1973 (8) TMI 129 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Violation of Section 10(d) of the Central Sales Tax Act, 1956.
2. Levy of penalty under Section 10A of the Central Sales Tax Act, 1956.
3. Mens rea and reasonable excuse.
4. Interpretation of Section 10A regarding the calculation of penalty.

Detailed Analysis:

1. Violation of Section 10(d) of the Central Sales Tax Act, 1956:
The assessee, a registered dealer in electrical goods, used goods purchased for resale in the execution of works contracts. This was found to be a violation of Section 10(d) of the Central Sales Tax Act, 1956, which led to a penalty under Section 10A. The Sales Tax Officer found that the assessee had repeatedly committed this offense in prior years. The Appellate Assistant Commissioner and the Tribunal upheld this finding, noting that the goods were knowingly used for purposes other than resale, and no reasonable excuse was provided for this misuse.

2. Levy of Penalty under Section 10A of the Central Sales Tax Act, 1956:
The Sales Tax Officer imposed a penalty of Rs. 1,193.88 on the assessee. The Appellate Assistant Commissioner and the Tribunal upheld this penalty, stating that the assessee had knowingly committed the offense and had been penalized for similar violations in previous years. The Tribunal rejected the plea of non-availability of goods as a reasonable excuse, noting that no evidence was provided to support this claim.

3. Mens Rea and Reasonable Excuse:
The assessee argued that there was no mens rea (guilty mind) as the goods were used only when they were not otherwise available, and thus there was a reasonable excuse for their use. However, both the Sales Tax Officer and the Appellate Assistant Commissioner found that the misuse of goods was deliberate and habitual. The Tribunal also noted that the assessee did not produce any evidence regarding the non-availability of goods. The court concluded that the assessee violated Section 10(d) with full knowledge and without reasonable excuse.

4. Interpretation of Section 10A Regarding the Calculation of Penalty:
The assessee contended that the penalty under Section 10A should be limited to one-and-a-half times the concessional rate of tax. The court examined the language of Section 10A and concluded that the penalty should be calculated based on the non-concessional rate of tax. The court disagreed with the Madras High Court's interpretation in State of Madras v. Prem Industrial Corporation, which supported the assessee's view. Instead, the court agreed with the decisions of the Mysore High Court, the Jammu and Kashmir High Court, and the Orissa High Court, which held that the penalty should be based on the non-concessional rate to avoid absurd consequences and ensure the legislative intent of penalizing dishonest purchases.

Conclusion:
The court dismissed the tax revision case, upholding the penalty imposed on the assessee for violating Section 10(d) of the Central Sales Tax Act, 1956. The court also clarified that the penalty under Section 10A should be calculated at one-and-a-half times the non-concessional rate of tax. The petition was dismissed with costs.