2007 (7) TMI 589 - HC - VAT and Sales Tax

Penalty under section 65 of the Rajasthan Sales Tax Act 1994 - Held that - Revision petitions are allowed and the impugned order of the Tax Board dated October 26 2005 and those passed by the assessing authority in so far as they imposed the penalty under section 65 of the Act upon the petitioner-assessee are set aside and the order of the Deputy Commissioner (Appeals) in favour of the assessee is restored and it is held that no penalty under section 65 of the Act could be imposed upon the petitioner-assessee in the circumstances of case as penalty under section 65 of the Act cannot be imposed on the assessee unless the Revenue establishes that there is deliberateness on the part of the assessee or conscious concealment of taxable turnover with the purpose to avoid or evade the tax and such penalty cannot be imposed merely because the contention of the assessee that particular sale is not taxable is rejected or explanation furnished by him is not found to be acceptable by the Revenue.

Issues Involved:
1. Imposition of penalty under Section 65 of the Rajasthan Sales Tax Act, 1994.
2. Taxability of food items sold in a factory canteen.
3. Registration and payment of sales tax by the petitioner-assessee.
4. Bona fide belief and mens rea in tax evasion.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 65 of the Rajasthan Sales Tax Act, 1994:
The primary issue pertains to the penalty imposed under Section 65 of the Rajasthan Sales Tax Act, 1994. The Tax Board, Ajmer, had restored the penalty imposed by the assessing authority, which was challenged by the petitioner-assessee. The petitioner argued that the imposition of the penalty was unjustified as the transactions were duly recorded in the books of account, and the assessee was under a bona fide belief that the service of food items did not amount to a sale liable for sales tax. The court considered the rival submissions and case laws cited by both parties and concluded that the penalty imposed and restored by the assessing authority and the Tax Board deserved to be set aside. The court emphasized that the imposition of penalty requires a deliberate act of concealment or furnishing inaccurate particulars, which was not evident in this case.

2. Taxability of Food Items Sold in a Factory Canteen:
The petitioner-assessee was running a canteen in the factory premises and received a subsidy from the employee welfare fund. The assessing authority found that the sale of food items in the canteen was taxable under the Act. The petitioner-assessee did not dispute the taxability of these items after the 46th Amendment of the Constitution of India and the consequential amendment in the Rajasthan Sales Tax Act, 1994. The court acknowledged that the sale of food items in a canteen is a taxable event under the RST Act, particularly after the amendment in law with effect from April 1, 1987.

3. Registration and Payment of Sales Tax by the Petitioner-Assessee:
Upon receiving a notice from the assessing authority, the petitioner-assessee immediately got registered as a dealer and paid the tax along with the interest imposed. The court noted that the petitioner-assessee obtained registration with retrospective effect from the date of commencement of business and paid the tax without any demur. The transactions were duly recorded in the books of account, and the assessment was framed based on these records. The court highlighted that there was no concealment of turnover or filing of inaccurate particulars by the petitioner-assessee.

4. Bona Fide Belief and Mens Rea in Tax Evasion:
The petitioner-assessee contended that he was under a bona fide belief that the service of food items was not taxable and relied on various judgments to support this belief. The court emphasized that an assessee is entitled to claim that a particular sale is not taxable and that the rejection of such a bona fide contention does not necessarily imply mens rea or guilty animus. The court reiterated that the imposition of penalty is not automatic and requires a reasonable conclusion of contumacious conduct or guilty intention. The court found that the assessing authority did not establish any deliberateness or guilty animus on the part of the petitioner-assessee to conceal taxable turnover.

Conclusion:
The court concluded that the present revision petitions deserved to be allowed, and the penalty imposed and restored by the assessing authority and the Tax Board, respectively, deserved to be set aside. The court restored the order of the Deputy Commissioner (Appeals) in favor of the assessee, holding that no penalty under Section 65 of the Act could be imposed upon the petitioner-assessee in the aforesaid circumstances. The court did not pass any order as to costs.

← Previous Next →