AI Drafter 
TaxTMI 
TaxTMI 
2006 (7) TMI 578
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....hether the act or omission of the assessee resulting in commission of the violations of the Act and dealt with in clauses (b), (c) and (d) of Section 10 of the Act, mens rea was present, in Vijaya Electricials v. State of Tamil Nadu (1991) 82 STC 268, Kumudham Printers (P) Ltd. v. State of Tamil Nadu (1994) 95 STC 453, State of Tamil Nadu v. C.A.Akthar and Co. (1998) 108 STC 510, State of Tamil Nadu v. Srinath Pharma (1998) 110 STC 177, Chennai Textile Chemicals Pvt. Ltd. v. State of Tamil Nadu, 2002 (125) STC 107, Bhuvaneshwari Traders v. State of Tamil Nadu (2006) 143 STC 608 it was held that there was nothing in Section 10-A of the Act which requires that mens rea must be established before penalty can be levied under that provision. Before we deal with this problem in the light of the statutory provisions we will state the material facts which have given raise to this reference. T.C.No.82 of 1997 3. The assessee in T.C.No.82 of 1997 is registered under the Act as a dealer. In the registration certificate issued to the assessee he was authorised to purchase by issue of C-Forms for re-sale acids, nitrates, packing cases and other commodities for manufacture of acids, jewell....
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....e purchase of boiler even without including it in their registration certificate would not be considered as a grave mistake and the purchase of boiler by the assessee is a bona fide one and any motive cannot be attributed on the part of the assessee for such purchase and therefore, set aside the order of the Assessing Officer in respect of levy of penalty of Rs.10,809/-. 5. The Division Bench after noting the conflicting decisions deemed it fit to have these matters referred to the Full Bench. 6. Learned counsel appearing for the assessee submitted before us that mens rea is essential to attract penalty under Section 10-A of the Act. The ingredients of the offence under Section 10(b) is 'false representation' and as long as false representation is not established, penalty under section 10-A is not sustainable. It is submitted that there is nexus between the business activity of the assessee and the items purchased by issue of C-Form and as such penalty is not leviable. Merely because the belief entertained by the assessee turned out to be not proper or correct does not mean that the issue of C-Form was on the basis of a false representation. 7. In reply, learned counsel ap....
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.... the State Act are to be applied in respect of the Central sales tax as well, unless a different intention is disclosed in the Central Act. 11. The violations specified in clauses (b), (c) and (d) of Section 10 of the Act are the following: (b) being a registered dealer, falsely represents when purchasing any class of goods that goods of such class are covered by his Certificate of registration; or (c) not being registered dealer, falsely represents when purchasing goods in the course of interState trade or commerce that he is a registered dealer; or (d) after purchasing any goods for any of the purposes specified in clause (b) or clause (c) or clause (d) of sub-section (3) or sub-section (6) of Section 8 fails, without reasonable excuse, to make use of the goods for any such purpose. The violation of law spelt out in clause (a), clause (aa), clause (e) and clause (f) of section 10 of the Act must necessarily be dealt with by prosecuting the offender, and such offender cannot avoid prosecution by paying penalty as these violations are excluded from the purview of section 10-A of the Act. 12. Section 10(b) provides for an offence if any person being a registered de....
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.... said to be mala fide or unreasonable. What Section 43 of the Madhya Pradesh General Sales Tax Act, 1958 requires is that the assessee should have filed a 'false' return and a return cannot be said to be 'false' unless there is an element of deliberateness in it. It is possible that even where the incorrectness of the return is claimed to be due to want of care on the part of the assessee and there is no reasonable explanation forthcoming from the assessee for such want of care, the Court, may, in a given case, infer deliberations and the return may be liable to be branded as a false return. But where the assessee does not include a particular item in the taxable turnover under a bona fide belief that he is not liable so to include it, it would not be right to condemn the return as a 'false' return inviting imposition of penalty. This view which is being taken by us is supported by the decision of this Court in Hindustan Steel Limited v. State of Orissa, (1969)2 SCC 627, where it has been held that "even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical venial breach of the pr....
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....penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law, or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. The Court also observed that the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act, or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. 15. In Sri Lakshmi Machine Works v. The State of Madras, (cited supra) a Division Bench of this Court following the decision of the Supreme Court in State of Rajasthan v. Jaipur Udyog Limited, (cited supra) has held that mere representation based on a bona fide belief will not bring an assessee within the mischief of that provision. The representation, in order to come under that provision, should be a false representation to the knowledge of the assessee. If a belief is entertained by the assessee bona fide that the goods are covered by the cert....
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....y the Orissa High Court in Jayshree Chemicals Ltd. v. Addl. Commissioner of Sales Tax, (1992) 87 STC 359, by the Mysore High Court in Manjunatha Tyre Retreading Works v. State of Mysore, (1969) Vol.XXIII STC 428 and by the Madhya Pradesh High Court in Commissioner of Sales Tax v. Bombay Garage, (1984) 57 STC 67. 18. Learned counsel appearing for the Revenue heavily relied upon the decision in Vijaya Electricals case, cited supra where the Bench held that, if a dealer knowing what was contained in the certificate of registration, used the "C" form declarations in respect of goods not mentioned in the certificate, the representation made by the dealer is "false". This decision seems to have been incorporated in a number of other decisions cited supra. We may mention that in Vijaya Electricals case also the Bench clearly held that to the limited extent mens rea has application in tax default cases. It was held that mens rea would stand established, if the conduct of the assessee is found to be blameworthy, within the meaning of the particular provision of the given tax statute. Where a finding is recorded on facts about the existence of the blameworthy conduct, which the Legislatur....
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....ion 271(1)(c) of the Income-tax Act and held that the former relates to the obligation of the assessee to file a return within the due date, while the latter deals with concealment where statutory obligation has been imposed requiring the assessee to file the return within the due date. Section 271(1)(a) provides that penalty may be imposed if the Income-tax Officer is satisfied that any person has, without reasonable cause, failed to furnish the return of total income and Section 276C provides that if a person wilfully fails to furnish in due time the return of income required under Section 139(1), he shall be punishable with rigorous imprisonment for a term which may extend to one year or with fine. The Court noted that having regard to the provisions of Section 276(c) which speaks of wilful failure on the part of the defaulter and taking into consideration the nature of the penalty, which is punitive, no sentence can be imposed under that provision unless the element of mens rea is established. Thus, this decision is also of no assistance to the learned counsel for the Revenue. 21. Section 10(b) of the Act provides for an offence if any person being registered dealer falsely ....