2010 (11) TMI 895 - HC - VAT and Sales Tax

Setting aside the penalty order passed by the assessing officer Held that - Declaration form ST-18A was neither produced at the time of checking of the vehicle nor along with reply to show-cause notice before the assessing officer. Therefore, it is a clear case of breach of provisions of section 78(2) of the Act. The Deputy Commissioner (Appeals) while setting aside the penalty order observed that the assessing officer did not make any inquiry and failed to prove the guilty mind or mens rea on the part of the assessee. Therefore, the penalty order is liable to be set aside. The reasoning assigned by the Deputy Commissioner (Appeals) is contrary to the judgment of the honourable apex court in Guljag Industries v. Commercial Taxes Officer reported in 2007 (8) TMI 344 - SUPREME Court wherein the honourable apex court held that mens rea is not essential ingredient for contravention of section 78(2) of the Act. Apart from above, the Deputy Commissioner (Appeals) as well as the Rajasthan Tax Board, both have set aside the penalty order on the ground that penalty order has been passed against the owner of the goods, whereas penalty order could not have been passed against owner of the goods for an offence relating to the period prior to March 22, 2002. The reason assigned by both the appellate authorities is illegal and contrary to the law laid down by the honourable apex court. Revision petition filed by the Revenue is allowed

Summary

Issues:
Violation of section 78(2)(a) of the Rajasthan Sales Tax Act, 1994 - Imposition of penalty under section 78(5) - Appeal allowed by Deputy Commissioner (Appeals) - Challenge by Revenue before Rajasthan Tax Board - Dismissal of appeal by Rajasthan Tax Board - Revision petition by Revenue challenging the decision.

Analysis:

The case involved a violation of section 78(2)(a) of the Rajasthan Sales Tax Act, 1994, where a penalty was imposed under section 78(5) due to the absence of declaration form ST-18A with the goods during a vehicle check. The assessing officer imposed a penalty of Rs. 35,230, which was challenged by the assessee in an appeal. The Deputy Commissioner (Appeals) allowed the appeal on the grounds that mens rea to evade tax was not proven and that the penalty could not be imposed on the owner of the goods for pre-March 22, 2002 offenses. Subsequently, the Revenue appealed to the Rajasthan Tax Board, which dismissed the appeal, leading to the current revision petition.

The petitioner argued that the penalty was rightfully imposed as the declaration form was not produced during the vehicle check or in response to the show-cause notice. The petitioner contended that the decision to set aside the penalty order by the Deputy Commissioner (Appeals) and the Rajasthan Tax Board was incorrect, citing a Supreme Court case precedent that mens rea was not essential for contravention of section 78(2) of the Act.

The High Court judge analyzed the case in light of the reasons provided by the appellate authorities. It was noted that the breach of section 78(2)(a) attracted the penalty under section 78(5) of the Act. The Deputy Commissioner (Appeals) and the Rajasthan Tax Board had set aside the penalty order based on the lack of mens rea and the incorrect application of the law regarding the imposition of penalties on the owner of goods. The judge referred to a Supreme Court judgment that clarified the term "person in-charge of the goods" under section 78(5) to include the owner of the goods.

Consequently, the High Court allowed the revision petition by the Revenue, setting aside the judgments of the Deputy Commissioner (Appeals) and the Rajasthan Tax Board. The original penalty order passed by the assessing officer was restored due to the non-appearance of the respondent during the proceedings. No costs were awarded due to the absence of the respondent.