1995 (9) TMI 79 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Applicability of Clause (h) of sub-section (1) of Section 15A of the U.P. Sales Tax Act, 1948.
2. Determination of mens rea or guilty intention for the imposition of penalty.
3. Assessment of the Tribunal's findings regarding the misuse of Form 31.
4. Examination of the procedural correctness and the exercise of discretion by the assessing authority.

Issue-wise Detailed Analysis:

1. Applicability of Clause (h) of sub-section (1) of Section 15A of the U.P. Sales Tax Act, 1948:
The assessee contended that Clause (h) of sub-section (1) of Section 15A did not apply to the facts and circumstances of the case. Clause (h) contemplates two situations: making a false verification or declaration on an application for registration or in connection with any proceedings under the Act. The Tribunal upheld the penalty on the grounds that the assessee had misused Form 31 and the declaration was incorrect. However, the High Court observed that the penalty is not automatic and must be based on judicial considerations, emphasizing that the declaration should not have been signed unless Form 31 was fully filled out.

2. Determination of mens rea or guilty intention for the imposition of penalty:
The High Court noted that in order to sustain a penalty under Section 15A(1)(h), there must be a guilty mind or an element of mens rea. The Tribunal did not find any evidence of dishonest conduct or an intention to defraud the Revenue. The High Court referenced the case of Commissioner of Sales Tax v. Mahadeo Prasad and Sons, where it was held that the mere non-mentioning of a godown did not attract a penalty unless there was an intention to evade the law. Similarly, in Hindustan Steel Ltd. v. State of Orissa, the Supreme Court emphasized that penalty should not be imposed unless there is deliberate defiance of law or contumacious or dishonest conduct.

3. Assessment of the Tribunal's findings regarding the misuse of Form 31:
The Tribunal pointed out that the law does not permit blank Form 31 to be issued to transporters and held the issuing parties responsible for any misuse. The Tribunal found that the declaration signed by the assessee was subsequently found to be false. However, the High Court clarified that the term "false" implies an intention to deceive, which was not established in this case. The High Court noted that the declaration was signed honestly, though incorrectly, without any intention to defraud the Revenue.

4. Examination of the procedural correctness and the exercise of discretion by the assessing authority:
The High Court emphasized that the discretion to impose a penalty must be exercised judicially and based on all relevant circumstances. The Tribunal did not consider the bona fide nature of the mistake or the absence of mens rea. The High Court observed that the penalty provisions are not intended to penalize an honest assessee for a bona fide mistake and that it is not mandatory to levy a penalty in every case of default. The High Court concluded that the Tribunal committed an error of law in upholding the penalty, as no case for penalty was made out either on facts or in law.

Conclusion:
The revision was allowed, and the order of the Sales Tax Tribunal upholding the imposition of penalty was set aside. The High Court held that no case for penalty was made out, emphasizing the need for judicial discretion and the absence of any dishonest conduct or intention to defraud the Revenue.