Mens rea and valid tax liability govern penalty and interest under Rajasthan sales tax law; both claims failed.

Penalty under section 16(1)(e) of the Rajasthan Sales Tax Act required proof of mens rea, and the assessing authority bore the burden of establishing it; a mere rejection of the assessee's explanation was insufficient. On the facts, the explanation was found plausible and mens rea was absent, so penalty was not leviable. Interest under section 11B could arise only where there was a valid tax liability under the charging provisions; because the goods were exempt and tax was not lawfully leviable, the amount deposited did not attract interest. The Tribunal's view was upheld on both penalty and interest.

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Issues: (i) Whether penalty under section 16(1)(e) of the Rajasthan Sales Tax Act, 1954 was leviable in the absence of mens rea. (ii) Whether interest under section 11B of the Rajasthan Sales Tax Act, 1954 was leviable where the underlying goods were exempt from tax.

Issue (i): Whether penalty under section 16(1)(e) of the Rajasthan Sales Tax Act, 1954 was leviable in the absence of mens rea.

Analysis: Penalty under section 16(1)(e) requires mens rea as an essential ingredient. The burden to establish such mens rea lies on the assessing authority. Mere rejection of the assessee's explanation does not by itself justify penalty. On the facts found, the assessee had not collected sales tax on the disputed transactions and the explanation was held to be plausible, supporting the finding that mens rea was absent.

Conclusion: The penalty was not leviable and the assessee succeeded on this issue.

Issue (ii): Whether interest under section 11B of the Rajasthan Sales Tax Act, 1954 was leviable where the underlying goods were exempt from tax.

Analysis: Interest can arise only where there is a valid tax liability under the charging provisions. If no tax is leviable on the goods, any amount collected under a mistaken belief and deposited in the treasury does not become tax liable to interest. Since the goods were exempt under section 4(1) and tax was not lawfully leviable, the amount deposited could not attract interest under section 11B. The definition of tax in section 2(r) also supports this conclusion.

Conclusion: Interest was not leviable and the assessee succeeded on this issue.

Final Conclusion: The revisional challenge failed in full, and the Tribunal's view was upheld on both penalty and interest.

Ratio Decidendi: Penalty under section 16(1)(e) requires proof of mens rea, and interest under section 11B cannot be levied unless there is a valid tax liability under the charging provisions.

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