The State of Tamil Nadu v. Tvl.Parry Agro Industries Ltd.

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 18.06.2009C O R A M:THE HONOURABLE MR.JUSTICE F.M.IBRAHIM KALIFULLAandTHE HONOURABLE MR.JUSTICE B.RAJENDRANW.P.No.27963 of 2004 and M.P.No.33983 of 2004The State of Tamil Nadu,rep.by the Deputy Commissioner(CT),Coimbatore Division, Coimbatore... Petitioner..vs..1. Tvl.Parry Agro Industries Ltd., Valparai.2. The Secretary, The Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Coimbatore... RespondentsWrit Petition filed under Article 226 of the Constitution ofIndia, for issuance of a Writ of Certiorari, calling for the recordson the files of the 2nd respondent pertaining to the order dated04.04.2003 made in CTA No.328 of 2002 and quash the same as illegal.For Petitioner : Mr.Haja Nazirudeen, Spl.G.P.(T)For Respondents : Mr.N.Inbarajan for R1 R2-TribunalO R D E R(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 isunder challenge. 2. The first respondent is a manufacturer of black tea and isregistered under the Central Sales Tax Act as well as under theTamil Nadu General Sales Tax Act. The first respondent was assessedby the Assessing Officer in respect of alleged misuse of Form 'C' inrespect of products such as wire mesh, X-Ray film & accessoriespurchased by the assessee from other States for which Form 'C' wasutilised. The Assessing Authority had came to the conclusion thatthe purchase of the materials was not directly required for thepurpose of manufacture of the goods and hence use of Form 'C' attractpenalty under Section 10(A) and imposed penalty for the above saidpurchase. The relevant portion is extracted below: https://hcservices.ecourts.gov.in/hcservices/ "4. I heard the arguments of both therepresentatives and verified the records producedbefore me. The appellants have mainly relied on thefact that the goods purchased were meant for being usedin the manufacturing of tea. They have claimed thatthere is a close link or nexus between the goodspurchased and the business activity. They have reliedon the fact of the subsequent inclusion of these goodsby the assessing authority. This proves that they areotherwise eligible to effect the purchase of thesegoods. Hence this is only a technical offence. Theyhave also pleaded for taking a lenient view. They havepleaded for deducting the tax paid at 4%."3. Against the said levy of penalty alone, the assesseepreferred appeal before the Appellate Assistant Commissioner. Thoughtaking a lenient view the appellate authority came to the conclusionthat the goods which are used or purchased were not directly linkedto manufacture and process and that mentioning of goods in wrongcolumn, purchase of essential goods without including them in thecertificate will fall under technical offences only and held that alenient view must be taken. The appellate authority modified thelevy 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 AssistantCommissioner (CT), Pollachi, the assessee preferred appeal before theSales Tax Appellate Tribunal, Coimbatore and contended that there wasno false representation and brought to the notice of the Tribunalthat subsequent inclusion in Form 'B' of the Digital Display Counter,Avery scale, coper cable, wire mesh, X-ray films and accessorieswould show that the assessee was eligible for inclusion of thesegoods in the Form 'B' certificate and hence there was no mens rea forthe levy of penalty as against the assessee. 5. It is also pleaded that the assessee only acted bonafidelyand he had no motive to escape the liability by using 'C' declarationForm, hence, no penalty should be levied. That apart, before penaltycould be imposed, the circumstances established must be reasonablypoint to the conclusion that the assessee concerned has consciouslycommitted the acts or omissions which go to constitute the offenceand the burden would be on the Department to prove the existence ofsuch circumstances.6. The Tribunal after hearing both parties have clearly gave afinding which is extracted below: https://hcservices.ecourts.gov.in/hcservices/ "On the above finding, the learned AuthorisedRepresentative for the appellants argued that since thegoods purchased were, interlinked with the businessactivity of the assessee and since there is no mensreaor false representation the levy of penalty is unjustand may be set aside. We have perused the copy of Form-B certificate, wherein the above mentioned goods wereincluded with effect from 16.10.01, a copy of letter inActs Cell V/31235/01 dated 15.05.01 is relied on by theAppellate Assistant Commissioner who has stated that thecase of the appellants deserve minimum penalty. Since wefind that there is no mens rea and no falserepresentation and since the above items purchased wereintegrally connected with the manufacturing activity ofthe appellant and were purchased under the bonafidebelief that they are entitled to purchase by use of C-form and there is no violation of Section 10(b) of theAct, penalty is unwarranted and we set aside the penaltyconfirmed by the Appellate Assistant Commissioner atRs.10,405/- and Rs.21,985/-."Having found out on facts that there is no mens rea or falserepresentation, the levy of penalty is unjustified. In fact theTribunal has also given a finding of fact that the above items wereintegrally connected with manufacturing activities of the appellantand were purchased under the bonafide belief that they are entitledto purchase by use of 'C' Form. Hence there was no violation ofSection 10(b) of the Act.7. When this question of having no mens rea was established bythe Tribunal by its findings, whether the question of imposition ofpenalty under Section 10(b) would arise in this case. In thisconnection, we are fortified by the Full Bench decision of this Courtreported in (2006) 148 STC 256 (Mad) (FB) (State of Tamil Nadu Vs Nu-Tread Tyres) wherein, the Full Bench has categorically held at underin paragraph 21 viz.,"21. Section 10(b) of the Act provides for an offenceif any person being registered dealer falsely representswhen purchasing any class of goods that goods of suchclass are covered by his certificate of registration. Theexpression "falsely represent" clearly shows that theelement of mens rea is the necessary component of theoffence. In the absence of mens rea, resort to penalprovision would not be proper unless it is establishedthat the conduct of the dealer was contumacious or thatthere was deliberate violation of the statutory provisionor wilful disregard thereof. If the registered dealerhonestly believes that any particular goods are embracedby the certificate of registration and on that belief https://hcservices.ecourts.gov.in/hcservices/ makes a representation, he cannot be held guilty of theoffence under Section 10(b) of the Act and no penalty canbe imposed under Section 10-A of the Act. The questionwhether the assessee acted under the honest belief is aquestion of fact. Therefore, in our view, "mens rea" isan essential ingredient for the levy of penalty underSection 10(b) of the Central Sales Tax Act, 1956. Thereference is answered accordingly."8. The Full Bench decision clearly indicate if a registereddealer honestly believes that any particular goods are embraced bythe certificate of registration is only a case under Section 10(b).The inclusion of these materials subsequently and also on the beliefthat use of Form 'C' was only for legitimate use for the company andhas made a representation, he cannot be held guilty under section 10(b) of the Act and therefore the Tribunal came to the rightconclusion that no levy of penalty could be imposed on the assesseeunder Section 10(b) and cannot be interfered at this stage.9. The findings of the Tribunal is well founded and we find noreason to interfere with the findings especially by virtue of thelatest 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. Sd/Asst.Registrar/true copy/Sub Asst.RegistrarkkTo The Secretary,The Tamil Nadu Sales Tax Appellate Tribunal(Additional Bench), Coimbatore.1 cc To Mr.N.Inbarajan, Advocate, SR.24325.1 cc To The Government Pleader, SR.24581. W.P.No.27963 of 2004 and M.P.No.33983 of 2004 SSK(CO)RVL 08.07.2009