2001 (10) TMI 1112 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Unreasonable delay in imposing penalty.
2. Requirement of mens rea for false representation under section 10(b) of the Central Sales Tax Act.
3. Vicarious liability of the transferee for offences committed by the transferor.
4. Validity of penalty orders given the non-amendment of the registration certificate.

Issue-wise Detailed Analysis:

1. Unreasonable Delay in Imposing Penalty:
The appellant argued that the penalty orders were issued after an unreasonable delay of 10-12 years post-remand and 16 years after the alleged offences. The court noted that while there is no absolute legal principle that delay invalidates penalty proceedings without a statutory limitation, the department failed to provide a satisfactory explanation for the delay. The reasons given by the Sales Tax Officer, such as the legal confusion and a request to keep the matter pending due to an appeal before the Supreme Court, were not found convincing. The court upheld the learned single Judge's conclusion that the delay was unjustified, leading to the quashing of the penalty orders.

2. Requirement of Mens Rea for False Representation:
The respondent contended that the essential ingredient of mens rea (intent) required under section 10(b) of the Central Sales Tax Act was absent since the respondent was a transferee and not involved at the time of the alleged offences. The court agreed, emphasizing that penal liability under sections 10(a) and 10(b) could not be imposed without establishing mens rea. The court noted that the respondent, being a transferee, could not have had the requisite mens rea for the offences committed by the transferor.

3. Vicarious Liability of the Transferee:
The court highlighted that there is no provision in the Central Sales Tax Act for holding a person vicariously liable for the penal actions of another unless expressly stated by the statute. Since the respondent was not the dealer at the time of the offences and the U.K. companies were the ones who issued the C forms, the respondent could not be held liable for the offences committed by the transferor companies. The court concluded that the respondent could not be subjected to penalties under section 10A in lieu of prosecution for offences they did not commit.

4. Validity of Penalty Orders Given the Non-Amendment of the Registration Certificate:
The court noted that in the case of KDHP, although the goods under the head "cultivation" and "crop protection" were disallowed in 1966, the registration certificate was not amended during 1967-1973. Therefore, KDHP could not be said to have committed an offence during that period as the original certificate continued to operate. This point was accepted by the learned single Judge, who quashed the penalty orders based on this reasoning.

Conclusion:
The court dismissed the appeal, upholding the learned single Judge's decision to quash the penalty orders and direct the refund of the penalty amounts with interest. The court found no substance in the appellant's contentions regarding delay, mens rea, vicarious liability, and the validity of the penalty orders. The appeal was dismissed without costs, considering the financial crisis faced by the State.