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2020 (8) TMI 778 - HC - VAT and Sales TaxLevy of penalty under Section 10-A read with Section 10(b) of CST Act - purchase of diesel and fuel for generator set against the C forms at concessional rates - misuse of such Declaration in C forms - honest/bonafide belief or not - HELD THAT - Section 10(b) of the Act provides for an offence if any person being registered dealer falsely represents when purchasing any class of goods that goods of such class are covered by his certificate of registration. The expression falsely represents clearly shows that the element of mens rea is the necessary component of the offence. In the absence of mens rea, resort to penal provision would not be proper unless it is established that the conduct of the dealer was contumacious or that there was deliberate violation of the statutory provision or willful disregard thereof - If the registered dealer honestly believes that any particular goods are embraced by the certificate of registration and on that belief makes a representation, he cannot be held guilty of the offence under Section 10(b) of the Act and no penalty can be imposed under Section 10A of the Act. The question whether the assessee acted under the honest belief is a question of fact. The learned Appellate Tribunal was justified in holding that the Assessee was entitled to purchase the said fuel viz., diesel, for its generator set and even though the same was not separately included in the Registration Certificate of the Assessee, no mens rea can be attributed to the Assessee for purchase of the same at concessional rate against C Form and therefore, the question of imposition of penalty under Section 10(b) of the Act read with Section 10-A of the Act does not arise. Petition dismissed - decided against Revenue.
Issues:
1. Imposition of penalty under Section 10-A of the CST Act for purchase of diesel and fuel for generator set against "C" forms. 2. Interpretation of the requirement of mens rea for the imposition of penalty under Section 10(b) of the CST Act. 3. Application of legal principles regarding the classification of diesel as raw material for concessional rates under Section 10 of the Act. Issue 1: Imposition of Penalty under Section 10-A of the CST Act The State filed a writ petition challenging the Sales Tax Appellate Tribunal's order allowing the appeal of the assessee, holding that no penalty could be imposed under Section 10-A for purchasing diesel and fuel for a generator set against "C" forms. The Tribunal reasoned that the fuel purchase was integral to the manufacturing activity, and the dealer was entitled to purchase fuel by issuing C forms. The Tribunal cited Rule 13 of CST Rules, emphasizing that the purchase was done with a bona fide intention, reducing the penalty. Relying on case law, the Tribunal set aside the penalty and allowed the appeals in question. Issue 2: Interpretation of Mens Rea for Penalty under Section 10(b) of the CST Act Both counsels referred to a Full Bench judgment stating that the element of mens rea is essential for imposing penalties under Section 10(b) of the Act. The absence of mens rea implies no penalty can be imposed unless there is contumacious conduct or deliberate violation of statutory provisions. The Full Bench held that if a dealer honestly believes goods are covered by their registration certificate, no penalty can be imposed. The reference to the Full Bench judgment clarified that mens rea is a crucial element for levying penalties under Section 10(b) of the CST Act. Issue 3: Classification of Diesel as Raw Material for Concessional Rates Referring to a Supreme Court judgment, it was established that diesel used for running a generator set in the manufacturing process could be considered a raw material and purchased at concessional rates against "C" forms. The Court emphasized that the diesel was essential for manufacturing the end product, satisfying the conditions for concessional rates. Despite not being separately included in the Registration Certificate, the Assessee was entitled to purchase diesel at a concessional rate. Therefore, the Appellate Tribunal's decision was deemed justified, and no mens rea was attributed to the Assessee for the purchase. In conclusion, the High Court dismissed the Revenue's writ petition, finding no merit in challenging the Tribunal's decision. The Court upheld the Tribunal's ruling that the Assessee was entitled to purchase diesel for the generator set at concessional rates, absolving them of any penalty under Section 10(b) of the CST Act. The judgment emphasized the importance of mens rea in imposing penalties and clarified the classification of diesel as a raw material for concessional rates, ultimately leading to the dismissal of the Revenue's petition.
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