Mens rea is essential for CST penalty where diesel purchases for manufacturing were made in bona fide belief of coverage.

Penalty under Section 10(b) read with Section 10-A of the Central Sales Tax Act, 1956 is not sustainable unless the dealer makes a false or dishonest representation and acts with mens rea. Where a registered dealer purchased diesel for a generator set used in manufacturing and believed in good faith that the purchase was covered by the C forms, the absence of a separate mention of diesel in the registration certificate did not by itself establish culpable intent. On that basis, the penalty was held not exigible and the Revenue's challenge failed.

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Issues: Whether penalty under Section 10(b) read with Section 10-A of the Central Sales Tax Act, 1956 could be imposed for purchase of diesel for generator set against C forms when the item was not separately shown in the registration certificate.

Analysis: The registered dealer purchased diesel for use in the generator set connected with manufacturing activity. The decision turned on whether the dealer falsely represented that the goods were covered by the certificate of registration. The controlling principle applied was that an offence under Section 10(b) requires mens rea, and penalty under Section 10-A cannot be imposed unless there is deliberate or contumacious violation. The Court accepted that the dealer acted under a bona fide belief that the purchase was covered, and that the absence of a separate mention of diesel in the certificate did not by itself establish culpable intent. Reliance was also placed on the settled view that concessional purchase for manufacturing use is permissible where the statutory conditions are otherwise satisfied.

Conclusion: Penalty under Section 10(b) read with Section 10-A was not exigible and the Revenue's challenge failed.

Ratio Decidendi: Mens rea is an essential ingredient for penalty under Section 10(b) of the Central Sales Tax Act, 1956, and in the absence of a false or dishonest representation a penalty under Section 10-A cannot be sustained.

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