2011 (12) TMI 453 - HC - VAT and Sales Tax

Penalty u/s 78(5) - Mens rea - Held that - From the order of the appellate authority dated August 28, 2000, it is apparent that no intent to evade tax by the assessee was found in the facts of the case, it was admitted by the Revenue that the goods in transit were duly tax-paid, and the declaration form ST-18C was filed by the assessee along with its reply to the show-cause notice. The Tax Board in its order dated August 28, 2000 has held that the presence of all other documents in the course of checking of the vehicle was sufficient to prove that goods in transit were duly tax-paid, and thus no matter what intent to evade tax was absent. It was further held that on the mere unavailability of declaration form ST-18C along with other documents in the first instance a penalty under section 78(5) of the 1994 Act was mechanically applied overlooking the subsequent furnishing of the form in issue along with the reply to show-cause notice. The Tax Board relied upon the judgment of the honourable Supreme Court in State of Rajasthan v. D.P. Metals 2001 (10) TMI 881 - SUPREME COURT OF INDIA , wherein it was held that if the assessee was able to produce the relevant documents such as form ST-18C on receipt of notice, it would be sufficient compliance of law and no penalty can be imposed. As such the Tax Board upheld the order of the appellate authority whereby it set aside the order of penalty imposed upon the assessee under section 78(5) of the 1994 Act. there was no mens rea of the assessee to evade tax - Decided against Revenue.

Summary

Issues:
1. Challenge to the order upholding penalty under section 78(5) of the Rajasthan Sales Tax Act, 1994.
2. Interpretation of law regarding penalty imposition for missing declaration form ST-18C during transit.
3. Application of the principle of mens rea in tax evasion cases.

Analysis:
1. The revision petition challenged the order of the Rajasthan Tax Board, Ajmer, upholding the penalty imposed under section 78(5) of the Rajasthan Sales Tax Act, 1994. The appellate authority had set aside the penalty imposed on the assessee for missing declaration form ST-18C during transit. The Tax Board upheld the appellate authority's decision, leading to the revision petition before the High Court.

2. The case involved a situation where a vehicle carrying goods was checked during transit, and although other relevant documents were present, the declaration form ST-18C was missing. The assessing officer imposed a penalty based on the absence of the form, misinterpreting section 78(5) of the 1994 Act. However, the appellate authority corrected this misinterpretation, emphasizing the lack of evidence of intent to evade tax and the subsequent submission of the form by the assessee. The High Court noted that the Tax Board relied on the Supreme Court judgment in State of Rajasthan v. D.P. Metals, which emphasized that the submission of relevant documents upon notice suffices for compliance with the law, and no penalty should be imposed in such cases.

3. The High Court, after reviewing the facts and legal precedents, concluded that there was no mens rea on the part of the assessee to evade tax. It cited the Supreme Court judgment in D.P. Metals, which remained valid law under Article 141 of the Constitution of India. The High Court found no error in the Tax Board's decision and dismissed the revision petition, affirming the order setting aside the penalty under section 78(5) of the 1994 Act.