Bona fide belief and mens rea governed CST penalty for C form purchases; penalty survived only for goods lacking business nexus.

Penalty under the Central Sales Tax Act for purchases against C forms depended on conscious knowledge that the goods were not covered by the registration certificate; a bona fide belief that the goods were included negatived the requisite mens rea. Applying that principle, goods closely connected with the assessee's manufacturing activity, including furnace oil, distribution pipes, copper cable, transformers, electrical goods, demineralising plant, circular trolley, M.S. trolley and water storage tank, were treated as purchased under a genuine belief and penalty was not leviable. Aluminium sheets were not shown to have the same nexus with the business and could not reasonably be brought within the existing certificate entries, so penalty was sustained for that item.

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Issues: Whether penalty under the Central Sales Tax Act was leviable for purchases made against C forms in respect of items not then included in the registration certificate, and whether the assessee's bona fide belief excluded penalty for all such items or only for those having a close nexus with its business.

Analysis: The governing principle is that penalty for making a false representation requires conscious knowledge that the goods are not covered by the registration certificate. A bona fide belief that the goods were embraced by the certificate negatives the requisite mens rea. The Government's instruction to adopt a lenient view where omission to include goods in the certificate was inadvertent or due to ignorance also supported this approach. Applying that principle, the items such as furnace oil, distribution pipes, copper cable, transformers, electrical goods, demineralising plant, circular trolley, M.S. trolley and water storage tank were found to have a close connection with the assessee's manufacturing activity and to have been purchased under a genuine belief that they were covered. Aluminium sheets, however, were not shown to bear such a nexus and could not reasonably be brought within the existing entries.

Conclusion: Penalty was held not leviable in respect of furnace oil, distribution pipes, copper cable, transformers, electrical goods, demineralising plant, circular trolley, M.S. trolley and water storage tank. Penalty was sustained only with respect to aluminium sheets.

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