1980 Supreme(Raj) 174
RAJASTHAN HIGH COURT AT JAIPUR BENCH
C.M.Lodha, N.M.Kasliwal, JJ.
M/s. Vijai Hosiery Mills - Appellant
Versus
The State of Rajasthan - Respondent
D.B. Sales Tax Reference No. 13 of 1980.
Decided On : 7-01-1980
Penalty under Section 16(1)(i) of the Rajasthan Sales Tax Act, 1954 cannot be imposed where the assessee has a bona fide belief that he is not liable to pay tax.
Headnote:
SALES TAX - Rajasthan Sales Tax Act, 1954 - Section 16(1)(i) - Penalty - Whether penalty could be imposed on the petitioner under Section 16(1)(i) of the Act for claiming exemption on the sale of banians on the ground that banian is a garment and not a hosiery product - Held, no.
Fact of the Case:
The petitioner, a registered dealer under the Rajasthan Sales Tax Act, 1954, claimed exemption from payment of sales tax on the sale of banians on the ground that banians were garments and not hosiery products. The assessing authority, however, held that banians were hosiery products and levied a penalty on the petitioner under Section 16(1)(i) of the Act for fraudulently evading or avoiding the payment of tax or concealing its liability to tax.
Finding of the Court:
The court held that the petitioner had a bona fide belief that banians were garments and not hosiery products, and therefore, it could not be said that the petitioner fraudulently evaded or avoided payment of tax or concealed its liability to tax. Hence, the court held that the taxing authorities were not justified in imposing penalty on the petitioner under Section 16(1)(i) of the Act.
Issues: Whether penalty could be imposed on the petitioner under Section 16(1)(i) of the Rajasthan Sales Tax Act, 1954 for claiming exemption on the sale of banians on the ground that banian is a garment and not a hosiery product.
Ratio Decidendi: The court held that where the assessee does not include a particular item in the taxable turnover under a bonafide belief that he is not liable so to include it, it will not be right to condemn the return as a false return inviting imposition of penalty. The court also held that even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute.
Final Decision: The court answered the question of imposition of penalty in favour of the assessee, i. e., in the negative.
JUDGMENT
1. - This is a reference under Section 15(3A) of the Rajasthan Sales Tax Act, 1954 (which will hereinafter be referred to as "the Act"), by the Board of Revenue for Rajasthan, Ajmer, in pursuance of the order of this Court dated 30th September, 1969, passed in D.B. Civil Misc. Application (Sales Tax) No. 44 of 1969.
2. The question that has been referred to us reads as follows:
Whether, after the amendment of Section 5 of the Rajasthan Sales Tax Act by Section 6 of the Rajasthan Amending Act (Act No. 13 of 1964), sales tax could be levied by the State of Rajasthan on the goods sold by the petitioner during the period from 14th May, 1964, to 31st December, 1964, by virtue of Notification, Excise and Taxation Department, No. F. 5(40) FD (R & T)/63-XIII dated 2nd March, 1963, issued by the Government of Rajasthan and penalty could be imposed on it under Section 16(l)(i) of the said Act?
3. For a correct appreciation of the contentions advanced by the learned counsel for the parties, we may refer to a few facts giving rise to the reference. The petitioner, M/s. Vijai Hosiery Mills, is a registered dealer under the Act. The period for assessment under consideration is from 1st January, 1964, to 31st December, 1964. The assessee showed a turnover of Rs. 1,79,214 on account of sale of "banians", but did not deposit the tax at the time of filing the return on the ground that the sale of "banians" was exempt from payment of sales tax by virtue of Notification No. F. 5(99) E & T/60 dated 26th March, 1962. The Commercial Taxes Officer, Circle B, Jaipur, however, did not accept the petitioner's contention and held that "banians" did not fall within the definition of the term "garments" but were a hosiery product and, consequently, liable to be taxed. He also levied a penalty of Rs. 10,752.84, an amount equal to the amount of tax. Aggrieved by the order of the assessing authority, the petitioner filed an appeal before the Deputy Commissioner (Appeals), Commercial Taxes, Jaipur II, but was unsuccessful. Thereafter, the petitioner filed a revision application before the Board of Revenue for Rajasthan, Ajmer, but that too was dismissed. The petitioner then made an application under Section 15(1) of the Act to the Board for making a reference to this Court, but that application was not decided within the prescribed period. Consequently, the petitioner approached this Court under Section 15(2) of the Act and this Court by its order dated 30th September, 1969, required the Board to state a case and refer the question of law arising out of its revisional order. The question has already been extracted above.
4. The learned counsel for the petitioner stated at the very outset that the petitioner had challenged the vires of the notification dated 26th March, 1962, of the State Government, which deals with the question of exemption by a writ petition before this Court, but the same was dismissed and thereupon the petitioner filed an appeal by certificate before the Supreme Court. The judgment of the Supreme Court is reported as Jaipur Hosiery Mills (P.) Ltd. v. State of Rajasthan [1970] 26 S.T.C. 341 (S.C.) . It is submitted that though the Supreme Court in agreement with this Court upheld the validity of the notification dated 26th March, 1962, yet observed that the question whether "banians" were included in the term "hosiery products" should have been left to be decided in each individual case by the assessing authority. It is submitted that the aforesaid judgment was delivered by the Supreme Court on 27th April, 1970, whereas the reference in question had been made by the Board of Revenue before that, i. e., on 31st March, 1970. It is further submitted by the learned counsel for the petitioner that the petitioner would have moved the taxing authorities over again to determine the question whether "banians" are included in the term "hosiery products" in the light of the Supreme Court's order, but now, since the petitioner-firm has closed its
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