1989 (4) TMI 306 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of the penalty imposed under section 15-A(1)(o) of the U.P. Sales Tax Act, 1948.
2. Interpretation and application of section 28-A of the U.P. Sales Tax Act, 1948.
3. Consideration of mens rea in the imposition of penalty.
4. Relevance of technical default in penalty proceedings.

Issue-wise Detailed Analysis:

1. Validity of the Penalty Imposed under Section 15-A(1)(o) of the U.P. Sales Tax Act, 1948:
The assessee, M/s. Bharat Ply-wood Products Pvt. Ltd., was penalized with Rs. 1,600 under section 15-A(1)(o) of the U.P. Sales Tax Act, 1948 for importing goods using an invalid Form XXXI. The penalty was initially upheld by both the Appellate Assistant Commissioner (Judicial) and the Sales Tax Appellate Tribunal. The Tribunal concluded that the goods were imported deliberately on an invalid form, thus contravening section 28-A of the Act.

However, the High Court found that the penalty order could not be sustained. The assessing officer had determined that there was no dishonest intention or contumacious conduct by the assessee. The invalidation of Form XXXI occurred after it was issued to the assessee, and the assessee promptly obtained a new form upon realizing the invalidation.

2. Interpretation and Application of Section 28-A of the U.P. Sales Tax Act, 1948:
Section 28-A pertains to the "import of goods into the State against declaration." It mandates that any person intending to import goods liable to tax must obtain and furnish the prescribed declaration form. The driver or person in charge of the vehicle must carry and present this form at the check-post. The High Court emphasized that the provisions of section 28-A are aimed at preventing tax evasion. The power to detain goods and levy penalties under this section requires evidence of an attempt to evade tax.

The High Court noted that the entire section 28-A had been analyzed in detail in the case of Jain Shudh Vanaspati Ltd. v. State of U.P., where it was established that mere lack of requisite documents is insufficient for penalty unless there is an attempt to evade tax.

3. Consideration of Mens Rea in the Imposition of Penalty:
The High Court addressed the argument that mens rea or guilty intent is not necessary for imposing a penalty under section 15-A(1)(o). The Tribunal had relied on the case of Bulaki Das, which suggested that mens rea is not required. However, the High Court referred to the Division Bench decision in Jain Shudh Vanaspati, which implied that intentional evasion of tax is necessary for penalty imposition.

The High Court concluded that, based on the findings of the assessing officer, there was no evidence of dishonesty or contumacious conduct by the assessee. Therefore, the penalty was not justified.

4. Relevance of Technical Default in Penalty Proceedings:
The High Court considered whether a technical default, without any dishonest intention, warranted a penalty. The Supreme Court's decision in Hindustan Steel Ltd. v. State of Orissa was cited, where it was held that penalty should not be imposed for mere technical or venial breaches of the law. The High Court found that the assessee's default was technical and not intentional, aligning with the principles from Hindustan Steel Ltd.

The High Court concluded that the imposition of penalty on the assessee was unwarranted as it was based on a technical default without any dishonest intent. Therefore, the revision was allowed, and the penalty order was set aside.

Conclusion:
The High Court allowed the revision petition, setting aside the penalty imposed on the assessee. The Sales Tax Tribunal was directed to pass an appropriate order in light of the High Court's decision. The judgment emphasized the necessity of proving an attempt to evade tax for imposing penalties under section 28-A and highlighted that technical defaults without dishonest intent do not warrant penalties.

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