1951 (2) TMI 13 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Whether the omission of Rs. 1,15,620-8-3 in the turnover was wilful under Section 15(a) of the Madras General Sales Tax Act.
2. Interpretation of the term "wilful" in the context of the Madras General Sales Tax Act.
3. Whether the accused's belief that the amount was non-taxable constitutes a bona fide mistake or a wilful submission of an untrue return.

Issue-Wise Detailed Analysis:

1. Whether the omission of Rs. 1,15,620-8-3 in the turnover was wilful under Section 15(a) of the Madras General Sales Tax Act:

The accused, managing director of T.N.K. Govindarajulu Chetty & Co., was convicted under Section 15(a) of the Madras General Sales Tax Act for omitting Rs. 1,15,620-8-3 from the turnover in the return for the year 1947-48. The company had purchased brass sheets and supplied them to customers, billing only for manufacturing charges due to an arrangement with the customers. The Deputy Commercial Tax Officer issued a notice pointing out that the entire sale price should be included in the turnover. The company agreed to include the amount but claimed the omission was a bona fide mistake. The Presidency Magistrate held that the omission was conscious and deliberate, thus constituting a wilful submission of an untrue return.

2. Interpretation of the term "wilful" in the context of the Madras General Sales Tax Act:

The term "wilful" was not defined in the Act, leading to various judicial interpretations. The court examined several precedents to ascertain its meaning. In Smith v. Barnham, "wilfully" was defined as "wantonly or causelessly." In In re the Postmaster-General and Colgan's Contract, it was noted that an honest mistake is not wilful unless persisted in after being pointed out. In Reg v. Senior, "wilfully" meant acts done deliberately and intentionally, not by accident or inadvertence. The court also referenced Indian cases, such as Jayarama Chettiar v. Emperor, where it was held that omission due to a wrong view of the law is wilful if done with full knowledge of the omission.

3. Whether the accused's belief that the amount was non-taxable constitutes a bona fide mistake or a wilful submission of an untrue return:

The court found that the accused bona fide believed that the transaction did not change the nature of the contract with the customers. The accused's immediate readiness to rectify the omission upon it being pointed out indicated bona fides. The court held that the omission was not deliberate with the intent to evade tax but was based on a mistaken belief about taxability. Thus, the submission of the return was not wilful within the meaning of Section 15(a).

Conclusion:

The court concluded that the accused did not wilfully submit an untrue return as the omission was based on a bona fide belief and not with the intention to evade tax. The conviction and sentence were set aside, and the appeal was allowed.