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TMI Blog1986 (5) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... said Act for sale, but instead of selling those, the assessees had used those for their own consumption. The revenue proceeded on the basis that since the goods purchased had not been used for the purposes specified in section 8(3)(b) of the Act and as recorded in the C form certificates, the assessees had committed offences under section 10(d) of the Act inasmuch as they had used the goods purchased by them on the basis of C form certificate for a purpose other than the one mentioned in the certificates and therefore were liable to pay penalty as well. All the authorities including the Tribunal had found that the assessees had actually committed the offences under section 10(d) of the Act in using the goods for purposes other than the one mentioned in C form certificates. Being a finding of fact, the High Court proceeded on the basis that the assessees had committed the offence. The question that was posed before the High Court was what was the quantum of penalty that had to be levied under section 10A of the Act. Section 10A of the Act deals with penalties. Section 10A is a provision for imposition of penalty in lieu of prosecution. This section was initially added by section 8 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to in sub- section (3) shall be liable to pay tax under the Act, which shall be four per cent now and at the relevant time prior to 1975 was three per cent of the turnover. Sub-section (3) of section 8 deals with the goods referred to in clause (b) of sub- section (1) of section 8. The Tribunal, as mentioned hereinbefore, accepted the contention that the penalty leviable under section 10A in this case should be one-and-a-half times the concessional rate of tax and not one-and-a-half times the tax which would have been leviable if no C form certificate had been produced. The revenue challenged before the High Court the correctness of the view taken by the Tribunal. The High Court followed the decision of the Madras High Court in State of Madras v. Prem Industrial Corporation [1969] 24 STC 507. Another view was expressed by the Mysore High Court in M. Pais & Sons v. State of Mysore [1966] 17 STC 161 and the Orissa High Court in Bisra Limestone Co. Ltd. v. Sales Tax Officer, Rourkela Circle, Uditnagar [1971] 27 STC 531 took a different view. It also appears that in Bisra Limestone Co. Ltd. [1971] 27 STC 531 (Orissa) the decision of the Madras High Court in State of Madras v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was whether he was guilty of the offence under section 10(b) of the Act. The last contention urged in that case as appears from page 169 of the Reports was that on a true interpretation of section 10A it was clear that the assessee should have been levied penalty only at 1 1/2 per cent of the disputed turnover and not at the rate of 10 1/2 per cent as was done by the authorities below. This contention did not appear to the High Court to be correct. All the sales of goods validly covered by C forms were liable to be taxed at 1 percent of the turnover. Such of the goods which were not validly covered by C forms were liable to be taxed at 7 per cent of the turnover. The penalty provided by section 10A was one-and-a-half times the tax leviable. It was found in that case that the goods with which the court was concerned were not covered by any valid C forms and, therefore, sales tax was leviable on them at 7 per cent of the turnover. If that was so, then the penalty on that turnover was leviable at 101 per cent of the turnover. The Madras High Court in State of Madras v. Prem Industrial Corporation [1969] 24 STC 507 had occasion to consider this question and it was upon this decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d judgment before us. The question again cropped up before the Orissa High Court in Bisra Limestone Co. Ltd. v. Sales Tax Officer [1971] 27 STC 531. There the Orissa High Court was of the view that the question of penalty would arise only when the goods were not mentioned in the certificate of registration and puchase of the same was made on a false representation made by the purchasing dealer that these were so mentioned. If the normal rate had been paid for the goods, without making any false representation, no offence under section 10(b) would be committed. It was only to such cases that the expression "if the offence had not been committed' had application and therefore the penalty payable under section 10A would be one-and-a-half times the normal rate and not the concessional rate. Based on the language of section 10A(1), a contention was raised before the High Court that penalty should not exceed one-and-a-half times the "tax which would have been levied under this Act in respect of the sale to him of the goods if the offence had not been committed". According to the contention if the goods were purchased on concessional rate on false representation that these were covered u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssa High Court in Bisra Limestone Co. Ltd. [1971] 27 STC 531 and also the Mysore High Court's view mentioned hereinbefore. The Jammu and Kashmir High Court was unable to agree with the views of the Madras High Court in State of Madras v. Prem Industrial Corporation [1969] 24 STC 507. The question again came to be considered by the Kerala High Court in the case of Kottayam Electricals P. Ltd. v. State of Kerala [1973] 32 STC 535. There the submission was that the courts should construe the phrase "if the offence had not been committed" to mean "if the assessee had not misused or misapplied the goods". The argument was that if the goods were not misused or misapplied the tax payable would be at the concessional rate of 3 per cent under section 8(1)(b) of the Act and that the maximum penalty that could be imposed could only be one-and-a-half times the tax calculated at 3 per cent on the turnover in respect of which the offence had been committed. After discussing the contentions and acknowledging that section 10A was not happily worded, the High Court felt that it was unable to accept the view of the Madras High Court in State of Madras v. Prem Industrial Corporation [1969] 24 STC 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has yet to come across a penal provision, which created a fiction that an offender was not an offender, and should, therefore, be treated as a non-offender. Obviously, by such a fiction, the very object of the penal provision in question was frustrated and, therefore, the legislature could never have intended that by the creation of the above-referred fiction, the very object of introducing the penal clause contained in section 10A of the Act should have been destroyed. The truth of the matter, according to the High Court, was that the use of the word "if" simpliciter was meant to indicate a condition, the condition being that at the time of assessing the penalty, that situation should be visualised wherein there was no scope of committing any offence. Such a situation could arise only if the tax liability fell within the provisions of sub-section (2) of section 8 of the Act. The scheme of the section showed that concessional rates contemplated by sub-section (1) thereof would be available only with reference to those goods which were covered by the declarations in form C. This was clear in the scheme of the section. Further, the High Court noted that if the contention canvassed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s cling to literalness and should seek to endeavour to avoid an unjust or absurd result. We should not make a mockery of legislation. To make sense out of an unhappily worded provision, where the purpose is apparent to the judicial eye "some" violence to language is permissible. [See K.P. Varghese v. Income-tax Officer, Ernakulam [1981] 131 ITR 597 at 604 to 606 (SC) and Luke v. Inland Revenue Commissioners [1964] 54 ITR 692 (HL).] Bearing the scheme of the Act in perspective we are of the opinion that the contention of the revenue in this case has to be accepted. "If the offence had not been committed" cannot have the effect that penalty should be levied on the basis of the rate which would have been levied had no offence been committed under clause (d) of section 10 of the Act. For the purpose of imposition of penalty, it could not be treated that the rate which would govern the question of penalty was the rate which could be levied on the basis that the assessee had made no fault. It would lead to putting a premium on avoidance of the provisions of the Act. In our opinion sub-section (1) of section 10A makes it clear that penalty should be worked out at the rate of tax which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expressed by the Gujarat High Court in Gaekwar Mills Ltd. v. State of Gujarat [1976] 37 STC 129. As Lord Denning has said, the Judge has to perform the constructive task of finding the intention of Parliament, and he must supplement the written word so as to give "force and life" to the intention of the legislature. Primarily, it is always the duty to find out the intention of the legislature and if it can be done without doing much violence to the language as we find it can be done in this case, though, as we have noted that when the purpose was writ large in the scheme of the section "some violence" is permissible, here we are of the opinion that the construction put by the assessee cannot be accepted and the contention urged on behalf of the revenue in this case should be preferred. We must remember that the provision is a penal provision. It has further to be borne in mind that the expression "if" is not same as "as if " nor does it contemplate a deeming provision. It has also to be borne in mind that the provision was introduced for the imposition of penalty in lieu of prosecution. The purpose of the Act and the object of a particular section has to be borne in mind. Having ..... X X X X Extracts X X X X X X X X Extracts X X X X
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