1989 (9) TMI 377 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the penalty imposed under the Bihar Finance Act, 1981.
2. Classification of coal and coke as the same commodity under the Central Sales Tax Act, 1956.
3. Determination of intra-State vs. inter-State transactions.
4. Requirement of mens rea for imposing penalties.
5. Availability of alternative remedies for challenging the orders.

Issue-wise Detailed Analysis:

1. Legality of the penalty imposed under the Bihar Finance Act, 1981:
The petitioners challenged the imposition of penalties amounting to Rs. 3,81,584.64 and Rs. 3,85,788.51 under the Bihar Finance Act, 1981. They argued that since coal and coke are considered the same commodity under sections 14 and 15 of the Central Sales Tax Act, 1956, and given the notification under section 11(2) of the Bihar Finance Act, 1981, they should not be liable for further tax on hard coke manufactured from coal. The court noted that the Division Bench decision in Anil Hard Coke Industries v. State of Bihar [1988] 71 STC 322 confirmed that coal includes hard coke, and no further sales tax is payable on coke for intra-State sales once tax on coal is paid.

2. Classification of coal and coke as the same commodity under the Central Sales Tax Act, 1956:
The petitioners relied on the Anil Hard Coke Industries case to assert that coal and coke are the same commodity. The court agreed that hard coke falls under the definition of coal, as per the Division Bench decision. However, the court clarified that this decision did not address the implications under the Central Sales Tax Act, particularly for inter-State sales.

3. Determination of intra-State vs. inter-State transactions:
The respondent argued that the transactions were inter-State, not intra-State, and the petitioners failed to produce their books of account to prove otherwise. The court emphasized that under section 3 of the Central Sales Tax Act, a sale is deemed inter-State if it occasions the movement of goods from one State to another or involves a transfer of documents during such movement. The court observed that the petitioners did not provide sufficient evidence to classify the transactions as intra-State, thus justifying the penalties imposed.

4. Requirement of mens rea for imposing penalties:
The petitioners contended that there was no mens rea, or intent to conceal income, and thus no penalty should be imposed. They cited Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211 (SC) and Cement Marketing Co. of India Ltd. v. Assistant Commissioner of Sales Tax [1980] 45 STC 197 (SC). The court noted that the Supreme Court in Gujarat Travancore Agency, Cochin v. Commissioner of Income-tax [1989] 177 ITR 455 held that mens rea is not always necessary for imposing penalties. Therefore, the absence of mens rea did not absolve the petitioners from penalties.

5. Availability of alternative remedies for challenging the orders:
The court highlighted that the petitioners had an alternative remedy to appeal before the prescribed authority under the Bihar Finance Act. Citing Titaghur Paper Mills Co. Ltd. v. State of Orissa [1983] 53 STC 315 (SC) and Vijay Prakash D. Mehta v. Collector of Customs (Preventive), Bombay AIR 1988 SC 2010, the court emphasized that statutory remedies should be exhausted before seeking relief through writ petitions. Consequently, the court dismissed the writ applications, advising the petitioners to pursue the alternative remedy provided under the Act.

Conclusion:
The writ petitions were dismissed, with the court directing the petitioners to utilize the alternative remedy of appeal available under the Bihar Finance Act. The court did not find it necessary to delve into other points raised, given the availability of the statutory remedy. No order as to costs was made.