1991 (1) TMI 400 - HC - VAT and Sales Tax

Summary

Issues:
Penalty proceedings under section 15-A(1)(d) of the U.P. Sales Tax Act, 1948 based on non-disclosure of correct purchase source and false documents. Burden of proof on department to establish mens rea for penalty imposition. Interpretation of mens rea requirement under section 15-A(1)(d) based on precedent. Applicability of burden of proof under section 12-A of the Sales Tax Act in penalty proceedings. Calculation and imposition of penalty under section 15-A(1)(d)(ii) in relation to tax avoidance. Recognition certificate holder's exemption from tax liability and its impact on penalty imposition.

Detailed Analysis:

The judgment concerns the revision filed by the assessee against the Sales Tax Tribunal's order imposing a penalty under section 15-A(1)(d) of the U.P. Sales Tax Act, 1948. The assessee's contention was that the penalty was unjust as he had disclosed the names of sellers in vouchers presented to the mobile squad, and the department failed to establish mens rea, a crucial element for penalty imposition.

The learned counsel for the assessee argued that mens rea is essential for penalty proceedings under section 15-A(1)(d) and cited the case of Kishori Lal Rakesh Kumar Mandi v. Commissioner of Sales Tax to support this claim. The precedent highlighted the significance of mens rea in penal provisions preceding section 15-A(1)(g), emphasizing the need for the department to prove mens rea before imposing a penalty under section 15-A(1)(d).

Furthermore, the burden of proof was a key aspect in the case, with the department alleging unreliable purchases by the assessee. The department relied on section 12-A of the Sales Tax Act regarding the burden of proof in assessment proceedings. However, it was clarified that penalty proceedings are distinct from assessment proceedings, and the burden of proof in penalty cases rests on the department to demonstrate the unreliability of the purchases made by the assessee.

Regarding penalty calculation under section 15-A(1)(d)(ii), the counsel argued that even if the purchases were not made, the assessee, being a recognition certificate holder under section 4-B of the Sales Tax Act, was exempt from tax liability. As no tax was leviable on the assessee, no tax was avoided, and hence, no penalty could be imposed under section 15-A(1)(d)(ii) for tax avoidance.

In conclusion, the judgment held that the department failed to establish tax avoidance by the assessee and the non-disclosure of purchases from certain sellers, as claimed by the department, was not proven. Consequently, the penalty imposed by the Sales Tax Tribunal was set aside, and the revision filed by the assessee was allowed.

This detailed analysis of the judgment provides insights into the legal intricacies surrounding penalty proceedings, burden of proof, mens rea requirement, and the impact of tax exemption on penalty imposition under the U.P. Sales Tax Act, 1948.