1989 (6) TMI 275 - HC - VAT and Sales Tax

Court upholds tax jurisdiction, quashes penalty for lack of mens rea & procedural fairness

The court held that the Superintendent of Taxes had jurisdiction to levy penalties under section 10-A of the Central Sales Tax Act, dismissing arguments ... - Issues Involved:1. Jurisdiction of the Superintendent of Taxes to levy penalty u/s 10-A of the Central Sales Tax Act.2. Essential ingredients of an offence u/s 10(b) of the Central Sales Tax Act.3. Violation of principles of natural justice.Summary:1. Jurisdiction of the Superintendent of Taxes to levy penalty u/s 10-A of the Central Sales Tax Act:The petitioner contended that the Superintendent of Taxes, Agartala, lacked jurisdiction to impose a penalty u/s 10-A of the Central Sales Tax Act, as the certificate of registration was granted by the Chief Secretary. However, the court held that the Superintendent of Taxes was the competent authority to grant registration under the Tripura Sales Tax Act, 1976, and thus had the requisite power and jurisdiction to take action u/s 10-A. The argument that the Superintendent of Taxes required previous sanction from the Commissioner was also dismissed, as the power to levy penalty u/s 10-A is derived directly from the section itself and not from section 9(2) of the Central Act.2. Essential ingredients of an offence u/s 10(b) of the Central Sales Tax Act:The petitioner argued that the essential ingredient of 'false representation' was absent, and the penalty was imposed without any finding of mens rea. The court agreed, stating that 'false representation' implies an element of mens rea, and a mere technical or venial breach without mens rea does not attract penalty u/s 10(b). The court emphasized that penalty provisions must be strictly construed and interpreted in favor of the taxpayer in case of ambiguity. The impugned order lacked any finding of mens rea and equated 'false representation' with 'wrong representation,' which is incorrect.3. Violation of principles of natural justice:The petitioner contended that the show cause notice lacked particulars of the alleged unauthorized purchases, thereby violating the principles of natural justice. The court agreed, noting that the notice did not provide descriptions, values, dates, or declaration form details of the alleged purchases. Reasonable opportunity of hearing requires that the facts be intimated to the person concerned. The court held that the notice was insufficient and the order of penalty did not fulfill the necessary requirements, making it unsustainable.Conclusion:The petition was allowed, and the impugned order of penalty dated September 2, 1980, was quashed. No order as to costs.