TaxTMI 
TaxTMI 
2007 (7) TMI 589
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....llected any sales tax from the employees of the said company. On a survey made by the assessing authority on December 28, 1999, it was found by the assessing authority that the assessee was liable to get itself registered and pay the tax on the sale of such food items in the canteen and accordingly, by an assessment order dated March 14, 2000, the assessing authority passed an order imposing the tax, interest and penalty at double the rate of tax upon the petitioner-assessee. The position of tax, interest and penalty for these three years is given below in the form of a chart: The petitioner-assessee immediately got itself registered as a dealer without prejudice to his right to contend that such sale of food items was not taxable under the Act and it was so registered by the assessing authority with effect from the date of commencement of its business, namely, October 1, 1997 and the petitioner-assessee also paid the tax along with the interest imposed by the assessing authority. The issue, therefore, in the present revision petitions is only pertaining to penalty imposed under section 65 of the Act at double the quantum of tax imposed. The first appeal filed by the petitioner-a....
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....e has not raised any grievance about that. He, however, submitted that it was not at all a fit case for imposition of a penalty under section 65 of the Act for avoidance and evasion of tax. He also urged that since the assessee was under a bona fide belief about his liability to get registered and pay tax as he was receiving subsidy from the company and no penalty was imposed under section 59 of the Act for non-registration while granting registration to him with retrospective effect from October 1, 1997 and since all the transactions were duly recorded in the books of account and those very figures were made the basis of imposition of the tax and interest by the assessing authority, it was not at all a fit case for imposition of the penalty under section 65 of the Act. He relied upon the various judgments in support of his submission. The list of these cited cases is as below: 1.. Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211 (SC). 2. Murarilal Ahuja & Sons v. Board of Revenue [1986] 61 STC 393 (Raj). 3.. Cement Marketing Co. of India Ltd. v. Assistant Commissioner of Sales Tax, Indore [1980] 45 STC 197 (SC). 4.. Vijai Hosiery Mills v. State of Rajasthan [19....
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....d and restored by the assessing authority and the Tax Board, respectively, deserves to be set aside. It is true that the sale of food items in a canteen in factory premises even as per requirement of Factories Act and other labour legislation is a taxable event under the RST Act and is exigible to sales tax under the RST Act particularly after amendment in law with effect from April 1, 1987 consequent upon 46th Amendment in the Constitution of India, but the consideration for imposition of the penalty for concealment of taxable turnover and taxable sales are different. Admittedly, just upon survey of the business premises, when a notice was served upon the assessee pointing out his liability to get registered and pay tax, he obtained such registration with retrospective effect from the date of commencement of his business, namely, October 1, 1997. He also paid the tax along with interest as imposed by the assessing authority without any demur. It is also not in dispute that all the transactions of sale on the basis of which taxable turnover by the assessee was computed by the assessee, were duly recorded in the books of account maintained by the assessee in regular course of busin....
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....iming the said turnover to be exempt from the sale and contested this position. In view of this, the question of the assessee having a guilty animus or mens rea as they call it does not arise in the present case. An assessee is even entitled to claim that a particular sale is not taxable sale and it is exempt or non-taxable in view of certain provisions and judgments of the courts. The rejection of such bona fide contention by the authorities created under the Act or even by courts of law does not necessarily lead to the conclusion that the assessee carried any mens rea or guilty animus in raising such contention and, therefore, penalty should be imposed for non-payment of tax in such circumstances. The imposition of penalty is never automatic and ipso facto. Such imposition of penalty has to be preceded by a reasonable conclusion arrived at by the concerned authority that there is a conduct contumacious or a guilty intention on the part of the subject or assessee in not paying the tax. Such reasonable conclusion can be arrived at only after complying with the principle of natural justice- giving of a show cause notice to the assessee and after considering and deciding his objecti....
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....e in the penalty proceeding but the finding in the assessment proceeding cannot be regarded as conclusive for the purposes of the penalty proceeding. That is how the law has been understood by this court in Anwar Ali's case [1970] 76 ITR 696 (SC), and we believe that to be the law still. It was also laid down that before a penalty can be imposed the entirety of the circumstances must be taken into account and must point to the conclusion that the disputed amount represents income and that the assessee has consciously concealed particulars of his income or deliberately furnished inaccurate particulars. . ." The Division Bench of this court in Vijai Hosiery Mills v. State of Rajasthan [1980] 45 STC 345, held as under: (at page 349) "Taking all the circumstances into consideration, we are inclined to hold that it cannot be said that there was any mens rea or guilty intention on the part of the petitioner when it claimed exemption on the sale of banians on the ground that banian is a garment and not a hosiery product. It cannot, therefore, be said that the petitioner fraudulently evaded or avoided payment of tax or concealed its liability to tax. Having come to the conclusion tha....
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....and his explanation with regard to the same being decided, clearly points out that he carried a mala fide intention of not paying the tax in question and concealed such taxable turnover and sale from the Revenue and failed to pay tax thereon without any reasonable cause. The judgment in the case of Director of Enforcement v. MCTM Corporation Pvt. Ltd. AIR 1996 SC 1100 wherein the honourable Supreme Court held that penalty under section 23(1)(a) of the Foreign Exchange Regulation Act, 1947 stood attracted as soon as there was violation of section 10(1) of the Act where any person who has a right to receive any foreign exchange and payment in rupees in India fails to get the foreign exchange repatriated within a reasonable time after the right to receive the same accrues, the commission of offence under section 10(1) is complete and breach of such "civil obligation" attracted penalty under section 23(1)(a) of the Act and mens rea is not an essential ingredient for holding a delinquent liable to pay penalty under the said provisions. The said judgment relied upon by the Revenue in the present case is, with great respect, clearly distinguishable because the requirement of repatriation....