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TMI Blog1994 (1) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... le them to purchase machineries. Accordingly, C forms were issued for a small portion of the value of machinery to the extent of Rs. 3,21,203.75. But at the time of the final assessment for the year 1985-86, the first respondent scrutinised the C forms register and informed the petitioner that the certificate of registration did not specifically include the machineries for which they had issued C forms and under such circumstances, C forms could not be issued. The petitioner, thereafter, did not issue any C forms even though the machinery is valued at Rs. 35 lakhs. 3.. On May 18, 1987, the first respondent issued a notice proposing to impose a penalty of Rs. 48,181 to the petitioner-society under section 10-A of the Central Sales Tax Act on the ground that petitioner has committed an offence under section 10(b) of the Act. The petitioner sent a reply to the said show cause notice on May 27, 1985, itself stating that C forms were issued under the bona fide belief that the same could be issued for purchase of machinery for setting up the crumb rubber factory. They have also said that there was no mala fide intention in issuing the C forms. They, therefore, requested to drop all fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion before the Board of Revenue evidenced by exhibit P3. Exhibit P3 revision was considered by the Board of Revenue and passed exhibit P6 order wherein the Board of Revenue also confirmed the orders, exhibits P1 and P2 passed by the statutory authorities. But according to the petitioner, the Board of Revenue did not consider independently the question of mala fide intention raised before that authority by the petitioner-society in the matter of issuing C forms. The petitioner challenges the validity of exhibits P1, P2 and P6 orders passed by the respondents in this proceedings under article 226 of the Constitution of India. 7.. I heard the learned counsel appearing on behalf of the petitioner as well as the learned Government Pleader. Even though notice was served on the respondents as early as on August, 1989, no counter-affidavit has been filed by the respondents in this case. The learned counsel for the petitioner submits that the first respondent who is the authority competent to impose the penalty under the Act has not entered any finding regarding the essential ingredients under the section, viz., the mental element in issuing the C forms and according to the learned couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declarations were issued with the full knowledge that the goods purchased were not covered by the certificate of registration. In the decision reported in Varghese and Sons v. Sales Tax Officer [1965] 16 STC 323, a learned Judge of this Court, K.K. Mathew, J., as he then was, quashed an order imposing penalty by the Sales Tax Officer as there was no finding by the said officer regarding the nature of the representation made by the assessee as false and the C form declarations were issued without the belief that the goods purchased were covered by the certificate of registration. Again in the decision reported in Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211*, the Supreme Court has stated that"........It is elementary that section 43 of the Madhya Pradesh General Sales Tax Act, 1958, providing for imposition of penalty is penal in character and unless *The passage quoted above appears in Cement Marketing Co. of India Ltd. v. Assistant Commissioner of Sales Tax [1980] 45 STC 197 (SC) at page 200.-Ed. the filing of an inaccurate return is accompanied by a guilty mind, the section cannot be invoked for imposing penalty." In the Mysore High Court decision reported in K.A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here was any false representation. As stated earlier, unless and until there is a finding by the statutory authority, that there is a false declaration made by the assessee in respect of the C form issued, no penalty can be imposed under section 10-A of the Act. The learned counsel for the petitioner has also placed reliance on the decision reported in Cement Marketing Co. of India Ltd. v. Assistant Commissioner of Sales Tax [1980] 45 STC 197 wherein the meaning of the expression "falsely represents" under section 10 has been explained. Learned Judges found that the words "falsely represents", postulate mens rea in that the representation should be of something as true which in fact and to his knowledge is false and that this element would be excluded if the purchaser acted in the bona fide belief that his representation is true. The Supreme Court further considered the question whether the petitioner is liable to penalty under section 43 of the Madhya Pradesh General Sales Tax Act and section 9(2) of the Central Sales Tax Act, 1956, for filing false representation by not including in the taxable turnover, the amount of freight which was part of the "free on rail destination railwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d earlier, in exhibit P1 order, there is no finding by the assessing authority that the false declaration was knowingly and deliberately made with mala fide intention to earn the benefit of concessional rate of sales tax. As a matter of fact, there is no finding regarding the mens rea or the mental element of the assessee at the time when C forms were issued. In the absence of such a finding by the assessing authority, there is absolutely no justification to impose the penalty under section 10-A of the Act. 10.. In the decision reported in Braja Lal Banik v. State of Tripura [1990] 78 STC 283, the Gauhati High Court had held that: "Section 10-A of the Central Sales Tax Act, 1956, vests the power of levying penalty on a dealer, for offences under clauses (b), (c) and (d) of section 10 of the Act, on the person, or authority 'who granted to him or, as the case may be, is competent to grant to him a certificate of registration' under the Act." ........................... "Section 10(b) of the Central Sales Tax Act, 1956, provides that if a person being a registered dealer 'falsely represents' when purchasing any class of goods that goods of such class are covered by his certific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty is exigible, and if so, what quantum should be levied. The order levying penalty should show that both these aspects were borne in mind while levying the penalty. Penalty proceedings are quasi-criminal in nature and in imposing penalty under section 28(8), the officer has to act judicially and not arbitrarily or mechanically." In the light of the above decision, there is sufficient force in the contention raised by the learned counsel for the petitioner in this case since the maximum penalty was imposed against the assessee in this case. 13.. Even though in exhibit P2, the appellate authority entered a finding that since the person who signs C form declaration is an educated man and since it contains an affirmation that the goods are "covered by the registration certificate", there is a false representation and no further evidence is required to prove mens rea, as stated earlier, there is no such finding to that effect in exhibit P1 order by the assessing authority. The assessing authority has not applied his mind and entered a finding whether C form declaration which was issued by the secretary of the petitioner-society is with a mala fide intention to defeat the in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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