State Taxation Tribunal - West Bengal
A.O.P. (India) Pvt. Ltd. And Anr. vs C.T.O., Bowbazar Charge And Ors. on 7 May, 2004
Equivalent citations: (2008)11VST4(NULL)
JUDGMENT
B.K. Lala, Judicial Member
1. In this application under Section 8 of the West Bengal Taxation Tribunal Act, 1987, the petitioner has challenged the order dated July 21, 1998 passed by the respondent No. 1 imposing penalty of Rs. 45,00,000 for violation of Section 5A of the Bengal Finance (Sales Tax) Act, 1941 (in short, "the Act, 1941").
2. The case of the petitioner is that the company has registration certificate with coverage of "binded printed materials and printed materials" allowing the company to purchase inter alia, the raw materials and consumable stores at a concessional rate under Section 5(1)(bb) of the Act, 1941. The company purchased printing inks from registered dealers during the financial years ending March 31, 1993, march 31, 1994 and March 31,1995 issuing declaration forms prescribed under the Bengal Sales Tax Rules, 1941 for availing the benefit of concessional rate of tax under Section 5(1)(bb) of the Act, 1941.
3. The proceeding for imposition of penalty under Section 5A of the Act, 1941 was started against the petitioner on the allegation that the declaration forms were used unauthorisedly for the said financial years 1992-93, 1993-94 and 1994-95. After hearing the petitioner, penalty of Rs. 45,00,000 was levied on the ground that declaration forms issued by the petitioner for purchase of the goods were used illegally for manufacture of taxable goods as well as the goods included in Schedule I and for "labour jobs". Revisions were preferred against the order passed by the learned Commercial Tax Officer which was upheld by both the revisional authorities.
4. The learned lawyer for the petitioner submits that there was no contravention of any provisions of law, since the petitioner used the printing materials for the purpose of manufacture of "binding printed materials and printed materials". It is further submitted that Section 5A of the Act 1941 provides the amount of penalty should not exceed double the amount of tax to be levied under the Act, in respect of the concerned goods. But the respondent No. 1 imposed penalty for the alleged sales of exempted goods for which no tax could be levied. It is also submitted that printing of books, periodicals, etc., according to the specifications and order of the customers does not constitute any sale. The concerned officer also issued declaration forms repeatedly on being satisfied about the proper use of such forms. Therefore, imposition of penalty is not sustainable under law since the doctrine of contributory negligence applies. The respondent No. 1 also failed to establish any mens rea on the part of the petitioner. The impugned order dated July 21, 1991 therefore, is bad in law and liable to be set aside.
5. In support of his contention, the learned lawyer for the petitioner relied on the decisions reported in Jayshree Chemicals Ltd. v. Additional Commissioner of Sales Tax, Orissa [1992] 87 STC 359 (Orissa), Ipitata Sponge Iron Ltd. v. State of Orissa [1992] 85 STC 42 (Orissa), Braja Lal Banik v. State of Tripura [1990] 78 STC 283 (Gauhati), Hindustan Steel Ltd. v. State of Orissa and Assessing Authority-cum-Excise and Taxation Officer, Gurgaon v. East India Cotton Mfg. Co. Ltd. .
6. On behalf of the respondents, it is submitted that admittedly, the petitioner-company used printing inks for the purpose of printing, taxable printed materials including binded printed materials and for tax-free articles and also for printing on the papers supplied by the parties on works contract basis. The petitioner, therefore, acted against the provisions of Section 5A of the Act, 1941. The petitioner, thus, deliberately to avoid the tax has used the printing materials illegally. According to the learned State Representative, the principles of contributory negligence does not apply in this case, since the petitioner furnished incorrect information regarding use of declaration forms on earlier occasions disclosing that those were used for production and sale of taxable goods. Only after scrutiny of assessment records it revealed that the petitioner was furnishing such particulars since long. The order of penalty, therefore, is legal and justified. The application is liable to be dismissed.
The only point for consideration is, if the order dated July 21, 1998 imposing penalty of Rs. 45,00,000 was proper and justified.
7. On going through the decided cases relied on behalf of the petitioner, we find that the dealers in those cases, have committed the mischief of misusing declaration forms violating the provisions of Section 10 of the Central Sales Tax Act, 1956. The provisions of Section 10(d) are more or less, identical to those of Section 5A of the Act, 1941.
8. It is the contention of the learned lawyer for the petitioner that, there was no mens rea on the part of the petitioner for using the printing materials for the purpose of non-taxable goods and for the job-work, the principles laid down in the aforesaid cases are, therefore, applicable in the present facts and circumstances of the case.
9. We, therefore, find it necessary to quote the relevant provisions of Section 10 of the Central Sales Tax Act, 1956 vis-a-vis the provisions of Section 5A of the Act, 1941.
10. Penalties.--If any person,-
(a) ...
(aa) ...
(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) ...
(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;
(e) ...
(f) ...
he shall be punishable with simple imprisonment, etc....
The Section 5A of the Act, 1941 states as follows:
If any registered dealer or undertaking, after purchasing any goods for any of the purposes referred to in Clauses (aa), (aaaa) and (bb) of Sub-section (1) or Sub-clause (ii) of Clause (a) of Sub-section (2) of Section 5, makes use of the same for any other purpose, the prescribed authority may, after giving such registered dealer or the owner of such undertaking a reasonable opportunity of being heard, by an order in writing, direct that he shall pay by way of penalty a sum not exceeding double the amount of the tax which could have been levied under this Act in respect of the sale of the goods concerned.
10. The gist of the offence under Section 10(b) of the Act, 1956 is false representation made to an inter-State seller, at the time of purchase that the goods intended to be purchased are of the class covered by the certificate of registration, whereas the gist of offence under Section 10(d) of the Act, 1956 is that after purchasing goods for any other purposes enumerated in Section 8(3)(b), the purchaser fails to make use of the goods for the declared purpose. The offences are separate and distinct. Still in both types of offences, mens rea is an essential ingredient. The provisions of Section 10(b) is not relevant for the purpose of deciding the issue in controversy.
11. In a case reported in Jayshree Chemicals Ltd. v. Additional Commissioner of Sales Tax, Orissa [1992] 87 STC 359 (Orissa), relied on behalf of the petitioner, the fact was that the petitioner purchased mercury for use in manufacturing process but ultimately resold the same. It was found that reselling was done on the ground that certain quantity was not required by him for the purposes of manufacturing. The registration certificate amended to include these articles for resale. Mens rea, therefore, was found to be absent since the dealer applied for amendment of its registration certificate. Hence, no penalty was imposed on mercury but regarding other goods, the order of penalty was sustained. In the case reported in Ipitata Sponge Iron Ltd. v. State of Orissa [1992] 85 STC 42 (Orissa) penalty was imposed on the petitioner on the ground that goods, such as, iron, steel, cement, etc., were purchased at a concessional rate but were not utilised in the manufacture or processing of goods for sale. It was held that the petitioner violated the provisions of Section 10(b) of the Act, 1956 since the cement and building materials, etc., would not be covered by the expression "goods intended for use in manufacture". However, the amount of penalty was held to be leviable equivalent to the amount of tax which the petitioner would have paid otherwise on the goods, had he not purchased them at a concessional rate since the Revenue was not found free from blame. In a case reported in Assessing Authority-cum-Excise and Taxation Officer, Gurgaon v. East India Cotton Mfg. Co. Ltd. [1981] 48 STC 239 (SC), the assessee purchased dyeing colours and other chemicals for use in manufacture. The goods, so purchased by the assessee were partly used for his own business and partly for processing and dyeing textiles to third parties on job basis. It was held that the provisions of Section 8 of the Act, 1956 clearly covers a case where a registered dealer manufactured or processed goods for a third party on job contract. The honourable Supreme Court further observed. "A statute must be construed according to its plain language and neither should anything be added nor should anything be subtracted unless there are adequate grounds to justify the inference that the legislature clearly so intended". On the question of penalty the honourable Supreme Court held "the order imposing 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. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances". Similar view was taken in several other cases by the honourable courts of the different States as discussed in a case reported in Braja Lal Banik v. State of Tripura [1990] 78 STC 283 (Gauhati).
12. Though unlike Section 10(b) of the Central Sales Tax Act, 1956 either the expression "falsely represents" or that of "without reasonable excuse" appearing in Section 10(d) has not been included in that provisions of Section 5A of the Act, 1941 still the aforesaid legal principles are also applicable in the present case. Hence, before penalising the petitioner, clear finding is to be made if the petitioner deliberately used the goods otherwise purchased at a concessional rate, violating the provisions of Section 5A. It is the admitted case that the petitioner purchased goods at a concessional rate and used in the job-work as well as the manufacturing of goods covered under Schedule I.
13. The mens rea was found absent by the honourable Supreme Court, in a case of Commercial Taxes Officer v. Foreign Import & Export Association [1994] 95 STC 101 where a registered dealer purchased trade materials for processing raw wool at a concessional rate of tax but used the same for processing raw wool belonging to the others. The honourable court held that it could not be said that the respondent had acted deliberately in contravention of law and no penalty could be levied under Section 10(b) of the Act, 1956. The decision taken by the Rajasthan High Court reported in Commercial Taxes Officer, Circle A, Kota v. Foreign Import & Export Association [1980] 45 STC 265 was thus affirmed. But under Section 5A, the goods have to be purchased for any of the purposes referred to in Clauses (aa), (aaaa) and (bb) of Sub-section (1) or Sub-clause (ii) of Clause (a) of Sub-section (2) of Section 5 of the Act, 1941 and the Sub-section (1) of Section 5 clearly says that the goods so purchased have to be used directly by the dealer in the manufacture of taxable goods. Hence, the dealer admittedly failed to use the goods directly for manufacturing his taxable goods though purchased at a concessional rate of taxes. He has given no reasonable explanation for that rather, he shifted his responsibility upon the concerned officer taking the plea of contributory negligence. He has taken the tax benefit while purchasing goods and manufactured nontaxable goods causing loss to the revenue. The provisions of Section 5A is well attracted in his case.
14. Now, the question comes up for consideration, how far the quantum of penalty levied upon the petitioner, is proper and justified. According to Section 5A, the penalty should not be double the amount of tax which could have been levied in respect of the sale of the goods concerned. The learned Commercial Tax Officer in his impugned order dated February 20, 1991 observed, "Shri Pinaki Lal Choudhury fails to quantify as to how much goods which are purchased at a concessional rate have been used in the job-work and in the manufacture of goods covered under Schedule I.... In absence of sufficient and satisfactory documentary evidences I am of opinion that 80.05 per cent of total purchases made at concessional rate of tax have been used in the course of manufacture goods covered under Schedule I and printing and labour job in respect of the periods 1992-93. Similarly, it is construed that 77.52 per cent and 80.05 per cent of total purchase made at a concessional rate of tax in respect of the periods 1993-94 and 1994-95 have been used in the course of manufacture of goods covered under Schedule I and printing and labour job done".
15. The petitioner since failed to produce the relevant documents the learned Commercial Tax Officer had no other alternative but to find out the percentage of exempted sales from the total purchase made against the declaration forms. There is nothing wrong in the impugned order passed by the learned Commercial Tax Officer and it needs no interference. Therefore, the present application is liable to be dismissed without costs.
16. It is dismissed accordingly. No order as to costs.
A. Deb, Technical Member
17. I agree.