2020 (2) TMI 473 - HC - VAT and Sales Tax

Levy of penalty u/s 10-A read with Section 10(b) of CST Act - purchase of diesel and fuel for generator set against the C forms at concessional rates - said items were not separately mentioned in the Registration Certificate of the Assessee under the CST (Registration and Turnover) Rules - HELD THAT - The learned Appellate Tribunal was justified in holding that the Assessee was entitled to purchase the said fuel viz., diesel, for its generator set and even though the same was not separately included in the Registration Certificate of the Assessee, no mens rea can be attributed to the Assessee for purchase of the same at concessional rate against C Form and therefore, the question of imposition of penalty under Section 10(b) of the Act read with Section 10-A of the Act does not arise. Petition dismissed - decided against Revenue.

Issues:
1. Imposition of penalty under Section 10-A read with Section 10(b) of the Act for purchase of diesel and fuel for a generator set against "C" forms.
2. Interpretation of the relevant provisions of the CST (Registration and Turnover) Rules.
3. Application of mens rea in the context of penalty imposition under Section 10(b) of the Central Sales Tax Act.
4. Consideration of judicial precedents regarding the classification of diesel as raw material for manufacturing processes.

Analysis:
1. The High Court addressed the issue of penalty imposition under Section 10-A read with Section 10(b) of the Act for the purchase of diesel and fuel for a generator set against "C" forms. The Sales Tax Appellate Tribunal had allowed the appeal of the assessee, ruling that no penalty could be imposed as the items were not separately mentioned in the Registration Certificate. The Tribunal emphasized that the purchase of fuel against "C" forms was integral to the manufacturing activity, including machinery parts, equipment, tools, stores, spare parts, accessories, fuel, or lubricants. The Court, citing relevant case law, upheld the Tribunal's decision, stating that no mens rea could be attributed to the assessee for the purchase at concessional rates, thus negating the need for penalty imposition.

2. The Court analyzed the CST (Registration and Turnover) Rules, particularly Rule 13, to determine the scope of items covered under the Registration Certificate. It was highlighted that the inclusion of diesel in the registration certificate by the Commercial Tax Officer supported the assessee's entitlement to purchase fuel using "C" forms. This interpretation aligned with the view that the purchases were made with a bona fide intention, justifying the reduction of penalty by the Appellate Assistant Commissioner.

3. The application of mens rea in penalty imposition under Section 10(b) of the Central Sales Tax Act was extensively discussed. The Court referred to the Full Bench decision in the case of State of Tamil Nadu vs. Nu-Thread Tyres, emphasizing that mens rea is an essential element for penalty levy. It was clarified that in the absence of mens rea or deliberate violation, no penalty could be imposed on the registered dealer. The Court's analysis underscored the importance of establishing the dealer's honest belief in the representation made during purchases.

4. The Court considered the classification of diesel as raw material for manufacturing processes, drawing on the Supreme Court's decision in CTO v. Rajasthan Taxchem Ltd. The Supreme Court had recognized diesel as raw material when used for running a generator set in the manufacturing process. This classification was crucial in determining the applicability of concessional rates under Section 10 of the Act. The Court concurred with the Tribunal's decision that the assessee's use of diesel as fuel for the generator set qualified as using it as raw material, justifying the purchase against "C" forms.

In conclusion, the High Court dismissed the Revenue's writ petition, affirming the Tribunal's decision and emphasizing the absence of mens rea for penalty imposition. The Court's detailed analysis of the legal provisions, precedents, and factual circumstances provided a comprehensive understanding of the issues involved in the judgment.

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