(Order of the Court was made by B.RAJENDRAN, J.) The State is the petitioner. The order, dated 04.04.2003, passed by the Sales Tax Appellate Tribunal in C.T.A.No.326/2002 is under challenge.
2. The first respondent is a manufacturer of black tea and is registered under the Central Sales Tax Act as well as under the Tamil Nadu General Sales Tax Act. The first respondent was assessed by the Assessing Officer in respect of alleged misuse of Form 'C' in respect of products such as wire mesh, X-Ray film & accessories purchased by the assessee from other States for which Form 'C' was utilised. The Assessing Authority had came to the conclusion that the purchase of the materials was not directly required for the purpose of manufacture of the goods and hence use of Form 'C' attract penalty under
Section 10(A) and imposed penalty for the above said purchase. The relevant portion is extracted below:
"4. I heard the arguments of both the representatives and verified the records produced before me. The appellants have mainly relied on the fact that the goods purchased were meant for being used in the manufacturing of tea. They have claimed that there is a close link or nexus between the goods purchased and the business activity. They have relied on the fact of the subsequent inclusion of these goods by the assessing authority. This proves that they are otherwise eligible to effect the purchase of these goods. Hence this is only a technical offence. They have also pleaded for taking a lenient view. They have pleaded for deducting the tax paid at 4%."
3. Against the said levy of penalty alone, the assessee preferred appeal before the Appellate Assistant Commissioner. Though taking a lenient view the appellate authority came to the conclusion that the goods which are used or purchased were not directly linked to manufacture and process and that mentioning of goods in wrong column, purchase of essential goods without including them in the certificate will fall under technical offences only and held that a lenient view must be taken. The appellate authority modified the levy of penalty by re-fixing at 50% of the tax levied instead of 150% as assessed to by the Assessing Authority.
4. Aggrieved against the said order of the appellant Assistant Commissioner (CT), Pollachi, the assessee preferred appeal before the Sales Tax Appellate Tribunal, Coimbatore and contended that there was no false representation and brought to the notice of the Tribunal that subsequent inclusion in Form 'B' of the Digital Display Counter, Avery scale, coper cable, wire mesh, X-ray films and accessories would show that the assessee was eligible for inclusion of these goods in the Form 'B' certificate and hence there was no mens rea for the levy of penalty as against the assessee.
5. It is also pleaded that the assessee only acted bonafidely and he had no motive to escape the liability by using 'C' declaration Form, hence, no penalty should be levied. That apart, before penalty could be imposed, the circumstances established must be reasonably point to the conclusion that the assessee concerned has consciously committed the acts or omissions which go to constitute the offence and the burden would be on the Department to prove the existence of such circumstances.
6. The Tribunal after hearing both parties have clearly gave a finding which is extracted below:
"On the above finding, the learned Authorised Representative for the appellants argued that since the goods purchased were, interlinked with the business activity of the assessee and since there is no mensrea or false representation the levy of penalty is unjust and may be set aside. We have perused the copy of Form-B certificate, wherein the above mentioned goods were included with effect from 16.10.01, a copy of letter in Acts Cell V/31235/01 dated 15.05.01 is relied on by the Appellate Assistant Commissioner who has stated that the case of the appellants deserve minimum penalty. Since we find that there is no mens rea and no false representation and since the above items purchased were integrally connected with the manufacturing activity of the appellant and were purchased under the bonafide belief that they are entitled to purchase by use of C-form and there is no violation of
Section 10(b) of the Act, penalty is unwarranted and we set aside the penalty confirmed by the Appellate Assistant Commissioner at Rs.10,405/- and Rs.21,985/-."
Having found out on facts that there is no mens rea or false representation, the levy of penalty is unjustified. In fact the Tribunal has also given a finding of fact that the above items were integrally connected with manufacturing activities of the appellant and were purchased under the bonafide belief that they are entitled to purchase by use of 'C' Form. Hence there was no violation of
Section 10(b) of the Act.
7. When this question of having no mens rea was established by the Tribunal by its findings, whether the question of imposition of penalty under
Section 10(b) would arise in this case. In this connection, we are fortified by the Full Bench decision of this Court reported in (2006) 148 STC 256 (Mad) (FB) (State of Tamil Nadu Vs Nu-Tread Tyres) wherein, the Full Bench has categorically held at under in paragraph 21 viz., "21.
Section 10(b) of the Act provides for an offence if any person being registered dealer falsely represents when purchasing any class of goods that goods of such class are covered by his certificate of registration. The expression "falsely represent" clearly shows that the element of mens rea is the necessary component of the offence. In the absence of mens rea, resort to penal provision would not be proper unless it is established that the conduct of the dealer was contumacious or that there was deliberate violation of the statutory provision or wilful disregard thereof. If the registered dealer honestly believes that any particular goods are embraced by the certificate of registration and on that belief makes a representation, he cannot be held guilty of the offence under
Section 10(b) of the Act and no penalty can be imposed under
Section 10-A of the Act. The question whether the assessee acted under the honest belief is a question of fact. Therefore, in our view, "mens rea" is an essential ingredient for the levy of penalty under
Section 10(b) of the Central Sales Tax Act, 1956. The reference is answered accordingly."
8. The Full Bench decision clearly indicate if a registered dealer honestly believes that any particular goods are embraced by the certificate of registration is only a case under
Section 10(b). The inclusion of these materials subsequently and also on the belief that use of Form 'C' was only for legitimate use for the company and has made a representation, he cannot be held guilty under
Section 10(b) of the Act and therefore the Tribunal came to the right conclusion that no levy of penalty could be imposed on the assessee under
Section 10(b) and cannot be interfered at this stage.
9. The findings of the Tribunal is well founded and we find no reason to interfere with the findings especially by virtue of the latest pronouncement made by the Full Bench referred to above. We, therefore, do not find any merit in the writ petition. Accordingly, the writ petition fails and the same is dismissed. No costs. Consequently, connected W.P.M.P. is closed.
kk To The Secretary, The Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Coimbatore