2022 (8) TMI 159 - HC - VAT and Sales Tax

Penalty proceedings initiated under Section 10A of the Act - correctly utilization of Form-C for purchase of said goods can be answered once the provisions contained in Section 10 of the Act are perused or not - HELD THAT - As per Sub Clause (b) of section 10 of the Act penalty can be imposed upon registered dealer who falsely purchase any class of goods that goods are covered by certificate of registration. Thus Section 10(b) of the Act clearly indicates that in case any dealer has not obtained registration certificate for purchase of any product or any class of goods or the same are not covered by the certificate of registration then penalty can be levied upon the dealer in case he purchases the said goods utilizing Form-C. In the present case admittedly the revisionist did not have Certificate of Registration for purchase of Railway Siding Locomotives and Transmitters and hence he could not have utilized Form-C for purchase of said goods and his case is covered under Section 10(b) of the Act and therefore penalty proceedings were initiated by the Assessing Authority. It is also noticed that railway siding locomotives and transmitters are not such goods as can be included in any other class of goods for which certificate of registration had already been obtained by the revisionist and hence neither it has been argued nor it is established that railway siding locomotives and transmitters are such goods which can be included in any other class or category of goods for which registration certificate has already been granted to the revisionist. In the present case the revisionist had never applied for registration of Railway Siding Locomotives and Transmitters and in absence of registration of such goods Form-C was issued to him for purchase of the said items and it could not be demonstrated by the revisionist that he had done this under any bona fide belief or under mistake of fact. Apart from the above clearly Railway Siding Locomotives and Transmitters cannot be related to any other goods or class of goods for which registration had already been obtained by the revisionist so as to show that he was under some bona fide belief that the said goods are included in the class of goods for which Registration Certificate had already been issued - In absence of any such bona fide belief or any other circumstance indicating that revisionist could have validly purchased the said goods against Form-C it cannot be said that the same had been obtained in a bona fide manner and hence leads to inevitable conclusion that Form-C had been utilized malafidely and unauthorizedly only with intention to evade tax. It cannot be demonstrated that purchase of goods against Form-C was done in bona fide manner nor had the revisionist moved any application for inclusion of said goods for registration under Section 7 of the Act - it cannot be said that there is any infirmity in imposition of penalty by the revenue under Section 10 of the Act - The revisionist is dismissed.

Summary

Issues:
1. Imposition of penalty under Section 10A of the Act without mens rea.
2. Justification of penalty on railway siding, locomotives, and other integral goods.

Analysis:

Issue 1: Imposition of penalty under Section 10A without mens rea
The revisionist challenged the Trade Tax Tribunal's order imposing a penalty for unauthorized purchases against Form C. The revisionist, a Cooperative Society engaged in fertilizer manufacturing, argued that they had applied for registration to purchase essential materials at concessional tax rates. The dispute arose from penalty proceedings initiated for purchases made in the assessment year 1989-90. The Tribunal partially allowed the appeals, leading to the revision before the High Court. The revisionist contended that penalties were unjustified as there was no mens rea, citing relevant Supreme Court judgments. However, the Court found that the revisionist had not obtained a Certificate of Registration for certain goods, leading to justified penalty proceedings under Section 10(b) of the Act.

Issue 2: Justification of penalty on integral goods
The Court considered whether penalties on railway siding, locomotives, and other goods were justified. The revisionist argued that these goods were essential for the manufacturing process and integral to production. They relied on a Supreme Court judgment regarding goods necessary for manufacturing. However, the Court noted that for the assessment year in question, the revisionist had not applied for registration for these goods. Despite subsequent approvals, the revisionist continued to purchase these goods using Form C without proper registration. The Court emphasized that penalties were valid under Section 10(b) of the Act as the revisionist had not obtained registration for these specific goods. The absence of mens rea and the unauthorized nature of the purchases led to the dismissal of the revisionist's claims, upholding the penalties imposed by the revenue authorities.

In conclusion, the High Court dismissed the revisionist's appeal, ruling in favor of the revenue authorities. The Court held that the penalties imposed were justified under Section 10 of the Act due to the revisionist's unauthorized purchases against Form C without proper registration. The Court found no infirmity in the Tribunal's order and declined to interfere, answering the legal questions against the revisionist and in favor of the revenue authorities.