( 1. ) THIS is a reference made by the Sales Tax Tribunal under Section 44 of the Madhya Pradesh General Sales Tax Act, 1958, referring for our answer the following questions of law:

(1) Whether, in the facts and circumstances of the case, the Tribunal was justified in holding that within the meaning of Section 43 (1) of the M. P. General Sales Tax Act, 1958, the assessee had deliberately furnished a false return by claiming a deduction for supplies of coal to electricity undertakings to the tune of Rs. 19,18,010? And (2) If the Tribunal was justified in this conclusion, whether the penalty of Rs. 8,000 imposed on the assessee is excessive in the circumstances of the case ?

( 2. ) THE period with which we are concerned in this case is from 1st October, 1962, to 30th September, 1963. A penalty of Rs. 8,000 was imposed on the assessee under Section 43 (1) of the Madhya Pradesh Act, read with Section 9

(3) of the Central Sales Tax Act, 1956. The assessee filed its returns in form V under Rule 7-A of the Madhya Pradesh Sales Tax (Central) Rules, 1957. The assessee disclosed all the sales made by It during the relevant period. The assessee, however, claimed exemption from payment of tax in respect of sales to electrical undertakings. Sales to electrical undertakings were exempt from tax under Section 2 (j) (a) of the C. P. and Berar Sales Tax Act, 1947. The M. P. General Sales Tax Act, 1958, came into force from 1st April, 1959. There is no such exemption provided in the Madhya Pradesh Act. The penalty of Rs. 8,000 was imposed on the assessee on the ground that it filed false returns, in that it falsely claimed exemption in respect of sales to electrical undertakings amounting to Rs. 19,18,010, when such sales were not exempt.

( 3. ) THE assessee contended before the sales tax authorities that it had claimed the exemption on legal advice. The assessee, however, failed to establish that any such legal advice was obtained by him. It was also not disputed that the assessee had collected sales tax from the electrical undertakings. The Tribunal observed that the assessee knew that the exemption claimed by it was not tenable and, therefore, it must be held that the assessee filed false returns within the meaning of Section 43 (1 ).

( 4. ) THE Learned Counsel for the assessee submitted before us that, on the facts and circumstances of the case, the finding of the Tribunal that the assessee knew that the claim for exemption from tax in respect of sales to electrical undertakings made by it in the returns was not tenable, is not justified. We are not inclined to go into this question because it is essentially a question of fact. On the material placed before it, the. Tribunal was justified in drawing the conclusion that the assessee knew that it was not entitled to any exemption in respect of sales to electrical undertakings. The point, however, is whether, even in such a situation, it can be said that the assessee filed false returns within the meaning of Section 43 (1) by claiming exemption in respect of sales to electrical undertakings. The form of return does not contain any column for exemption. The turnover and the sales were fully disclosed in the returns filed by the assessee. The sales to electrical undertakings in respect of which the assessee claimed exemption were also fully disclosed. The assessee took only a legal plea that the sales to electrical undertakings were not taxable. In our opinion, when the facts are fully disclosed in a return and are misstated, the raising of a legal plea of exemption cannot make the return a false return within the meaning of Section 43 (1), even if the assessee knew that the plea of exemption was not sustainable. A return will be a false return when some statement of fact in the return is falsely made. But when the facts are fully and correctly disclosed, raising of a false legal plea cannot make the return false. The assessing authority can, in such cases, easily assess the correct amount