False representation test under CST penalty law: bona fide issuance of form C for cotton waste defeated penalty.

Penalty under section 10(b) of the Central Sales Tax Act applies only where a registered dealer falsely represents that the goods purchased are covered by the certificate of registration. A mere wrong or mistaken representation is insufficient. On the stated facts, the dealer had long issued form C for cotton waste without departmental objection, sought amendment when the issue was raised, and the record showed no deliberate or knowing misrepresentation. Those facts supported a bona fide belief, so the finding of false representation could not stand and the penalty was not sustainable.

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Issues: Whether penalty under section 10(b) of the Central Sales Tax Act, 1956 was leviable for issuance of form C in respect of cotton waste on the ground of false representation.

Analysis: Penalty under section 10(b) is attracted only where a registered dealer falsely represents that the goods purchased are covered by the certificate of registration. The distinction between a false representation and a wrong or mistaken representation is material. On the facts, the dealer had been issuing form C for cotton waste for years without objection from the department, had applied for amendment of the registration certificate when the issue was pointed out, and the record did not show any deliberate or knowing misrepresentation. The long departmental silence and the dealer's subsequent conduct supported the plea of bona fide belief. In such circumstances, the finding that the dealer made a false representation could not be sustained.

Conclusion: Penalty under section 10(b) was not sustainable in respect of cotton waste and the assessee succeeded on this issue.

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