Hansa Palace Art Furniture vs Assistant Commercial Taxes Officer, Ward-III, Circle-A

Vineet Kothari, J.—The learned Tax Board by the impugned order dated 27.02.2012 had dismissed the appeal of the petitioner-Assessee in second round of litigation for same cause, and upheld the order dated 22.12.2009 of Deputy Commissioner (Appeals), Commercial Tax, Udaipur, and the order dated 13.10.1998 of the Assessing Authority imposing penalty under Section 78(5) of the RST Act. The relevant findings of the Tax Board in the order impugned is quoted herein below:--

Briefly stated, the facts of the case are that on 12.10.1998, a goods vehicle number GJ-7X-5432 was intercepted and checked by the respondent authority and it was found that Form ST 18A was not accompanying the goods in question viz. furnitures and thus finding violation of Section 78(5) of the RST Act, penalty of Rs. 29,359/- was imposed on the petitioner assessee vide order dated 13.10.1998. Upon a challenge being laid by the petitioner-assessee by filing appeal before the learned Dy. Commissioner (Appeals) the same was initially allowed vide order dated 06.06.2001 setting aside the penalty order dated 13.10.1998. Against the order dated 06.06.2001, the Revenue filed second appeal, which was allowed by the learned Tax Board vide order dated 27.01.2003. Against the order dated 27.01.2003 of the Tax Board, the petitioner Assessee filed sales tax revision before this Court being STR No. 85/2007- M/s. Hansa Palace Art Furnitures v. ACTO, and the aforesaid sales tax revision, came to be allowed vide order dated 05.09.2007 along-with connected revisions, whereby the matter was remanded back to the learned Dy. Commissioner (Appeals) to decide the matters afresh in accordance with the observations made in the order dated 05.09.2007.

Thereafter, the learned Dy. Commissioner (Appeals), Udaipur, after hearing the assessee again proceeded to reject the appeal of the assessee vide order dated 31.12.2009. The second appeal preferred by the petitioner-Assessee, against the order dated 31.12.2009 also came to be rejected by the learned Tax Board vide order dated 27.02.2012 finding that goods in question was not raw material but were furnished furniture items, which were duly notified for ST-18A.

The petitioner-Assessee has filed the present revision petition in this Court aggrieved by the said order of Tax Board.

The position of law with regard to the imposition of penalty under Section 78(5) of the Act is that there is no requirement in law for Revenue to establish mens rea on the part of assessee in these penalty proceedings under Section 78(5) of the Act, has been settled by the catena of judgments of the Hon''ble Supreme Court and has been reiterated by the Full Bench of this Court in a recent case decided upon a reference in the case of Assistant Commercial Taxes Officer Vs. Indian Oil Corporation Ltd.--> , in which the Full Bench, headed by Hon''ble the Acting Chief Justice, held as under:--

"34. The suspicion or doubt on the documents to be false or forged, per se, does not attract levy of penalty under sub-section (5) of Section 78 of the RST Act, 1994. In such case, an opportunity is to be given under Rule 55(1) of the RST Rules, 1995, to a person, to produce the required documents and/or declaration forms completed in all respects, when the goods enters or leaves the nearest check-post of the State. It is only when a person despite giving such an opportunity, is not able to produce the document 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 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 v. 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 under Section 78(5)."

In view of the aforesaid discussion, our answers to the questions referred, are as follows:--

(i) The requirement of mens rea is not relevant for the purpose of determining the liability for penalty, in terms of Section 78(5) of the RST Act, 1994.

(ii) The mens rea is not required to be proved as necessary ingredient for imposition of penalty under sub-section (5) of section 78, on proving violation of sub-section (2) of Section 78 of the RST Act, 1994.

(iii) The amendment of Rule 55 of the RST Rules, 1995, in pursuance to the decision of the Hon''ble Supreme Court in State of Rajasthan and Another v. M/s. D.P. Metals (supra), authorises the authority empowered, to make an enquiry of violation of Section 78(2), and not to adjudicate a to whether the mens rea was present in violation of sub-section (2) of Section 78, for imposing penalty under sub-section (5) of Section 78 of the RST Act, 1994.

(iv) The mens rea is not required to be proved as necessary ingredient for imposition of penalty under sub-section (5) of Section 78, on proving violation of sub-section (2) of Section 78 of the RST Act, 1994."

With the decision on the aforesaid referred questions, let the S.B. Sales Tax Revision No. 92/1999, and other connected Sales Tax Revisions, be sent back and be listed before the Bench having jurisdiction to decide the matters, in accordance with the opinion given by us and the answers provided above on such opinion."

In view of above legal position, the matter deserves to be remanded back to the learned Assessing Authority, again setting aside all the impugned orders passed by the three authorities below and the assessing authority will now pass fresh orders in accordance with law after providing an opportunity of hearing to the respondent-Assessee in terms of aforesaid judgment and other relevant judgments and recording satisfaction about the actual goods carried and furnishing of ST-18A. Ordered accordingly.

With these observations and directions, the revision petition filed by the Assessee is disposed of accordingly. No costs. A Copy of this order be sent to the concerned parties forthwith.