2006 (11) TMI 588 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to revisional order confirming penalty under section 10A of the Central Sales Tax Act for violation of section 10(d) for assessment years 1993-94 to 1996-97.

Detailed Analysis:

1. Violation of Section 10(d) and Imposition of Penalty:
The petitioner, a TV program company, issued C forms for concessional sales tax on purchases for their cable TV network. The assessing officer found misuse of C forms, proposing a penalty under section 10A for violating section 10(d) of the Act. The petitioner argued the items were used for transmitting TV signals, akin to distribution of power, thus not violating section 8(3)(b). However, the court held TV signals are not a form of power, rejecting the petitioner's contention. The petitioner's declaration for registration stated items were for resale, but they were not sold, leading to a violation. The court upheld the penalty as the petitioner did not use the purchased items for the declared purpose of resale.

2. Justification of Penalty Amount:
The penalty levied at nine percent of the purchase value was contested by the petitioner, who paid tax at four percent against C forms. The loss of revenue was six percent, justifying the maximum penalty of nine percent. The court dismissed the argument that penalty should be levied by the State of purchase, stating section 10A authorizes the issuing authority to levy penalties. Mitigating factors like the petitioner's business nature and delayed penalty initiation led the court to reduce the penalty to two-thirds of the actual amount for the assessed years.

3. Requirement of Mens Rea for Penalty:
The petitioner argued mens rea was necessary for penalty imposition, citing precedents. The court disagreed, stating the penalty under section 10A aims to compensate the State for revenue loss due to C form misuse. Considering the petitioner's potential higher tax liability without the forms, the court modified the penalty, reducing it to two-thirds of the original amount for all four years.

In conclusion, the court upheld the penalty for violation of section 10(d) but reduced the amount based on mitigating factors and the purpose of the penalty provision.