TMI Blog2010 (9) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... ertificate as soon as he learnt about his fault. It is evident from the impugned judgment that the High Court has lost sight of the fact that the dealer had used Form 'C' to import items like sutli, tat, etc., in addition to the cotton waste. Assuming that the dealer was of the bona fide belief that cotton included the cotton waste, it is hard to believe that there was some confusion in the mind of the dealer in so far as other items were concerned. - Matter remanded back for fresh reconsideration. - Civil Appeal No. 2344-2347 of 2004, 6382-6383 of 2004 - - - Dated:- 10-9-2010 - D.K. Jain and H.L. Dattu, JJ. REPRESENTED BY : Shri Aarohi Bhalla, Counsel, for the Appellant. Shri Dhruv Agarwal, Sr. Counsel for the Respondent. [Judgment per : D.K. Jain, J.]. - These appeals, by special leave, are directed against the judgments and orders delivered by the High Court of Judicature at Allahabad, reversing the orders passed by the Sales Tax Tribunal, Meerut, (for short "the Tribunal"). In the first set of appeals (No. 2344-2347/2004) the Tribunal had affirmed the levy of penalties on the respondent, under Section 10(b) read with Section 10A of the Central Sales Tax Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Nos. 243 of 1986 for the assessment year 1977-78; 242 of 1986 for assessment year 1978-79 and 550 of 1986 for assessment year 1980-81, set aside the order of penalty on purchase of cotton waste on the ground that no objection was raised by the revenue for the previous years, and therefore, the issuance of Form 'C' for the purchase of said commodity was a bona fide error on the part of the dealer and it did not involve false representation. In relation to other commodities, the Tribunal remanded the matters for re-fixation of penalty. However, when appeals for the present assessment years were taken up, notwithstanding its earlier orders, the Tribunal vide order dated 22nd January 1991, affirmed the orders levying penalty, inter alia observing that for the purposes of sales tax, cotton and cotton waste are two different commodities and the fact that the dealer had deliberately used Form 'C' to import items like cotton waste, sutli, tat etc., established that the dealer had imported the goods by making a false representation and had taken the benefit of concessional rate of tax unauthorizedly. According to the Tribunal, these circumstances proved the mala fide on the part of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id item, which was not included in their registration certificate. Accordingly, a notice was issued to the dealer under Section 10(b) read with Section 10A of the Act to show-cause as to why penalty under the said provisions should not be levied on them. Not being satisfied with the reply furnished by the dealer, the Assessing Authority levied penalty in the sum of Rs. 73298.60p. and Rs. 2,08,064/- for the assessment years 1985-86 and 1986-87 respectively. Dealer's first appeal to the Deputy Commissioner (Appeals) pertaining to the assessment years 1985-86 was partly allowed in as much as the quantum of penalty was reduced to Rs.1075/- but on merits, appeals for both the assessment years were rejected. Being aggrieved, the dealer preferred two second appeals before the Tribunal. Inter alia, observing that apart from the fact that in the application under Section 7(1) and 7(2) of the Act in form 'A', the word 'oil seed', mentioned in an inappropriate column- 16-GHA was deleted, the dealer was also under a bona fide belief that they were authorized to purchase oil seeds against Form 'C' as the department had been regularly issuing Form 'C' to them for the purchase of oil seeds, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalties, have created severe punishments even where the offences have been defined to exclude mens rea." Reliance was also placed on the decisions of the High Courts in Dyeer Meakins Breweries Ltd. v. U.P.; CST v. M/S. Rama Sons, Vijaya Electricals v. State of Tamil Nadu. and Integrated Enterprises v. State of Kerala in support of the same proposition. It was asserted that in the present cases the items which were included in the Registration Certificate were clearly different and distinct from the items for which Form 'C were issued and therefore, the dealers could not claim that it was a bona fide omission on their part. 7. Mr. Dhruv Agarwal, learned senior counsel appearing for the dealers in both the cases, on the other hand, submitted that since under Section 10A of the Act, in case of offence under Section 10(b) of the Act, discretion is conferred on the Assessing Authority to levy penalty in lieu of the prosecution of the dealer, the requirement of mens rea would be sine qua non for attracting the said penal provision. In support, learned counsel relied on the decision of this Court in Bharjatiya Steel Industries v. Commissioner, Sales Tax, Uttar Pradesh. Learned co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , without reasonable excuse, to make use of the goods for any such purpose; (e) has in his possession any form prescribed for the purpose of sub-section (4) or sub-section (8) of section 8 which has not been obtained by him or by his principal or by his agent in accordance with the provisions of this Act or any rules made thereunder; (f) collects any amount by way of tax in contravention of the provisions contained in Section 9A, he shall be punishable with simple imprisonment which may extend to six months, or with fine or with both; and when the offence is a continuing offence, with a daily fine which may extend to fifty rupees for every day during which the offence continues." Section 10A of the Act provides for the imposition of penalty in lieu of prosecution. Sub-section (1) of the said Section, relevant for our purpose, reads as follows : "10A. Imposition of penalty in lieu of prosecution (1) If any person purchasing goods is guilty of an offence under clause (b) or clause (c) or clause (d) of section 10, the authority who granted to him or, as the case may be, is competent to grant to him a certificate of registration under this Act may, after giving him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... answer to the question depends on the object of the statute and the language employed in the provision of the statute creating the offence. There is no gain saying that a penal provision has to be strictly construed on its own language. In Nathulal v. State of Madhya Pradesh, while dealing with the question whether to constitute an offence under Section 7 of the Essential Commodities Act, 1955 which provides for levy of penalty for contravention of any order made under Section 3 of the State Act mens rea is an essential ingredient, a three-Judge Bench of this Court observed as follows : "Mens rea is an essential ingredient of a criminal offence. Doubtless a statute may exclude the element of mens rea, but it is a sound rule of construction adopted in England and also accepted in India to construe a statutory provision creating an offence in conformity with the common law rather than against it unless the statute expressly or by necessary implication excluded mens rea. The mere fact that the object of the statute is to promote welfare activities or to eradicate a grave social evil is by itself not decisive of the question whether the element of guilty mind is excluded from the ing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no dispute that having regard to the provisions of Section 276-C, which speaks of wilful failure on the part of the defaulter and taking into consideration the nature of the penalty, which is punitive, no sentence can be imposed under that provision unless the element of mens rea is established." (Emphasis supplied by us) 17. To put it succinctly, in examining whether mens rea is an essential element of an offence created under a taxing statute, regard must be had to the following factors : (i) the object and scheme of the statute; (ii) the language of the section and; (iii) the nature of penalty. 18. It is true that the object of Section 10(b) of the Act is to prevent any misuse of the registration certificate but the legislature has, in the said Section, used the expression "falsely represents" in contradistinction to "wrongly represents." Therefore, what we are required to construe is whether the words "falsely represents" would cover a mere incorrect representation or would embrace only such representations which are knowingly, wilfully and intentionally false. 19.According to the Black's Law Dictionary (6th Edition), the word "false" has two distinct and well-recognize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the view canvassed by the Revenue were to be accepted, the result would be that even if a dealer raises a bona fide contention that a particular item was not liable to be included in the taxable turnover, he will have to show it as forming part of the taxable turnover in his return and pay taxes upon it on pain of being held liable for penalty in case his contention is ultimately found by the Court to be not acceptable. That surely could never have been the intention of the Legislature. 22. In view of the above, we are of the considered opinion that the use of the expression "falsely represents" is indicative of the fact that the offence under Section 10(b) of the Act comes into existence only where a dealer acts deliberately in defiance of law or is guilty of contumacious or dishonest conduct. Therefore, in proceedings for levy of penalty under Section 10A of the Act, burden would be on the revenue to prove the existence of circumstances constituting the said offence. Furthermore, it is evident from the heading of Section 10A of the Act that for breach of any provision of the Act, constituting an offence under Section 10 of the Act, ordinary remedy is prosecution which may en ..... X X X X Extracts X X X X X X X X Extracts X X X X
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