2022 (2) TMI 788 - HC - VAT and Sales Tax

Quantum of penalty under section 10(A) of the CST Act - petitioner availed tax concession at the reduced rate of Central Sales Tax at 4% by issuing Form 'C' declaration for certain items, which were not covered in the Form 'B' registration certificate issued by the second respondent to them - HELD THAT - The petitioner admitted its liability to pay tax for the purchases made in respect of goods that were not covered under Form 'B' registration certificate issued by the second respondent. They disputed only the quantum of penalty levied by the authorities below. Therefore, this court is inclined to look into the orders of the authorities below to that extent alone. It is seen that the assessing officer, after inspection and verification of records, found that the petitioner claimed concessional rate of CST at 4% by issuance of form 'C' declaration in respect of certain items that were not covered under the certificate of registration in form 'B' issued to them by the second respondent and thereby committed the offence as contemplated under section 10(b), warranting penalty under section 10(A) of the CST Act, 1956 - there was no false representation as alleged by the department and the concept of 'mens rea' would not arise for levy of penalty under section 10(A) of the CST Act. Being dissatisfied with the explanation submitted, the assessing officer ultimately completed the assessment, levying penalty at the rate of 150% of the tax due. The Tribunal after detailed analysis, came to the conclusion that there was mensrea on the part of the petitioner and hence, they were liable to pay penalty. At the same time, the Tribunal observed that the penalty levied by the assessing officer, was too excessive and therefore, the same was modified by restricting to 100% and not 150% - considering the fact that the petitioner made applications seeking amendment of the Form B registration certificate, which disclosed that they had made inter-state purchases on the bonafide impression that the disputed items would have been included in the Form B registration certificate issued by the second respondent; and subsequently, they had admitted their liability to pay tax in respect of the disputed items, this court is of the opinion that the levy of penalty has to be modified by restricting it to 50%, instead of 100% as done by the Tribunal. Petition disposed off.

Summary

Issues:
1. Challenge to order of Tamil Nadu Sales Tax Appellate Tribunal regarding penalty levied under CST Act, 1956.

Detailed Analysis:

Issue 1: Challenge to Tribunal's Order on Penalty Levied under CST Act, 1956
The petitioner, engaged in the manufacture and export of hosiery garments, challenged the order of the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Coimbatore, dated 29.01.2007. The petitioner disputed the penalty levied under Section 10(A) of the CST Act, 1956, for availing tax concession at a reduced rate of Central Sales Tax without proper authorization. The petitioner admitted liability for purchases not covered under their registration certificate but contested the quantum of penalty imposed. The assessing officer found the petitioner in violation of Section 10(b) of the CST Act for claiming concessional CST rate without proper authorization. The petitioner argued that the items in question were raw materials or components used in manufacturing hosiery goods, falling under permissible items as per Section 8(3)(b) of the CST Act. They also claimed to have sought amendment of their registration certificate to include these items. The Appellate Authority reduced the penalty, but the Tribunal upheld the penalty, though modifying it from 150% to 100%. The High Court, after considering the petitioner's efforts to amend their registration certificate and their admission of liability, modified the penalty further to 50%, disagreeing with the Tribunal's decision to uphold a 100% penalty. The High Court disposed of the writ petitions with this modification, without costs.

This detailed analysis covers the challenge to the Tribunal's order on the penalty levied under the CST Act, 1956, providing a comprehensive overview of the case, arguments presented, findings of lower authorities, and the High Court's final decision on the matter.