State Taxation Tribunal - West Bengal
Aziz And Company vs Commercial Tax Officer, Colootola ... on 27 March, 1990
Equivalent citations: [1990]79STC32(TRIBUNAL)
JUDGMENT
L.N. Ray, Judicial Member.
1. Briefly the case of the applicant is that the applicant No. 1-firm is a manufacturer and seller of hooka tobacco and is a registered dealer under the Bengal Finance (Sales Tax) Act, 1941. In the registration certificate granted to the firm an endorsement was made to the effect that sales of raw materials and consumable stores as may be required in the manufacture of hooka tobacco, will be taxable at the rate mentioned in Section 5(1)(bb) of the said Act, if the same are purchased by the applicant for use directly in the manufacture and sale of goods in West Bengal. The registration certificate was granted on December 19, 1973. Up to March 31, 1980, the rate of tax payable under Section 5(1)(bb) was 3 per cent upon furnishing declaration form for purchases made for manufacture of any goods whether taxable or tax-free. With effect from April 1, 1980, the relevant provision was amended to the effect that declaration forms could be furnished in respect of purchases made for manufacture of only taxable goods. The purchases made for manufacture of tax-free goods were excluded from the benefit of the provision of Section 5(1)(bb). Hooka tobacco has always been a tax-free goods under item 18 of Schedule I and Section 6. There was another amendment of the law by which the rate of tax was reduced from 3 per cent to 1 per cent with effect from April 1, 1981, upon production of similar declaration forms. Thereafter, the law was further amended with effect from October 1, 1982, raising the rate of tax from 1 per cent to 2 per cent on condition of furnishing declaration forms. During the period from April 1, 1980 to the end of March, 1983, the applicant-firm upon application to the concerned Commercial Tax Officer, obtained declaration forms on five occasions for use under Section 5(1)(bb). On those occasions the Commercial Tax Officer examined the necessary papers and books of account and issued declaration forms. The applicant used those forms and enjoyed the benefit derived therefrom. On July 1, 1983, a notice was served on the applicant for production of books of account which were produced on February 8, 1984. Thereafter on March 12, 1984, notice was issued on the applicant under Section 5B of the 1941 Act proposing to impose a penalty not exceeding Rs. 9,22,014.40 for alleged improper use of declarations in form No. XXIV-A during the period from April 1, 1980 to March 31, 1983, to cover purchases worth more than Rs. 62 lakhs. The case of the applicant in substance is that the conditions laid down in Section 5B are not satisfied in its case and, therefore, the concerned officer had no jurisdiction to issue any such notice. There is no dispute that out of three conditions under Section 5B, two are fulfilled in this case, namely, the applicant is a registered dealer and declaration forms had been issued to it under Section 5(1)(bb). What is disputed by the applicant is that the third condition laid down in section SB is not satisfied in its case. It is that the applicant must have furnished a declaration under Section 5(1)(bb) in respect of a sale to him of goods of any class or classes not specified at the time of sale in the certificate of registration granted to him under Section 7(3). It is urged by Mr. Gopal Chakraborty learned Advocate, appearing for the applicant, that the registration certificate has, at all material times, contained an endorsement that the applicant is entitled to the benefit of Section 5(1)(bb) for its purchases of raw materials and consumable stores for manufacture of hooka tobacco. He has further urged that in spite of the amendment to the 1941 Act from time to time to the effect that declaration forms could not be used in respect of purchases for manufacture of tax-free goods, the fact of such amendments was not known to the applicant. We have, however, not heard at length on this point and we do not like to give any decision on this question, because the case is otherwise capable of a final decision on the sole point as to whether the third requirement for action under Section 5B has been satisfied in this case or not.
2. Mr. P.K. Chakraborty, the learned State Representative, has contended that it is true that the registration certificate has always contained the endorsement to the effect that the applicant is entitled to the benefit of Section 5(1)(bb) in respect of purchases for manufacture of hooka tobacco and that the endorsement was not amended after the provision in the law was changed with effect from April 1, 1980, but the applicant cannot be allowed to reap the benefit of its own wrong-doing by using declaration forms for such purchases which are not permissible in accordance with law. He fairly conceded that the Commercial Tax Officer or officers who had considered the applications of the applicant and issued declaration forms with effect from April 1, 1980, failed to apply the amended law, yet the applicant ought not to have taken the benefit of the unamended endorsement in the registration certificate. He further submitted that in Clause (a) of Section 5B(1) the words "in accordance with law" should be read so as to give the true meaning to the provision. In other words, he submitted that the mere fact of an endorsement in the registration certificate cannot permit the applicant to enjoy the benefit, until such endorsement is in conformity with the law prevailing at the time. He also submitted that even if an officer of the State Government committed any mistake or was in collusion in issuing declaration forms by ignoring the amended provisions of the law, the Revenue cannot be estopped from enforcing the legal provisions.
3. In the present case there is no question of enforcing any legal provision for recovery of the tax lost on account of mistaken or illegal issuance of declaration forms. The basic question which falls for consideration is whether the action of penalty can be initiated or taken under Section 5B(1)(a) against the applicant. The imposition of penalty is largely different from imposition of a tax. We do not find any similarity between the two. It has been urged by Mr. Chakraborty on behalf of the respondents that the question of mens rea is not relevant in respect of Section 5B. We are in agreement with him and we also are of the opinion that the question of mens rea need not be raised in this context.
4. But there cannot be any doubt that all the three conditions under Section 5B(1) must be fulfilled before any action can be initiated against the applicant for imposition of penalty. The third condition we have already noticed is that declarations should have been furnished by the applicant in respect of purchases of goods which have not been specified in its registration certificate at the relevant time. The common ground is that at the relevant time the registration certificate permitted, by way of the existing endorsement, the use of declaration forms for purchases for manufacture of hooka tobacco. It is difficult to explain away this fact on the ground that the Commercial Tax Officers had committed mistake or any other lapse in issuing declaration forms, nor can we hold that the fact of existing endorsement in the registration certificate can be explained away by the enjoyment of the benefit by the applicant contrary to the amended provisions of law. We are deciding the question of imposition of penalty and not any question of recovery of any tax which has not been paid or collected on account of any mistake or collusion.
5. The learned State Representative has referred to the decisions reported in [1979] 43 STC 58 (P&H) (Bhim Sain Sudarshan Kumar v. State) and [1965] 16 STC 271 (Orissa) (Nowranglal Agarwala v. State of Orissa), both of which in our opinion, do not apply to the facts and circumstances and the real issue involved in the present case. On the contrary, Mr. Gopal Chakraborty, the learned Advocate for the applicant, referred to a decision of a single Bench of the Calcutta High Court, reported in [1987] 64 STC 186 (Cal) (Darshan Lal Rameshchand v. Commercial Tax Officer). Reliance was placed by the learned Judge in that case on a decision of D. Basu, J. of the Calcutta High Court in the case of Textile England Agencies [C.R. No. 355(W)] and another decision of the same Court in the case of National Alloy & Metal Works (Pvt.) Ltd. reported in [1985] 58 STC 107. These cases appear to have a bearing on the facts of the present case. The ratio of those decisions is that the court cannot allow any party to take advantage of its own wrong, whether it is a private person or State. We are inclined to agree with the ratio of those decisions. The applicant, whether he was aware or ignorant of the amended legal provisions, could not have enjoyed the benefit of Section 5(1)(bb), had the Commercial Tax Officers refused to issue declaration forms and amended the registration certificate after the law came to be amended with effect from April, 1980. There is a provision for such amendment in Sub-section (4) of Section 7 of the 1941 Act. It may be mentioned in this connection that there was no obligation on the part of the applicant to bring to the notice of the concerned officer for correction of the registration certificate as far as this point is involved. Mr. Gopal Chakraborty, learned Advocate for the applicant, has rightly drawn our attention to Section 16 of the Act in which the circumstances under which the applicant would have an obligation to get the registration certificate corrected on furnishing certain information, are laid down. The provisions of Section 16 do not require the applicant to get such an endorsement, as in the present case, to be modified or corrected upon furnishing any information.
6. It is true, as argued by Mr. P.K. Chakraborty, the learned State Representative, that the applicant then has enjoyed an unlawful benefit but, in any case, it cannot be proceeded against under Section 5B ; yet that cannot be helped, more so because Section 5B is regarding imposition of penalty which after all takes at least a partial character of a punishment. In such a case, unless all the ingredients are proved by the Revenue, it is not possible to allow it to proceed against the applicant.
7. That being the position, we are of the opinion that the notice issued on March 12, 1984, under Section 5B proposing to impose a penalty, cannot be sustained, since all the conditions are not fulfilled in this case. Accordingly, the application succeeds. The said notice dated March 12, 1984, is quashed and the respondents are restrained from proceeding against the applicant under section SB in the circumstances of this case. The case is thus disposed of. No order is made as to costs.
B.C. Chakrabarti, Chairman.
8. I agree.
P.C. Banerji, Technical Member.
9. I agree.