This trade tax revision, filed by the assessee, is directed against an order of the Trade Tax Tribunal, Ghaziabad dated 20.12.2003 passed in Second Appeal No. 48 of 1998, Assessment Year 1996-97.
Under the order impugned the Tribunal has proceeded to hold that since there had been an attempt to avoid tax while transporting the goods without valid documents, the assessee was liable for penalty under Section 15A(1)(o) of the U.P. Trade Tax Act. However, in the facts of the case the Tribunal has reduced the penalty to the tune of Rs. 15,000/- only.
Challenging the order so passed, counsel for the assessee Sri Kunwar Saxena placed reliance upon the judgment of the High Court of Judicature at Allahabad in the cases of Jain Suddh Vanaspati vs. State of U.P. (1983-UPTC-198), Oriental Carbon Limited vs. Commissioner, Sales Tax (1985-UPTC-613) and the judgment of the Supreme Court in Civil Appeal No. 1548 of 1987, decided on 05.12.1996 reported in 1997-NTN-Vol. 10-105. It is contended that the penalty is leviable under Section 15A(1)(o) for contravention of Section 28-A of the Act only if it is established that there has been an intention to evade tax, as would follow from the language of Section 28-A(6).
He submits that the High Court in the aforesaid judgments has held that merely because the required Form-31 accompanying the transaction was found to be completely blank, it by itself cannot be a ground to levy penalty under Section 15-A(1)(o) in absence of a finding that same had been done with the intention to evade the tax. For the purpose he has also placed reliance upon the findings which have been recorded in the assessment order.
Standing Counsel in reply submits that from a simple reading of Section 15A(1)(o) it is apparently clear that penalty is attracted on violation of the provision of Section 28-A. Therefore, if there is violation of the provisions of any of the sub section of Section 28-A, penalty would be attracted and it is not necessary that in every case there should be an element of mens rea of avoiding the tax under Section 15A(1)(o). He clarifies that even in respect of transactions which are not accompanied by valid document, violation of statutory rules is established, which will attract penalty. He clarifies that the issue of mens rea may at best a factor to be taken into consideration while working out the quantum of penalty to be imposed. However, such mens rea to evade the tax is not a condition precedent for exercise of powers under Section 15A(1)(o).
He further points out that the assessment order has been passed after the proceedings of penalty were completed. Therefore, the finding of the Tribunal in the impugned order, to the effect that Form-31 had been left completely blank with an intention to re-use the same, cannot be said to be a perverse finding so as to warrant any interference in exercise of revisional jurisdiction. He clarifies that the Tribunal in the facts of the case has rightly come to a conclusion that Section 15A (1)(o) was attracted and therefore the assessee was liable to pay the penalty.
Sri Kunwar Saxena in reply submits that although the assessment order is subsequent to the penalty proceedings, yet from the assessment order it is apparently clear that the account books had been accepted. Meaning thereby that there was no intention to evade the tax. The assessment order has become final between the parties. He refers to the judgment of the High Court in the case of Jaimco Shoe Factory (1995-UPTC-295), Prakash Enterprises vs. Commissioner, Sales Tax (2000-UPTC-1098), Omex Electronics vs. Commissioner, Sales Tax (2001-UPTC-530), Setu Textiles vs. Commissioner, Trade Tax (2009-UPTC-1123), Inter Arch Building Products vs. CTT (2010-UPTC-503 and S/S Ramesh Chandra Santosh Kumar (2010-UPTC-1113).
He also contended that Section 54(1) of the VAT Act is pari-materia to Section 15A(1)(o) of the Trade Tax Act. Therefore, places reliance upon the judgment of the Division Bench of this Court in the case of Rama Pulses vs. State of U.P. (2009-NTN-Vol.41-189) and the judgment of the Hon'ble Single Judge in the case of Multitex Filterization Engineering Limited vs. Commissioner, Commercial Tax (2009-NTN-Vol.39-263) and upon the judgment of the Hon'ble Supreme Court in the case of Hindustan Steel Limited vs. State of Orisa (1969(2) SCC-627) and Bharjatiya Industries Limited vs. Commissioner, Sales Tax (2008-UPTC-338) and lastly upon the judgment in the case of SCT vs. Sanjiv Fabricators (2010-UPTC-1239).
I have heard learned counsel for the parties and have gone through the records of the writ petition.
In order to appreciate the contentions raised on behalf of the parties it would be worthwhile to reproduce Section 15A(1)(o) and the note at the end of the various sub-clauses, which read as follows:
"15-A. Penalties in certain cases: (1) If the assessing authority is satisfied that any dealer or other person......
(o). imports or transports, or attempts to import or transport, abets the import or transport of any goods in contravention of the provisions of section 28-A;
Note: It may, after such inquiry, if any, as it may deem necessary, direct that such dealer or person shall pay, by way of penalty, in addition to the tax, if any, payable by him,-"
It would also be worthwhile to reproduce Sections 28-A (2), 28-A (5) and 28-A (6), which read as follows:
"28-A. Import of goods into the State against declaration.
(2) Where such goods are to be consigned by road,-
(a) the importer shall furnish to the consignor the declaration in the prescribed form in duplicate duly filled in and signed by him and the driver or any other person-in-charge of any vehicle carrying any such goods shall carry with him the copies of such declaration duly verified by the consignor in the prescribed manner together with such other documents as may be prescribed and shall before crossing any check-post or barrier established under section 28, deliver one copy of such declaration to the Officer-in-charge of such check post or barrier and the other copy of the declaration and the remaining documents alongwith the goods to the importer or his agent;
(b) the Officer-in-charge of the check-post or barrier shall grant a receipt for the copy of declaration delivered to him and it shall not be necessary for the driver or the person-in-charge of the vehicle to deliver any copy of the declaration at any other check-post or barrier that he may cross if he shows such receipts to the Officer-in-charge of such other check-post or barrier.
(c) .......................
(d).....................
(5) The driver or other person-in-charge of any vehicle carrying any goods referred to in the preceding sub-section shall stop the vehicle at every such check-post or barrier, when so required by an officer authorised under sub-section (2) of section 13, as the case may be, and allow him to search the vehicle and inspect the goods and all documents referred to in the preceding sub-section and shall, if so required, give him name and address and the names and addresses of the owner of the vehicle and of the consignor and the consignee of the goods.
(6) Where the officer making the search or inspection under this section finds any person transporting or attempting or abetting to transport any goods to which this section applies without being covered by proper and genuine documents referred to in the preceding sub-section and for reasons to be recorded he is satisfied after giving such person an opportunity of being heard that such goods were being so transported in an attempt to evade assessment or payment of tax due or likely to be due under this Act, he may order detention of such goods."
In the opinion of the Court from a simple reading of Section 15A(1)(o) it is apparently clear that penalty is attracted on violation of any of the provisions of Section 28-A. Section 28-A (1) permits the import of goods within the State, while Section 28-A(2)(a) provides that such import of goods must be accompanied by forms/declarations, as statutorily prescribed in such number as mentioned therein. Section 28-A(2)(b) requires the deposit of documents at the check-post with the officer-in-charge, while Section 2(5) mandates that the required documents accompanying the transaction should be available with the driver of the vehicle for being produced as and when it is intercepted by the competent officer, including the name of the consignor and the consignee of the goods.
In the opinion of the Court, if there is violation of the provisions of Section 28-A (2)(a), 28-A(2)(b) or 28-A (5), penalty under Section 15A (1)(o) would be attracted.
So far as Section 28-A(6) is concerned, it is an independent provision conferring the power of seizure of the goods for non-production of the documents asked for.
This power to seize the goods has been hedged by the State Legislature by providing that such seizure should be made only when the officer concerned has reasons to be satisfied, after giving an opportunity of being heard, that there is an intention to evade the tax.
This Court has no hesitation to record that Section 28-A(6) operates in a different field qua the power to seize the goods. It is only in respect of such exercise of power of seizure that the restriction has been placed upon the power of the officer concerned to ensure that he is prima facie satisfied that there is an intention to evade the tax.
The power of seizure so circumscribed under Section 28-A(6) shall not in any way affect or dilute the power of levy of penalty for mere violation of provisions of Section 28-A(2) and 28-A(5).
In a given set of fact the documents may be incomplete, as required under Section 28-A(2) but there may not be an intention to evade the tax. In such a situation the power of seizure under Section 28-A(6) may not be exercisable but penalty under Section 15A(1)(o) can still be imposed.
At this stage it would be worthwhile to reproduce paragraph 28 of the judgment of the Hon'ble Supreme Court in the case of Bharjatiya Industries Limited (supra), which has also been relied upon by the counsel for the assessee for a different purposes. Paragraph 28 reads as follows:
"28. It is, therefore, difficult to accede to the contention of Mr. Banerjee that under no circumstances absence of mens rea would not be a plea for levy of penalty. An assessing Authority has been conferred with a discretionary jurisdiction to levy penalty. By necessary implication, the authority may not levy penalty. If it has the discretion not to levy penalty, existence of mens rea becomes a relevant factor."
From the aforesaid paragraph 28, it would be apparently seen that the Supreme Court has clarified that where there is a discretion to levy the penalty, absence of mens rea is a relevant consideration for the purposes of quantification of the penalty to be levied. The said judgment is complete answer to the contentions, which have been raised on behalf of the assessee. What follows therefrom is that mens rea is not a condition sun-qua-non for levy of penalty, it is only a relevant factor to be considered at the time of exercise of discretion at the time of quantification.
This Court may also refer to the judgment of the Supreme Court in the case of Guljag Industries Vs. CTO; (2007) 7 SCC-269. The Apex Court has clearly explained the impact of mens rea and the extent it is applicable in the matter of levy of penalty, which is only a civil obligation, remedial and coercive in nature, and is different from the penalty for a crime. For ready reference paragraph 8 of the judgment is being quoted below:
"8. Existence of mens rea is an essential ingredient of an offence. However, it is a rule of construction. If there is a conflict between the common law and the statute law, one has to construe a statute in conformity with the common law. However, if it is plain from the statute that it intends to alter the course of the common law, then that plain meaning should be accepted. Existence of mens rea is an essential ingredient in every offence; but that presumption is liable to be displaced either by the words of the statute creating the offence or by the subject-matter with which it deals. A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is different from the penalty for a crime."
The Hon'ble Supreme Court of India has gone to hold that where the penalty is for statutory offence, there is no question of proving of intention or mens rea as the same is excluded from the category of essential ingredient for imposing the penalty.
Kunwar Saksena, counsel for the assessee at this stage submitted that the provisions of the Rajasthan Sales Tax Act are different from those of State of U.P. He explains that there are two basic distinctions in the provisions applicable in the State of Rajasthan viz-a-viz those applicable in the State of U.P. i. e. (a) there is no provision at par with Section 28-A(6) of the U.P. Trade Tax Act, which specifically provides that there must be intention to evade tax before exercise of power of seizure and (b) there is discretion in the matter of levy of penalty, the issue of mens rea becomes relevant, inasmuch as in the State of Rajasthan there is provision of fixed penalty for violation of the statutory provisions. Therefore, the judgment is distinguishable.
The distinction so pleaded by Sri Saksena does not appeal to the Court. As already noticed above, the power under Section 28A(6) is to be exercised in the matter of seizure of goods only. It would not control the applicability of Section 15-A(1)(o) for levy of the penalty for statutory violations. Therefore, mere use of word intention to evade tax, which have been so provided in the matter of seizure of goods under Section 28(6) will not control or will not be applicable for the purposes of levy of penalty for violation of provision of Section 28-A(2) or Section 28-A(5) of the U.P. Trade Tax Act.
So far as the issue of discretion in the matter of imposition of penalty is concerned, this Court may record that the Supreme Court in the aforesaid cases has explained that where discretion is conferred upon the authority concerned to levy penalty or not, the issue of mens rea becomes a relevant factor. In given set of fact it is open to the authority concerned to come to a conclusion that zero penalty be levied, as there has been no evasion of tax. This exercise of discretion cannot lead to a conclusion that the authority does not have the jurisdiction to levy the penalty, if there is no mens rea i. e. only for statutory violations. The jurisdiction to levy the penalty and quantification of the penalty in the given facts of the case are entirely two different aspect of the matter.
What is being asked by the counsel for the assessee is that the discretion to be exercised in the matter of quantification may be read as condition precedent for exercise of power to levy the penalty itself.
This Court can not accept the proposition raised on behalf of the counsel for the petitioner,. Penalty under the provisions of Section 15-A(1)(o) can be levied for violation of any of the clauses of Section 28-A. It is also worth mentioning that under various sub-clauses of Section 15-A (1) itself penalty has been provided for violation of statutory provisions where mens rea has no role to play, namely Section 15-A (1) sub clauses (a), (e), (k), (n) and (r).
Counsel for the petitioner has placed heavy reliance upon the judgment of the Hon'ble Supreme Court of India in Civil Appeal No. 1548 of 1987 decided on 05.12.1996, reported in 1997-NTN-Vol.10 page 105. The judgment whereof reads as follows:
"The High Court quashed the imposition of penalty upon the respondent having regard to the finding of fact reached by the Tribunal that there had been no intention to cause any loss to the revenue or to evade tax in importing into the State certain consignments of carbon black without carrying Forms in Form-31. Having regard to the findings of the Tribunal we don not think that any interference with the judgment and order under challenge is called for and the appeal is dismissed with no orders as to costs."
From the aforesaid judgment it is apparently clear that the Supreme Court had refused to interfere with the order of the High Court only on the ground that in the facts of the case the Tribunal had recorded that there was no intention to cause any loss to the revenue or to evade tax in importing within the State certain consignments of carbon black without carrying Form-31.
At the very out set it may be seen that the judgment of the Hon'ble Supreme Court proceeds on facts only. It does not lay down any binding precedent.
The Apex Court in the case of Bhavnagar University v. Pitiola Sugar Mills 2003 (2) SCC 111 followed in the case of Dr. Raghuvir Singh reported in AIR SCC Weekly 5817 has explained that a little difference in the facts of the case will make a lost of difference in the precedential value of the decision.
So far as the other judgments relied upon by the counsel for the petitioner are concerned, suffice is to record that the Division Bench judgment in the case of Jain Suddh Vanaspati (Supra) had been delivered prior to the amendment in Section 28-A and therefore the Tribunal has rightly, in the facts of the case, recorded that with the change in the language in Section 28-A, the judgment in the case of Jain Suddh Vanaspati ceases to have any binding effect.
This Court may further record that in the case of Jain Suddh Vanaspati paragraph 23, which has been referred to by the counsel for the petitioner, the Division Bench has held that for the seizure of the goods it is a condition precedent to make out a case that there was an attempt to evade the tax. This has to be examined with reference to the power of detention of goods and levy of penalty thereafter. The issue as to whether the penalty could be levied on technical violation of Section 28-A(2) and 28-A(5) had not been examined.
The other judgment of the Hon'ble Single Judge, which has been followed by the Division Bench in the case of Jain Suddh Vanaspati (supra), for holding that no penalty under Section 15-A(1)(o) can be levied for violation of Section 28-A unless mens rea of avoiding the tax is established, in the opinion of the Court did not take into consideration the scope of Section 15-A(1)(o) which provide for levy of penalty on violation of the statutory provisions only in addition to the penalty, which may be levied on seizure of goods under Section 28-A(6).
In any view of the matter the legal position stands settled under the judgments of the Supreme Court in the case of Bharjatiya Industries Limited (supra) and Guljag Industries (supra).
Counsel for the petitioner lastly submitted that at least from the judgment of the Hon'ble Supreme Court in the case of Bharjatiya Industries Limited (supra), it cannot be disputed that the existence of mens rea becomes a relevant factor for the purposes of quantification of penalty. The Tribunal in the facts of the case has, however, held that mens rea is of no relevance and therefore the quantification done by the Tribunal is based on non-consideration of a relevant factor. Accordingly, the part of the order of the Tribunal quantifying the penalty cannot be legally sustained.
The last contention so raised on behalf of the assessee appears to be well supported by the judgment of Supreme Court in the case of Bharjatiya Industries Limited (supra). Since the assessing authority has discretion to quantify the amount of penalty to be levied and further since the Supreme Court has held that mens rea is a relevant factor for the said purpose, the order of the Tribunal to that extent has to be set aside.
Accordingly, the order of the Tribunal, insofar as it holds that penalty can be levied even in absence of intention to evade the tax, is affirmed. The Tribunal may redetermine the quantum of penalty to be levied, giving due weightage to the mens rea part involved, namely the intention to evade tax. For the limited purpose the matter is remanded to the Tribunal for quantification of the penalty alone afresh.
So far as the judgment in the case of SCT vs. Sanjiv Fabricators (2010-UPTC-1239). is concerned, it may be recorded that Section 54(1) of the VAT Act was under consideration. This Court is not required to examine the provision of the said Act in the facts of this case, yet this Court may point out that Clause 2 of Clause 14 of Section 54 has not been taken note of in the said judgment. The matter is left to be examined in an appropriate case.
With the aforesaid observation/direction the present revision is disposed of.
Order Date :- 8.9.2011 Pkb/