1966 (9) TMI 124 - HC - VAT and Sales Tax

Summary

Issues:
Conviction under section 45(2)(b) of the Madras General Sales Tax Act, 1959 for non-payment of tax, requirement of proving fraudulent intent for evasion of tax.

Analysis:
The petitioner was convicted under section 45(2)(b) of the Madras General Sales Tax Act, 1959 for non-payment of tax for the years 1954-55 to 1961-62, with a fine imposed by the Fourth Presidency Magistrate, Madras. The key contention raised by the petitioner's counsel was the lack of proof regarding fraudulent evasion of tax, which is essential under the said provision. Mere failure to pay tax, even for an extended period, does not constitute an offense unless accompanied by fraudulent intent. The term "fraudulently" in section 45(2)(b) is interpreted in line with section 25 of the Indian Penal Code, requiring an element of deception with intent to defraud for it to apply. The burden of proving fraudulent evasion rests with the prosecution, and without evidence demonstrating such intent, the offense cannot be established.

The Magistrate, in the judgments under review, concluded that the petitioner's non-payment of tax was a fraudulent evasion based on the lack of payment despite notices and failure to challenge the assessment. However, it is emphasized that the prosecution must establish fraudulent intent through concrete evidence, such as concealing assets or disposing of properties to avoid tax obligations. Mere delay or inability to pay due to financial constraints does not automatically amount to fraudulent evasion. Each case must be evaluated based on its specific facts and circumstances to determine if there was a deliberate intent to deceive authorities. In this instance, the petitioner's dispute of the assessment and absence of evidence indicating fraudulent intent led the court to set aside the convictions and sentences, emphasizing the prosecution's failure to prove the offense under section 45(2)(b) of the Act.

In conclusion, the court allowed the petitions, overturning the convictions and sentences imposed on the petitioner for non-payment of tax. The lack of evidence demonstrating fraudulent evasion of tax meant that the essential element required under section 45(2)(b) of the Act was not proven by the prosecution. Therefore, the fines, if paid, were ordered to be refunded, highlighting the importance of establishing fraudulent intent to sustain such convictions under the relevant legal provisions.