Mens rea is required for sales tax penalty; disclosure of true turnover meant penalty could not stand.

Penalty under section 43(1) of the Madhya Pradesh General Sales Tax Act, 1958 cannot be imposed mechanically; it requires a factual finding of mens rea, guilty intention, malice, contumacious conduct, deliberate concealment, or another act aimed at evading tax lawfully due. On the facts recorded, the assessee had filed the return and disclosed the true turnover, which was accepted for tax assessment, and the Tribunal found no mens rea. In those circumstances, the penalty provision was not attracted, and deletion of the penalty was upheld in favour of the assessee.

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Issues: Whether penalty under section 43(1) of the Madhya Pradesh General Sales Tax Act, 1958 could be sustained in the absence of a categorical finding of mens rea or guilty intention on the part of the assessee.

Analysis: Penalty under the sales tax statute cannot be imposed mechanically. A finding on facts is required showing malice, contumacious conduct, or deliberate concealment of material facts, or some act aimed at avoiding tax legally due. Here, the Tribunal had recorded that the assessee had filed the return and disclosed the true turnover, which was accepted for determining tax liability, and that no mens rea was found. In such circumstances, the penalty provision was not attracted.

Conclusion: The question was answered in favour of the assessee and against the Revenue, and the deletion of penalty was upheld.

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