1974 (7) TMI 100 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the failure to record a finding about the absence of reasonable excuse before imposing a penalty under section 10A read with section 10(d) of the Central Sales Tax Act, 1956, is material.
2. Whether the applicant-firm failed to make use of kantan purchased against certificates in form C without reasonable excuse, thereby attracting a penalty under section 10A read with section 10(d) of the Central Sales Tax Act, 1956.
3. The maximum penalty that can be imposed under section 10A of the Central Sales Tax Act, 1956.

Detailed Analysis:

Issue 1: Materiality of Failure to Record Finding About Absence of Reasonable Excuse
The Tribunal's decision was scrutinized regarding whether the absence of a recorded finding about the lack of reasonable excuse before imposing a penalty under section 10A read with section 10(d) of the Central Sales Tax Act, 1956, is material. The Court concluded that the expression "without reasonable excuse" is a necessary ingredient of the offence under section 10(d). The penal provision in section 10(d) requires three ingredients: (i) purchase of goods for the specified purpose, (ii) failure to use the goods for such purpose, and (iii) such failure being without reasonable excuse. Therefore, the department must plead and prove this ingredient, and it must be mentioned in the show cause notice. The Tribunal erred in thinking that this was not an ingredient of the offence and that it would not be material if no finding was given by the sales tax authorities. Thus, the first question was answered in the negative.

Issue 2: Justification of Penalty Imposition
The Tribunal's decision to uphold the penalty was based on conjectures and assumptions without proper evidence. The Sales Tax Officer had not given any finding on the absence of reasonable excuse, and both the appellate authority and the Tribunal considered it as a matter of defence. The Court emphasized that the department must allege and prove the absence of reasonable excuse. The reliance on circumstantial evidence, such as a prior High Court decision, was deemed misplaced. The Tribunal's conjecture about the non-availability of kantan and patti in the local market was also unsupported by material evidence. Therefore, the second question was also answered in the negative.

Issue 3: Maximum Penalty Imposition
The third issue regarding the maximum penalty under section 10A did not arise due to the answers to the first two questions. The Tribunal had already reduced the penalty to a rate of 4 percent, making the question of whether the maximum limit was 4.5 percent or 15 percent irrelevant. Consequently, the third question was deemed not to survive and did not require a decision.

Conclusion:
The Court answered the first two questions in the negative, indicating that the Tribunal was not justified in its findings and the penalty imposition was not upheld. The third question was deemed irrelevant and did not arise for decision. The State was ordered to pay the costs of the petitioner-company for this reference.