1994 (1) TMI 250 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to imposition of penalty under section 10-A of the Central Sales Tax Act, 1956 based on unauthorized purchase of "silk yarn" at concessional rate by a registered dealer under the Orissa Sales Tax Act, 1947.

Analysis:
The petitioner, a registered dealer, purchased "silk yarn" at a concessional rate by furnishing declarations in form C, despite its certificate of registration not authorizing such purchases. The Sales Tax Officer imposed a penalty of Rs. 36,000 under section 10-A of the Central Act. The petitioner contended that there was no mala fide intention and no mens rea to attract the penalty. However, the Additional Commissioner upheld the penalty, stating that the petitioner had committed an offence under section 10(b) of the Central Act. The petitioner's argument of "silk yarn" being tax-free in Orissa but taxable outside was rejected, emphasizing the lack of authorization for the purchases at that time.

The term "false" in section 10 of the Central Act implies intentional deceit or negligence, requiring a purpose to deceive or perpetrate fraud. Mens rea is crucial to prove an offence under section 10(b), necessitating that the dealer knowingly misrepresented goods not covered by their registration. The distinction between negligent and fraudulent representations is highlighted, with falsity of representation requiring knowledge of its untruth. The imposition of penalty under section 10-A is not automatic and necessitates a notice to the dealer, followed by a reasonable opportunity to be heard. The principle of natural justice mandates that the dealer must offer a bona fide explanation, supported by relevant materials. In this case, the lack of substantial material to prove bona fides led to the conclusion that the petitioner was not acting bona fide.

Regarding the quantum of penalty, the maximum limit under section 10-A is one-and-a-half times the tax payable. Considering the subsequent incorporation of "silk yarn" in the registration certificate, a reduced penalty of Rs. 22,000, approximately the difference in tax payable and paid, was deemed appropriate by the court. The judgment disposed of the writ petition accordingly, with both judges concurring on the decision.