Allahabad High Court
Chaudhary Plastic Bags vs The Commissioner Of Sales Tax on 17 December, 2004
Author: R.K. Agrawal
Bench: R.K. Agrawal
JUDGMENT R.K. Agrawal, J.
1. The present sales tax revision has been filed by the revisionist, M/s. chaudhary Plastic Bags against the order dated 8th January, 1992 passed by the Sales Tax Tribunal Bench-II, Allahabad in second appeal No. 334/91 relating to the Assessment Year 1986-87 in respect of penalty proceedings under Section 10(A) of the Central Sales Tax Act, 1956, hereinafter referred to as the Central Act.
2. Briefly stated the facts giving rise to the present revision are as follows:-
The revisionist claims itself to be a new unit under Section 4A of the U.P. Sales Tax Act, 1948. hereinafter referred to U.P. Act. It has been issued an eligibility certificate for a period of three years. It has been issued an eligibility certificate for a period of three years. It has established its unit after obtaining a term loan from the National Small Industries Corporation Ltd., Delhi, hereinafter referred to as the Corporation, and the payment has been made to the suppliers of machineries directly by the Corporation. The machineries have been imported by the revisionist for the manufacture of plastic bags. It is a registered dealer both under the Central Act and U.P. Act. In respect of the registration certificate granted under the Central Act the revisionist has been registered for sale of plastic bags on retail as well as wholesale basis granules and for the purchase of plastic granules for the manufacture of plastic bags. It is claimed by the revisionist that at the time of grant of registration under the Central Act the authorized representative Sri Prakash Chaudhary had given a statement on 17th April, 1986 before the Assessing Authority to the effect that the revisionist had taken a loan from Corporation and it would make payment directly to the dealer from whom the revisionist has made the purchases of the machineries. It made an application on 24th April, 1986 for issuance of five Form-C and five Form-31 for import of the machineries. The necessary Form-31 for import of the machineries. The necessary From-31 and Form-C have been issued to the revisionist. Thereafter, the revisionist had imported machineries from outside the state of U.P. and had issued Form-C for the value of Rs. 2,89,875/- to two firms of Delhi, namely, M/s. Kailash Engineering Works and M/s. Kuldeep Engineering Works. It appears that on the basis of an internal audit report, the Sales Tax Officer, Sector 5, Allahabad issued notice under Section 10(A) of the Central Act calling upon the revisionist to show cause as to why penalty be not imposed as it had misused declaration Form-C for the purchase of machineries worth Rs. 2,89,875 for which it was not recognized and not entitled to issue declaration Form C. The revisionist submitted its reply to the show cause, stating therein that even though in the registration certificate it has not been mentioned that the revisionist is entitled to purchase machineries required for the manufacture of plastic bags but at the time of grant of registration this fact was specifically mentioned in the oral statement that the revisionist would be importing machineries against the loan sanctioned by the Corporation for which the payment would be made directly by the Corporation. The omission to mention machinery in the registration certificate under the Central Act is accidental and on this ground proceeding for penalty should not have been initiated. It was further submitted that taking into consideration the plea of import of machinery, the Assessing Authority had issued the declaration Form-C an, therefore, there is no misuse.
3. The Sales Tax Officer, Sector-5, Allahabad vide order dated 30th september, 1988 did not accept the explanation offered by the revisionist and imposed a sum of Rs. 26,088/- as penalty. The order has been upheld by the Assitant Commissioner (Judicial), sales Tax Range-II, Allahabad and the Sales Tax Tribunal., Allahabad.
4. I have heard Sri Rakesh Ranjan Agrawal, learned counsel for the revisionist and Sri K.M. Sahai, learned Standing Counsel appearing for the Revenue.
5. Learned counsel for the revisionist submitted that the fact that the revisionist would be importing machineries from outside the State of U.P. was within the knowledge of the Assessing Authority as a specific statement was given by the authorized representative of the revisionist on 17 April 1986 at the time of grant of registration. Further, the Assessing Authority had issued declaration Form-C as per the requirement of the revisionist after fully satisfying that the demand is genuine and bonafide. According to him, the penalty under Section 10 of the Central Act and has straight was initiated proceeding under Section 10(A) of the Central Act, which is not permissible under law.
6. He further submitted that under Rule 8(3), 8(6) and 8(17) of the Central Sales Tax (U.P.) Rules, the Assessing Authority issues declaration Form-C only after being satisfied with the requisition for blank Form-C by the dealer is genuine, bona fide and reasonable and further the dealer has to maintain a register wherein correct and complete account of every forms obtained by him is to be entered and further the Assessing Authority has to obtain the account of the forms previously issued to the dealer before he issues fresh forms. According to him, as the declaration Form-C have been issued after the satisfaction of the Assessing Authority that the demand for the blank forms is genuine and details have been mentioned and verified, there was no contravention or misuse of the declaration From-C and the penalty was unjustified. Learned counsel for the revisionist further submitted that the Assessing Authority had imposed penalty on the basis of the letter of the Deputy Commissioner (Executive) Sales Tax wherein specific direction has been issued that a sum of Rs. 26,088 is liable to be imposed as penalty as revisionist has made irregular purchase of machineries worth Rs. 2,89,875/- against the declaration From-C. There was no application of mind by the Assessing Authority and on this ground the penalty is liable to be set aside. In support of his various pleas, he has relied upon the following decision:-
1. P.K. Varghese and sons v. Sales Tax Officer, Special Circle Ernakulam, (1965) 16 S.T.C. 323 (Kerala)
2. M. Pais & Sons and Anr. v. The State of Mysore, (1996) 17 S.T.C. 161 (Mysore)
3. Sri Lakshmi Machine Works v. The State of Madras, (1973) 32 S.T.C. 407 (Madras)
4. Wasti Ram & Sons v. Commissioner of Sales Tax, 1988 Allahabad Tax Judgments, 90(All.)
5. Commisioner of Sales Tax v. S/s Kashi Prasad Ram Chandra Lal, Allahabad, 2001 U.P.T.C. 173 (All.)
6. Kisan Sahkari Chini Mills Limited v. The Commissioner of Sales Tax, Lucknow, Sales Tax Revision No. 499 of 1992
7. Sanjeev Fabrics v. Commissioner of sales Tax, U.P., Lucknow, (2004) 137 S.T.C. 563 (All)
7. Sri K.M. Sahai, learned Standing Counsel submitted that as the revisionist was not registered under the Central Act for purchase of machinery to be used in the manufacture of plastic bags it was not entitled to purchase them against declaration Form-C and the revisionist not only had purchased them by issuing declaration Form-C, thus exposing itself to penalty under Section 10(A) of the Central Act. He further submitted that it was not necessary for the Assessing Authority to first proceed under Section 10 of the Central Act for levy of penalty and thereafter take proceeding under Section 10(A) of the Central Act as it is at the option of the Assessing Authority either to proceed under Section 10 or 10(A) of the Assessing Authority either to proceed under Section 10 or 10(A) of the Central Act. He further submitted that the Assessing Authority had applied its independent mind while proceeding under Section 10(A) of the Central Act and imposing penalty. The explanation given by the revisionist had been considered and order imposing the penalty has been upheld upto the stage of Tribunal. Moreover, the plea that the penalty order has been passed without any application of mind and on the dictates of the higher authorities had not been raised nor dealt with by the Tribunal and, therefore the revisionist cannot be permitted to raise this point for the first time in the present revision before this court. He submitted that under Section 10(A) of the Act mens rea is not required to be establishes and in support thereof a decision of this Court in the Case of Commissioner of Sales Tax v. Rama & Sons 1999 UPTC 425 has been relied.
8. Having heard the learned counsel for the parties, I find that the plea regarding penalty order having been passed without any application of mind and the at the dictates of higher authorities had not been raised by the revisionist at any point of time. Even before the Tribunal no such plea has been raised. The affidavit of local counsel Sri G.C. Agarwal, which has been filed before this Court stating that the said point has been raised by him before the Tribunal cannot be taken into consideration inasmuch as it was open to the revisionist to make proper application before the Tribunal for rectification of the order for dealing with the point which has been raised by it but has not been dealt with by the Tribunal. Even in the order of the Tribunal mentioning arguments of the learned counsel for the revisionist no such plea has been recorded and therefore, it is to be taken that till such time the Tribunal corrects the order, the plea of penalty order having been passed without application of mind has not been raised in view of the decision of the Apex Court in the State of Maharashtra v. R.S. Naik, AIR 1982 SC 1249.
9. Coming to the merits of the case, I find that it is not in disputes that the revisionist had not been granted registration under the Central Act for purchase of machineries for use and manufacture of plastic bags. The registration certificate is conspicuously silent on this issue. It is not the case of the revisionist that any application for amendment of the registration certificate and for incorporating machineries have been made. Thus, the plea that by some omission or inadvertent mistakes this item has been left out cannot be believed. The plea that the Assessing Authority was aware that the revisionist would be importing machineries from outside the State of U.P. does not help the case of the revisionist inasmuch as it is always open to the manufacture either to purchase machineries from within the State or from outside the State. Merely because this fact was in knowledge of the Assessing Authority it would not mean or establish that the revisionist should be treated as dealer registered under the Central Act for purchase of machineries also. Likewise, issuance of declaration Form-C by the Assessing Authority on the application of the revisionist also does not advance the cause. At the time of issuance of declaration Form-C, it cannot be presumed, that the Assessing Authority was well aware about, the items for which the revisionist was registered and was entitled for issuance of declaration Form-C. It was the first instance of issuance of declaration Form-C and, therefore, the satisfaction or about bona fide requirement, or the details have been maintained or a register have been kept will not come to the rescue of the revisionist. It is also not correct to say that as the penalty proceedings under Section 10 of the Central Act has not been initiated the proceedings under Section 10(A) of the Central Act cannot be initiated. It is always open to the Assessing Authority either to proceed under Section 10 of the Central Act, which imposes punishment with simple imprisonment which may extend to six months, or with fine or with both or to proceed under Section 10A of the Central Act which provides for imposition of penalty in lieu of prosecution. The only requirement is that the ofience under Clause (b) or Clause (c) or Clause (d) of Section 10 is fulfilled, and therefore, proceedings under Section 10(A) had rightly been initiated.
10. Coming to the cases cited by the learned counsel for the revisionist. I find that in the case of P.K.Varghese and Sons (supra), the Kerala High Court has held that mens rea is an essential ingredient for the commission of an offence under Section 10(b) of the Central Act and in order to constitute an offence under Section 10(b) of the Central Act it must be proved that the dealer made the representation that the goods purchased were covered by the registration certificate with the knowledge that they were not so covered. Where there was no finding that the representations made by the petitioner were false, namely that the 'C' Form declarations were issued without the belief that the goods purchased were covered by the registration certificate, the imposition of penalty under Section 10A of the Central Act would be illegal.
11. In the case of M.Pais & Sons and Anr. (supra), the Madras High Court has held that for offence under Section 10(b) of the Central Act mens rea is necessary.
12.In the case of Wasti Ram & sons (supra), this Court has held that where the assessee all through stated that it bonafide believed that the machinery imported thereby was fully covered by the term mill stores, which explanation of the assessee has been accepted by the Assistant Commissioner (Judicial) and upon discovering that the machinery imported thereby was not covered by the term mill stores, the assessee soon got the registration certificate amended and the amended certificate of registration enabled the assessee to import all kinds of machinery, which goes to show that there was not mens rea on the part of the assessee and penalty under Section 10(B) of the Central Act is not exigible.
13. In the case of S/s Kashi Prasad Ram Chandra Lal, Allahabad (supra), this Court has held that assessee had been importing Gari Gola in declaration Form-C. It is an item of Kirana even though it is liable to tax as oil seed being declared goods and therefore, there was no false representation.
14. In the case of Kisan Sahkari Chini Mills Ltd., Tilhar Shahjahanpur (supra) this Court has held that where dealer under bona fide belief that the purchase were made in respect of the goods, which were mentioned in the registration certificate, there cannnot be any case of false representation and no penalty under Section 10(b) of the Central Act is exigible.
15. In the case of Sanjiv Fabrics (supra) the assessee-dealer had imported cotton waste, Polythene, sutli and Tat against declaration Form-C, whereas it was registered under the central Act for 'cotton' and 'cotton yarn', this Court held that it cannot be said that any false representation has been made by the dealer.
16. In the case of Rama and Sons, General Merchant, Ballia (supra), this Court has held that apart from falsehood of representation it is not necessary to establish mens rea as an independent factor. While holding so this Court has relied upon a decission of the Apex Court in the case of Gujarat Travancore Agency v. C.I.T., (1989) 177 I.T.R. 455 wherein the Apex court has held as follows:-
"Unless there is something in the language of the statute indicating the need establish the element of mens rea, it is generally sufficient to prove that a default in complying with the statute has occurred. In our opinion, there is nothing in Section 271(1)(a) which requires that mens rea must be proved before penalty can be levied under that provision. We are supported by the statement in Corpus Juris Secundum, Volume 85, page 580,. paragraph 1023;
A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws."
17. In the case of State of Rajasthan v. Jaipur Udyog Limited, (1972) 30 STC 565 (SC), the Apex Court has held that unless it is shown that the dealer had made false representation, Section 10(A) of the Central Act is not attracted.
18. In the present case I find that the Tribunal has found that the revisionist was not registered under the Central Act for purchase of the machinery to be used in the manufacture of plastic bags and, therefore, it was not entitled to issue declaration Form-C. Further the Tribunal has found that the revisionist had made a false representation while obtaining declaration From-C. The revisionist has not been able to produce any cogent material on record to show that there was no false representation made by it in the purchases of machinery against declaration Form-C. In view of the findings recorded by the Tribunal, the decisions cited by the revisionist are of no help to it.
19. The case in hand is not one of those cases where the question of commodity falling under a particular items of goods mentioned in the registration certification under the Central Act is involved. It is a case where the item i.e. machinery was not at all mentioned in registration certificate and thus, there cannot be any question of bona fide belief in issuing declaration Form-C in import of the machinery. Cases regarding bona fide belief of understanding about item being covered in the registration certificate is of no assistance.
20. In view of the foregoing discussion, I do not find any merit in this revision. It is dismissed.