1964 (7) TMI 31 - HC - VAT and Sales Tax

Court quashes order due to lack of mens rea under Central Sales Tax Act

PK. Varghese and Sons Versus Sales Tax Officer, Special Circle, Ernakulam

The court quashed the respondent's order and allowed the writ petition, finding that the petitioner lacked the requisite mens rea for the offense under ... - Issues Involved:1. Validity of the use of 'C' Form declarations for inter-State purchases.2. Interpretation of the registration certificate (Exhibit P-1).3. Determination of mens rea under Section 10(b) of the Central Sales Tax Act, 1956.4. Legality of the penalty imposed under Section 10A of the Central Sales Tax Act, 1956.Detailed Analysis:1. Validity of the use of 'C' Form declarations for inter-State purchases:The petitioner, a registered firm, used 'C' Form declarations to make inter-State purchases of goods not specified in their registration certificate (Exhibit P-1). The respondent issued a notice (Exhibit P-2) stating that the firm had committed an offense under Section 10(b) of the Central Sales Tax Act by using 'C' Form declarations for goods not covered by the registration certificate. The goods in question included paints, water paper, polishing cloth, water polish, gamaxine, tarpaulin, chairs, fire extinguishers, and sulphuric acid.2. Interpretation of the registration certificate (Exhibit P-1):The petitioner argued that the term 'etc.' in Exhibit P-1 was intended to include all categories and classes of goods in which the firm was doing business. However, the respondent in Exhibit P-4 concluded that 'etc.' could only include items similar to provisions like sugar and chillies, not items like paints and varnishes. Consequently, the goods purchased were not covered by the registration certificate, making the use of 'C' Form declarations unauthorized.3. Determination of mens rea under Section 10(b) of the Central Sales Tax Act, 1956:The petitioner contended that they were under a bona fide belief that the goods were covered by the registration certificate and thus had no mens rea in issuing the 'C' Form declarations. The court emphasized that the term 'falsely represents' in Section 10(b) implies that the dealer must have knowingly made false representations. The court cited legal precedents (Brend v. Wood, Sherras v. De Rutzen, and Derry v. Peek) to highlight that mens rea is an essential ingredient of the offense under Section 10(b). The court concluded that a representation made negligently or inadvertently, without the knowledge that it was false, does not constitute an offense under Section 10(b).4. Legality of the penalty imposed under Section 10A of the Central Sales Tax Act, 1956:The respondent imposed a penalty of Rs. 2,206.70 under Section 10A, reducing it from the initially proposed 10 1/2 % to 1% of the cost of the goods. The court found that there was an error of law in the respondent's order (Exhibit P-4) by equating negligent or inadvertent behavior with fraudulent representation. The court reiterated that a negligent representation is not equivalent to a fraudulent one and that there was no finding that the 'C' Form declarations were made falsely, i.e., without belief in their truth.Conclusion:The court quashed the respondent's order (Exhibit P-4) and allowed the writ petition, concluding that the petitioner did not have the requisite mens rea for the offense under Section 10(b). The penalty imposed under Section 10A was deemed invalid due to the lack of evidence that the representations were made falsely. The petition was allowed with no order as to costs.