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TMI Blog2015 (11) TMI 1078X X X X Extracts X X X X X X X X Extracts X X X X ..... han & Another(D.B. Civil Writ Petition No.4250/1998), 2005(1) RLR 291, decided on 02.06.2004, and in M/s Maharana Talkies Vs. State of Rajasthan & Others(D.B. Civil Special Appeal No.858/1994), reported in (2004) 19 Sales Tax Today 239, decided on 29.11.2004, as well as M/s. Lalji Mulji Transport Company Vs. State of Rajasthan, 2002(3) RLR 255, as follows:- "(i) Whether requirement of mens rea is relevant for the purpose of determining the liability for penalty in terms of Section 78 sub-section(5) of the Rajasthan Sales Tax Act, 1994" (ii) Whether the mens rea is required to be proved as a necessary ingredient for imposition of penalty under sub-section(5) of Section 78 on proven violation of sub-section (2) of Section 78 of the Rajasthan Sales Tax Act, 1994? (iii) Whether in view of the amendment to Rule 55 of the Rajasthan Sales Tax Rules, 1995 pursuant to the decision of the Hon'ble Supreme Court in the case of State of Rajasthan and Another Vs. M/s. D.P. Metals, on sufficient cause being shown whether any authority empowered would be justified in not imposing the penalty in the absence of mens rea being proved? (iv) Whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods; and (c) the goods which are being carried by a person. [(2A) The State Government may require by notification that the documents required to be furnished under sub-section (2), shall be furnished by means of such electronic devices, and be accompanied by such processing fee, as may be prescribed.] (3) Where any goods are in movement within the territory of the State of Rajasthan, an officer empowered by the State Government in this behalf may stop the vehicle or the carrier or the person carrying such goods, for inspection, at any place within his jurisdiction and the provisions of sub-section (2) shall mutatis mutandis apply. (4) Where any goods in movement, other than exempted goods, are without documents, or are not supported by documents as referred to in sub-section (2), or documents produced appear false or forged, the in charge of the checkpost or the officer empowered under sub-section (3) may - (a) direct the driver or the person in charge of the vehicle or carrier or of the goods not to part with the goods in any manner including by transporting or re-booking, till a verification is done or an enquiry is made, which shall not take m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer empowered under sub-section (3) may release the vehicle or the carrier on the payment of the amount of penalty imposed under sub-section (8) or on furnishing such security as may be directed by such in-charge or officer. (10) Where a transporter, while transporting goods, is found to be in collusion with trader to avoid or evade tax, the in-charge of the check post or the officer empowered under sub-section (3) shall detain the vehicle or carrier of such transporter and after affording him an opportunity of being heard and with the prior approval in writing of the Deputy Commissioner (Administration) having jurisdiction, may confiscate such vehicle or carrier. [(10-A] Notwithstanding anything contained in this section, where the driver or the person incharge of the vehicle or the carrier abstained from bringing or stopping the vehicle or carrier at the nearest check-post as provided under clause(b) of sub-section (2), the incharge of the check-post or the officer empowered under sub-section (3) may detain such vehicle or carrier and, after affording an opportunity of being heard to the owner or a person duly authorised by such owner or the driver or the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the check-post or the officer empowered under rule 52, shall complete the verification or enquiry within 7 days from the date of issue of the direction and take a view for action, if any, as warranted by the circumstances of the case. (3) Where a person incharge of the goods or the driver, as the case may be, does not possess any document and declaration form in respect of the goods in movement, or refuses to deliver the documents and the declaration forms, or the documents and the declaration forms produced appear to be false or forged, the Incharge of the check-post or the officer empowered under rule 52, may get such goods unloaded from the vehicle or the carrier and seize the same and shall issue a receipt of the goods so seized in form ST 20. (4) Where the goods are seized, the Incharge of the check-post or the officer empowered under rule 52 shall serve a notice on the person incharge of the goods or the vehicle or the carrier, or the owner of the goods, if present, as the case may be requiring him to show cause within 7 days from the date of service of the notice as to why the documents and declaration as referred to in sub-rule (1A), were not produced or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question of relevancy of mens rea(knowledge of the wrongfulness of the act; guilty intention; or guilty mind), for the purpose of determining the liability for penalty in terms of sub-section(5) of Section 78 of the RST Act, 1994. The answer to question Nos. (ii) and (iv) which is repetition of question No.(ii) will be necessary, if the question No.(i) is decided in affirmative. The question No.(iii) has been framed, in view of the amendment made in Rule 55 of the RST Rules, 1995, pursuant to the decision of the Apex Court in State of Rajasthan And Another Vs. M/s. D.P. Metals, (2002) 1 SCC 279, by which a new sub-section (1) was inserted and re-numbered by Notification dated 22.03.2002, providing for affording an opportunity to the owner or the person in-charge of the goods, and in their absence, the owner or the driver of the vehicle, to produce the required documents and/or declaration forms complete in all respects, when the goods enters or leaves the nearest check-post of the State. The answer to question No.(iii) will also depend upon the answer to the question No.(i), which is a primary question, to be decided by this Court. 5. Before proceeding to refer to the argume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filled in by the consignor but due to lack of knowledge of Hindi language, the same could not be filled in by the consignor. The AO did not accept the explanation and refused to accept the unfilled form as a declaration. He imposed a penalty under Section 22-A(7) of the Act. In appeal, the Deputy Commissioner(Appeals) came to a conclusion that under Rule 25(3) of the RST Rules, 1955, the purchasing dealer was required to give the requisite declaration in Form ST 18-A to the selling dealer. The responsibility to fill the form was on M/s Guljag Industries, which carried on its business from Rajasthan, and was familiar with the Hindi language, therefore, the unfilled form ST 18-A cannot be accepted as a declaration. The appeal was dismissed. In second appeal, the Rajasthan Tax Board came to a conclusion that penalty could not be imposed without establishing guilty mind(mens rea) on the part of M/s Guljag Industries. Learned Single Judge of the Rajasthan High Court, in revision, held that the presence of mens rea was not a sine qua non for levying penalty in case of contravention of Section 22-A(3) of the Act, and in the present case, Form ST 18-A was totally blank, though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the document by the driver at the check-post cannot result in levy of penalty. In revision, learned Single Judge of the Rajasthan High Court remanded the matter to the Rajasthan Taxation Tribunal. The Tribunal took a view that it was obligatory on the part of the consignee or his agent to carry with him the requisite documents, and also to produce the documents at the check-post, on demand by the officer. The contravention of Section 22-A of the Act cannot be obliterated by subsequently producing the documents at the time of assessment. The Tribunal held that penalty was automatic once the driver, on demand, failed to produce the documents. Once the offence is complete subsequent furnishing of the documents even if bona fide, will not relieve the owner of the goods from liability of penalty. 9. The Rajasthan High Court had held in its judgment dated 02.06.2004, that levy of penalty was not automatic in the case where the goods in movement are found to be unaccompanied by the required documents. The question of levy of penalty would arise only before the goods are delivered to consignee, and if it is found that the goods are in movement unaccompanied with document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contravention was made by the defaulter with any guilty intention. It was further held that unless the language of the provision intends the need to establish mens rea, it is generally sufficient to prove the default/contravention in complying with the statute. In the present case also the statute provides for a hearing. However, that hearing is only to find out whether the assessee has contravened Section 78(2) and not to find out evasion of tax which function is assigned not to the officer at the check-post but to the A.O. in assessment proceedings. In the circumstances, we are of the view that mens rea is not an essential element in the matter of imposition of penalty under Section 78(5). 33. In our view, the aforestated judgment in the case of D.P. Metals (supra) has no application to the present case. We are not concerned in the present case with false or forged documents/declaration. In the present case the goods in movement were carried with the blank declaration Form 18A/18C which was duly signed by the assessee. therefore, as stated above, we hold that the goods in movement were carried without the declaration Form 18A/18C. therefore, Section 78(2)(a) stood attracte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 35. For the aforestated reasons, we hold that Section 78(5) of the RST Act 1994 (Section 22A(7) of the RST Act 1954) is the section enacted to provide remedy for loss of revenue and it is not enacted to punish the offender for committing economic offence and, therefore, mens rea is not an essential ingredient for contravention of Section 78(2) of the RST Act 1994. That, the breach of Section 78(2) would attract the levy of penalty under Section 78(5) in cases where the goods in movement have travelled with an incomplete Form No. 18A/18C. We accordingly uphold the judgment of the High Court of Rajasthan in Sales Tax Revision No. 1023/2002 dated 14.10.03 (which is annexed as p. 1 of the appeal paper book in Civil Appeal No. 5197 of 2005 filed by Guljag Industries v. CTO)." 11. The judgment of the Apex Court in Guljag Industries Vs. Commercial Taxs Officer(supra), has clearly explained the law, with regard to the relevance of mens rea, and its proof, for the purposes of determining the liability for penalty in terms of sub-section (5) of Section 78 of the RST Act, 1994, and thus, squarely covers the question No.(i), which guides the question Nos.(ii) and (iv) also. 12. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l obligation which attracts penalty under the Act would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention. The Supreme Court had held in Chairman, SEBI Vs. Shriram Mutual Fund(supra), that unless the language of the provision intends the need to establish mens rea, it is generally sufficient to prove the default/contravention in complying with the statute. The statute provides for a hearing. In the case of RST Act, 1994, hearing is only to find out whether the assessee had contravened Section 78(2) of the RST Act, 1994, and not to find out evasion of tax which function is not assigned to the officer at the check-post, but to the Assessment Officer in the assessment proceedings. In the circumstances, the Supreme Court, without any doubt or ambiguity, held that mens rea is not an essential element in the matter of imposition of penalty under Section 78(5) of the RST, 1994. 16. We are, thus, relieved of deciding the question No.(i), or for that matter, question Nos.(ii) and (iv), which depend upon the answer of the question No.(i), after the Supreme Court has held authoritatively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommission of any crime, but determine the liability of the contravenor for the breach of his obligations, imposed under the Act. They impose penalty for the breach of the civil obligations laid down under the Act, and not impose any sentence for commission of an offence. The expression 'penalty' is a word of wide significance. Sometimes, it means recovery of an amount as a penal measure even in civil proceedings. An exaction which is not compensatory in character, is also termed as a 'penalty'. When penalty is imposed by an adjudicating officer, it is done so in adjudicatory proceedings, and not by way of fine as a result of prosecution of an accused for commission of an offence in a criminal Court. Merely because penalty clause exists in Section 23(1)(a), the nature of the proceedings under that Section is not changed from adjudicatory to criminal prosecution. An order made by an adjudicating authority under the Act is not that of conviction but of determination of the breach of the civil obligation by the offender. 19. Mr. R.B. Mathur submits that breach of the provisions of Section 78(5) of the RST Act, 1994, falls in the category of 'civil offen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmercial Taxes And Another, 117 STC 457(SC); Union of India Vs. Rajasthan Spinning & Weaving Mills, 11 VAT Reporter 210(SC), Parashwanath Granine India Ltd. Vs. State of Rajasthan And Another, 114 STC 271(Raj. High Court), Lalji Mulji Transport Co. Vs. State of Rajasthan(supra); ACTO, FS-I, Jaipur Vs. M/s. Indian Oil Corpn. Ltd., (2006) 15 Tax Up Date 207 (Raj. High Court), and Commercial Taxes Officer Vs. Deewan Rubber Industries Pvt. Ltd., 132 STC 211(Raj. High Court), in support of his submissions. 21. In Hindustan Steel Ltd. Vs. The State of Orissa(supra), the Supreme Court held that an order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law, or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. The penalty will not also be imposed merely because it is lawful to do so. The facts of the case related to assessment of tax under the Orissa Sales Tax Act. The Sales Tax Officer directed the company to pay tax due for ten quarters ending December 31, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellants were not right in not including the amounts of planting subsidy and transport subsidy in the taxable turnover, considering the facts and circumstances of the case, it was not correct to say that they had acted deliberately in defiance of law, or that their conduct was dishonest or they had acted in conscious disregard of their obligation under the Sales Tax Act. 23. In Union of India Vs. Rajasthan Spinning & Weaving Mills(supra), there was willful concealment resulted into evasion of tax. The Supreme Court held that the penalty was imposable when escaped duty was the result of deliberate deception by the assessee with the intent to evade duty by adopting any of the means as provided in Section 11A of the Central Excise Act, 1944. 24. Section 11AC of the Central Excise Act, 1944, uses the expression:"........by reasons of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of the Act or of the rules made thereunder with intent to evade payment of duty......." The penalty under Section 11AC, as the word suggests, is punishment for an act of deliberate deception by the assessee with the intent to evade duty by adop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion forms, and for submission of the false or forged document or declaration. He submits that for submission of false or forged document or declaration, the language of the statute provides for determination of guilty mind, and thus, mens rea is necessary ingredient for the purpose of imposition of penalty. He submits that the judgment in Guljag Industries Vs. Commercial Taxes Officer(supra), did not relate, nor is relevant for deciding whether mens rea is a necessary ingredient, where false or forged documents and declaration have been submitted, inviting levy of penalty. He relied on Commissioner of Sales Tax, Uttar Pradesh Vs. Sanjiv Fabrics, (2010) 9 SCC 630, in which it was held, with reference to Section 10(b) and 10-A of the Central Sales Tax Act, 1956, that the violations enumerated in clauses (b), (c) and (d) of Section 10, may not necessarily result in prosecution with possible imposition of sentence of imprisonment, as an alternative of imposition of penalty in respect of violation is provided under Section 10-A. It was held that where an offence can be said to have been committed without mens rea, is a vexed question. However, there is a presumption that mens rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g penalty under Section 10(b) read with Section 10-A of the Act. 31. We do not find that the reference to Commissioner of Sales Tax, Uttar Pradesh Vs. Sajiv Fabrics(supra), is relevant in the present case inasmuch as in Commissioner of Sales Tax, Uttar Pradesh Vs. Sajiv Fabrics(supra), the interpretation of Section 10(b) and 10-A was under consideration, which uses of word 'falsely represents' under Section 10(b). There is difference between the word 'falsely represents', and the submission of false or forged document or declaration. The words 'falsely represents' would necessarily bring in determination, as to whether a thing called 'false', is done or made with knowledge, actual or constructive, that it is untrue or illegal or is said to be done falsely when the meaning is that the party is in fault for its error. The expression 'falsely represent' is indicative of the fact that the offence comes into existence only where a dealer acts deliberately in defiance of law or is guilty of contumacious or dishonest conduct. 32. In the case of submission of false or forged document and declaration, sub-section (2) of Section 78 or sub-section (5) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and/or declaration forms completed in all respects, when the goods enters or leaves the nearest check-post of the State, or the documents are found to be false or forged, after enquiry, that a penalty may be imposed, which is a civil liability for compliance of the provisions of the Act for the purposes of checking the evasion of tax. It is thus not correct to submit that penalty for submission of false or forged document or declaration, necessarily involves adjudication, for which mens rea is relevant, and is a necessary ingredient. Any doubts in this regard have been clarified by the Hon'ble Supreme Court in Guljag Industries Vs. Commercial Taxes Officer(supra), in which it has been clearly held in para 30, after quoting the provisions of Section 78, that; "In the present case also the statute provides for a hearing. However, that hearing is only to find out whether the assessee has contravened Section 78(2) and not to find out evasion of tax which function is assigned not to the officer at the check-post but to the AO in assessment proceedings. In the circumstances, we are of the view that mens rea is not an essential element in the matter of imposition of penalty unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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