2019 (11) TMI 609 - HC - VAT and Sales Tax

Demand of penalty u/s 10-A of the Central Sales Tax Act, 1956 - Form-C - allegation against assessee of false declaration by making use of statutory Form-C issued under the Act to import packing material which item was first recorded in the registration certificate of the assessee on 09.07.2001 - Whether applicant is entitled to make purchase of packing material against Form-C in view of the provisions of Section 8(3)(d) of the Central Sales Tax Act? - HELD THAT - Though it may not be denied that there existed an entitlement in law for the assessee to obtain registration with respect to packing material as the assessee was engaged in manufacture of 'beedi' - However, it is a fact that the assessee was granted inclusion of packing material in its registration certificate w.e.f. 09.07.2001. No penalty may have been levied for the period from 09.07.2001 to 31.03.2002 inasmuch as the assessee had been authorised to make purchase of packing material by virtue of its specific inclusion in its registration certificate - However, for the period prior to 09.07.2001, merely because there existed an entitlement in law to apply for inclusion of such packing material in the registration certificate, there cannot follow any inference that therefore, there was false declaration made by the assessee. Whether in view of the fact that the assessee had been similarly using Form-C in the earlier assessment years to import packing material which fact was in the knowledge of the assessing officer, there could ever arise a case of false declaration? - HELD THAT - n the first place, allegation of false declaration involves an element of mens rea. It is wholly different from a mere wrong declaration. If the assessee uses Form-C to import packing material that were not recorded in its registration certificate, it may give rise to penalty proceedings, if that fact is noted in the first few instances of utilisation of Form-C. However, if such utilisation of Form-C is, as a fact found to be a business practice adopted over a long period of ten years, as has been claimed by the assessee, the conduct of the revenue authorities for such long period would become relevant. The revenue authorities having thus contributed to the bona fide belief that would be found existing in such case would not be permitted to unilaterally alter their stand and impose penalty on the charge of false declaration as no element of mens rea can ever found existing in such cases. The matter is remitted to the Tribunal that may summon the record of assessments of the assessee for the period 1991 onwards, to examine whether the register of utilisation of Form-C had been examined by the assessing officer over different years and whether it disclosed utilisation of Form-C by the assessee in different years to import packing material - If such utilisation is found to be recorded then, the Tribunal may further examine whether any penalty had been imposed on the assessee in any of the earlier years for utilisation of Form-C to import packing material. Revision allowed in part.

Summary

Issues:
- Entitlement to purchase packing material against Form-C under Section 8(3)(d) of the Central Sales Tax Act
- Allegation of false declaration due to the use of Form-C for importing packing material

Entitlement to Purchase Packing Material Against Form-C:
The revisionist contested the penalty imposed under Section 10-A of the Central Sales Tax Act for making a false declaration by using Form-C to import packing material. The High Court noted that the revisionist was authorized to purchase packing material from 09.07.2001 onwards as it was included in the registration certificate. Therefore, no penalty should have been levied for the period post the inclusion date.

Allegation of False Declaration:
Regarding the allegation of false declaration for the period before 09.07.2001, the Court highlighted that having the entitlement to apply for inclusion of packing material in the registration certificate did not automatically imply a false declaration. The Court emphasized that the presence of mens rea is essential for a false declaration, which is distinct from a mere wrong declaration. The Court acknowledged the revisionist's claim of utilizing Form-C for over a decade with the knowledge and acceptance of revenue authorities, as evidenced by examination of declaration forms and absence of penalties in earlier assessments.

The Court cited a precedent where a long-standing business practice acknowledged by revenue authorities should not lead to penalty proceedings for false declaration. The Court emphasized that the revenue authorities' actions over the years contributed to the revisionist's bona fide belief in using Form-C for importing packing material. The Court stressed that in such cases, where no mens rea is present, revenue authorities cannot unilaterally change their stance and impose penalties.

Conclusion:
The Court set aside the previous order and remitted the matter to the Tribunal for further examination. The Tribunal was directed to review the revisionist's assessment records from 1991 onwards to ascertain the history of Form-C utilization for packing material imports and check if penalties were imposed in earlier years. The Tribunal was instructed to make a decision based on these findings expeditiously, preferably within six months. The revision was partly allowed, emphasizing the importance of examining factual details before determining penalties for alleged false declarations.