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TMI Blog1996 (9) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... wire scraps, aluminium scraps, etc. During the period from April 1, 1991 to December 21, 1994 the applicant purchased and sold, inter alia, brass scrap, zinc scrap, zinc ingot and zinc dross. On seven occasions the Commercial Tax Officer, on the applicant s prayers, issued declaration forms (hereinafter referred to as the D.Fs. ) for use against purchases of these new items, and did so after due verification of the previously used D.Fs. with their corresponding sale particulars. The applicant on receipt of D.Fs. issued the same to the sellers. But he was served with a notice dated December 30, 1994 in form VIIC calling for the documents and objections, if any, for hearing in connection with the determination of amounts of penalty to be imposed for improper use of D.Fs. during the period from April 1, 1991 to December 30, 1994. The applicant filed objection along with the books of accounts, purchase bills, etc., in connection with hearing of the penalty proceeding before the Assistant Commissioner. But a penalty of Rs. 3,60,000 was imposed by an order dated August 3, 1995 and a demand notice dated September 6, 1995 was also issued for the said amount. On revision the Deputy Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that the Commercial Tax Officer had information about purchase of such goods cannot save such illegal use of D.Fs. from the ambit of the penal provision of section 5B of the 1941 Act. The penalty imposed, being within permissible limit, is not violative of law. Thus, the application initiating the present case is liable to be dismissed. 3.. The affidavit-in-reply submitted by the applicant contains paragraphwise denial of the contents of the affidavit-in-opposition. The additional pleas of the applicant are, inter alia, that the respondents made wrong interpretation of the concerned laws and of the reported decisions and that the information received from the documents, supplied along with his (applicant s) application for issue of D.Fs. ought to have been treated as information otherwise received within the meaning of section 7(4). 4.. The main issue that calls for decision here is whether the order dated November 23, 1995 of the Deputy Commissioner is liable to be quashed on the ground of any illegality or impropriety. 5.. The applicant being a reseller, his use of D.Fs. should be confined to purchases provided in clause (aa) of sub-section (1) of section 5. U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o amendment of R.C. as are relevant for the present purpose. Section 7(4) provides, inter alia, that Commissioner may from time to time amend any certificate of registration in accordance with information furnished under section 16 or otherwise received. The part of section 16 as is relevant in the present context runs thus,- 16. Information to be furnished regarding changes of business.-If any dealer to whom the provisions of sub-section (2) of section 10 apply, (a)................ (b)............... (c) changes the name or nature of his business or effects any change in the class or classes of goods in which he carries on his business and which is or are specified in his certificate of registration, or (d)................ he shall within the prescribed time and in the prescribed manner inform the prescribed authority accordingly; and if any such dealer dies, his legal representative shall in like manner inform the said authority. Another provision that needs consideration in this context is that of subrule (1) of rule 11 of the Bengal Sales Tax Rules, 1941. The sub-rule reads: 11(1) When any registered dealer makes any report in accordance with section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods not included in the R.C. and, on the contrary, the applicant s pretence as if items in question were included in the R.C. misled the Commercial Tax Officer. Before us it has not been contended on behalf of the applicant that he on any such occasion made specific disclosure to the Commercial Tax Officer that the D.Fs. were needed for purchase of goods not included in the R.C. or that his formal prayers for issue of D.Fs. were accompanied by the R.Cs. that the Commercial Tax Officer had the opportunity to verify the entries of the R.C. with the nature of goods for whose purchase the D.Fs. were required. When it is obligatory for a registered dealer to confine the use of D.Fs. only to the extent of items included in the R.C., the Commercial Tax Officer, in the absence of any special reason to suspect to the contrary, may expect such dealer to have acted according to such obligation. Hence, the Commercial Tax Officer may not, in such circumstance, resort to elaborate scrutiny on every prayer for issue of D.Fs. In such circumstances, even if an unwary Commercial Tax Officer issues D.Fs., the same does not thereby vest the dealer with right to use D.Fs. for purchase of goods no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to impose penalty upon dealer for improper use of D.Fs. But, the High Court did not give any specific finding on the point. In our view, such observation of Mr. Dutta is not in keeping with the position of law. We are of the view that it would be quite legitimate to initiate a penalty proceeding under section 5B of the 1941 Act for the overt act of improper use of the D.Fs. by the dealer in disregard of his obligation in the face of the fact that his R.C. did not cover the items for which D.Fs. were used. The applicant in the case before us despite his knowledge of the extent of coverage of his R.C. has enjoyed the concessional rate of tax, has misled his sellers and has caused loss of revenue to the State exchequer. He seeks to exploit the Commercial Tax Officer s mistake as a plea for his deliberate defiance of the law. Shri Dey relies on the decision in the case of Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211 (SC); [1972] 83 ITR 26 (SC) to justify the applicant s action. In this decision it has been observed that imposition of penalty for failure to perform a statutory obligation is a discretion to be exercised judicially by the authority and that penalty will not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 129 ITR 404 (SC) (Assistant Controller of Estate Duty v. Prayag Dass Agarwal). In the first case, it came up before the Supreme Court for decision if the word may as appearing in rule 4(2) of the Uttar Pradesh Disciplinary Proceedings (Administrative Tribunal) Rules, 1947 should be construed to mean shall . Supreme Court firstly took note of the position that under rule 4(1) the Governor may refer to the Tribunal the case relating to an individual Government servant or class of such servants involved in delinquence of the nature specified in the sub-rule itself. The court next noted that under section 4(2) the Governor may in respect of a gazetted Government servant on his own request, refer the case to the Tribunal in respect of the matters referred to in sub-rule (1). The Supreme Court came to a finding that the word may in sub-rule (2) should be construed as shall . The court elaborated the point with the observation that sub-rule (1) was enough to encompass all Government servants including the gazetted ones and therefore a special provision for the gazetted Government servants contained in sub-rule (2) cannot but be construed as obligatory on the Governor to refer the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etation or creates doubts, the interpretation which favours the assessee should be adopted. But we have already seen that the expression received otherwise as appearing in section 7(4) neither creates any doubt nor suffers from any ambiguity. 15.. According to Shri Dey, absence of mens rea protects the applicant from penalty. To derive support for this contention Shri Dey refers to decision reported in [1996] 101 STC 203 (Singh Traders v. Commissioner of Sales Tax, Lucknow). In this case it has been observed by the High Court of Allahabad, that where an offence is the creation of a statute, normally without anything more, the requirement of element of mens rea is imported into the concept of offence unless there is something express or implied in the language of the provision which goes against such presumption. This decision is in the context of section 15A of the U.P. Sales Tax Act, 1948, which provides for penalty for making false verification or declaration in any application for registration or in connection with any proceeding under the Act. In this case, the same person was the proprietor of a business concern and also the manager of another Government undertaking. Both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eady seen that the applicant tried to make gain by abuse of D.Fs. in spite of his knowledge that the goods purchased were not covered by his R.C. Shri Dey argues that the penalty proceeding against the applicant was vitiated by the fact that along with the notice in form VIIC, the gist of order proposed to be passed was not sent. According to him the sheet containing the gist of order proposed to be passed was handed over on a subsequent date. His plea is that since in terms of rule 55B(2) of the 1941 Act it is mandatory, the gist of the proposed order must accompany the notice in form VIIC. The impression of pin-mark appearing in the xerox copy of the notice in form VIIC (annexure C to the application) clearly shows that some other paper/papers were sent as enclosure to this notice. Be that as it may, the signatures of the officer are dated December 30, 1994 both in the notice in form VIIC and the sheet containing gist of the proposed order. We find no reason to hold that the gist of the proposed order was withheld. At any rate it appears from the order of the Assistant Commissioner dated August 3, 1995 that during the hearing of the penalty proceeding the dealer or his advocate d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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