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TMI Blog2006 (7) TMI 578X X X X Extracts X X X X X X X X Extracts X X X X ..... he cannot be held guilty of the offence under Section 10(b) of the Act and no penalty can be imposed under Section 10A of the Act. The question whether the assessee acted under the honest belief is a question of fact. Thus, mens rea is an essential ingredient for the levy of penalty under Section 10(b) of the Central Sales Tax Act, 1956. The reference is answered accordingly - The Registry is directed to place the appeals before the appropriate Bench for disposal. - A. P. Shah, CJ D. Murugesan And R. Sudhakar,JJ. For the Petitioner : Mr. Haja Nazirudeen, Spl. G. P. For the Respondent : M/s. Chandran, Karuppiah, Ramani ORDER (Order of the Court was made by The Hon'ble Chief Justice.) The point that present itself before the Full Bench is whether mens rea is an essential ingredient for the levy of penalty under Section 10(b) of the Central Sales Tax Act, 1956 (hereinafter referred to as 'the Act'). 2. The decisions of this Court under Section 10-A of the Act have not been consistent, while in some of the decisions such as State of Tamil Nadu v. Betala Industries (1993)88 STC 328, Sri Lakshmi Machine Works v. State of Madras (1973) 32 STC 407 and in Dharma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, as held in Vijaya Electricals's case, 82 STC 268 levy of penalty is justified. The finding of the Appellate Assistant Commissioner was confirmed by the Tribunal. T.C.No.1180 of 1992 4. In this case the assessee who is a registered dealer purchased a boiler, which was required for tyre retreading business, by using C-Form certificate for availing concessional rate of tax, which item is not included in their certificate of registration. The Assessing Officer held that the assessee has purchased the boiler by misusing the C-Form certificate issued to him and therefore, levied a penalty of Rs.10,809/- under Section 10-A of the Act. In Appeal, the Appellate Assistant Commissioner held that the assessee has simply pleaded that they were in bona fide belief and faith while purchasing the goods. The assessee cannot take advantage of bona fide belief and faith and the G.O. issued by the State of Tamil Nadu when they blatantly violated the provisions of the Act. The assessee not only failed to get the commodity included in the certificate of registration but they also misused the commodity by utilising in the works contract for which purpose the C-Form cannot be issued and uphe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in clauses (b), (c) and (d) of Section 10 of the Act are not necessarily to result in prosecution with the possible imposition of sentence of imprisonment or fine or both. An alternative is provided in respect of these violations in Section 10-A of the Act. 10. Section 10-A of the Act provides for imposition of penalty in lieu of prosecution. It provides that if any person purchasing goods is guilty of an offence under clause (b) or clause (c) or clause (d) of Section 10 of the Act, the authority who granted, or is competent to grant to that person a Certificate of Registration under the Act, may, after giving him a reasonable opportunity of being heard, by order in writing, impose upon him by way of penalty a sum not exceeding one and a half times of tax which would have been levied under sub-section (2) of Section 8 of the Act in respect of the sale to him of the goods, if the sale had been a sale falling within that sub-section. The proviso (1) to section 10-A of the Act bars prosecution for an offence in respect of which a penalty has been imposed under this section. Proviso (2) to Section 10-A of the Act provides that the penalty imposed under Section 10-A(1) has to be coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d furnished false returns by not including the amount of freight in the taxable turnover disclosed in the returns. Allowing the appeal the Supreme Court has held as follows:- "Now it is difficult to see how the assessee could be said to have filed 'false' returns, when what the assessee did, namely, not including the amount of freight in the taxable turnover, was under a bona fide belief that the amount of freight did not form part of the sale price and was not includible in the taxable turnover. The contention of the assessee throughout was that on a proper construction of the definition of 'sale price' in Section 2(o) of the Madhya Pradesh General Sales Tax Act, 1958 and Section 2(h) of the Central Sales Tax Act, 1956, amount of freight did not fall within the definition and was not liable to be included in the taxable turnover. This was the reason why the assessee did not include the amount of freight in the taxable turnover in the returns filed by it. Now, it cannot be said that this was a frivolous contention taken up merely for the purpose of avoiding liability to pay tax. It was a highly arguable contention which required serious consideration by the Court and the belief e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sely representing that the goods purchased were covered by the registration certificate. The Supreme Court expressed the view that unless it is shown that the assessee had made such a false representation section 10-A would not stand attracted. In that case, the Board of Revenue as well as the High Court had come to the conclusion that the assessee was entitled to the concessional rate which he claimed. The State disputed that decision and went before the Supreme Court. The Supreme Court said, "Assuming, without deciding, that the view taken by them (Board of Revenue and the High Court) is incorrect, even then it is impossible to say under the circumstances of the case that the respondent (assessee) was guilty of making any false representation." The view taken by the Supreme Court in that case was where there is a possibility of two view in the matter as to whether the goods purchased are covered by the registration certificate or not, the mere issue of a C form certificate by the assessee without any further circumstance or material will not lead to the conclusion that the assessee has made false representation. 14. In Hindustan Steel Ltd. v. State of Orissa, (1970) 25 STC 211, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nless the dealer acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. Thus whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judiciously and on consideration of all the relevant circumstances. Where, therefore, a breach flows from a bona fide belief that the dealer is not liable to act in the manner prescribed by the statute, the assessing officer would be entitled to refuse to impose any penalty. Similarly, when a dealer is technically guilty of violation but not in conscious disregard of the provisions and acted bona fide and has no motive to escape the liability by using "C" declaration forms, no penalty should be levied. Before a penalty can be imposed, the circumstances established must reasonably point to the conclusion that the assessee concerned has consciously committed the acts or omissions which go to constitute the offence and the burden would be on the department to prove the existence of such circumstances. Thus, in a proceeding for levy of penalty under section 10-A the department must prove th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... versing the decision of the High Court the Supreme Court held that the proceedings under Section 23(1)(a) are "adjudicatory" in nature and character and are not "criminal proceedings". Mens rea is not an essential ingredient for holding a delinquent liable to pay penalty under Section 23(1)(a) of FERA, 1947 for contravention of the provisions of Section 10 of FERA, 1947 and penalty is attracted under Section 23(1)(a) as soon as the contravention of statutory obligation contemplated by Section 10(1)(a) is established. In the present case, we are concerned with Section 10(b) of the Central Sales Tax Act and what Section 10(b) requires is that the registered dealer should have made false representation and such a representation cannot be said to be false unless there is an element of deliberateness in it. Therefore, the decision of the Supreme Court under FERA has no application. 20. Learned counsel for the Revenue also relied on the decision of the Supreme Court in I.T.Commissioner, Gujarat v. I.M.Patel Co., AIR 1992 SC 1762 where a two Judge Bench of the Apex Court held that mens rea need not be proved before imposition of penalty under Section 271(1)(a) of the Income-tax Act. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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