2015 (6) TMI 1009 - HC - VAT and Sales Tax

Leviability of penalty under section 78(5) of the Rajasthan Sales Tax Act, 1994 - Whether mens rea is required to be proved - Mandatory declaration form ST-18C not produced at the time of inspection - Held that - the declaration form, which was obtained by the assessee, was available with them, and which was produced immediately on demand, and even on the same day of intercepting the vehicle. Also he appeared before the authorized officer himself on the same day and produced declaration form ST-18C, therefore, once it is a finding of fact given by the assessing officer that the declaration form was produced on the same day on June 23, 1999 when the vehicle was intercepted, in the light of the judgment rendered by the honourable apex court in the case of State of Rajasthan and another Versus DP. Metals (and other appeals) 2001 (10) TMI 881 - SUPREME COURT OF INDIA and in the light of the rule 54 of the RST Rules, which postulate that principle of natural justice demand that an opportunity should be given and therefore, it is a clear cut case where the declaration form, though mandatory, required to be carried with the vehicle but the driver/vehicle incharge forgot to carry the same, which was immediately produced on demand that too on same day. Therefore, in the light of judgment rendered by Honourable Apex Court in the case of Guljag Industries v. Commercial Taxes Officer 2007 (8) TMI 344 - SUPREME Court and Larger Bench of this court in Assistant Commercial Taxes Officer v. Indian Oil Corporation Ltd. 2015 (11) TMI 1078 - RAJASTHAN HIGH COURT , mens rea is not essential and and the observation regarding mens rea needs to be reversed. Also the penalty has not to be levied. - Decided against the revenue

Summary

Issues:
1. Conflict of opinions in Division Bench judgments regarding mens rea requirement for penalty under section 78 of Rajasthan Sales Tax Act, 1994.
2. Relevance of mens rea for imposing penalty under sub-section (5) of section 78 on proven violation of sub-section (2) of section 78.
3. Impact of amendment to rule 55 of Rajasthan Sales Tax Rules, 1995 following the Supreme Court decision in State of Rajasthan v. D. P. Metals.
4. Application of mens rea as a necessary ingredient for penalty under section 78(5) on proven violation of section 78(2) of Rajasthan Sales Tax Act, 1994.

Analysis:
The High Court of Rajasthan addressed a sales tax revision petition concerning conflicting opinions in Division Bench judgments regarding the mens rea requirement for imposing penalties under the Rajasthan Sales Tax Act, 1994. A Larger Bench was constituted to resolve questions related to mens rea in penalty determinations. The Larger Bench, in a connected revision petition, clarified that mens rea is not relevant for determining penalty liability under section 78(5) of the Act, even in cases of proven violation of section 78(2). The amendment to rule 55 post the Supreme Court decision in State of Rajasthan v. D. P. Metals empowers authorities to inquire into violations without the need to establish mens rea for imposing penalties under section 78(5).

In the specific case under consideration, the respondent's goods were inspected at a check-post without the mandatory declaration form ST-18C. The assessing officer imposed a penalty under section 78(5) due to the absence of the form during inspection. The Deputy Commissioner (Appeals) and the Tax Board subsequently ruled in favor of the respondent, leading to the Revenue's appeal. The Revenue contended that the mandatory declaration form should have been present during the inspection, emphasizing the importance of compliance.

The High Court upheld the Tax Board's decision, noting that the respondent promptly produced the required declaration form upon demand during the inspection itself. The court emphasized that the form was obtained before dispatching the goods and was provided immediately upon interception, meeting the principles of natural justice. The court highlighted that mens rea is not essential for penalties, as established by previous judgments. Consequently, the court found no legal basis for levying a penalty in this case, ruling in favor of the respondent and against the Revenue.

In conclusion, the High Court's detailed analysis clarified the application of mens rea in penalty determinations under the Rajasthan Sales Tax Act, emphasizing compliance with legal requirements and the principles of natural justice. The judgment provided clarity on penalty imposition and upheld the Tax Board's decision based on the specific circumstances of the case.