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1994 Supreme(Mad) 989
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE THANIKKACHALAM & THE HONOURABLE MR. JUSTICE SHANMUGAM
State of Tamil Nadu - Appellant
Versus
Amrutanjan Limited - Respondents
Tax Case No. 5 of 1987 (Revision No. 4 of 1987)
Decided On : 24 November 1994
For the levy of penalty under section 10(b) of the CST Act, there must be conscious disregard of the provisions of law by the assessee while issuing C forms by including the goods which are not stated in the registration certificate.
Headnote:
CST ACT - SECTION 10(B) - SECTION 10A(1) - PENALTY FOR FALSE REPRESENTATION - MENS REA - CAPITAL GOODS NOT COVERED BY REGISTRATION CERTIFICATE - LEVY OF PENALTY - CONDITIONS.
Fact of the Case:
The respondent, a registered dealer under the CST Act, issued C forms with declarations that the articles purchased were intended for resale or for use in the manufacture of other goods for sale. However, the goods purchased were not resold or used in the manufacture of other goods for resale, but were used for other purposes. The Commercial Tax Officer proposed to levy a penalty under section 10A(1) of the CST Act, which was confirmed by the Appellate Assistant Commissioner but reduced in quantum. On further appeal, the Tribunal deleted the penalty.
Finding of the Court:
The court held that the Tribunal erred in deleting the penalty levied under section 10(b) of the CST Act. The court found that the respondent had made a false representation by issuing C forms for the purchase of goods that were not enumerated in the registration certificate. The court also found that the respondent had the mens rea or guilty mind required for the imposition of a penalty under section 10(b) of the Act.
Issues: Whether the capital goods in which the assessee is not a dealer, but which it requires to manufacture or pack the goods for sale/resale is the class of goods which the purchaser is entitled to under registration certificate.
Ratio Decidendi: The court held that the computer components purchased by the dealer were not covered by the registration certificate of the dealer. The court also held that the respondent had not made a truthful representation, which was an equation of a false representation. The court further held that the making of a false representation is the sine qua non for invoking the provisions of section 10(b) of the Act and that the existence of mens rea would be inherent in that finding.
Final Decision: The court set aside the order of the Tribunal and restored the order passed by the Appellate Assistant Commissioner in imposing a penalty under section 10(b) of the CST Act.
THANIKKACHALAM, J.
The State of Tamil Nadu is the petitioner herein. M/s. Amurutanjan Limited is the respondent. The respondent is a registered dealer under the Central Sales Tax Act, 1956 (hereinafter referred to as "the CST Act"). During the year 1982-83 they have issued the following "C" forms with declarations that the articles purchased are intended for resale or for use in the manufacture of other goods for sale. But the goods purchased were not resold or used in the manufacture of other goods for resale. They have been actually used for other purposes.
C form No. Nature of goods Value
21-4-82 J/9 69057 standard head acid 19, 481 transaction battery
6-8-82 J/9 702599 directional dot 67, 950 matrix printed visual display unit
6-8-82 J/9 702600 HCL 8C/2 floppy- 1, 16, 960 driva dala
20-12-82 J/9 702784 Video screen 85, 000
2, 89, 391
According to the Commercial Tax Officer, the dealers have purchased the goods not mentioned in the registration certificate by issuing the C form. This is an offence punishable under section10(b) of the CST Act. It was therefore proposed to levy a penalty of Rs. 52, 000 at 1 1/2 times of the tax due on the turnover involved under section 10A(1) of the CST Act. By way of explanation, the respondent, in their letter dated February 10, 1984, stated that the C forms were issued in support of the purchase made for the purpose of their research and development and the sole objective of which is to make the goods commercially expedient. They have also stated that they were under bona fide impression that the C forms can be issued to these goods which are incidental and ancillary to the business. Hence they requested to drop the proposals for the levy of penalty under section10A(1) of the CST Act. The assessing authorities found that the respondent is guilty of an offence under section10(b) of the CST Act because the goods purchased by them against C form are not covered by the certificate. Accordingly, penalty was levied. On appeal, the Appellate Assistant Commissioner, while confirming the penalty, reduced the quantum from Rs. 52, 000 to Rs. 34, 667. Accordingly, the order passed by the Commercial Tax Officer was modified to that extent. On further appeal by the respondent, the Tribunal deleted the, penalty levied by the authorities below. Aggrieved, the State is in revision before this Court.
2. Learned Additional Government Pleader (Taxes), submitted as under :
The Tribunal ought not to have deleted the penalty of Rs. 34, 667 levied under section10A of the CST Act. The Tribunal failed to note that the goods involved in the purchase on the issue of C forms were computer parts which were not included in the registration certificate. The Tribunal's observation that mens rea should be established by the department to levy the penalty under section10A of the Act is not correct in law. The assessee has not resold or used the goods in the manufacture of other goods for resale, but the goods purchased were used for other purposes only which warrants a penalty under section10A of the CST Act. Having held that section10A of the CST Act has been rightly invoked the Tribunal ought to have affirmed the penalty levied by the lower authorities. According to learned Additional Government Pleader (Taxes), if once it is known that the respondent herein has issued C forms with regard to the goods which are not enumerated in the registration certificate, that itself would amount to submitting a false declaration as contemplated under section10(b) of the Act. Again it was submitted that false representation was made with the knowledge of the assessee and therefore penalty is leviable under section10(b) of the Act. The Revenue has established mens rea in submitting false statements by the respondent herein. For all these reasons, it was submitted that the Appellate Tribunal was not correct in deleting the penalty levied under section10(b) of the Act.
3. On the other hand, learned counsel for the respondent submitted a
