2022 (9) TMI 848 - HC - VAT and Sales Tax

Levy of penalty under section 10-A of the Central Sales Tax Act, 1956 - Condition precedent for imposition of penalty - applicability of Concessional rate - failure on the part of Department to establish any means rea on the part of the applicant - malafide intention on the part of the applicant by using 'C' forms for purchase of goods or not - HELD THAT - Admittedly, Section 10-A of the Act, 1956 was invoked upon the Assessing Authority finding violation of Section 10(b)(c) or (d) of the Act, 1956. Incidentally, clause (b), (c) and (d) pertain to falsely representing and purchasing any class of goods that goods of such class are covered by the certificate of registration; not being a registered dealer but falsely representing when purchasing goods in the course of inter-State trade or commerce that he is a registered dealer; or after purchasing any goods for any of the purposes specified in clause (b) or clause (c) or clause (d) of sub-section (3) or sub-section (6) of section 8 fails, without reasonable excuse, to make use of the goods for any such purpose. Admittedly, there is also a specific finding by the second appellate authority in the order dated 18.07.2013 of their being bonafide belief on the part of the revisionist and there being no ill intention on the part of the revisionist and no such ill intention having been proved by the department. Needless to mention that it is open to the authorities concerned to proceed against the revisionist in accordance with law in case any misuse of Form 'C' comes to the notice of the authority concerned or for default under any other clause of Section 10 of the Act, 1956. The order dated 18.07.2013 is set-aside so far as it remands back the matter to the authority concerned, leaving it open to the authorities concerned to proceed against the revisionist in accordance with law, in case any misuse of Form 'C' comes to the notice of the authority concerned or for default under any other clause of Section 10 of the Act, 1956 - The revision is partly allowed.

Issues Involved:
1. Imposition of penalty under Section 10-A of the Central Sales Tax Act, 1956.
2. Justification of remanding the case to the first appellate authority.
3. Bona fide belief and absence of malafide intent in using 'C' forms.

Detailed Analysis:

1. Imposition of Penalty under Section 10-A of the Central Sales Tax Act, 1956:
The core issue revolves around whether the penalty imposed under Section 10-A of the Central Sales Tax Act, 1956 was justified. The revisionist argued that the penalty could only be imposed if there was a false representation or misuse of goods without reasonable excuse, as specified in clauses (b), (c), and (d) of Section 10. The second appellate authority found that the revisionist used Form 'C' under a bona fide belief without any malafide intent. Consequently, it was argued that none of the conditions under Section 10(b), (c), and (d) were met, thus invalidating the penalty imposed by the Assessing Authority.

2. Justification of Remanding the Case to the First Appellate Authority:
The second appellate authority's decision to remand the case back to the first appellate authority for fresh consideration was contested. The revisionist argued that since the second appellate authority had already determined the absence of malafide intent and bona fide use of Form 'C', remanding the case was unnecessary and an exercise in futility. The court agreed, referencing a similar case (Commissioner of Trade Tax vs. M/s Leasing and Finance Ltd. Kanpur) where it was held that remanding the case after concluding no violation of Section 10(d) was unjustified. The court emphasized that it is always open for the authorities to initiate penalty proceedings under any other clause of Section 10 if necessary.

3. Bona Fide Belief and Absence of Malafide Intent in Using 'C' Forms:
The revisionist's defense hinged on the argument that the use of 'C' forms was done under a bona fide belief and without any malafide intention. The second appellate authority confirmed this, noting that the revisionist had made full disclosure of facts and nature of business in their registration application. The court found that the Assessing Authority had not proven any ill intent on the part of the revisionist. Therefore, the conditions for invoking Section 10-A, which requires false representation or misuse of goods, were not met.

Conclusion:
The court concluded that the remand of the matter to the first appellate authority was unwarranted given the findings of bona fide belief and absence of malafide intent by the second appellate authority. Therefore, the order dated 18.07.2013 was set aside to the extent that it remanded the matter, leaving it open for the authorities to proceed against the revisionist in accordance with law if any misuse of Form 'C' is noticed or for default under any other clause of Section 10 of the Act, 1956. The revision was partly allowed, addressing the three substantial questions of law accordingly.

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