".....But there is no warrant for limiting the meaning of the expression 'in the manufacture of goods' to the process of production of goods only. The expression 'in the manufacture' takes in within its compass, all processes which are directly related to the actual production. Goods intended as equipment for use in the manufacture of goods for sale are expressly made admissible for specification. Drawing and photographic materials falling within the description of goods intended for use as 'equipment' in the process of designing which is directly related to the actual production of goods and without which commercial production would be inexpedient must be regarded as goods intended for use 'in the manufacture of goods'." To substantiate charge No. 3, what is required to be found out is whether the goods purchased by using "C" declaration forms for the purposes of use mentioned in the certificate of registration have actually been used for any other purpose without a reasonable excuse? I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awful to do so and whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of authority to be exercised judicially and on a consideration of all the relevant circumstances. In the case of Pannalal Umesh Kumar of Ghoghar v. Commissioner of Sales Tax [1971] 27 STC 199, a Bench of the Madhya Pradesh High Court was considering the question of levy of penalty under section 10-A of the CST Act as it was alleged that there has been contravention of section 10(b). The learned Judges of the Madhya Pradesh High Court held that the department must establish that the representation made by the assessee was false to the knowledge of the assessee and in the absence of mens rea, a dealer cannot be penalised for contravention of section 10(b). The Bench further observed that a penalty under section 10-A is not to be levied merely because there has been a disregard of the provisions therein mentioned including section 10(b) of the Act, but there must be a positive mens rea on the part of the dealer without which penalty cannot be levied. In the case of Polestar Electronic (Pvt.) Ltd. v. Additional Commissioner, Sales Tax [1978] 41 STC 409, the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee had made a false representation and, therefore, the High Court rightly took the view that it attracts the penalty provision contained in section 10(b) of the Act, because section 10(b) provides for levy of penalty where a registered dealer falsely represents while purchasing any class of goods that such goods are covered by his certificate of registration. In view of the finding of the forums below that the dealer had falsely represented, the High Court came to the conclusion that existence of mens rea could be inherent in that finding. Therefore, it is not possible for us to agree with the submission of the learned Standing Counsel that to attract the provision of penalty, it is not necessary to establish the mens rea on the part of the dealer. We have examined this question recently in two cases. In O.J.C. No. 6510 of 1991 (Deputy Chief Mining Engineer v. State of Orissa) disposed of on February 10, 1993*, an order levying penalty under section 10-A of the CST Act was under consideration as the assessee was penalised for having committed an offence under section 10(d) of the Act. We held in that case that while deciding the question of imposition of penalty under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether those goods have been used for distribution of power. The revisional authority while considering charge No. 3 also came to the conclusion that the goods after being purchased have not been utilised for generation of electricity, and, therefore, there is violation of section 10(d) of the CST Act and thereby committed the error as the certificate of registration covered generation or distribution of electricity. Then, while considering charge No. 3, the revisional authority has merely considered the question of "steel and cement" which was in fact not mentioned in the charge itself. Therefore, the revisional order is vitiated by consideration of extraneous materials. The revisional authority also committed an error in coming to the conclusion that the goods purchased by the dealer were supplied to the contractor like B.H.E.L. and after fabrication and erection the same had been transferred by the contractor to the petitioner which amounts to a sale by the petitioner to B.H.E.L. and again by B.H.E.L. to the petitioner after fabrication which was not the subject of charge itself. Charge No. 3 was to the effect that the goods having been purchased for generation of electricity a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut since there has been total misconception both on the part of the assessing officer as well as on the part of the revisional authority and since there has been total non-application of mind by the revisional authority to the materials on record, we think it appropriate to remit the matter so far as the levy of penalty in relation to charge No. 3 is concerned to the said revisional authority for his consideration who will decide the matter bearing in mind the observations and directions given by us in this judgment. 8.. Coming now to charge No. 4, the said charge is to the effect that though as per the certificate of registration, the business of the petitioner was only generation of electricity, but goods were purchased by the petitioner for the purposes of transformation and transmission of electricity which is clearly outside the scope of the petitioner's entitlement. This list of goods so purchased was enclosed as annexure IV to the show cause notice which has been annexed as annexure 6 to the writ application. Such use of goods attracts the provision of section 10(b) of the CST Act. Section 10(b) of the CST Act would be attracted if a registered dealer falsely represents wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the same could be utilised under the certificate of registration. 9.. So far as charge No. 5 is concerned the same is based on the allegation that goods have been purchased on the strength of the certificate of registration which the petitioner was not entitled to purchase and thereby the petitioner is stated to have falsely purchased the goods and thereby committed the offence under section 10(b) of the CST Act. The goods so purchased have been enumerated in annexure V to the notice dated March 5, 1989. The revisional authority came to the conclusion that out of the goods purchased for which charge No. 5 has been levelled, steel that was purchased was not utilised for generation of electricity, but it was on the other hand supplied to the contractors for a price and, therefore, according to the revisional authority, there has been contravention of section 10(b) of the CST Act and the petitioner is liable to pay the penalty. The revisional authority found that steel is not specified in the registration certificate of the petitioner and, therefore, such purchase of steel has been made by the petitioner purporting it to be covered by the certificate of registration. The Sales ..... X X X X Extracts X X X X X X X X Extracts X X X X
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