Mens rea is essential for false declaration penalty under CST, and long-accepted Form-C practice needs factual verification.

Penalty for false declaration under the Central Sales Tax regime depends on proof of mens rea, not merely on an incorrect Form-C declaration. Where packing material was later included in the registration certificate, purchases made after that inclusion could not support penalty, and earlier use of Form-C was not treated as false declaration solely because the assessee could have sought inclusion earlier. Long-standing use of Form-C, coupled with prior revenue acceptance, may support a bona fide belief and requires factual verification before penalty is imposed. The penalty order was therefore set aside for fresh consideration and the matter remitted for re-examination of the earlier records.

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Issues: (i) Whether penalty under Section 10-A of the Central Sales Tax Act, 1956 could be sustained for purchase of packing material against Form-C where the material was later included in the registration certificate. (ii) Whether long-standing use of Form-C for importing packing material, with the knowledge and acceptance of the revenue authorities, could still amount to a false declaration warranting penalty.

Issue (i): Whether penalty under Section 10-A of the Central Sales Tax Act, 1956 could be sustained for purchase of packing material against Form-C where the material was later included in the registration certificate.

Analysis: The assessee may have been entitled in law to seek registration for packing material for use in the manufacture of beedi, but specific inclusion of packing material in the registration certificate operated only from 09.07.2001. For the period after such inclusion, the assessee was authorised to make purchases of packing material by Form-C. For the period before that date, the mere existence of a legal entitlement to seek inclusion in the registration certificate did not by itself establish false declaration.

Conclusion: The penalty could not be sustained for the period after 09.07.2001, and the issue of false declaration for the earlier period was not answered against the assessee on that ground alone.

Issue (ii): Whether long-standing use of Form-C for importing packing material, with the knowledge and acceptance of the revenue authorities, could still amount to a false declaration warranting penalty.

Analysis: A charge of false declaration involves an element of mens rea and is distinct from a merely incorrect declaration. Where a business practice has been consistently followed for many years and has been examined and accepted by the revenue authorities in earlier assessment years, the assessee may acquire a bona fide belief that its conduct is permissible. In such circumstances, the revenue cannot unilaterally change its stand and impose penalty for false declaration without first ascertaining the relevant facts, including the earlier assessment records and the manner in which Form-C utilisation was dealt with.

Conclusion: The matter required factual verification by the Tribunal and the penalty order was set aside and remitted for fresh consideration.

Final Conclusion: The revision was allowed in part, the penalty order was annulled for reconsideration, and the Tribunal was directed to re-examine the earlier records and pass a fresh order in accordance with law.

Ratio Decidendi: Penalty for false declaration under the Central Sales Tax regime requires proof of mens rea, and a long-accepted business practice known to and acquiesced in by the revenue authorities may negate such mens rea unless the relevant facts are first verified.

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