Reasonable excuse is an essential ingredient of penalty under section 10(d); penalty fails without proof and finding on that element.

For penalty under section 10(d) of the Central Sales Tax Act, the absence of a reasonable excuse is an essential element of the penal offence, not a mere defence or exception. Because the provision is penal and quasi-criminal, it must be strictly construed, and the department must plead, prove and obtain a finding on every ingredient before penalty can be imposed. On the facts, the record did not establish that the dealer failed without reasonable excuse to use the goods for the purpose for which they were purchased, as there was no adequate factual foundation or reasoned finding on that statutory element. The penalty was therefore unsustainable.

---

---

Issues: (i) Whether, for penalty under section 10(d) of the Central Sales Tax Act, 1956, the absence of reasonable excuse is an ingredient of the offence that must be found by the authority; (ii) whether, on the facts, the material on record established that the dealer failed without reasonable excuse to use the goods for the purpose for which they were purchased.

Issue (i): Whether, for penalty under section 10(d) of the Central Sales Tax Act, 1956, the absence of reasonable excuse is an ingredient of the offence that must be found by the authority.

Analysis: Section 10(d) was read as creating a penal default consisting of three elements: purchase of goods for the specified purpose, failure to use them for that purpose, and failure without reasonable excuse. The provision was treated as penal and quasi-criminal in nature, so it had to be strictly construed. The expression "without reasonable excuse" was therefore not a mere defence or exception but part of the statutory definition of the offence. Since the department had to allege and prove all ingredients of the offence, a finding on this element was necessary before penalty could be imposed.

Conclusion: The absence of reasonable excuse is an essential ingredient of the offence under section 10(d), and a penalty cannot be sustained without a finding on that element.

Issue (ii): Whether, on the facts, the material on record established that the dealer failed without reasonable excuse to use the goods for the purpose for which they were purchased.

Analysis: The record did not disclose any proper notice or factual foundation showing how the department sought to establish the negative ingredient. The earlier legal ruling relied upon by the authorities could not, by itself, prove deliberate misuse in the facts of the case, and the further suppositions about market availability or intentional use of C forms were unsupported by evidence. In the absence of pleadings, proof, and a reasoned finding on the statutory ingredient, the penalty order could not stand.

Conclusion: The statutory ingredients of the offence were not established on the facts, and the penalty was unsustainable.

Final Conclusion: The reference was answered in favour of the dealer, the penalty could not be sustained, and the costs were awarded against the State.

Ratio Decidendi: Where a penal provision expressly makes liability depend on failure "without reasonable excuse," that phrase is an essential element of the offence, and the authority must plead, prove, and record a finding on it before imposing penalty.

---