1995 (12) TMI 344 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Imposition of penalty under Section 18-A of the Karnataka Sales Tax Act, 1957.
2. Requirement of mens rea for imposing penalty.
3. Bona fide offer to refund excess tax collected.
4. Discretionary power of the assessing authority in imposing penalties.

Detailed Analysis:

1. Imposition of Penalty Under Section 18-A of the Karnataka Sales Tax Act, 1957:
The petitioner, engaged in the manufacture and marketing of milk products, collected sales tax at 8% on "Amul spray" despite a notification reducing the tax rate to 4%. The assessing authority subjected the sales to 4% tax and initiated penalty proceedings under Section 18-A for the excess tax collected. The penalty imposed was equivalent to the excess amount collected. Appeals to the Deputy Commissioner of Commercial Taxes and the Karnataka Appellate Tribunal were unsuccessful.

2. Requirement of Mens Rea for Imposing Penalty:
The petitioner argued that mens rea, or a guilty mind, was necessary for imposing a penalty under Section 18-A. The court examined the principle "actus non facit reum nisi mens sit rea" and noted exceptions where mens rea is not required, especially in fiscal statutes. It referenced several cases, including R.S. Joshi, Sales Tax Officer v. Ajit Mills Limited and State of Maharashtra v. Mayer Hans George, to establish that mens rea is not necessary for penalties under economic laws. The court concluded that Sections 18 and 18-A create an absolute liability, not requiring proof of mens rea.

3. Bona Fide Offer to Refund Excess Tax Collected:
The petitioner claimed a bona fide intention to refund the excess tax collected. However, the court found the offer insincere and belated, made only after penalties were imposed. The petitioner's actions, such as seeking to adjust the refund against future tax liabilities, demonstrated a lack of genuine effort to refund the amount to customers. The court held that the offer was insufficient to avoid penalties, emphasizing that bona fide efforts must be timely and sincere.

4. Discretionary Power of the Assessing Authority in Imposing Penalties:
The court highlighted that the imposition of penalties under Section 18-A is discretionary, not automatic. The assessing authority must consider all relevant circumstances, including the dealer's bona fides and conduct. The penalty should be fair and reasonable, not arbitrary. The court cited Commissioner of Sales Tax v. Prakash Trading Co. and Elestone Estates and Industries Ltd. v. State of Karnataka to support the view that discretion must be exercised judicially. The court found that the penalty imposed, equivalent to the excess amount collected, was appropriate and within the assessing authority's discretion.

Conclusion:
The court dismissed the petitions, upholding the penalties imposed under Section 18-A of the Karnataka Sales Tax Act. It affirmed that mens rea is not required for such penalties, and the assessing authority's discretion was exercised appropriately. The petitioner's belated offer to refund the excess tax was found insincere, and the penalty was deemed just and proper in the circumstances.