1998 (11) TMI 660 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of penalty levied under Section 10-A of the Central Sales Tax Act.
2. Requirement of mens rea for levying penalty under Section 10-A read with Section 10(b) of the Central Sales Tax Act.
3. Bona fide belief and its impact on penalty imposition.

Detailed Analysis:

1. Validity of penalty levied under Section 10-A of the Central Sales Tax Act:
The revision petitions challenge the orders of the Sales Tax Tribunal, which dismissed the Commissioner's appeals against the setting aside of penalties imposed on the respondents. The respondents had issued Form C for purchasing goods not covered by their registration certificates, thereby paying Central Sales Tax at a lower rate. The Tribunal concurred with the first appellate authority's view that there was no mens rea or evil intention on the part of the dealers. The High Court, however, found that the representation in Form C was false, and the respondents' conduct was at least grossly negligent, if not deliberately false, thereby making them liable for penalty under Section 10-A read with Section 10(b) of the Central Sales Tax Act.

2. Requirement of mens rea for levying penalty under Section 10-A read with Section 10(b) of the Central Sales Tax Act:
The High Court discussed the necessity of mens rea in the context of penalty under tax statutes. It referred to various judgments, including the Hon'ble Madras High Court's decision in Vijaya Eleetricals v. State of Tamil Nadu, which held that mens rea need not be established for penalty under Section 10-A read with Section 10(b) if the representation is found to be false. The Court also cited the Hon'ble Kerala High Court's decision in Integrated Enterprises v. State of Kerala, which held that mens rea is not a factor in the levy of penalty under these provisions. The High Court concluded that apart from the falsehood of the representation, it is not necessary to establish mens rea as an independent factor.

3. Bona fide belief and its impact on penalty imposition:
The respondents contended that they had a bona fide belief that the goods purchased were covered by their registration certificates. The High Court, however, found this belief to be unreasonable and baseless. In the case of the first respondent, the purchase of toffees instead of biscuits was done to gain a financial advantage by paying a lower tax rate. Similarly, the second respondent's claim that chewing gum was a medicine was deemed unreasonable. The Court held that the respondents' conduct showed a lack of bona fides and gross negligence, making their representations false within the meaning of Section 10-A read with Section 10(b).

Conclusion:
The High Court allowed the revision petitions, setting aside the impugned orders of the Tribunal. It held that the respondents committed default within the meaning of Section 10-A read with Section 10(b) of the Central Sales Tax Act and rendered themselves liable to penalty. The matter was remanded back to the Tribunal to decide the quantum of the penalty after giving the parties a reasonable opportunity of hearing on the other aspects involved in the appeals.