2011 (9) TMI 881 - HC - VAT and Sales Tax

Court clarifies penalty for statutory violations under Section 15A(1)(o) without proving intent. Penalty reduced, mens rea considered.

Mascot Footcare Versus Commissioner of Trade Tax, UP., Lucknow

Mascot Footcare Versus Commissioner of Trade Tax, UP., Lucknow - [2012] 49 VST 241 (All) Issues Involved:1. Applicability of penalty under Section 15A(1)(o) of the U.P. Trade Tax Act, 1948.2. Requirement of mens rea (intention to evade tax) for imposing penalty.3. Interpretation of Section 28A of the U.P. Trade Tax Act, 1948.4. Discretion in quantification of penalty.Issue-wise Detailed Analysis:1. Applicability of Penalty under Section 15A(1)(o):The Tribunal held that the assessee was liable for penalty under Section 15A(1)(o) due to an attempt to avoid tax while transporting goods without valid documents. The penalty was reduced to Rs. 15,000. The court clarified that penalty is attracted on violation of any provision of Section 28A, including non-compliance with documentation requirements under Section 28A(2) and 28A(5).2. Requirement of Mens Rea for Imposing Penalty:The assessee argued that penalty under Section 15A(1)(o) requires proof of intention to evade tax. The court referred to multiple judgments, including the Supreme Court's ruling in Bharjatiya Steel Industries and Guljag Industries, to conclude that mens rea is not a condition precedent for imposing penalty. However, mens rea is relevant for determining the quantum of penalty. The court emphasized that the power to levy penalty for statutory violations does not necessitate proving an intention to evade tax.3. Interpretation of Section 28A:The court explained that Section 28A(6) pertains to the power of seizure and requires satisfaction of an intention to evade tax. This provision operates independently of the penalty provisions under Section 15A(1)(o). Violations of Section 28A(2) and 28A(5) can attract penalties without the need to establish mens rea. The court distinguished between the power to seize goods and the power to levy penalties, noting that the latter can be imposed for technical violations even without an intention to evade tax.4. Discretion in Quantification of Penalty:The court acknowledged that the assessing authority has discretion in quantifying penalties and must consider mens rea in this context. The Tribunal's failure to consider mens rea in determining the penalty amount was deemed incorrect. The court remanded the matter to the Tribunal for fresh quantification of the penalty, taking into account the intention to evade tax.Conclusion:The court affirmed the Tribunal's decision that penalty under Section 15A(1)(o) can be imposed for statutory violations without proving an intention to evade tax. However, it remanded the case for fresh determination of the penalty amount, emphasizing the need to consider mens rea in quantification. The revision was disposed of with the direction to the Tribunal to reassess the penalty amount.