2015 (8) TMI 1240 - HC - VAT and Sales Tax

Penalty u/s 78(5) - Evasion of duty - Mens rea - violation of sub-section (2) of Section 78 of the Rajasthan Sales Tax Act, 1994 - Held that - It has been noticed by the Tax Board that there were several discrepancies noticed in the documents produced by the vehicle In-charge at the time of interception. It has been observed by the Tax Board that the documents namely; bill was prepared later on after the vehicle was intercepted and clear cut case has been made out by the Tax Board which is a finding of fact recorded by it that the bill, which was produced at the time of interception and the bill, which was later on produced, was quite different and had variance and it was further noticed that it was not verifiable even from the records maintained by the assessee and produced before the AO. - There is a finding of fact by the Tax Board that the photocopies were merely kept to keep the offices of Revenue in dark, as original bill book was blank and entries could be made as per choice and convenience and further these can be categorized in the category of false and forged and it is a clear cut case of evasion of Tax. Therefore, once there is a clear cut admission by the assessee himself that the bill was prepared later on and in my view as well, there is no case made out by the assessee and it was a clear cut case of evasion of tax and the penalty has been rightly imposed by the AO and sustained by the Tax Board - Decision in the case of Guljag Industries 2007 (8) TMI 344 - SUPREME Court - Decided against assessee.

Summary

Issues:
1. Interpretation of mens rea requirement for penalty under Section 78(5) of the Rajasthan Sales Tax Act, 1994.

Analysis:
The High Court addressed the conflicting opinions on the mens rea requirement for penalty under Section 78(5) of the Act. A Larger Bench was formed to resolve this issue. The questions framed included whether mens rea is relevant for determining penalty liability and if it is necessary to prove mens rea for penalty imposition in case of violation of Section 78(2) of the Act. The Larger Bench's decision clarified that mens rea is not essential for penalty determination under Section 78(5) and need not be proved for penalty imposition in case of Section 78(2) violation.

The Court highlighted that the amendment to Rule 55 of the Rajasthan Sales Tax Rules, 1995, post the Supreme Court's decision in State of Rajasthan Vs. M/s. D.P. Metals, empowers authorities to inquire about Section 78(2) violations without adjudicating on the presence of mens rea for penalty imposition under Section 78(5). The judgment emphasized that mens rea is not a necessary ingredient for imposing penalties under Section 78(5) upon proving Section 78(2) violations.

In a specific case, the Court reviewed a penalty imposed on an assessee for discrepancies in documents related to a vehicle interception. The Assessing Officer imposed a penalty under Section 78(5) after finding discrepancies in the documents. The matter went through appeals, with the Tax Board upholding the penalty. The Court noted that the documents were different, indicating evasion of tax. The Tax Board found that the documents were false and forged, leading to a clear case of tax evasion. The Court concluded that the penalty was rightly imposed and sustained by the Tax Board, citing relevant case law.

In conclusion, the Court ruled in favor of the revenue and against the assessee, based on the findings of tax evasion through document discrepancies. The judgment referenced the decision in Guljag Industries case to support the penalty imposition. The Court directed the order to be sent to the assessee for information.