2011 (2) TMI 1312 - HC - VAT and Sales Tax

Court quashes penalty under Tax Act due to unintentional error on edible oil tax rate

The court overturned the penalty imposition under the Madhya Pradesh Commercial Tax Act, 1994, on the petitioner, a registered dealer, for mistakenly ... Whether the penalty has been rightly imposed upon the petitioner? Held that:- Keeping in view the language of section 69, and the expressions used for making liable for imposition of penalty and the explanation offered by the petitioner in our considered view, it cannot be held that the petitioner deliberately or dishonestly shown rate of tax to be two per cent in place of four per cent in its return. It is also not a case that the petitioner had recovered the tax at the rate of four per cent and deposited it with the Department at the rate of two per cent. Having regard to the aforesaid, no case under section 69 of the Act of 1994 for imposition of penalty is made out, as according to us there was no deliberate action on the part of the petitioner, therefore, in the absence of mens rea, the provision of penalty could not have been invoked against the petitioner.Petition is allowed. Issues:1. Challenge to penalty imposition under the Madhya Pradesh Commercial Tax Act, 1994.2. Interpretation of section 69 of the Act regarding imposition of penalty.3. Determination of whether there was concealment or furnishing of false particulars by the petitioner.4. Assessment of the petitioner's actions regarding the rate of tax on edible oil.Detailed Analysis:1. The petitioner, a registered dealer under the Madhya Pradesh Commercial Tax Act, challenged the penalty imposed by the Assistant Commissioner and Additional Commissioner for depositing tax at a lower rate due to a mistaken understanding of the tax rate on edible oil. The petitioner contended that the penalty was imposed without fulfilling the necessary conditions and that the lower tax deposit was an unintentional error.2. Section 69 of the Act allows for the imposition of a penalty if a dealer conceals turnover, furnishes false particulars, or submits a false return. The court examined whether the petitioner's actions constituted concealment or furnishing false particulars. The law requires mens rea or a guilty mind for penalty imposition.3. The court found that the petitioner's turnover disclosure was accepted, and there was no evidence of deliberate concealment or furnishing false particulars. The mistake in the tax rate was deemed a bona fide error, not intentional wrongdoing. The court cited precedents emphasizing the importance of mens rea for penalty imposition.4. The petitioner mistakenly believed the tax rate on edible oil was two percent, unaware of the change to four percent from May 1, 1999. Upon discovering the error, the petitioner promptly paid the correct tax. The court concluded that there was no deliberate or dishonest action by the petitioner, and the penalty provision could not be invoked without mens rea.In the final judgment, the court allowed the petition, quashed the penalty orders, and restrained the respondents from recovering the penalty amount. The court emphasized the absence of mens rea and the lack of deliberate intent in the petitioner's actions as reasons for overturning the penalty imposition.