TMI Blog2015 (11) TMI 1078X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods in movement because it is left blank, then in that event Section 78(5) provides for imposition of monetary penalty for non-compliance. In the case of RST Act, 1994, hearing is only to find out whether the assessee had contravened Section 78(2) of the RST Act, 1994, and not to find out evasion of tax which function is not assigned to the officer at the check-post, but to the Assessment Officer in the assessment proceedings. In the circumstances, the Supreme Court, without any doubt or ambiguity, held that mens rea is not an essential element in the matter of imposition of penalty under Section 78(5) of the RST, 1994. - on a complaint being made against such person by the assessing authority, or any other competent officer after having obtained sanction from the Deputy Commissioner(Administration) having jurisdiction, he shall, on conviction by a Judicial Magistrate having jurisdiction, be punishable with simple imprisonment for a term, which may extend to six months, and with fine, not exceeding rupees five thousand, and for the offences covered under clauses(b), (c), (f), or (g) of Section 71(1) of the RST Act, 1994, with a minimum sentence of simple imprisonment of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is thus not correct to submit that penalty for submission of false or forged document or declaration, necessarily involves adjudication, for which mens rea is relevant, and is a necessary ingredient. The requirement of mens rea is not relevant for the purpose of determining the liability for penalty, in terms of Section 78(5) of the RST Act, 1994 - The mens rea is not required to be proved as necessary ingredient for imposition of penalty under sub-section (5) of Section 78, on proving violation of sub-section(2) of Section 78 of the RST Act, 1994. - Decided against the assessee. - S.B. SALES TAX REVISION NO.92/1999 - - - Dated:- 26-2-2015 - Mr. Sunil Ambwani, Mr. Veerendr Singh Siradhana And Mr. Prakash Gupta, JJ Appeals involve : S.B. SALES TAX REVISION NO. 424/1999, 57/2002, 8/2003, 94/2003, 107/2003, 113/2003, 122/2003, 206/2003, 25/2004, 33/2004, 38/2004, 58/2004, 70/2004, 73/2004, 9/2005, 25/2005, 98/2005, 144/2005, 199/2005, 202/2005, 203/2005, 259/2005, 14/2006, 66/2006, 83/2006, 93/2006, 104/2006, 105/2006, 122/2006 209/2008 For the Petitioner : Mr. R.B. Mathur with Mr. Nikhil Simlote and Ms. Tanvi Sahai For the Respondent : Mr. T.C. Jain, Mr. Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner may, with a view to prevent or check avoidance or evasion of tax, by notification in the Official Gazette, direct the setting up of a checkpost at such place and for such period as may be specified in the notification, and every officer or official who exercises his powers and discharges his duties at such checkpost by way of inspection of documents produced and goods being moved, shall be its in charge. (2) The driver or the person in charge of a vehicle or carrier of goods in movement shall - (a) carry with him a goods vehicle record including challans and bilties , bills of sale or despatch memos and prescribed declaration forms; (b) stop the vehicle or carrier at every checkpost set up under sub-section (1); (c) produce all the documents including prescribed declaration forms relating to the goods before the in charge of the checkpost; (d) give all the information in his possession relating to the goods; and (e) allow the inspection of the goods by the in charge of the check post or any other person authorised by such in charge. Explanation .- For the purposes of this chapter, - (i) vehicle or carrier shall include any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f sub-section (2) or for submission of false or forged documents or declaration, a penalty equal to 1[thirty percent of the value of such goods]. (6) During the pendency of the proceeding under sub-section (5), if anybody appears before the in-charge of the checkpost or the officer empowered under sub-section (3) and prays for being impleaded as a party to the case on the ground of involvement of his interest therein, the said in-charge or the officer on being satisfied may permit him to be impleaded as a party to the cases; and thereafter, all the provisions of this section shall mutatis mutandis apply to him. (7) The in-charge of the checkpost or the officer empowered under sub-section (3) may release the goods to the owner of the goods or to anybody else duly authorised by such owner, if seized and not already released under clause (c) of sub-section (4), on payment of the penalty imposed under sub-section (5) or on furnishing such security for the payment thereof, as such in-charge or officer may consider necessary. (8) Where the driver or the person In-Charge of the vehicle or the carrier is found guilty for violation of the provisions of sub-section (2) subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der sub-section (11)]. 3. Rules 55 and 55-A of the Rajasthan Sales Tax Rules, 1995 (for short, 'the RST Rules, 1995'), made in exercise of the powers conferred by Section 99 of the RST Act, 1994, provide for delivery of documents and seizure of goods and mode of furnishing information at Check-Posts. The provisions of Rules 55 and 55-A of the RST Rules, 1995, are in aid of provisions of Section 78. Rules 55 and 55-A of the RST Rules, 1995, are quoted as below:- 55. Delivery of documents and seizure of goods:- (1) The owner or the person in charge of the goods and their absence, the owner or the driver of the vehicle, shall deliver the documents and declaration forms as provided in clause (a) of sub-section (2) of section 78, to the incharge of the nearest check-post. If the goods in movement are not accompanied with complete documents and declaration forms, the incharge of the check-post shall afford an opportunity, to any of the above referred persons, to produce the required documents and/or declaration forms completed in all respect, when the goods enters or leaves the near check-post of the State. [1A)] On being asked by the Incharge of the check-post or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner (Administration) having jurisdiction, may sell such goods in open auction in accordance with the procedure laid down and the instruction issued by the Commissioner. (6) The sale proceeds received under sub-rule (5) shall be deposited in the Government account. (7) Any person entitled to such sale proceeds shall, on an application to the Deputy Commissioner (Administration) referred to in sub-rule (5), be paid the sale proceeds, referred to in sub-rule (6), after deducting therefrom the amount of penalty due in respect of the goods seized and auctioned, the amount of interest, if any, the expenses of the sale and other incidental charges. 55.A. Mode of furnishing information of Check-Posts.- (1) The information required under sub-section (2) of section 78 may also be supplied in such digital, electronic or encoded manner as may be notified by the State Government. (2) The digital, electronic or encoded formats so notified shall have same legal status as documents required under sub-section (2) of section 78 and the provisions of section 78 shall apply mutatis mutandis when the information is supplied in such digital, electronic or encoded formats. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter with which it deals. A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is different from the penalty for a crime. 6. The facts in the case of Guljag Industries Vs. Commercial Taxes Officer(supra), arising from the State of Rajasthan were that on 21.01.1995, near Banar Road Check-post a vehicle was checked in which 47 barrels of chemicals were transported from Vishakhapatnam. Along with the goods, outward Gate Pass No.4331 dated 16.09.1995 of Andhra Petro-Chemicals Ltd. and Consignment No.920 dated 16.09.1995 of M/s AVR Co., were found in which the name of the cosignor was shown as M/s Andhra Petro-Chemicals Ltd., Vishakhapatnam and the name of the assessee was mentioned as M/s. Guljag Industries. Along with the goods, Form ST 18-A No.236084, was also found in which the goods transported were not declared though the same was duly signed. Under the circumstances, the AO came to the conclusion that there was a contravention of the provisions of Section 22-A(3) of the Rajasthan Salex Tax Act, 1954 read with Rule 62-A(3) of the Rajasthan Sales Tax Rules, 1955. He issued notice under Section 22-A(7) of the Act, calling up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as shown to be from M/s Sumit Marbles, Abu Road. In the bill dated 31.10.1990, referring 50.31 sqm. of granite, priced at ₹ 34,494/-, the name of the recipient was shown as M/s Sri Parashwanath Granites. On verification, the goods were found to be more than the quantity shown in the bill. On searching the vehicles, two envelopes were found, one of which was of M/s Parashwanath Granites and other was of M/s Hindustan Granites. On suspicion, notice under Rule 54 of the Rules was issued, on which the representative of the assessee appeared. He deposited the disputed penalty amount, and on which the goods were released. In reply to the show cause notice given to the assessee proposing levy of penalty under Section 22-A(7) of the Act, it was submitted by the assessee that he had delivered the relevant documents to the transporter, which were found to be in the vehicle at the time of seizure of the goods, and, therefore, the assessee was not liable to be penalised. According to the assessee, the driver of the vehicle had made a mistake in not producing the documents, which were with him at the time of checking, and thus, the assessee was not liable to be penalised for breach of Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was correct in all respects, and therefore, there was no tax evasion. 10. Considering the provisions of the Act, the Supreme Court in Guljag Industries Vs. Commercial Taxes Officer(supra), clarified the legal position with regard to the mens rea in paragraphs 27, 30, 33, 34 and 35, as follows:- 27. Default or failure to comply with Section 78(2) is the failure/default of statutory civil obligation and proceedings under Section 78(5) is neither criminal nor quasi-criminal in nature. The penalty is for statutory offence. therefore, there is no question of proving of intention or of mens rea as the same is excluded from the category of essential element for imposing penalty. Penalty under Section 78(5) is attracted as soon as there is contravention of statutory obligations. Intention of parties committing such violation is wholly irrelevant. 30. In Chairman, SEBI v. Shriram Mutual Fund and Anr., this Court found on facts that a mutual fund had violated SEBI (Mutual Funds) Regulations, 1996. Under the said Regulations there was a restriction placed on the mutual fund on purchasing or selling shares through any broker associated with the Sponsor of the mutual fund beyo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Before concluding, we may mention that in this batch of civil appeals we have civil appeals filed by the Department. These civil appeals relate to cases where specified documents did not accompanied the goods in movement. The lead case in that regard is civil Appeal No. 5240 of 2005 -Assistant Commercial Taxes Officer v. Guljag Industries Ltd. filed by the Department. We make it clear that our judgment is basically confined to cases where blank/incomplete Form 18A/18C had accompanied the goods in movement. Whatever we have stated above is in the context of the incomplete Form 18A/18C travelling along with the goods in movement. However, civil Appeal No. 5240 of 2005 and such other civil appeals filed by the State (Department) are those cases where the documents were not accompanied the goods in movement, like, the bills of sale, bills of transport etc. In civil Appeal No. 5240 of 2005 the facts of which have been reproduced hereinabove, show that the case was confined to documents not accompanying the goods in movement. therefore, the said appeals stand on a different footing. They have nothing to do with incomplete forms travelling along with the goods in movement. These civil a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of import/export is not filed before the AO, it results in evasion of tax, however, when the goods in movement are carried without the declaration Form ST 18-A/18-C, then strict liability comes in, in the form of Section 78(5) of the Act. Breach of Section 78(2) imposes strict liability under Section 78(5) because as explained, goods in movement cannot be carried without Form ST 18-A/18-C. 14. The Supreme Court further explained in para 26, that the object behind enactment of Section 78(5), is to emphasise loss of revenue and to provide a remedy for such loss. It is not the object of the said section to punish the offender for having committed an economic offence and to deter him from committing such offences. The penalty imposed under Section 78(5), is a civil liability. Willful breach is not an essential ingredient for attracting the civil liability as in the case of prosecution. Section 78(2) is a mandatory provision. If the declaration Form ST 18-A/18-C does not support the goods in movement because it is left blank, then in that event Section 78(5) provides for imposition of monetary penalty for non-compliance. 15. The Supreme Court relied on the judgment of Chairma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls(supra), Chairman, SEBI Vs. Shriram Mutual Fund And Another(supra); Union of India And Others Vs. Dharmendra Textiles Processors And Others, (2008) 306 ITR 277(SC); Commissioner of Income-Tax Vs. Atul Mohan Bindal, (2009) 317 ITR 1 (SC); State of U.P. And Others Vs. Sukhpal Singh Bal, (2005) 7 SCC 615, an Assistant Commercial Taxes Officer Vs. Bajaj Electricals Limited, (2009) 1 SCC 308. 18. In Director of Enforcement Vs. M.C.T.M. Corporation Pvt. Ltd. And Others(supra), the Supreme Court held, with reference to the provisions of Sections 10(1) and 23(1)(a) of the Foreign Exchange Regulation Act, 1947, that mens rea is a state of mind, or 'guilty intention', as is considered under the criminal law, without which the accused cannot be held guilty of committing crime, and is not applicable to the proceedings under Section 23(1)(a) of the FERA, 1947, which are adjudicatory in nature and character and are not criminal proceedings. The officers of the Enforcement Directorate and other administrative authorities are expressly empowered by the Act to adjudicate only. Indeed, they have to act 'judicially' and follow the Rules of natural justice to the extent possible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods while in movement. In such case, on a complaint being made against such person by the assessing authority, or any other competent officer after having obtained sanction from the Deputy Commissioner(Administration) having jurisdiction, he shall, on conviction by a Judicial Magistrate having jurisdiction, be punishable with simple imprisonment for a term, which may extend to six months, and with fine, not exceeding rupees five thousand, and for the offences covered under clauses(b), (c), (f), or (g) of Section 71(1) of the RST Act, 1994, with a minimum sentence of simple imprisonment of three months. In such case, mens rea would be required as the offences disclosed under Section 71(1) are criminal in nature, and that in such case, the Judicial Magistrate will be required to convict a person, and impose a sentence of imprisonment and/or fine. In such case, on a defence taken that a person was not of guilty mind, will require proof of guilty mind namely the mens rea as a necessary ingredient for conviction, sentence and fine. 20. Mr. T.C. Jain, learned counsel appearing for the respondents submits that the mens rea is necessary for imposing penalty under Section 78(5) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt found that neither the Tribunal, nor the High Court had referred to the important piece of evidence, and thus, remanded the matter asking the parties to submit a supplementary statement of the case on the questions whether the company charged any profit apart from the storage charges for supplying cement and structural steel, for which there were no facts stated before the Tribunal, and which may have established that the assessee was a dealer, as defined, at the relevant time. 22. In E.I.D. Parry(I) Ltd. Vs. Assistant Commissioner of Commercial Taxes And Another(supra), the penalty was imposed on failure to include the taxable item in the return in the proceedings of the assessment. The Supreme Court held that the levy of penalty was not justified. Until the judgment of the Madras High Court in Perambalur Sugar Mills Ltd. Vs. State of Tamil Nadu, [1992] 86 STC 17, dated July 15,1991, the correct position of law within the State of Tamil Nadu was not free from doubt, and even thereafter, the Sales Tax Tribunal had in subsequent orders, held that transport subsidy was not includible in the taxable turnover. Such a view was held by the Tribunal till March 19, 1993, on a bona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Act, 1994. The judgment of the Supreme Court clarified that the liability under Section 78(5) of the RST Act, 1994, is a civil liability for compliance of the Act, and that there is no obligation by the Sales Tax Authority at the check-post to make any assessment, nor the provisions of Section 71 are attracted. 27. In view of finality of the judgment, and the opinion expressed by the Hon'ble Supreme Court in Guljag Industries Vs. Commercial Taxes Officer(supra), in the matter of proof of mens rea for imposition of penalty, and in holding that the mens rea is neither relevant, nor necessary to be proved for imposition of penalty under Section 78(5), on violation of Section 78(2) of the RST Act, 1994, we are not required to refer to the judgments of Rajasthan High Court in Parashwanath Granine India Ltd. Vs. State of Rajasthan And Another(supra), Lalji Mulji Transport Co. Vs. State of Rajasthan(supra), ACTO, FS-I, Jaipur Vs. M/s. Indian Oil Corpn. Ltd.(supra), and Commercial Taxes Officer Vs. Deewan Rubber Industries Pvt. Ltd.(supra). 28. Mr. Naresh Gupta, Advocate, assisting the Court, tried to draw the distinction between violation of the provisions of clause(a) of sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30. The violations enumerated in clauses (b), (c) and (d) of Section 10, may not necessarily result in prosecution with the possible imposition of sentence of imprisonment, as an alternative is provided in respect of these violations in Section 10-A. The word 'false' under Section 10(b), has two distinct and well-recognised meanings, namely (i)intentionally or knowingly or negligently untrue, or (ii) untrue by mistake or accident, or honestly after the exercise of reasonable care. A thing is called 'false' when it is done, or made with knowledge, actual or constructive, that it is untrue or illegal, or it is said to be done falsely when the meaning is that the party is in fault for its error. 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 10-A of the Act, the burden will be on the Revenue to prove the existence of circumstances constituting the said offence. In the light of the language employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all respects when the goods enters or leaves the nearest check-post of the State. Sub-rule(2) of Rule 55 requires that verification or enquiry shall be completed within seven days from the date of issue of the direction, and for action, if any, warranted in the circumstances of the case, in pursuance to the direction given under sub-clause(a) of clause(4) of Section 78 of the RST Act, 1994, which provides that where any goods in movement, other than exempted goods, are without documents, or are not supported by documents as referred to in sub-section(2), or documents produced appear false or forged, the Incharge of the check-post or the officer empowered under sub-section (3), may direct the driver or the person incharge of the vehicle or carrier or of the goods not to part with the goods in any manner including by retransporting or rebooking, till a verification is done or an enquiry is made, which shall not take more than seven days. 34. The suspicion or doubt on the documents to be false or forged, per se, does not attract levy of penalty under sub-section (5) of Section 78 of the RST Act, 1994. In such case, an opportunity is to be given under Rule 55(1) of the RST Rules, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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