2022 (1) TMI 862 - HC - VAT and Sales Tax

Levy of penalty under Section 10A of the Central Sales Tax Act 1956 - C-Forms - inter-state sales - absence of a finding that the petitioner had falsely represented at the time of purchase of goods that the same were covered by the registration certificate issued to them - section 10(b) of the CST Act - HELD THAT - Admittedly in the present case there was no finding either in the assessment order or in the orders passed by the Appellate Authorities that the petitioner had made false representation that the goods purchased against C Form from the inter state dealers were covered under the Form B issued to them thereby constituting the offence under section 10(b) warranting levy of penalty under section 10A of the CST Act. In fact all the authorities confined their enquiry to merely find as to whether the goods purchased were mentioned in the registration certificate issued to the petitioner and they failed to make any enquiry as to whether the petitioner had falsely represented when purchasing the goods that the same were covered by the certificate of registration issued to them though not covered - the essential ingredient of mens rea for levy of penalty on the petitioner was not established. In such circumstances the findings of the Assessing Officer as confirmed by the First Appellate Authority as well as the Tribunal that the petitioner committed the offence under section 10(b) warranting levy of penalty under section 10A of the Act cannot be allowed to be sustained. Both the writ petitions stand allowed by setting aside the orders passed by the authorities below with respect to levy of penalty - decided in favor of petitioner.

Summary

Issues:
Levy of penalty under Section 10A of the Central Sales Tax Act, 1956 for falsely representing goods covered by the registration certificate.

Analysis:
The High Court of Madras considered two writ petitions arising from an order passed by the Tamil Nadu Sales Tax Appellate Tribunal regarding assessment years 2000-01 and 2001-02. The main issue was whether the penalty under Section 10A of the CST Act was justified without a finding that the petitioner had falsely represented the goods at the time of purchase. The petitioner, engaged in the manufacture of Engineering Products, was penalized for inter-state purchases not included in their registration certificate. The assessing officer levied a penalty under Section 10A, which was later reduced by the First Appellate Authority and affirmed by the Tribunal.

The court analyzed Section 10(b) of the CST Act, which requires two conditions for penalty under Section 10A: goods purchased against Form 'C' not covered by the registration certificate and a false representation by the dealer at the time of purchase. Referring to a Full Bench decision, the court emphasized the necessity of mens rea for the offense under Section 10(b) and the requirement of false representation. The court noted that in the present case, there was no finding of false representation by the petitioner, as all authorities focused on whether the purchased goods were mentioned in the registration certificate without investigating the false representation element. Therefore, the essential mens rea for penalty imposition was not established.

Consequently, the court allowed both writ petitions, setting aside the orders of the lower authorities regarding the penalty levy. The court ruled that without establishing the element of false representation, the penalty under Section 10A could not be sustained. No costs were awarded, and the connected miscellaneous petitions were closed.