1993 (5) TMI 170 - HC - VAT and Sales Tax

Issues Involved:
1. Legality of the penalty imposed under Section 22A(7) of the Rajasthan Sales Tax Act.
2. Determination of mens rea or deliberate defiance of the law.
3. Relevance of the documents produced post-seizure.
4. The role of the consignee and the owner in the context of penalty imposition.

Issue-wise Detailed Analysis:

1. Legality of the penalty imposed under Section 22A(7) of the Rajasthan Sales Tax Act:
The petitioner challenged the penalty imposed by the Assistant Commercial Tax Officer (A.C.T.O.) for transporting an aluminium coil without requisite documents. The Tribunal reduced the penalty but upheld its imposition. The High Court emphasized that Section 22A aims to prevent tax evasion but does not mandate automatic penalty for every breach. The statute requires a show cause notice to provide an opportunity to the affected party to argue against the penalty. The court noted, "Law does not provide that once goods in transit are found to be unaccompanied by the requisite documents, the levy of penalty is automatic." This indicates that the penalty should not be imposed as a matter of course but after considering the specific circumstances of each case.

2. Determination of mens rea or deliberate defiance of the law:
The court highlighted that the penalty provision under Section 22A(7) is quasi-criminal and requires an inquiry into the intention behind the breach. It referred to the Supreme Court's observation in Hindustan Steel Ltd. v. State of Orissa, emphasizing that "penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation." The High Court stressed that the authorities failed to investigate whether the breach was intentional or merely technical. The court stated, "mens rea or deliberate defiance of the provision with intention to evade or avoid liability of tax... must be necessary ingredient before penalty could be levied."

3. Relevance of the documents produced post-seizure:
The petitioner produced documents from the seller post-seizure, explaining that the fifth coil was loaded at the last moment, and the documents were inadvertently left behind. The court noted that the authorities did not conduct any inquiry into the genuineness of these documents. It remarked, "Therefore, the mere fact that the goods were not accompanied by documents and were produced later on, during the proceedings by itself does not lead to any conclusion that such documents have been prepared later on by ante-dating the same." This indicates that the authorities should have verified the authenticity of the documents before imposing the penalty.

4. The role of the consignee and the owner in the context of penalty imposition:
The court distinguished between the "owner" and the "consignee" of the goods. It noted that the consignee might not necessarily be the owner at the time of transit, depending on the terms of the sale agreement. The court stated, "There can be only one person who can be 'owner'. Who is the owner of the goods in transit, depends upon the fact whether property in goods have passed to 'consignee' or not?" The authorities did not determine whether the petitioner was the owner of the goods at the time of transit, which is crucial for deciding the penalty's applicability. The court concluded that without determining the ownership and the intention behind the breach, the penalty could not be justified.

Conclusion:
The High Court quashed the orders of the Sales Tax Tribunal, the Deputy Commissioner (Appeals), and the A.C.T.O., concluding that the penalty was imposed without proper inquiry into the relevant facts and circumstances. The court emphasized the need for a thorough investigation into the intention behind the breach and the authenticity of the documents produced post-seizure. The revision was allowed, and no costs were imposed.

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