TMI Blog2002 (4) TMI 969X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Dinesh Mehta, learned counsel for the petitioner, has submitted that in both the cases, the facts are similar and only a pure question of law is involved and Revision Petition No. 343/2001 may be taken as a leading case for decision of both the cases. 3. The facts and circumstances giving rise to the said revision are that petitioner firm is a registered dealer under the Act, 1954 as well as under the Central Sales Tax Act and it carries the business in chemicals, such as Vax, Bronze, powder etc. On 3.8.95, vehicle No. RJ. 3T/3951 was intercepted near Jodhpur by the Sales Tax Authorities and on checking, it was found that M/s. Mayur Dyes Chemical Corporation, Rajkot (Gujarat) had sent goods for sale to the petitioner firm vide Bilty No. 27423 through M/s. Globe Transport Co. (P) Ltd. The said goods were not accompanied by declaration From ST. 18-A as required under the Act, 1994. The goods were seized and a show cause notice (annex.2) was served upon the petitioner firm to appear on 19.3.95 and show cause why penalty under Section 22-A(7) of the Act may not be imposed as the goods in question were not accompanied by Declaration From ST. 18-A. In response to the said show cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the Declaration From St. 18-A, would be sufficient to prove the existence of mens rea to avoid tax; and (2) Whether petitioner firm can be held liable for the negligence or irregularity committed by the transporter in not bringing the requisite Declaration From ST. 18-A? 6. Mr. Mehta has been fair enough in admitting that the goods were definitely not accompanied by the required Declaration Form ST. 18-A though it was accompanied with the Billy showing that the goods were tax free and he could not agitate the issue in revisional jurisdiction as to whether the finding of fact recorded by the learned Board that the plea taken by the petitioner- Assessee regarding sending the required declaration Form ST. 18-A in Gujarat and was not given to the transporter was false being a finding of fact. Thus, his submission remains limited only to the extent as to whether penalty can be imposed without recording the finding of fact that the petitioner intended to avoid tax as mens rea was suggested to be an essential ingredient for imposing the penalty. As there is no dispute that the goods were accompanied with a Bilty showing the same as tax free and declaration form ST. 18-A was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty in departmental proceedings against the employees. As the argument had been advanced that the expression penalty referred to in Rule 14 of the Railway Servants (Discipline and Appeal) Rules 1968, which provided for imposition of penalty of dismissal or removal in respect of a railway servant, stood confirmed by the Court holding as under:- The word 'penalty' imposed on a railway servant, in our opinion, does not refer to a sentence awarded by the Court to the accused on his conviction, but though not happily worded it merely indicates the nature of the penalty imposable by the disciplinary authority if the delinquent employee has been found guilty of conduct which has led to his conviction on a criminal charge ...... The words where any penalty is imposed' in Rule 14 (i) should actually be read as 'where any penalty is imposable' because so far as the disciplinary authority is concerned it cannot impose a penalty on the basis of the conviction and sentence passed against the delinquent employee by a competent court. Furthermore, the rule empowering the disciplinary authority to consider circumstances of the case and make such orders as it deems fit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liquidated damages. It is also used to indicate the sum to be forfeited on breach of a bond, and in common parlance it expresses any disadvantage resulting from an act. 13. And held that in view of the definition it was not possible to hold that the said provisions were not applicable in case of exempted establishments for the reason that some more provisions, legal or penal, were also made applicable to exempted establishments with a view to make to penal provisions more stringent with a view to check the growth of arrears. 14. In Director of Enforcement v. MCTM Corporation Pvt. Ltd. and Ors., AIR 1996 SC 1100, the Hon'ble Supreme Court considered as issue as to whether ingredients of mens rea was necessary in case of a person who is found violating the provisions of the Foreign Exchange Regulations Act, 1947. The Court observed as under:- Mens rea' is a state of mind. Under the criminal law, mens rea is considered as the 'guilty intention' and unless it is found that the 'accused' had the guilty intention to commit the 'crime', he cannot be held 'guilty' of committing the crime. An 'offence' under Criminal Procedure Code ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement with the aforesaid view and in our opinion, what applies to 'tax delinquency' equally holds good for the 'blameworthy' conduct for contravention of the provisions of FERA, 1947. We, therefore, hold that mens-rea (as understood in criminal law) is not an essential ingredient for holding a delinquent liable to pay penalty under Section 23(1) of FERA 1947 for contravention of the provisions of Section 10 of FERA, 1947 and that penalty is attracted under Section 23 (1)(a) as soon as contravention of the statutory obligation contemplated by Section 10(1) (a) is established. The High Court apparently fell in error in treating the 'blameworthy conduct' under the Act as equivalent to the commission of a 'criminal offence', overlooking the position that the 'blameworthy conduct' in the adjudicatory proceedings is established by proof only of the breach of a Civil obligation under the Act, for which the defaulter is obliged to make amends by payment of the penalty imposed under Section 23 (1)(a) of the Act irrespective of the fact whether he committed the breach with or without any guilty intention. Our answer to the first question formulated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be accepted. The existence of mens rea as an essential ingredient of an offence has to be made out by the construction of the statute. 17. While deciding the said case, the Full Court placed reliance upon a judgment by Wright, J. in Sherras v. De Ruten, 1985-1 QB 918, wherein it was observed as under:- There is a presumption that mens rea, an evil intention or a knowledge of the wrongfulness of the act, is an essential ingredient in every offence, but that presumption is liable to be displaced either by the words of the statute creating the offence or by the subject matter with which it deals, and both must be considered....... In order to find out whether mens rea i.e. a guilty mind is an ingredient or not, reference has to be made to the language of the enactment, the object and subject matter of the statute and the nature and character of the Act sought to sought to be punished. 18. The Hon'ble Supreme Court in Gujarat Travancore agency v. Commissioner of Income Tax, AIR 1989 SC 1971, wherein the Court considered the provision of Section 271(1)(a) of the Income Tax Act and held that the element of mens rea is not involved because the penalty imposed in civ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgments, including Gujarat Travancore Agency (supra) and Kalyan Das Rastogi (supra) and categorically held that in a lax liability, the plea of mens rea cannot be taken. 22. In Income Tax Commissioner, Andhra Pradesh, Hyderabad v. Bhikaji Dadabhai Co., AIR 1961 SC 1265, the Apex Court held that penalty is an additional tax imposed upon a person in view of his dishonesty or contumacious conduct. 23. In Corpus Juris Secundum, 85 580, it has been stated as under:- A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime of a fine or forfeiture provided as punishment for the violation of criminal or penal laws. 24. In M/s. Hindustan Steel Ltd. v. The State of Orissa, AIR 1970 SC 253, the Hon'ble Supreme Court considered the provisions of the Orissa Sales Tax act, 1947, particularly the provisions relating to imposition of penalty imposed for default in registering as a dealer under Section 9(1) read with Section 25(1)(a) of the said Act, and held as under:- But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An Orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (f) (g) and Article 21 of the Constitution of India, as Article 21 of the Constitution of India, as Article 20 of the Constitution guarantees the protection in respect of conviction for the offence under any law for the time-being in force unless the other conditions provided therein are complied with. The Hon'ble Apex Court considered a large number of its earlier judgments, including the meaning and definition of penalty and reached the conclusion that a penalty imposed by the Sales Tax Authority is only a civil liability, though penal in nature, and it can be imposed provided the default committed by the dealer is established at an inquiry after giving the dealer concerned an opportunity of being heard. Moreso, the degree of remissness involved in the default is a relevant factor to be taken into account while levying penalty. As the Act provides both the minimum and the maximum amount of penalty leviable and it is corelated to the amount of tax which would have have been avoided if the turnover returned by such dealer had been accepted as correct. The order levying penalty is quasi-judicial in character and involves exercise of judicial discretion. 27. A Constitutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crimination is made, the word 'penalty' is found to be generic in its character, including both fine and forfeiture. A 'fine' is a pecuniary penalty, and is commonly (perhaps always) to be collected by suit in some form. A 'forfeiture' is a penalty by which one loses his rights and interest in his property. .......The word 'forfeiture' must bear the same meaning of a penalty for breach of a prohibitory direction. The fact that there is arithmetical identity, assuming it to be so, between the figures of the illegal collections made by the dealers and the amounts forfeited to the State cannot create a conceptual confusion that what is provided is not punishment but a transference of funds. If this view be correct, and we hold so the legislature, by inflicting the forfeiture, does not go outside the crease when it hits out against the dealer and deprives him, by the penalty of the law, of the amount illegally gathered from the customers. The Criminal Procedure Code, Customs and Excise Laws and several other penal statutes in India have used diction, which accepts forfeiture as a kind of penalty. When discussing the relings of this Court we will expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 78(5) can be regarded as technical or venial. Once the ingredients of Section 78(5) are established after giving a hearing and complying with the principles of natural justice, there is no discretion not to levy or levy lesser amount of penalty. 31. In Bengal Iron Merchant Association and Anr. v. Commissioner, Commercial Tax and Anr., 1996(7) SCC 537, the Hon'ble Supreme Court examined the provisions of Rule 89-A (2) of the Bengal Sales Tax Rules, 1941-analogous provision providing for requirement of declaration Form like ST.18-A in the instant case, and held that the said provisions of Rule 89-A (2) of the said Rules, 1941 required that any consignment of notified goods shall be accompanied by a declaration by the consignor or his authorised agent in relation to the consignment or to comply with them. The rule squarely placed an obligation upon the consignor/vendor to issue such a declaration and the consignee/purchasers to carry the declaration. The consignees were not entitled to complain that because iron and steel were taxable only at the first point of sale, the sellers (manufacturers) were not issuing the declaration as contemplated by Rule 89-A(2) and they were, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Madras High Court in Vijaya Electricals v. State of Tamil Nadu, 1991 82 STC 268, while interpreting the analogous provisions of Section 10-A read with Section 10(b) of the Act, held that mens rea need not be established and if representation is found to be false, it is sufficient to levy the penalty. 37. Similar view was reiterated by the Division Bench of the Madhya Pradesh High Court in Central India Motors v. C.L. Sharma, Assistant Commissioner of Sales Tax, Indore Region, Indore and Anr., 1980 46 STC. 38. In State of Madhya Pradesh v. Narain Singh and Ors., 1983 (3) SCC 596, the Hon'ble Supreme Court considered as case where two trucks carrying fertilizers were intercepted by the Madhya Pradesh Authorities under the Essential Commodities Act and the accused did not deny the transport of fertilizer bags or interception of its lorries or seizure of fertilizer bags and the only defence taken therein was than they were not aware of the contents of the documents seized from them and they were not engaged in exporting the fertilizer bags from Madhya Pradesh to Maharashtra in conscious violation of provisions of the Fertilizer Movement Control Order, 1973 read with Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t provisions of Section 22-A of the Act reads as under:- (3) The owner or person in charge of a vehicle, boat or animal shall carry with him a goods vehicle record, trip sheet or a log book, as the case may be, and (such other documents) as may be prescribed in respect of the goods carried in or on the vehicle, boat or animal, as the case may be, and produce the same before any officer in charge of check-post or barrier or any other officer as may be empowered by the Government in that behalf. The owner or person in charge of a vehicle, boat or animal entering the State limits or leaving the State limits shall also give a declaration containing such particulars as may be prescribed of the goods carried in or on the vehicle, boat or animal, as the case may be, before the officer in charge of the check post r barrier or the officer empowered as aforesaid and give one copy of the declaration to such officer, and keep one copy with him. (7) (a) The officer incharge of the check post or barrier or any other officer not below the rank of an Assistant Commercial Taxes Officer, empowered in this behalf may, after giving the owner or person incharge of the goods reasonable opportuni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpreted the provisions of Section 22-A(7) holding that mens rea was a necessary ingredient, observing as under: - ....Any order imposing penalty for failure to carry out statutory obligation is quasi-criminal in nature. The Statute has not provided any presumption about the existence of mens rea against the defaulter, therefore, as a prosecutor, burden of proving is primarily on the Revenue. The Revenue has failed to discharge its burden inasmuch as it has merely reached a presumption of such deliberate breach..... 45. Similar view has been reiterated in Assistant Commercial Tax Officer, Flying Squade v. Voltas Ltd., 2000 (120) STC 270. While deciding the said case, reliance has been placed upon the earlier judgments in Mahaveer Conductors (supra) and Hindustan Steel Ltd. (supra). 46. While deciding the case in Mahaveer Conductors (supra), any of the judgments of the Apex Court referred to above including the Seven Judges judgment in R.S. Joshi (supra), wherein the scope of applicability of mens rea in fiscal statute and even other statutes had been examined and explained, could not be brought to the notice of the Court. The Court had taken note of Hindustan Steel Lt ..... 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