Mens rea required for penalty; account books cannot be rejected on conjecture without proof of actual sales suppression.

Penalty cannot be sustained where it is imposed only to block a refund and no mens rea is shown; on that basis, the penalty is quashed with refund, interest, and costs directed in favour of the assessee. Account books also cannot be rejected merely because they were not produced at survey, rokar and khata were not maintained, or kiln capacity was estimated higher, if the records are otherwise verifiable and no actual suppression of sales is established. The turnover issue was therefore remitted for appropriate orders under Section 11(8) of the Sales Tax Act.

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Issues: (i) Whether penalty could be sustained and refund withheld in the absence of mens rea; (ii) Whether rejection of the assessee's account books and enhancement of turnover were justified on the facts disclosed.

Issue (i): Whether penalty could be sustained and refund withheld in the absence of mens rea.

Analysis: The penalty was found to have been imposed only to prevent refund otherwise due under the assessment orders. No material showed any mens rea attributable to the assessee, and on that footing the basis for levy of penalty was absent.

Conclusion: The penalty was quashed, and the refund with interest and costs was directed in favour of the assessee.

Issue (ii): Whether rejection of the assessee's account books and enhancement of turnover were justified on the facts disclosed.

Analysis: Non-production of account books at the time of survey, omission to maintain rokar and khata, and an estimated kiln capacity higher than that disclosed were held insufficient, by themselves, to reject otherwise verifiable account books. No actual suppression of sales was found, and no basis existed to presume deliberate under-estimation of capacity.

Conclusion: The revision was allowed, the account books were directed to be accepted, and the matter was sent back to the Tribunal for appropriate orders under Section 11(8) of the Sales Tax Act.

Final Conclusion: The assessee succeeded on both the penalty and account-book issues, but the turnover dispute required further action by the Tribunal on remand.

Ratio Decidendi: Penalty cannot be sustained without mens rea, and account books cannot be rejected merely on conjecture or on circumstances that do not establish actual suppression of sales.

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