2017 (10) TMI 947 - HC - VAT and Sales Tax

Penalty u/s 10-A of the CST Act, 1956 - allegation against the petitioner is that they have purchased Wind Mill and other spare parts for mills and the Form B certificate issued to the petitioner for registration under the provisions of the CST Act does not include the Wind Mill - Held that - The Hon ble Full Bench of this Court in the case of State of Tamil Nadu v. Nu-Tread Tyres 2006 (7) TMI 578 - MADRAS HIGH COURT has held that Section 10(b) of the CST Act provides for an offence if any person being a registered dealer falsely represents when purchasing any class of goods that goods of such class are covered by his certificate of registration. The expression falsely represents, clearly shows that the element of mens rea is the necessary component of the offence. The levy of penalty is not authorized, as there is no allegation of false representation or mis-representation on the part of the petitioner - petition allowed - decided on favor of petitioner.

Summary

Issues:
1. Whether the respondent was correct in levying penalty under Section 10-A of the Central Sales Tax Act, 1956?

Analysis:
The petitioner challenged a penalty levied by the respondent under Section 10-A of the CST Act, based on a notice issued after checking the petitioner's accounts and perusal of Form-8 register extract for the year 2003-04. The respondent alleged that the petitioner purchased a Wind Mill and spare parts not covered by the Form 'B' certificate issued under the CST Act. The petitioner argued that the Wind Mill purchase was for power generation, covered by the certificate. Despite this explanation, the respondent confirmed the penalty in the impugned order.

Upon examining the Form 'B' Certificate, it was found that it allowed for the purchase of goods for power generation, including non-conventional forms like power generated by a Wind Mill. The court interpreted the certificate as enabling the purchase of goods for power generation, which encompassed Wind Mill power generation. Consequently, the respondent's interpretation in the order was deemed incorrect.

Furthermore, the impugned order imposed a penalty under Section 10-A of the CST Act without alleging that the petitioner made a false statement knowingly outside the certificate's coverage. Citing a previous Full Bench judgment, the court emphasized that Section 10(b) requires mens rea, indicating a deliberate false representation by a registered dealer when purchasing goods. In the absence of mens rea, penal provisions should not apply unless there is contumacious conduct or willful violation of statutory provisions. As the petitioner honestly believed the goods were covered by the registration certificate, no penalty could be imposed under Section 10-A.

In light of the above analysis, the court held that the penalty was unauthorized due to the absence of false representation or misrepresentation by the petitioner. Therefore, the writ petition was allowed, quashing the impugned order, with no costs awarded.

This judgment clarifies the necessity of mens rea for penalties under the CST Act and emphasizes the importance of honest belief by registered dealers in representations related to their registration certificates.