TMI Blog2012 (11) TMI 371X X X X Extracts X X X X X X X X Extracts X X X X ..... fide belief that the goods in question were covered under its registration certificate - Trade Tax Tribunal was legally justified in quashing the penalty order passed under section 10A of the Central Sales Tax Act, 1956 - Sales/Trade Tax Revision No. 662 of 2001 - - - Dated:- 31-1-2012 - S. P. Mehrotra, J Standing Counsel for the Petitioner Kunwar Saxena for the Respondent JUDGEMENT S. P. Mehrotra, J:- The present revision has been filed against the judgment and order dated March 15, 2001 passed by the Trade Tax Tribunal, Moradabad, whereby the second appeal filed by the opposite-party-dealer was allowed, and the impugned orders passed by the authorities below were set aside and the disputed penalty was knocked off. It appears that during the assessment year 1995-96, the opposite-party assessee purchased from outside the State, cable and light fittings worth Rs. 3,09,681 against form C. Penalty proceedings under section 10A of the Central Sales Tax Act, 1956, were initiated against the opposite parry-dealer on the ground that while issuing form C for purchase of the aforesaid goods, the opposite party-dealer wrongly declared that it was authorized und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant and Sri Kunwar Saxena, learned counsel for the opposite party-dealer, and reserved the judgment in the revision. Subsequently, on September 17, 2009, an application supported by an affidavit was filed on behalf of the applicant. Along with the affidavit, a document indicating the items in regard to which the dealer had been given registration certificate under the Central Sales Tax Act, 1956 was also annexed. Copy of the said application was served on Sri Kunwar Saxena, learned counsel for the opposite party-dealer. By the order dated September 17, 2009, passed in the presence of the learned standing counsel appearing for the applicant and Sri Kunwar Saxena, learned counsel appearing for the opposite party-dealer, the said application and its accompanying affidavit were directed to be placed on record. Let us notice the submissions made by the learned standing counsel appearing for the applicant and Shri Kunwar Saxena, learned counsel appearing for the opposite party-dealer. The learned standing counsel has made the following submissions:- (i) Cable and light fittings imported by the opposite party-dealer against form C were not covered in the items, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al use. (iv) The burden to prove mens rea on the part of the opposite party-dealer was on the Revenue. The. Revenue failed to discharge the said burden. (v) The opposite party-dealer was authorized to import "consumbers" under its registration certificate, i.e., the things used for performance of works contract. For proper execution of the works contract, the goods in question, were required, and such goods were covered in the items "consumbers" as mentioned in the registration certificate. The Tribunal was, therefore, right in knocking off the penalty imposed on the opposite party-dealer. (vi) In any view of the matter, it was evident from the facts and circumstances of the case that the goods in question were imported against form C under the bona fide belief that the same were covered in the registration certificate issued to the opposite party-dealer, and there was no mens rea on the part of the opposite party-dealer in representing that the goods were covered under the registration certificate. In the absence of any mens rea, penalty under section 10A of the Central Sales Tax Act, 1956 could not be imposed on the opposite party-dealer. Reliance has been pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the class or classes of goods for the purposes of subsection (1) of section 8 of the said Act. Such certificate of registration is to be issued in form B prescribed under the 1957 Rules as per rule 5 of the said Rules. Section 8 of the Central Sales Tax Act, 1956 deals with the rates of tax on sales in the course of inter-State trade or commerce. Section 8, as it existed at the relevant time, provides as follows:- "8. Rates of tax on sales in the course of inter-State trade or commerce:- (1) Every dealer, who in the course of inter-State trade or commerce,- (a) sells to the Government any goods; or (b) 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 this Act, which shall be four per cent of his turnover. (2) The tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of goods in the course of inter-State trade or commerce not falling within sub-section (1),- (a) in the case of declared goods, shall be calculated at twice the rate applicable to the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r materials used for the packing of any goods or classes of goods specified in the certificate of registration referred to in clause (b) or for the packing of any containers or other materials specified in the certificate of registration referred to in clause (c). (4) The provisions of sub-section (1) shall not apply to any sale in the course of inter-State trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner,- (a) a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority; or (b) if the goods are sold to the Government, not being a registered dealer, a certificate in the prescribed form duly filled and signed by a duly authorized officer of the Government:- Provided that the declaration referred t6 in clause (a) is furnished within the prescribed time or within such further time as that authority may, for sufficient cause, permit. (5) Notwithstanding anything contained in this section, the State Government may, if it is satisfi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Sales Tax Act, 1956 lays down that for the applicability of sub-section (1) of the said section, it is necessary that the dealer selling the goods should furnish to the prescribed authority in the prescribed manner:- (a) a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority; or (b) if the goods are sold to the Government, not being a registered dealer, a certificate in the prescribed form duly filled and signed by a duly authorized officer of the Government. The declaration contemplated in clause (a) of sub-section (4) of section 8 is to be made in form G prescribed under the 1957 Rules as per sub-rule (1) of rule 12 of the said Rules, while the certificate contemplated in clause (b) of sub-section (4) of section 8 is to be made in form D prescribed under the 1957 Rules as per the said sub-rule (1) of rule 12 of the said Rules. Section 10 of the Central Sales Tax Act, 1956 deals with penalties. Section 10, as it stood at the relevant time, provides as under:- "10. Penalties:- If any person,- (a) furnishes a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 a reasonable opportunity of being heard, by 6rder in writing, impose upon him by way of penalty a sum not exceeding one-and-a-half times the tax which would have been levied under sub-section (2) of section 8 in respect of the sale to him of the goods, if the sale had been a sale falling within that sub-section:- Provided that no prosecution foran offence under section 10 shall be instituted in respect of the same facts on which a penalty has been imposed under this section. (2) The penalty imposed upon any dealer under sub-section (1) shall be collected by the Government of India in the manner provided in sub-section (2) of section 9,- (a) in the case of an offence falling under clause (b) or clause (d) of section 10, in the State in which the person purchasing the goods obtained the form prescribed for the purposes of clause (a) of sub-section (4) of section 8 in connection with the purchase of such goods; (b) in the case of an offence falling under clause (c) of section 10, in the State in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentation is untrue. In other words, there are two requirements first, the person concerned, (i.e., the registered dealer) makes representation which is not true, and second, while making the representation, the said person knows that the representation is not true, and still, he consciously and deliberately makes such representation. Thus, mere making of untrue representation by the person concerned, (i.e., the registered dealer) is not sufficient. Such untrue representation must be accompanied by wrongful intention or guilty mind or mens rea in the sense of the word "falsely" on the part of the said person, (i.e., the registered dealer) in performing the said Act. Therefore, a registered dealer can be held liable under clause (b) of section 10 when it is established that there was mens rea in the sense of the word "falsely", on the part of the dealer in representing that the goods purchased by him were covered by his certificate of registration. It is only when mens rea in the sense of the word "falsely", on the part of the dealer is established that penalty under section 10A read with clause (b) of section 10 of the Central Sales Tax Act, 1956 may be imposed on the dealer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the Central Sales Tax Act, 1956, which authorized it to purchase biscuits from outside the State. During the assessment year 1983-84, the dealer purchased from outside the State, toffees for Rs. 1,33,554 and flash brush for Rs. 2,316 and issued a declaration in form C, to the selling dealer thereby paying Central sales tax at a lower rate. Penalty proceedings were initiated against the dealer on the ground that the declaration made in form C was false because the registration certificate did not authorize the dealer to purchase the aforesaid items. The assessing officer imposed penalty of Rs. 20,380. On appeal, the first appellate authority set aside the penalty. The Tribunal affirmed the order of the first appellate authority. Thereupon, the Department filed revision, namely, the aforesaid S. T. R. No. 129 of 1994 before this court. In S. T. R. Nos. 130 and 131 of 1994, the dealer held a registration certificate under the Central Sales Tax Act, 1956, under which it could purchase kirana, agarbatti, medicines, camphor and sindoor, etc., from outside the State. During the two years in question, it purchased chewing gum from outside the State for Rs. 4,84,857 and Rs. 1,79,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In that case the assessee held a certificate of registration for Coca Cola, Fanta orange and Fanta soda. The dealer, however, purchased bottle coolers by using form C. It was held that the representation made in C form that the dealer was entitled to purchase bottle coolers was not a bona fide statement and was, therefore, a false one. It was held that the plea was too, far-fetched, unreasonable and baseless to justify inference of bona fides in the petitioner's favour and the only possible inference in the circumstances was that the petitioner acted mala fide in making what was dearly a false representation. In Gujarat Travancore Agency v. Commissioner of Income-tax [1989] 177 ITR 455 (SC), the question was about the levy of penalty on dealer in filing of return of the income under the Income-tax Act. The honourable Supreme Court held that the concept of mens rea was not applicable. The honourable Supreme Court has observed as under:- 'Unless there is something in the language of the statute indicating the need to establish the element of mens rea, it is generally sufficient to prove that a default in complying with the statute has occurred. In our opinion, there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coerce the delinquent in complying with the law. Therefore, in my view the default contemplated with section 10A read with section 10(b) was clearly made out. 12. Similarly in the case of other assessee M/s. Mahadeo Bholaram the dealer was registered for goods like kirana, medicines, etc. Chewing gum does not fall in any of these categories. The attempt on the part of the dealer to justify his conduct by saying that he thought it to be a medicine reflects on its part the lack of bona fides. Therefore, no person could honestly on reasonable grounds say that chewing gum is a medicine or an item included in kirana goods. It is an item of confectionery and was, thus, outside the scope of the goods mentioned in the registration certificate. In this case too therefore the statement was false and mens rea stood established because it was intended to make a wrongful gain to the assessee and wrongful loss to the Revenue by paying tax at a lower rate. Therefore, in this case too the default punishable under section 10A read with section 10(b) of the Central Sales Tax Act was established against the dealer-respondent." (emphasis supplied) This court has thus laid down that the words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intention on the part of the assessee to give any false declaration form C while importing gari gola. The assessee had been importing gari gola under the bona fide belief that it was an item of kirana even though it was liable to tax as oil-seed being declared goods. The Tribunal accordingly concluded that penalty under section 10A of the Central Sales Tax Act, 1956 was not exigible in the facts and circumstances of the case. This court upheld the order of the Tribunal and held as under (paragraph No. 4 of the said UPTC) (page 568 in 122 STC):- "It may be mentioned here that the word Keran is a wide word and includes several items. Normally gari gola sold by the assessee has not been treated as oil seed by the consumer but as an item of kerana. The findings which have been recorded by the Tribunal on the basis of appraisal of evidence and material on record are pure findings of fact. Section 10(b) of the Central Sales Tax Act, 1956 provides of levy of penalty if any person being registered dealer falsely represents when purchasing any class of goods that goods of such class are covered by a certificate of registration, thus for levying penalty under section 10(b) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of penalty under section 10(b) of the Central Sales Tax Act, 1956 read with section 10A of the said Act in respect of various assessment years. In view of these facts; this court held that it could not be said that false representation had' been made by the dealer. It was laid down as under (paras 11 and 12 of the said UPTC) (page 568 in 137 STC):- "11. This court in the case of Commissioner of Sales Tax v. Kashi Prasad Ram Chandra Lal [2001] 122 STC 567 (All) ; [2001] UPTC 173, had occasion to interpret the words "falsely represents" as occurred in section 10(b) and it has been held that section 10(b) of the Central Sales Tax Act, 1956 provides for levy of penalty if any person being registered dealer falsely represents when purchasing any class of goods that goods of such class are covered by a certificate of registration. Thus for levying penalty under section 10(b) of the Act the dealer should falsely represent that the goods are covered by the certificate of registration. The word falsely implies deliberate act, which has been done knowingly. The false representation and wrong representation both stand on different footing. In the present case there is no finding by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er such goods. If the dealer bona fide believes that the goods in question are covered by certificate of registration, but it ultimately turns out to be incorrect, it will not attract the provisions of section 10(b). In Commissioner of Trade Tax v. Bisheshwar Nath Mool Chand, Kanpur [2006] 29 NTN 416, the dealer was authorized under the registration certificate to purchase "plywood", "laminated decorative sheets" and "glue" under the registration certificate. The dealer purchased particles-board, hard-board, nova pan and hardner. Penalty proceedings under section 10A of the Central Sales Tax Act, 1956 were initiated against the dealer on the ground that various items purchased by the dealer were not covered under the registration certificate. The dealer claimed that hard-board and particles-board were kind of plywood and had issued form C under the bona fide belief that these were covered under the items "plywood and laminated decorative sheet". It was also claimed that the hardner was adhesive, which was used to paste the joints of the wooden material and was covered under "glue". Rejecting the claim of the assessee, the assessing authority imposed penalty on the dealer under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 STC 324 (All) ; [2006] UPTC 328, the items included in the registration certificate of the dealer were as under (page 326 in 147 STC):- "All kinds of machines required for manufacturing and production of papers, pulping instrument, iron and steel, chemicals and pulp irons formers, generators and all others electrical goods and equipment. Builder pipe fitting and others fitting. Fans exhaust air condition motors hassan cotton and waste paper jute rages asbestos sheet angle seed." The items which were purchased by the assessee utilizing form C included dyes, starch, colour, soap stone, lubricants, caustic dye, caustic soda, cotton linter and some other items. Rejecting the reply submitted by the dealer that the said items were included in "chemicals" mentioned in the registration certificate, the Sales Tax Officer imposed penalty on the dealer. The first appellate authority allowed the appeal filed by the dealer. It was held by the first appellate authority that there was no mala fide on the part of the dealer in importing the said goods and form C was issued under bona fide belief that the said articles were covered under the item "chemicals" mentioned in the registration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said goods was bona fide act of the dealer under bona fide belief that the said goods were covered by the registration certification, the provisions of penalty under section 10(b) of the said Act were not attracted, and no case was made out for imposing penalty on the dealer. In Indian Farmers Fertilizer Co-operative Limited, Bareilly v. Commissioner of Trade Tax, U. P., Lucknow [2009] 39 NTN 239, penalty under section 10A of the Central Sales Tax Act, 1956 was imposed on the registered dealer/applicant by the assessing authority in respect of various items on the ground that the registered dealer/applicant was not entitled to purchase the same against form C. Against the said penalty order, the registered dealer/applicant filed an appeal, which was dismissed and the order of penalty was confirmed. The registered dealer/applicant filed second appeal before the Trade Tax Tribunal, which was partly allowed and the order of penalty was modified. The Tribunal on various items accepted the contention of the registered dealer/applicant, and set aside the order of penalty on some of the items. The registered dealer/applicant, being aggrieved by that part of the order of the Tribunal, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealer, being under a bona fide belief, that the goods in question are covered by the registration certificate, then the provisions for imposition of penalty under section 10(b) read with section 10A are not attracted, and no penalty can be imposed under the said provisions. In Commissioner of Trade Tax v. Prem Agriculture Implements [2009] 40 NTN 70, the dealer carried on the business of agricultural implements and was authorized by virtue of his registration to purchase agricultural implements. The assessee issued form C for the purchase of diesel engine and spare parts. The assessing authority passed an order imposing penalty under section 10A of the Central Sales Tax Act, 1956 for an amount of Rs. 28,300. The first appeal filed by the dealer was dismissed. The dealer preferred a second appeal before the Trade Tax Tribunal. The Tribunal allowed the second appeal and set aside the orders passed by the authorities below. The Department filed revision before this court. This court dismissed the revision and upheld the order of the Tribunal. This court laid down as under (paragraphs 9, 10, 11 and 12 of the said NTN):- "9. The Trade Tax Tribunal has recorded that in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ief of the registered dealer would be bona fide if the same has been formed by him bona fide, i.e., honestly and on reasonable grounds. However, if there is lack of bona fide on the part of the registered dealer in making the representation then penalty may be imposed on such a dealer. Question as to whether the representation has been made by the registered dealer bona fide, i.e., honestly and on reasonable grounds, would depend on the facts and circumstances of each case, including the nature of the items included in the certificate of registration, the nature of item(s) imported by giving declaration in form C, etc. The above decisions also show that the questions regarding guilty mind or mala fide intention or wrongful intention or bona fide belief or lack of bona fide, are questions of fact, and the findings recorded on such questions are findings of fact. Let us now consider the present case. As noted earlier, the goods imported by the opposite party-dealer against form C were cables and light fittings. Even though the contention of the opposite party-dealer before the authorities below was that the said goods were imported for personal use, the opposite party-dealer ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tance in the contention raised on behalf of Revenue that the assessee was not entitled to import aforesaid items against form C. Therefore, I find it expedient that aforesaid appeal be allowed and the penalty imposed against the assessee be set aside." From a perusal of the above-quoted paragraph, it is evident that the Tribunal on a consideration of the record including the assessment order for the relevant year accepted the version that the opposite party-dealer executed works contract of pipe-fittings and compressor for Gas Authority of India Limited, Babrala, and the goods in questions had been imported for lighting work in execution of works contract. Though under the registration certificate the opposite party-dealer was authorized to import "consumbers", and "cables and light fittings" were not specifically mentioned in the registration certificate, still the use of the word "consumbers" in the registration certificate showed that the opposite party-dealer did not import "cables and light fittings" under any mala fide intention or having any mens rea. Though the Tribunal in the above-quoted paragraph made certain observations suggesting that a treated "cables and light ..... X X X X Extracts X X X X X X X X Extracts X X X X
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