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TMI Blog2012 (11) TMI 371X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tax Act, 1956, to purchase the said goods against form C. Show-cause notice in this regard was issued to the opposite party-dealer. However, no reply was submitted by the opposite party-dealer. By the order dated April 24, 1999, the assessing officer imposed penalty under section 10A of the Central Sales Tax Act, 1956, on the opposite party-dealer in respect of the purchase of the aforesaid goods against form C. It was, inter-alia, noted in the said order that despite repeated opportunities, the opposite party-dealer did not submit any reply to the show-cause notice. Penalty amounting to Rs. 46,452 was imposed at the rate of 15 per cent of Rs. 3,09,681, i.e., the value of the aforesaid goods imported against form C. The opposite party-dealer filed an appeal being Appeal No. 391 of 2000. The first appellate authority by its judgment and order dated April 29, 2000 partly allowed the said appeal filed by the opposite party-dealer, and reduced the penalty to Rs. 30,968, i.e., 10 per cent of the value of the aforesaid goods imported against form C. The opposite party-dealer thereupon filed a second appeal being Second Appeal No. 352 of 2000. As noted above, by the judgment and ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as entitled to purchase from outside the State against form C. The Tribunal heard in upholding that the said items would be covered under the item "consumbers" mentioned in the registration certificate of the opposite party-dealer. (ii) Before the assessing officer as well as before the first appellate authority, the opposite party-dealer represented that the goods in question were imported for personal use. However before the Tribunal, it was represented by the opposite party-dealer that the goods in question were brought against form C for completing and fulfilling the works contract. In view of the contradictory stand taken by the opposite party-dealer, it was evident that the explanation of the opposite party-dealer was false, and no further guilty intent or mens rea was required to be proved. Reliance has been placed by the learned Standing Counsel on a decision of this court in Commissioner of Trade Tax v. Rama and Sons General Merchant, Ballia [1999] UPTC 425. In reply, Sri Kunwar Saxena, learned counsel appearing for the opposite party-dealer has made the following submissions:- (i) Neither the assessing officer nor the first appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be imposed on the opposite party-dealer. Reliance has been placed by Sri Kunwar Saxena on the following decision:- (i) Commissioner of Trade Tax, U. P., Lucknow v. Bisheshwar Nath Mool Chand, Kanpur [2006] 29 NTN 416 (All). (ii) Indian Farmers Fertilizer Co-operative Limited, Bareilly v. Commissioner of Trade Tax, U. P., Lucknow [2009] 39 NTN 239. (iii) Commissioner of Trade Tax v. Prem Agriculture Implements [2009] 40 NTN 70. In rejoinder, the learned standing counsel has reiterated his submissions made earlier. I have considered the submissions made by the learned counsel for the parties. In order to appreciate the submissions made by the learned counsel for the parties, it is necessary to refer to the relevant provisions of the Central Sales Tax Act, 1956 as well as those of the Central Sales Tax (Registration and Turnover) Rules, 1957 (in short, "the 1957 Rules"). Section 7 of the Central Sales Tax Act, 1956 deals with registration of dealers. Sub-section (1) of section 7 provides that every dealer liable to pay tax under the Central Sales Tax Act, 1956 "shall" make an application for registration under the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; (2) The tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of goods in the course of inter-State trade or commerce not falling within sub-section (1),- (a) in the case of declared goods, shall be calculated at twice the rate applicable to the sale or purchase of such goods inside the appropriate State; and (b) in the case of goods either than declared goods, shall be calculated at the rate of ten per cent or at the rate applicable to the sale or purchase of such goods inside the appropriate State, whichever is higher; and for the purpose of making any such calculation any such dealer shall be deemed to be a dealer liable to pay tax under the sales tax law of the appropriate State, notwithstanding that he, in fact, may not be so liable under that law. (2A) Notwithstanding anything contained in sub-section (1A) of section 6 or sub-section (1) or clause (b) of sub-section (2) of this section, the tax paya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner,- (a) a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority; or (b) if the goods are sold to the Government, not being a registered dealer, a certificate in the prescribed form duly filled and signed by a duly authorized officer of the Government:- Provided that the declaration referred t6 in clause (a) is furnished within the prescribed time or within such further time as that authority may, for sufficient cause, permit. (5) Notwithstanding anything contained in this section, the State Government may, if it is satisfied that it is necessary so to do in the public interest, by notification in the Official Gazette, and subject to such conditions as may be specified therein, direct,- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 8 of the Central Sales Tax Act, 1956 lays down that for the applicability of sub-section (1) of the said section, it is necessary that the dealer selling the goods should furnish to the prescribed authority in the prescribed manner:- (a) a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority; or (b) if the goods are sold to the Government, not being a registered dealer, a certificate in the prescribed form duly filled and signed by a duly authorized officer of the Government. The declaration contemplated in clause (a) of sub-section (4) of section 8 is to be made in form G prescribed under the 1957 Rules as per sub-rule (1) of rule 12 of the said Rules, while the certificate contemplated in clause (b) of sub-section (4) of section 8 is to be made in form D prescribed under the 1957 Rules as per the said sub-rule (1) of rule 12 of the said Rules. Section 10 of the Central Sales Tax Act, 1956 deals with penalties. Section 10, as it stood at the relevant time, provides as under:- "10. Penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in lieu of prosecution. Section 10A, as it stood at the relevant time, lays down as follows:- "10A. Imposition of penalty in lieu of prosecution:- (1) If any person purchasing goods is guilty of an offence under clause (b) or clause (c) or clause (d) of section 10, the authority who granted to him or, as the case may be, is competent to grant to him a certificate of registration under this Act may, after giving him a reasonable opportunity of being heard, by 6rder in writing, impose upon him by way of penalty a sum not exceeding one-and-a-half times the tax which would have been levied under sub-section (2) of section 8 in respect of the sale to him of the goods, if the sale had been a sale falling within that sub-section:- Provided that no prosecution foran offence under section 10 shall be instituted in respect of the same facts on which a penalty has been imposed under this section. (2) The penalty imposed upon any dealer under sub-section (1) shall be collected by the Government of India in the manner pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alsely represents when purchasing any class of goods that goods of such class are covered by his certificate of registration. The words "falsely represents" appearing in clause (b) of section 10 are significant. The said words are in active voice and lay emphasis on the action of the person concerned, i.e., the registered dealer. The said words imply that the act of making representation has been done by the said person, (i.e., the registered dealer) consciously and deliberately, and the same has been done knowingly, i.e., with the knowledge that the representation is untrue. In other words, there are two requirements-first, the person concerned, (i.e., the registered dealer) makes representation which is not true, and second, while making the representation, the said person knows that the representation is not true, and still, he consciously and deliberately makes such representation. Thus, mere making of untrue representation by the person concerned, (i.e., the registered dealer) is not sufficient. Such untrue representation must be accompanied by wrongful intention or guilty mind or mens rea in the sense of the word "falsely" on the part of the said person, (i.e., the registere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. Unless it is shown that he has made such a false representation, section 10A of the said Act is not attracted. In Commissioner of Sales Tax v. Rama and Sons, General Merchant, Ballia [1999] UPTC 425, S. T. R. No. 129 of 1994 in respect of the dealers Rama and Sons, Ballia, and S. T. R. Nos. 130 and 131 of 1994 (Commissioner of Sales Tax v. Maha dev Bholaram, Ballia [1999] UPTC 425) in respect of the dealer Maha dev Bholaram, Ballia, were decided by this court. In S. T. R. No. 129 of 1994, the dealer was a general merchant and was registered under the Central Sales Tax Act, 1956, which authorized it to purchase biscuits from outside the State. During the assessment year 1983-84, the dealer purchased from outside the State, toffees for Rs. 1,33,554 and flash brush for Rs. 2,316 and issued a declaration in form C, to the selling dealer thereby paying Central sales tax at a lower rate. Penalty proceedings were initiated against the dealer on the ground that the declaration made in form C was false because the registration certificate did not authorize the dealer to purchase the aforesaid items. The assessing officer imposed penalty of Rs. 20,380. On appeal, the first appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e offence and no further guilty intent or mens rea need be proved. In fact there are many acts which are offences and do not require proof of any mens rea or guilty intention, for example possession of illicit fire arm. 9. The case in hand is in respect of a tax statute and the penalty provided is for a false statement. In Integrated Enterprises v. State of Kerala [1980] 46 STC 103 (Ker), the honourable Kerala High Court held that the mens rea is not a factor in the levy of penalty under section 10(b) read with section 10A of the Central Sales Tax Act. In that case the assessee held a certificate of registration for Coca Cola, Fanta orange and Fanta soda. The dealer, however, purchased bottle coolers by using form C. It was held that the representation made in C form that the dealer was entitled to purchase bottle coolers was not a bona fide statement and was, therefore, a false one. It was held that the plea was too, far-fetched, unreasonable and baseless to justify inference of bona fides in the petitioner's favour and the only possible inference in the circumstances was that the petitioner acted mala fide in making what was dearly a false representation. In G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on him to act with due care and caution in using a statutory document like form C. There is nothing in the orders of the authorities below that could make representation of the respondent true or even bona fide. Therefore, the respondent's conduct in making a wrong statement to gain a tax advantage and doing so with negligence makes representation false within the meaning of section 10A read with section 10(b) which as stated above deals with a civil liability and not a criminal offence. The word 'falsely' might have slightly different interpretation if the criminal prosecution was launched but here is a case of penalty which is levied to compensate the revenue and coerce the delinquent in complying with the law. Therefore, in my view the default contemplated with section 10A read with section 10(b) was clearly made out. 12. Similarly in the case of other assessee M/s. Mahadeo Bholaram the dealer was registered for goods like kirana, medicines, etc. Chewing gum does not fall in any of these categories. The attempt on the part of the dealer to justify his conduct by saying that he thought it to be a medicine reflects on its part the lack of bona fides. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Sales Tax, U. P., Lucknow v. Kashi Prasad Ram Chandra Lai, Allahabad [2001] 122 STC 567 (All) ; [2001] UPTC 173, the assessee was a registered dealer under the provisions of the Central Sales Tax Act, 1956, and was engaged in the business of kirana, etc. It was specifically registered under the Central Sales Tax Act, 1956 as a dealer for kirana, colour food drugs, dry fruits, seeds, kattha, supari, camphor and chemicals. The assessee had been importing gari gola against form C treating the same as an item of kirana. Penalty proceedings were initiated against the assessee under section 10A of the Central Sales Tax Act, 1956. The Tribunal held that there was no intention on the part of the assessee to give any false declaration form C while importing gari gola. The assessee had been importing gari gola under the bona fide belief that it was an item of kirana even though it was liable to tax as oil-seed being declared goods. The Tribunal accordingly concluded that penalty under section 10A of the Central Sales Tax Act, 1956 was not exigible in the facts and circumstances of the case. This court upheld the order of the Tribunal and held as under (paragraph No. 4 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1956 on the dealer in respect of the assessment years in question on the ground that the dealer made false representation in form C that "cotton waste" was covered under the certificate of registration granted to the dealer. This court allowed the revisions filed by the dealer, and set aside the penalty orders as regards "cotton waste". This court took note of the facts that the dealer was registered dealer since the assessment year 1977-78 and had been making purchases of "cotton waste" and issuing form C in respect of such purchases since then. The "Department did not raise any objection from the assessment year 1977-78 up to October 15, 1985 when a show-cause notice for imposition of penalty under section 10(b) of the Central Sales Tax Act, 1956 read with section 10A of the said Act in respect of various assessment years. In view of these facts; this court held that it could not be said that false representation had' been made by the dealer. It was laid down as under (paras 11 and 12 of the said UPTC) (page 568 in 137 STC):- "11. This court in the case of Commissioner of Sales Tax v. Kashi Prasad Ram Chandra Lal [2001] 122 STC 567 (All) ; [2001] UPTC 173, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly' implies that the persons making representation knew that certificate of registration does not cover the item, but knowingly fully well that it does not, represents that issuing form C covers it." (emphasis supplied) This decision thus lays down that in order to attract section 10(b), mere "wrong representation" is not sufficient. What is necessary is that the representation is "false representation". "Wrong representation" may be on account of some inadvertence or some omission. "False representation" takes place when the dealer knowingly makes representation that the goods in question are covered under his certificate of registration even though he knows that the certificate of registration does not cover such goods. If the dealer bona fide believes that the goods in question are covered by certificate of registration, but it ultimately turns out to be incorrect, it will not attract the provisions of section 10(b). In Commissioner of Trade Tax v. Bisheshwar Nath Mool Chand, Kanpur [2006] 29 NTN 416, the dealer was authorized under the registration certificate to purchase "plywood", "laminated decorative sheets" and "glue" under the registration certificate. The dealer purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alse representation should be made out by the assessing authority. The assessing authority should make out a case that form C were issued knowingly that the goods were not covered under the registration certificate and thus there was false representation by the assessee. As the Tribunal recorded the finding of fact that form C were issued under the bona fide belief that the alleged items purchased from outside the State of U. P., and in respect of which form C were issued, were covered under the registration certificate, and therefore, the Tribunal did not commit any error in deleting the penalty levied under section 10A of the Central Sales Tax Act, 1956. In Commissioner, Sales Tax v. Bhawani Paper Mills Ltd., Allahabad [2006] 147 STC 324 (All) ; [2006] UPTC 328, the items included in the registration certificate of the dealer were as under (page 326 in 147 STC):- "All kinds of machines required for manufacturing and production of papers, pulping instrument, iron and steel, chemicals and pulp irons formers, generators and all others electrical goods and equipment. Builder pipe fitting and others fitting. Fans exhaust air condition motors hassan cotton and wast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd has come to the conclusion which are fully supported from materials on record. The findings recorded by both the appellate authorities that the purchase by the assessee was under bona fide belief, the present was not a case for imposition of any penalty. No infirmity could be pointed out in the orders passed by both the appellate authorities which may warrant interference by this court in its revisional jurisdiction." (emphasis supplied) This decision thus lays down that the words "false representation" used in section 10(b) of the Central Sales Tax Act, 1956 require an overt act with an element of mens rea. Both the appellate authorities below having recorded findings on a consideration of the material on record, that action of purchase of the aforesaid goods was bona fide act of the dealer under bona fide belief that the said goods were covered by the registration certification, the provisions of penalty under section 10(b) of the said Act were not attracted, and no case was made out for imposing penalty on the dealer. In Indian Farmers Fertilizer Co-operative Limited, Bareilly v. Commissioner of Trade Tax, U. P., Lucknow [2009] 39 NTN 239, penalty under section 10A of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view, the provision of imposition of penalty was not attracted and the penalty imposed under section 10(b) of the Act was patently erroneous. The Additional Chief Standing Counsel invited the attention of the court to the judgment of this court in Commissioner of Trade Tax, U. P., Lucknow v. Chhabra International [2005] 28 NTN 56. In my opinion, this case has no relevance to the facts and circumstances of the present case. The said judgment was concerned with the amendment made in the registration certificate with retrospective effect." (emphasis supplied) This decision thus lays down that in view of the provisions of section 10(b) and section 10A of the Central Sales Tax Act, 1956, a dealer must make a false representation, only then penalty can be imposed under the said provisions. If there is bona fide act of the dealer, being under a bona fide belief, that the goods in question are covered by the registration certificate, then the provisions for imposition of penalty under section 10(b) read with section 10A are not attracted, and no penalty can be imposed under the said provisions. In Commissioner of Trade Tax v. Prem Agriculture Implements [2009] 40 NTN 70, the dealer carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchased any class of goods by issuing form C and has represented that the goods of such class are covered by his certificate of registration, and such representation has been made by the registered dealer falsely, i.e., consciously and deliberately, and knowing that such representation is not correct and the goods of such class are not covered by his certificate of registration. In other words, there is wrongful intention or mala fide intention or guilty mind or mens rea in the sense of the word "falsely" on the part of the registered dealer in making the representation. Therefore, if the representation has been made by the registered dealer under bona fide belief that the goods in question are covered by his certificate of registration then penalty under clause (b) of section 10 read with section 10A of the Central Sales Tax Act, 1956 cannot be imposed on such a dealer. Belief of the registered dealer would be bona fide if the same has been formed by him bona fide, i.e., honestly and on reasonable grounds. However, if there is lack of bona fide on the part of the registered dealer in making the representation then penalty may be imposed on such a dealer. Question as to wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee executed works contract of pipe fittings and compressor for Gas Authority of India Ltd., Babrala, in which it is alleged that cables and light fittings have been imported for lighting work in execution of works contact. Though alleged cable and light fittings have been taxed at 10 percent by the Department in the relevant assessment order but this fact may not be sufficient to presume that the assessee was not entitled to issue form C against cable and light fittings which is consumable in light work for executing the works contract in pipe fitting and compressor works. Cable and light fitting material may riot be said of such material which is not used in the welding machines, grinding machines and the lighting works at the time of execution of works contract of pipe fitting and compressor works executed by the assessee for Gas Authority of India Ltd., Babrala. Hence, I find ho substance in the contention raised on behalf of Revenue that the assessee was not entitled to import aforesaid items against form C. Therefore, I find it expedient that aforesaid appeal be allowed and the penalty imposed against the assessee be set aside." From a perusal of the above-quoted paragraph ..... X X X X Extracts X X X X X X X X Extracts X X X X
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