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Judgment
Ashok Kumar, J
Heard Sri Suyash Agarwal, learned counsel for the applicant and Sri A.C. Tripathi, learned Standing Counsel for the respondent-Commissioner.
The present revision relates for the assessment year 2001-02 under Section 10-A of the Central Sales Tax Act, 1956.
Brief facts of the case are that the applicant is a registered dealer and carried on the business of manufacture and sale of Tractor Parts and Diesel Engine Parts. A certificate of registration has been issued by the assessing authority of the revisionist to purchase the goods so as are mentioned in the certificate of registration. The items so are mentioned in the registration certificate are Rough Cast Iron Casting (Rough C.I. Casting) and lubricants. The assessee has effected the purchase of C.I. Casting amounting to Rs. 7,42,463.92/- and lubricants for sum of Rs. 1,924/- from one M/s Amit Alloys and Ferro Casting, Dhaulpur, Rajasthan against two Form C.
The C.I. Casting was brought by the applicant for the purposes of manufacture of certain machines and tractor parts.
The assessing authority of the applicant has initiated the penalty proceedings under Section 10-A of the Central Sales Tax Act on the ground that the applicant has purchased the C.I. Casting whereas the applicant was authorised to purchase the "Rough C.I. Casting". The objection was filed by the applicant in pursuance of the proceedings under Section 10-A before the assessing authority and it was contended that there was no concealment on the part of the applicant as the purchases were affected against Form C, which are covered with the registration certificate hence it was prayed that the penalty proceedings under Section 10-A be dropped.
The assessing authority has rejected the objection of the applicants and has imposed the penalty of Rs. 1,19,140/-.
There were certain error in the penalty order, hence an application under Section 22 was filed by the applicant before the assessing authority for rectification of mistake in the order dated 10.01.2006. The assessing authority has rectified the order and has passed a fresh order on 28.02.2006.
Aggrieved by the penalty order passed by the assessing authority an appeal was filed and the appellate authority vide order dated 27.04.2007 has partly allowed the appeal.
Against the order of the first appellate authority, the Commissioner Trade Tax U.P. has filed the second appeal before the Tribunal. The ground taken by the Commissioner in its grounds of appeal was that the applicant has affected the purchase against the Form C of "C.I. Casting", whereas certificate of registration authorises the applicant to purchase the "Rough C.I. Casting".
The Tribunal vide impugned order dated 10.12.2010 has allowed the appeal filed by the Commissioner and has set aside the order passed by the First Appellate Authority by restoring the penalty order of the assessing authority.
Learned counsel for the applicant has submitted that the proceedings under Section 10-A can only be initiated when a dealer is found guilty of an offence under Clause (b) or Clause (c) or Clause (d) of Section 10 of Central Sales Tax Act.
Learend counsel therefore submits that in the instant case the penalty proceedings was initiated against the applicant under Section 10-A on the basis that the applicant is guilty of an offence under Clause (b) of Section 10 of the Act.
Learned counsel for the applicant has placed the provision of Clause (b) of Section 10, which reads as follows:-
"Section 10. Penalties.-
If any person-
(b) being a registered dealer, falsely represents when purchasing any class of goods that goods of such class are covered by his certificate of registration; or"
Learned counsel for the applicant submits that the penalty under Clause (b) of Section 10 can only be initiated and imposed when a registered dealer, falsely represents, when he purchases any class of goods and that class of goods are not covered by his certificate of registration.
Learned counsel for the applicant emphasised the words used in Clause (b) of Section 10 i.e. "falsely represents".
Learned counsel for the applicant submits that none of the authorities recorded in their orders that the applicant has ever falsely represented while affecting the purchases against Form C. He has further submitted that in the certificate of registration the item has been mentioned as "Rough C.I. Casting". He has also pointed out that use of "Rough C.I. Casting" and "C.I. Casting" for the purposes of manufacture of the items namely machining and tractor parts is one and same. He has also submitted that the purchases are duly accounted for and are accepted by the assessing authority, hence the penalty proceedings under Section 10-A are wrongly initiated.
Heard learned counsel for the parties and perused the orders passed by the authorities below as well as the orders passed by the Tribunal. The First Appellate Authority has partly allowed the appeal and has knocked off the penalty imposed on the purchase of "C.I. Casting".
The First Appellate Authority has recorded categorical finding by holding that the "Rough C.I. Casting" and "C.I. Casting" are same item and after machining C.I. Casting the dealer manufactures machine parts/Tractor parts.
The First Appellate Authority has also recorded categorical finding that the applicant/ assessee has not misused Form C nor the dealer assessee has falsely represented while affected the purchase of C.I. Casting.
Admittedly the item purchased as C.I. Casting has been used and utilised for the purpose of manufacture of machines and tractor parts.
Learned counsel for the applicant has relied upon the decision of the Hon'ble Apex Court in the case of Commissioner of Sales Tax, U.P. Vs. Sanjiv Fabrics (2010) 35 VST 1 (SC). In the said case the Hon'ble Apex Court has held that the penalty provisions are penal in character and unless the filing of an inaccurate return is accompanied by a guilty mind, the section cannot be invoked for penalty.
In para 37 of the judgment of Sanjiv Fabrics (supra) the Apex Court has considered the meaning of the word "falsely represents".
The Apex Court, therefore, concluded that a finding of mens rea is a condition precedent for levying penalty under Section 10(b) read with Section 10-A.
The relevant paragraphs namely para 36 and and para 37 of the judgment of Sanjiv Fabrics (supra) are quoted herein below:-
"36. The Court finally held that it was elementary that section 43 of the State Act which provided for imposition of penalty is penal in character and unless the filing of an inaccurate return is accompanied by a guilty mind, the section cannot be invoked for imposing penalty. It was emphasised that if the view canvassed by the Revenue were to be accepted, the result would be that even if a dealer raises a bona fide contention that a particular item was not liable to be included in the taxable turnover, he will have to show it as forming part of the taxable turnover in his return and pay taxes upon it on pain of being held liable for penalty in case his contention is ultimately found by the Court to be not acceptable. That surely could never have been the intention of the Legislature.
In view of the above, we are of the considered opinion that the use of the expression "falsely represents" is indicative of the fact that the offence under Section 10(b) of the Act comes into existence only where a dealer acts deliberately in defiance of law or is guilty of contumacious or dishonest conduct. Therefore, in proceedings for levy of penalty under Section 10A of the Act, burden would be on the Revenue to prove the existence of circumstances constituting the said offence. Furthermore, it is evident from the heading of Section 10A of the Act that for breach of any provision of the Act, constituting an offence under Section 10 of the Act, ordinary remedy is prosecution which may entail a sentence of imprisonment and the penalty under Section 10A of the Act is only in lieu of prosecution. In light of the language employed in the section and the nature of penalty contemplated therein, we find it difficult to hold that all types of omissions or commissions in the use of Form C will be embraced in the expression "false representation". In our opinion, therefore, a finding of mens rea is a condition precedent for levying penalty under Section 10(b) read with Section 10A of the Act."
In view of the aforesaid and under the given circumstances, in my opinion the explanation furnished by the applicant is sufficient and therefore the penalty imposed under Section 10-A of the Act is set aside.
The revision is allowed.