1977 (4) TMI 48 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the appellant is liable for penalty under section 36(2)(c) of the Bombay Sales Tax Act, 1959 for wrongly showing turnover as sales in the course of import.
2. Whether the appellant's actions were due to a bona fide impression or constituted concealment, deliberate furnishing of inaccurate particulars, or gross neglect.

Analysis:
The appellant appealed against an order of the Assistant Commissioner of Sales Tax, challenging the penalty imposed for wrongly showing sales turnover as sales in the course of import. The Sales Tax Officer contended that the sales were local, not imports, and imposed a penalty under section 36(2)(c). The Assistant Commissioner upheld this decision, citing lack of justification for the import classification. The crux of the case was whether the appellant's actions constituted deliberate misconduct or were based on a bona fide impression. The appellant relied on the judgment in M/s. K.G. Khosla's case, which was considered valid during the relevant period. The legal position on sales in the course of import was further clarified by subsequent Supreme Court judgments. The appellant argued that their actions were based on a genuine belief and should not attract penalty.

The legal representative for the appellant argued that penalties should not apply if actions were based on a bona fide impression. Previous tribunal rulings were cited to support this argument, emphasizing the absence of mens rea or guilty mind. Cases such as M/s. Grand Smithy Works and M/s. Fragrance Flavour Corporation were referenced to illustrate instances where penalties were not justified due to genuine beliefs held by the assessee. Additionally, judgments from cases like M/s. Synoflor Company and M/s. D.G. Boys and Co. highlighted the need for legal clarity before imposing penalties. A judgment from the Madras High Court in M/s. City Motor Service Private Limited was also cited to support the argument that genuine beliefs should not result in penalties.

The lower authorities based their decisions on the interpretation of relevant Supreme Court judgments, concluding that the appellant's actions did not warrant penalty under section 36(2)(c). The court agreed with the appellant's argument that their actions were based on a bona fide impression stemming from the legal position at the time of assessment. The court found that the subsequent legal developments did not retroactively justify penalties for actions taken in good faith. Consequently, the court allowed the appeal, setting aside the penalties imposed by the lower authorities under section 36(2)(c) of the Bombay Sales Tax Act, 1959.