Tax on alleged tax-paid sales requires proof of prior payment or stock; penalty fails without mens rea.

Tax and interest on disputed sales could be sustained only if the assessee proved prior tax payment or sufficient tax-paid stock on the relevant date; without such proof, the assessing authority could levy tax and interest, and the factual position required fresh determination on remand. Penalty was not justified where the transactions were recorded in the books and no mala fide intention was found, because the absence of mens rea weighed against penal action. The revisional challenge therefore succeeded only in part: the tax and interest issue was reopened, while deletion of penalty remained undisturbed.

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Issues: (i) Whether the levy of tax and interest on the disputed sales of alleged tax-paid goods was sustainable and whether the matter required remand for determination of the factual position regarding stock and prior tax payment; (ii) Whether penalty was leviable under the Act in the absence of mens rea.

Issue (i): Whether the levy of tax and interest on the disputed sales of alleged tax-paid goods was sustainable and whether the matter required remand for determination of the factual position regarding stock and prior tax payment.

Analysis: The charging provision creates liability only where the statutory conditions are met, and goods already subjected to tax are excluded from taxable turnover. The claim that sales were tax-paid could be accepted only if the assessee was able to show that there was sufficient tax-paid stock on the relevant date or that tax had in fact already been paid on the disputed sales. In the absence of proof of such stock or prior tax payment, the assessing authority would be justified in levying tax and interest. The Tribunal had not correctly examined the matter on that basis, and the factual position required fresh determination.

Conclusion: The order setting aside the levy of tax and interest was quashed and the matter was remanded to the assessing authority for fresh decision in accordance with law.

Issue (ii): Whether penalty was leviable under the Act in the absence of mens rea.

Analysis: Penalty was not warranted because the transactions were recorded in the books of account and there was no finding of mala fide intention. Even though the Tribunal's view on adjustment of purchases for the whole year was not accepted, the case did not justify penal action on the facts found.

Conclusion: The setting aside of penalty was upheld.

Final Conclusion: The revision succeeded only in part: the tax and interest issue was reopened for fresh adjudication, while the deletion of penalty remained undisturbed.

Ratio Decidendi: Goods can be excluded from taxable turnover only when the assessee proves prior tax payment or sufficient tax-paid stock on the relevant date, and penalty requires a culpable element that is absent where the transactions are duly recorded and no mala fide intention is found.

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