2018 (11) TMI 808 - HC - VAT and Sales Tax

Imposition of penalty u/s 10-A of the Central Sales Tax Act, 1956 - purchase of M-Seal against Form-C - Held that - The penalty is imposable for deliberate defiance of law or upon guilty or contumacious or dishonest conduct. Also, the burden to establish such fact rests on the revenue. Further all types of omissions or commissions in the use of Form-C may not be embraced in the expression false representation . Though assessee admits that it may not even be entitled to purchase the commodity MSeal against Form-C, at the same time, there is no material or finding recorded by the revenue authority to establish that it had made a false declaration, while issuing such Form-C. The revenue authority also did not dispute the fact that commodity of M-Seal is popularly sold at hardware stores - The reasoning of the Tribunal that the assessee should have always taken care while issuing Form-C and because such care was not taken, therefore, its conduct was not bonafide is too difficult to accept inasmuch as in the first place the test of care required to be taken care cannot be defined for the purpose of application in all cases involving wrong use of Form-C. Even if it is established that due care may not have been taken, it would not lead to an automatic or logical conclusion of false declaration or malafide intention. The test to be applied being one of false declaration, absence of care to some extent may not therefore, be relevant. Decided in favour of the assessee and against the revenue - petition allowed.

Summary

Issues:
Interpretation of penalty under Section 10-A of the Central Sales Tax Act, 1956 for false representation in using Form-C against import of goods.

Analysis:
The High Court heard a revision filed for the A.Y. 1992-93 against a penalty order under Section 10-A of the Act. The assessing officer imposed a penalty on the assessee for purchasing "M-Seal" against Form-C, reasoning that it was not covered by the registration certificate. The first appellate authority reversed this decision, finding no deliberate false representation by the assessee, as the item was commonly sold at hardware shops. The Tribunal, however, upheld the penalty, emphasizing that the item was not a hardware item and the repeated use of Form-C was irrelevant. The Tribunal relied on a previous court decision and noted the need for mens rea for penalty under Section 10-A.

Moreover, the High Court considered the Supreme Court's ruling in a similar case, stating that deliberate defiance of law or dishonest conduct is necessary for imposing a penalty. The burden of proof lies with the revenue, and not all omissions or commissions in using Form-C constitute false representation. The Court highlighted that absence of care does not automatically indicate false declaration or malafide intention. The Tribunal's reasoning was found flawed, and the first appellate authority's conclusion of no deliberate false representation by the assessee was upheld.

Conclusively, the Court answered the question of law in favor of the assessee, stating there was no evidence of deliberate false representation, and the revision was allowed, overturning the penalty.