TaxTMI 
TaxTMI 
1977 (8) TMI 153
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt. 3.. Thus, they misused the certificate of registration granted to them under the CST Act towards the purchases of those materials, to which they were not entitled. Consequently, they violated section 10(b) of the CST Act and for such violation, penalty, being one and a half times of the taxes, which could have been levied under sub-section (2) of section 8 of the said Act in respect of the sale to them of the goods, as if the sale had been a sale falling under the said subsection. 4.. The assessing officer-the Deputy Commercial Tax Officer, Moore Market Assessment Circle, Madras-1, therefore proposed to impose a penalty of Rs. 4,077, being the one and a half times of the tax due on the total purchase of Rs. 29,785.90 at different rates of taxation made under section 10-A of the CST Act. 5.. To a notice issued to the dealers inviting objections, if any, to the abovesaid proposals, they replied stating that they sought permission to deal with surgical goods, along with the monthly return sent for the month of February, 1981. But, they admitted that they did not send the certificate of registration for endorsement, as they were unaware of the rules. Further, they also sta....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... they had not issued "C" forms. By the issuance of "C" forms, they had paid only Rs. 1,191.41 as sales tax at 4 per cent. Thus, they gained an advantage of Rs. 1,787.15 by issue of "C" forms. Therefore, it is but proper, he would say, to levy penalty equivalent to the monetary advantage gained by the dealers. Accordingly, the penalty was reduced to Rs. 1,787.15 or Rs. 1,787 in a round sum. 11.. With the above modification, the appeal was dismissed. 12.. The matter did not stop there. It was agitated further. The assessee filed an appeal before the Tribunal. It was taken on its file in Tribunal Appeal No. 1680 of 1982. 13.. The Tribunal, after hearing the arguments on both sides and a perusal of the connected records, allowed the appeal by setting aside the order of the Appellate Assistant Commissioner (C.T.) III, Madras-1. The reasoning or rationale for the order gets reflected in paragraphs 7 and 8 thus: "7. The case of the appellants is that under a bona fide impression the appellants had purchased the surgical items. Since these items comes under 'class or classes' of goods dealt with by the appellants the appellants have not violated the provisions of the Act. In or....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... reason as stated above. Hence this tax revision is dismissed. However, in the circumstances of the case, no costs." 15.. The question that now crops up for consideration is as to: "Whether, on the facts and in the circumstances of the case, the assessee, being a registered dealer could be construed to have made 'false representation' while purchasing any class of goods of such class were covered by his certificate of registration?" 16.. The question relatable to the issue of C forms, in the purchase of goods not included in the certificate of registration had always been rather moot or vexed, in the sense of many a decision emerging from the superior courts of jurisdictionthis Court, other High Courts and the apex Court of this country. All the decisions rendered happened to consider the purport, import and intendment of the expression "falsely represents" used in section 10(b) of the CST Act. There are two shades of views available in the courts of co-ordinate jurisdiction, that is to say, High Courts. One view is, the mens rea prescribed in the said section must be established by the department and a finding has to be recorded therefor, in a clinching fashion, before ev....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the basis of C forms. (b) The assessing authority detected the misuse of C forms by the holder for purchase of polythene granules and therefore, in the penalty proceedings initiated against the assessee-dealer, a specified amount of penalty was imposed upon them for contravention of section 10(b), in lieu of prosecution under section 10-A of the CST Act, of course, after complying with the requisite procedure prescribed therefor. 20.. It appears, the imposition of penalty, had been agitated up to the level of the Tribunal and this Court, after taking into consideration the hues of views projected by this Court and other High Courts, in many a decision, ultimately came to the conclusion that in order to levy penalty for the commission of an offence under section 10(b) of the CST Act, there must be definite finding regarding "false representation" or existence of mens rea and that in the absence of proof of mens rea, a person cannot be penalised for the said offence and so saying, this Court reached the conclusion reached by the Tribunal, though for different reasons and consequently dismissed the revision. 21.. By drawing our attention to this unreported decision as above....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s contemplated under section 10(b) is a 'sentence'. The creation of an offence by a statute proceeds on the assumption that the society suffers injury by the act or omission of the defaulter and in most cases of criminal liability, the intention of the Legislature is that the penalty should serve as a deterrent to discourage repetition of an offence. In the case of proceedings under section 10-A of the Act, however, it seems that the intention of the Legislature is to emphasise the fact of loss of revenue and to provide for remedy for such a loss. This becomes evident from the terms in which the penalty falls to be measured under section 10-A of the Act itself. Therefore, unless there is something in the language of the statute indicating the need to also establish the element of mens rea in proceedings under section 10-A of the Act, it would be generally sufficient to prove that the default in complying with the statute had occurred in the manner envisaged by section 10(b) of the Act. In our opinion, there is nothing in section 10-A which requires that mens rea must be proved before penalty can be levied under that provision if on facts, it is found that the assessee had mad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onduct 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 Legislature has treated as an offence or a default on the part of the assessee, like the making of a 'false representation', it would attract the provisions of section 10(b) of the Act and no further finding would be required to be recorded about the existence of mens rea on the part of the assessee, as it would be inherently included in the earlier finding. We, therefore, cannot accept the proposition that even if a finding has been recorded on facts by the competent authorities that an assessee has made a 'false representation', as contemplated by section 10(b) of the Act, in the absence of an additional finding that the assessee also had the requisite mens rea, he cannot be penalised under section 10(b) of the Act. The argument has no basis and is absolutely far-fetched. 17.. Of course, in the judgments, relied upon by the learned counsel for the assessee, which have been dealt with by us elsewhere, it has been stated that mens rea is an essential ingredient to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rings, undoubtedly, the representation made by the assessee was 'false'. When a representation is made intentionally or knowingly that it is not true, that representation would, unmistakably, be a 'false representation'. With a view to save himself from the penal consequences envisaged by section 10(b) of the Act, the assessee took the plea of acting 'bona fide'. What he did in fact, was to raise the plea of acting 'good faith'. Under the Indian Penal Code, section 52 defines 'good faith' and states that nothing is said to be done or believed in good faith, which is done or believed without due care and attention. It is not the case of the assessee that it had taken due care and paid due attention to study the entry in the certificate of registration before making purchases on the basis of the C forms. As a matter of fact, the subsequent conduct of the assessee in seeking to get included in the certificate of registration, a number of other goods, including 'ball-bearings', with effect from May 18, 1980, as is apparent from the amendment made to the certificate of registration by the Deputy Commercial Tax Officer, dated July 5, 1980 (available at page 29 of the typed set), goes to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e material on record and is neither perverse nor otherwise unreasonable, the conclusion becomes irresistible that the assessee had made a false representation and committed an offence under section 10(b) of the Act. The finding to the contrary recorded by the first appellate authority is based on surmises and conjectures and cannot be preferred over the findings recorded by the assessing authority as well as the Joint Commissioner regarding the making of the 'false representation' by the assessee to secure a benefit to which it actually was not entitled." 23.. Pertinent it is to observe at this juncture, that the cases referred to by a Division Bench of this Court in an unreported decision in T.C. No. 426 of 1981 had also been referred to in the case of Vijaya Electricals [1991] 82 STC 268 (Mad.). 24.. We may now say in a nut-shell the rule laid down in Vijaya Electricals [1991] 82 STC 268 (Mad.) relatable to the prescription of mens rea. There is nothing in section 10-A of the CST Act, which requires that mens rea must be proved before penalty can be levied under that provision, if on facts, it is found that the assessee has made a "false representation". Once a finding is r....