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TMI Blog1997 (8) TMI 509X X X X Extracts X X X X X X X X Extracts X X X X ..... the purchase of grease, adhesive and key chain by using "C" forms and availing of the concessional rate of tax at 4 per cent in respect of those purchases was violative of section 10(b) of the Act as these items "are distinct and separate items of goods and cannot be categorised as falling under the goods mentioned in the CST certificate". He, therefore, levied penalty of Rs. 26,670 being 1½ times the tax payable at the rate of 10 per cent on the turnover of Rs. 1,77,801.75 in relation to these three items. The assessee's case before the Commercial Tax Officer was that these goods are allied or similar to the goods mentioned in the certificate of registration and, therefore, were covered by the registration certificate. That plea was rejected by the Commercial Tax Officer. 2.. Before the Appellate Assistant Commissioner, the assessee contended in addition to what had been contended before the assessing officer, that they had got grease and distemper included in the registration certificate on July 12, 1982 and this conduct was sufficient proof of their bona fides. The appellate authority accepted the assessee's case that it had issued the " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act is false representation. Counsel submitted that the representation should have been untrue to the knowledge of the maker, and had been deliberately made with a view to evade the payment of tax at the higher rate. It was further submitted that in a case where an assessee had acted bona fide by ignorance, inadvertance or even negligence, such conduct on the part of the assessee would not amount to false representation. The further submission was that the authorities are bound to record a specific finding that the representation by the dealer was false, before any penalty is imposed on the dealer for the use of "C" forms, in respect of goods not specifically mentioned in the certificate of registration. 5.. Before considering these submissions of the learned counsel, it is useful to first examine the scheme of sections 10 and 10-A of the Act. 6.. Section 10 of the Act deals with penalties. It consists of seven categories of violations of the provisions of the Act, and provides for punishment for such violation which could be simple imprisonment which may extend to six months, or fine, or both, and in case of continuing offence, a daily fine which may extend to Rs. 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtained by a person who is either not registered as a dealer, or though registered has not included in the certificate of registration, the goods obtained by him at a concessional rate. The result of such action of obtaining goods at concessional rate, even though not eligible to enjoy such the concession is loss of revenue to the State to the extent of difference between the tax properly payable, viz., 10 per cent and the tax actually paid which is 4 per cent. Clause (d) of section 10 of the Act deals with a situation where a dealer who has obtained goods at a concessional rate of tax fails to make use of the goods for the purposes for which it was allowed to be obtained at concessional rate, without reasonable excuse for such failure. 10.. The violation of law spelt out in clause (a), clause (aa), clause (e) and clause (f) of section 10 of the Act must necessarily be dealt with by prosecuting the offender, and such offender cannot avoid prosecution by paying penalty as these violations are excluded from the purview of section 10-A of the Act. 11.. A proceeding under section 10-A of the Act being an alternative to prosecution, cannot be treated as equivalent to a prosecution, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. 14.. In the case of State of Tamil Nadu v. Kodaikanal Motor Union (P.) Ltd. [1986] 62 STC 271, the apex Court held that the penalty to be levied under section 10-A of the Act, is on the basis of the normal tax and not the concessional rate of tax. The court held that section 10-A(1) of the Central Sales Tax Act, 1956, as amended in 1973, makes it clear that, penalty should be worked out at the rate of tax which would have been levied if the offence had not been committed. The assessee would not have committed any offence only if, he had carried out the undertaking given by him in his declaration in form "C", or if he purchased the goods without giving any declaration, thereby incurring liability to pay normal rate of tax as contemplated by sub-section (2) of section 8. One who commits default cannot be said to have carried out the undertaking given by him. The court also referred to the scheme of section 8 of the Act, and held that the scheme indicates that concessional rates contemplated by sub-section (1) thereof would be available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mi and Co. [1992] 87 STC 345 and in Vijaya Electricals v. State of Tamil Nadu [1991] 82 STC 268, it was held that there was nothing in section 10-A of the Act which requires that mens rea must be established before penalty can be levied under that provision. 18.. The High Court of Kerala in the case of P.K. Varghese and Sons v. Sales Tax Officer, Special Circle, Ernakulam [1964] 16 STC 323 and in Rajalakshmi Textiles Finishing Mills v. Sales Tax Officer [1976] 38 STC 302, has taken the view that mens rea is an essential ingredient of an offence under section 10(b) of the Act. 19.. Having given our anxious consideration to the object and the scheme of sections 10 and 10-A of the Act in the light of the other provisions of the Act, we find it difficult to accept the submission that mens rea is an essential ingredient of the violations of the Act referred to in sections 10(b), (c) and (d) of the Act. As already pointed out, a proceeding under section 10-A of the Act is not a prosecution, and it is a proceeding primarily meant to recoup the amount of tax lost to the Revenue by reason of the wrongful conduct of the person committing the violations enumerated in clauses (b), (c) and (d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t forth as a mitigating circumstances in rare cases for avoiding the imposition of penalty must be established by the assessee; the burden is not on the Revenue. It is only in cases where there is a reasonable possibility of the goods not included in the certificate, and obtained at concessional rates being covered by the goods described in the certificate of registration, the conduct of the dealer can be regarded as bona fide, the benefit of any ambiguity in the description of goods being given to the dealer. In cases where the goods purchased by the use of the "C" forms are not, and cannot be regarded as covered under any of the classes of goods mentioned in the certificate of registration, there is no scope for a dealer claiming to have acted bona fide. A subsequent action on the part of such a dealer to have included in the registration certificate, such goods would not establish bona fides. Such an act performed by a dealer after he had been caught in his violation of the law, cannot be regarded as proof of his bona fide conduct. It is also necessary that the dealer who claims to have acted bona fide should be able to show, in addition to the goods being relatable to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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