2015 (11) TMI 1078 - HC - VAT and Sales Tax

Penalty u/s 78(5) - Whether the mens rea is required to be proved - Decision of larger bench - violation of sub-section (2) of Section 78 - Establishment of check-post and inspection of goods while in movement - Rajasthan Sales Tax Act, 1994 - Held that - There is dichotomy between contravention of Section 78(2) of the Act, which invites strict civil liability on the assessee and the evasion of tax. When a statement of import/export is not filed before the AO, it results in evasion of tax, however, when the goods in movement are carried without the declaration Form ST 18-A/18-C, then strict liability comes in, in the form of Section 78(5) of the Act. Breach of Section 78(2) imposes strict liability under Section 78(5) because as explained, goods in movement cannot be carried without Form ST 18-A/18-C. - The penalty imposed under Section 78(5), is a civil liability. Willful breach is not an essential ingredient for attracting the civil liability as in the case of prosecution. Section 78(2) is a mandatory provision. If the declaration Form ST 18-A/18-C does not support the goods in movement because it is left blank, then in that event Section 78(5) provides for imposition of monetary penalty for non-compliance. In the case of RST Act, 1994, hearing is only to find out whether the assessee had contravened Section 78(2) of the RST Act, 1994, and not to find out evasion of tax which function is not assigned to the officer at the check-post, but to the Assessment Officer in the assessment proceedings. In the circumstances, the Supreme Court, without any doubt or ambiguity, held that mens rea is not an essential element in the matter of imposition of penalty under Section 78(5) of the RST, 1994. - on a complaint being made against such person by the assessing authority, or any other competent officer after having obtained sanction from the Deputy Commissioner(Administration) having jurisdiction, he shall, on conviction by a Judicial Magistrate having jurisdiction, be punishable with simple imprisonment for a term, which may extend to six months, and with fine, not exceeding rupees five thousand, and for the offences covered under clauses(b), (c), (f), or (g) of Section 71(1) of the RST Act, 1994, with a minimum sentence of simple imprisonment of three months. In such case, mens rea would be required as the offences disclosed under Section 71(1) are criminal in nature, and that in such case, the Judicial Magistrate will be required to convict a person, and impose a sentence of imprisonment and/or fine. In such case, on a defence taken that a person was not of guilty mind, will require proof of guilty mind namely the mens rea as a necessary ingredient for conviction, sentence and fine. The violations enumerated in clauses (b), (c) and (d) of Section 10, may not necessarily result in prosecution with the possible imposition of sentence of imprisonment, as an alternative is provided in respect of these violations in Section 10-A. The word false under Section 10(b), has two distinct and well-recognised meanings, namely (i)intentionally or knowingly or negligently untrue, or (ii) untrue by mistake or accident, or honestly after the exercise of reasonable care. A thing is called false when it is done, or made with knowledge, actual or constructive, that it is untrue or illegal, or it is said to be done falsely when the meaning is that the party is in fault for its error. The use of the expression falsely represents , is indicative of the fact that the offence under Section 10(b) of the Act comes into existence only where a dealer acts deliberately in defiance of law, or is guilty of contumacious or dishonest conduct. Therefore, in proceedings for levy of penalty under Section 10-A of the Act, the burden will be on the Revenue to prove the existence of circumstances constituting the said offence. In the light of the language employed in Section 10-A and the nature of penalty contemplated therein, it cannot be held that all types of omissions or commissions in the use of Form C will be embraced in the expression false representation . Thus, therefore, a finding of mens rea is a condition precedent for levying penalty under Section 10(b) read with Section 10-A of the Act. It is only when a person despite giving such an opportunity, is not able to produce the document and/or declaration forms completed in all respects, when the goods enters or leaves the nearest check-post of the State, or the documents are found to be false or forged, after enquiry, that a penalty may be imposed, which is a civil liability for compliance of the provisions of the Act for the purposes of checking the evasion of tax. It is thus not correct to submit that penalty for submission of false or forged document or declaration, necessarily involves adjudication, for which mens rea is relevant, and is a necessary ingredient. The requirement of mens rea is not relevant for the purpose of determining the liability for penalty, in terms of Section 78(5) of the RST Act, 1994 - The mens rea is not required to be proved as necessary ingredient for imposition of penalty under sub-section (5) of Section 78, on proving violation of sub-section(2) of Section 78 of the RST Act, 1994. - Decided against the assessee.

Summary

Issues Involved:
1. Relevance of mens rea for determining liability for penalty under Section 78(5) of the Rajasthan Sales Tax Act, 1994.
2. Requirement of proving mens rea for imposition of penalty under Section 78(5) on violation of Section 78(2).
3. Impact of amendment to Rule 55 of the Rajasthan Sales Tax Rules, 1995, on the imposition of penalty without proving mens rea.
4. Necessity of mens rea for imposing penalty under Section 78(5) on violation of Section 78(2).

Issue-wise Detailed Analysis:

1. Relevance of Mens Rea for Determining Liability for Penalty under Section 78(5) of the Rajasthan Sales Tax Act, 1994:
The court examined whether mens rea (guilty intention) is necessary for imposing penalties under Section 78(5) of the RST Act, 1994. The Supreme Court in Guljag Industries Vs. Commercial Taxes Officer clarified that the existence of mens rea is not essential for imposing penalties under this section. The penalty is for a statutory civil obligation, not a criminal offense, thus intention or mens rea is irrelevant. The court concluded that the requirement of mens rea is not relevant for determining liability for penalty under Section 78(5).

2. Requirement of Proving Mens Rea for Imposition of Penalty under Section 78(5) on Violation of Section 78(2):
The court affirmed that proving mens rea is not necessary for imposing penalties under Section 78(5) for violations of Section 78(2). The Supreme Court's judgment in Guljag Industries established that penalties under Section 78(5) are for statutory offenses, and the intention of the violator is irrelevant. The court reiterated that the penalty is attracted as soon as there is a contravention of statutory obligations, making mens rea unnecessary.

3. Impact of Amendment to Rule 55 of the Rajasthan Sales Tax Rules, 1995, on the Imposition of Penalty without Proving Mens Rea:
The amendment to Rule 55, following the Supreme Court's decision in State of Rajasthan and Another Vs. M/s. D.P. Metals, was discussed. The court noted that the amendment provides an opportunity for the person in charge to produce required documents and/or declaration forms. However, the amendment does not necessitate proving mens rea for imposing penalties under Section 78(5). The court clarified that the empowered authority's role is to verify compliance with Section 78(2), not to adjudicate on the presence of mens rea.

4. Necessity of Mens Rea for Imposing Penalty under Section 78(5) on Violation of Section 78(2):
The court reaffirmed that mens rea is not required for imposing penalties under Section 78(5) on violations of Section 78(2). The Supreme Court in Guljag Industries emphasized that the penalty is a civil liability for non-compliance with statutory obligations, and the intention behind the violation is irrelevant. The court concluded that mens rea is not a necessary ingredient for imposing penalties under these sections.

Conclusion:
The court, guided by the Supreme Court's judgment in Guljag Industries, concluded that mens rea is not relevant for determining liability for penalties under Section 78(5) of the RST Act, 1994. The requirement of proving mens rea is unnecessary for imposing penalties for violations of Section 78(2). The amendment to Rule 55 does not alter this position, and mens rea is not required for imposing penalties under Section 78(5) on proven violations of Section 78(2). The reference was disposed of accordingly, and the related Sales Tax Revisions were sent back for further proceedings in line with this opinion.