2019 (5) TMI 968 - HC - VAT and Sales Tax

Imposition of penalty u/s 10-A of the Central Sales Tax Act - purchase of Rough C.I. Casting - HELD THAT - Hon'ble Apex Court in the case of Commissioner of Sales Tax, U.P. Vs. Sanjiv Fabrics 2010 (9) TMI 461 - SUPREME COURT . In the said case the Hon'ble Apex Court has held that the penalty provisions are penal in character and unless the filing of an inaccurate return is accompanied by a guilty mind, the section cannot be invoked for penalty. The Apex Court, therefore, concluded that a finding of mens rea is a condition precedent for levying penalty under Section 10(b) read with Section 10-A. The explanation furnished by the applicant is sufficient and therefore the penalty imposed under Section 10-A of the Act is set aside - revision allowed.

Summary

Issues:
Penalty under Section 10-A of the Central Sales Tax Act for purchasing C.I. Casting instead of Rough C.I. Casting.

Analysis:
The case involved a dispute regarding penalty proceedings under Section 10-A of the Central Sales Tax Act for the assessment year 2001-02. The applicant, a registered dealer engaged in the manufacture and sale of Tractor Parts and Diesel Engine Parts, purchased C.I. Casting and lubricants against Form C. The assessing authority initiated penalty proceedings alleging that the applicant falsely represented by purchasing C.I. Casting instead of Rough C.I. Casting as mentioned in the registration certificate. The applicant contended that there was no concealment as the purchases were made against Form C covered by the registration certificate. The assessing authority imposed a penalty of ?1,19,140 which was challenged through various stages of appeal.

The First Appellate Authority partially allowed the appeal, holding that Rough C.I. Casting and C.I. Casting were the same items used for manufacturing machine and tractor parts. It was found that the applicant did not misuse Form C or falsely represent while purchasing C.I. Casting. The Tribunal, however, allowed the appeal filed by the Commissioner Trade Tax U.P., setting aside the First Appellate Authority's decision and restoring the penalty imposed by the assessing authority.

The applicant argued that penalty proceedings under Section 10-A could only be initiated if a dealer falsely represents goods not covered by the registration certificate. Emphasizing the term "falsely represents" in Clause (b) of Section 10, the applicant contended that there was no misrepresentation as the purchases were duly recorded and accepted by the assessing authority. Referring to a Supreme Court decision, the applicant highlighted the penal nature of penalty provisions requiring a guilty mind for imposition. The Supreme Court's interpretation emphasized that mens rea is a condition precedent for levying penalty under Section 10(b) read with Section 10-A.

Considering the arguments and evidence presented, the judge, Ashok Kumar, J., concluded that the applicant's explanation was sufficient, setting aside the penalty imposed under Section 10-A of the Act. The revision was allowed in favor of the applicant, highlighting the importance of mens rea in penalty proceedings under the Central Sales Tax Act.