Penalty proceedings require strict statutory conditions; unused registration endorsement prevented penalty despite declarations issued under amended law.

Penalty proceedings under section 5B of the Bengal Finance (Sales Tax) Act, 1941, required strict satisfaction of every statutory precondition, including that the declarations were furnished for goods not covered by the registration certificate at the relevant time. Because the registration endorsement permitting use of declaration forms for hooka tobacco purchases had not been corrected, the mere fact that the dealer obtained an unintended benefit from declarations issued after amendment did not by itself justify penalty. Penalty jurisdiction was distinct from tax recovery, and the Revenue could not proceed unless the ingredients of section 5B were established. The notice was therefore treated as unsustainable and quashed.

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Issues: Whether notice initiating penalty proceedings under section 5B of the Bengal Finance (Sales Tax) Act, 1941, could be sustained where declaration forms were issued and used under an existing registration endorsement, notwithstanding a later amendment limiting the benefit to taxable goods.

Analysis: The liability to penalty under section 5B depended on fulfilment of all statutory conditions, including the requirement that declarations must have been furnished in respect of goods not specified in the registration certificate at the relevant time. The registration certificate continued to carry an endorsement permitting use of declaration forms for purchases for manufacture of hooka tobacco, and that endorsement had not been corrected. The fact that the dealer may have derived an unintended benefit from declarations issued contrary to the amended law did not alter the statutory precondition for penalty. Penalty proceedings were distinct from tax recovery, and the Revenue could not proceed unless the ingredients of section 5B were established. The question of mens rea was not material to the jurisdiction to initiate penalty in the circumstances.

Conclusion: The notice under section 5B was unsustainable and was quashed; the assessee succeeded.

Ratio Decidendi: Penalty can be initiated only when every statutory condition precedent is satisfied, and an assessee cannot be proceeded against for penalty merely because it benefited from an endorsement or declaration forms issued contrary to the amended law.

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