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2018 (8) TMI 936 - HC - VAT and Sales TaxPenalty - Misuse of Form C - non-production of Form C of Central Sales Tax Act - Section 10(a) of the Central Sales Tax Act, 1986 - It is the case of the petitioner that mens rea is established by conduct of the respondent himself and the question of reestablishing the mens rea, does not arise - Held that - The main ingredient under Section 10(a) of the Act is that unless it makes out that the respondent or purchaser has used Form-C for the purpose of the availing concession of tax in contravention of provisions, it is not permissible to levy penalty. In order to invoke Section 10(a) of the Act, the very important ingredient is whether there is mens rea or involvement of mind to defraud the Government. Mens rea or guilty mind, it is sine quo non before invoking Section 10(a) of the Act. When an Authority invokes Section 10(a) of the Act, Authority should clearly establish or elicit defraud to the Government by misusing Form-C for the purpose of resale. When it is permissible under Part-M of Schedule-II of Entry No.1 of KST Act, which specifically includes the machineries of the nature which respondent has bought from outside, it is permissible for the purpose of his use - it cannot be held that he has misused Form-C for the purpose of defrauding the Government. The petitioner has utterly failed to establish mens rea on the part of the respondent. Under these circumstances, it is proper to hold that there is no substantial question of law involved in this matter - petition dismissed - decided against Revenue.
Issues involved:
Challenge to order passed by Karnataka Appellate Tribunal under Section 65(1) of KVAT Act; Interpretation of Section 10(a) of Central Sales Tax Act; Mens rea in misuse of Form-C for purchasing machineries; Imposition of penalty under Section 10(a) of CST Act; Contravention of legal provisions in penalty imposition; Requirement of mens rea for invoking penalty; Proper use of Form-C for concessional rate; Failure to establish mens rea in case of respondent; Dismissal of petition. Analysis: Challenge to Karnataka Appellate Tribunal's Order: The petitioner filed a petition challenging the order of the Karnataka Appellate Tribunal under Section 65(1) of the KVAT Act. The appeal by the respondent before the Tribunal was partially allowed, leading to the petitioner's grievance and subsequent filing of the petition. Interpretation of Section 10(a) of Central Sales Tax Act: The petitioner contended that the Tribunal's order was contrary to Section 10(a) of the Central Sales Tax Act, which allows for penalty imposition in cases of failure to provide Form-C. The petitioner argued that the respondent's conduct in contravening Form-C provisions warranted the penalty under Section 10(a) of the Act. Mens Rea in Misuse of Form-C: The petitioner emphasized the establishment of mens rea through the respondent's conduct in purchasing machineries in violation of Form-C provisions. The petitioner argued that the misuse of concessional rates for resale purposes indicated mens rea, eliminating the need to reestablish mens rea. Imposition of Penalty under Section 10(a) of CST Act: The Assistant Commissioner imposed a penalty under Section 10(a) of the CST Act on the respondent for purchasing trucks without providing Form-C. The petitioner justified the penalty imposition based on the respondent's actions and non-filing of objections against the penalty proposition. Contravention of Legal Provisions in Penalty Imposition: The petitioner alleged that the Appellate Tribunal erred in allowing the appeal without proper appreciation of the case. The misuse of Form-C for resale purposes was considered a violation of concessional rate provisions, justifying the penalty. Requirement of Mens Rea for Invoking Penalty: The respondent argued that the penalty imposition was contrary to legal judgments requiring the establishment of mens rea before invoking penalties under Section 10(a) of the Act. The respondent highlighted the lack of mens rea in the case and referenced relevant legal precedents supporting this argument. Proper Use of Form-C for Concessional Rate: The respondent defended the use of Form-C for purchasing machineries, stating that the purchased items fell under permissible categories as defined in the Karnataka Sales Tax Act. The respondent maintained that there was no misuse of Form-C for resale purposes. Failure to Establish Mens Rea in Case of Respondent: The Appellate Tribunal found that the petitioner failed to establish mens rea on the part of the respondent in misusing Form-C for purchasing machineries. The Tribunal's decision was based on the lack of evidence indicating fraudulent intent on the respondent's part. Dismissal of Petition: After considering arguments from both parties and relevant legal provisions, the Court dismissed the petition. The Court held that the petitioner did not establish a substantial question of law, as mens rea was not proven in the respondent's actions, leading to the dismissal of the petition. This detailed analysis covers the various issues involved in the legal judgment, providing a comprehensive understanding of the case and the arguments presented by both parties.
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