M/S.ASIANET SATELLITE COMMUNICATIONS (P) LTD v. THE ADDITIONAL SALES TAX OFFICER-1

H.L.DATTU, C.J. & K.T. SANKARAN,J.----------------------------------------------------W.A. NO. 1379 OF 2007----------------------------------------------------Dated this the 12th July, 2007JUDGMENTH.L.DATTU, C.J.The orders of penalty passed for the assessment years 1993-94 to 1996-97under the provisions of the Central Sales Tax Act, 1956 by the assessing authorityagainst the petitioner was the subject matter of the Writ Petition. The learnedSingle Judge has rejected the writ petition. Questioning the correctness orotherwise of the said order is the subject matter of this Writ Appeal.2. The assessee is a dealer registered under the provisions of the KeralaGeneral Sales Tax Act (for short 'KGST Act') and also the Central Sales Tax Act,1956 (for short 'the Act'). The activity of the assessee is the distribution of TVsignals.3. For its business activity, the assessee had approached the authorityunder the KGST Act for grant of registration certificate as required under Section 7of the C.S.T. Act read with Rule 3(1) of the Central Sales Tax (Registration andTurnover) Rules, 1957. While making the application, it was the specific request ofthe assessee, that, he would intend to effect interstate purchase of Dish Antenna,Channel processor, Line Amplifier, TV and Satellite Monitor Level Meter, TV/FMand Satellite Level Meter, Equalizer, etc. for the purpose of resale.4. At this stage, it may be relevant to notice the application filed by theassessee before the authority for registration as envisaged under Section 7 of theAct. In column 16 of the application, the assessee has specifically stated that heintends to purchase the goods in the course of interstate trade or commerce for the W.A. NO.1379 OF 2007 :: 2 ::purpose of "resale".5. Keeping in view the request made by the assessee in the applicationfiled, the registering authority while granting the registration certificate, dated 28thMay, 1993, has permitted the assessee to effect interstate purchase of nearly 42items of machinery for the purpose of 'resale' alone. That can be inferred from thecertificate of registration that is produced by the learned counsel for the assesseeat the time of hearing of this appeal. In terms of clause (b) of sub-section (3) ofSection 8, the benefit of concessional rate of tax under sub-section (1) for sales toregistered dealers will be available only for the goods specified in the certificate ofregistration of those dealers.6. The assessing authority, being of the view that the assessee-dealercompany after purchasing the goods for the purpose specified in sub-section (3) ofSection 8 as per the registration certificate has failed to make use of the goods forthe declared purpose and thereby has violated provisions of Section 10(d) of theAct has imposed penalty under Section 10A of the Act for the assessment years1993-94 to 1996-97, after issuing a show cause notice to the assessee and afterconsidering the objections filed by the dealer in this regard.7. Aggrieved by that order, the assessee had carried the matter by way ofrevision before the Commissioner of Commercial Taxes. The said authority, afterconsidering the plea of the assessee, has come to the conclusion that theassessing authority is justified in levying penalty under Section 10A of the Act.8. Aggrieved by those orders, the assessee was before this Court inO.P.No.20037 of 2002. This Court by its order dated 8th November, 2006, haspartly allowed the Original Petition and has reduced the penalty imposed by theassessing authority for the assessment years 1993-94 to 1996-97. Correctness or W.A. NO.1379 OF 2007 :: 3 ::otherwise of the said order is the subject matter of the present appeal.9. Dr. K.B. Mohamedkutty, learned counsel appearing for the assesseewould submit that the activity of the assessee is "distribution of TV signals" and thatcan be included within the meaning of the expression “distribution of the other formof power” and, therefore, the assessing authority, in view of Section 8(3)(b) of theAct, could not have levied any penalty. Apart from this, learned counsel wouldsubmit that before passing an order for levying penalty, the authority ought to haveconsidered the explanation offerred by the assessee and should have also given afinding with regard to 'guilty mind' of the assessee for imposing penalty underSection 10-A of the Act and since that has not been done, the learned single Judgewas not justified in sustaining the order passed by the authorities under the Act. Insupport of that contention, the learned counsel has invited our attention to theseveral decisions of the various courts.10. Section 6 of the Act is the charging provision under this Act. It providesfor levy of tax on all sales of goods in the course of inter-State trade or commerce.Section 8 of the Act prescribes the rates of tax on sales in the course of inter-Statetrade or commerce. Under this section, every dealer who in the course ofinter-State trade or commerce sells any goods to the Government or sells toregistered dealers other than Government, the Goods of description referred to insub-section (3) of Section 8 is liable to pay tax at the rates prescribed and madeapplicable to different types of such transactions. The Goods referred to in clause(b) of sub-section (1) of Section 8 of the Act, are the goods of the class or classesspecified in the certificate of registration of the registered dealer purchasing thegoods as being intended for re-sale or for use by him in the manufacture orprocessing of goods for sale or in mining or in the generation or distribution of W.A. NO.1379 OF 2007 :: 4 ::electricity or any other form of power. That only means, the benefit of theconcessional rate of tax under sub-section (1) of Section 8 for sales to a registereddealer will be available only for the goods specified in the certificate of registrationof those dealers.11. Section 10 of the Act provides for levying of penalties. There areseveral sub-sections under this section. For our purpose, Section 10(d) of the Actis relevant and therefore, the same is extracted and it reads as under:"S.10(d): After purchasing any goods for any of thepurposes specified in clause (b) or clause (c) or clause (d) of sub-section (3) or sub-section (6) of Section 8 fails, without reasonableexcuse, to make use of the goods for any such purpose."12. Section 10(d) of the Act speaks of offences that if the purchasingdealer after purchasing any goods specified in clauses (b), (c) and (d) ofsub-section (3) of Section 8 or sub-section (6) of Section 8 fails, withoutreasonable excuse, makes use of the goods for such other purpose, the offenceunder this section is attracted. In order to have the concessional rate of tax undersection 8(1) (b) applied to an inter-State sale, the purchasing dealer has to give adeclaration to the selling dealer containing the prescribed particulars in aprescribed form obtained from the prescribed authority certifying intention that thegoods are intended for re-sale by him; for use by him in the manufacture orprocessing of goods for sale; or in mining or in the generation or distribution ofelectricity or any other form of power etc. if the purchasing dealer, thereafter,without reasonable excuse, uses any such goods for the purpose other than andcontrary to the declared purpose, the provisions of Sec.10(d) is attracted. Theuse of the words "without reasonable excuse" in this clause implies thatblameworthy conduct is necessary ingredient for the offence under Section 10(d) W.A. NO.1379 OF 2007 :: 5 ::of the Act.13. Section 10A of the Act provides for imposition of penalties in lieu ofprosecution. The said section is also relevant for the purpose of the disposal ofthis Writ Appeal. Therefore, the said section is extracted and the same reads asunder:“10A. Imposition of penalty in lieu of prosecution:- (1)If any person purchasing goods is guilty of an offence under clause(b) or clause (c) or clause (d) of Section 10, the authority whogranted to him or, as the case may be, is competent to grant tohim a certificate of registration under this Act, may, after giving hima reasonable opportunity of being heard, by order in writing,impose upon him by way of penalty a sum not exceeding one anda half times the tax which would have been levied under sub-section (2) of Section 8 in respect of the sale to him of the goods, ifthe sale had been a sale falling within that sub-section.Provided that no prosecution for an offence under Section10 shall be instituted in respect of the same facts on which apenalty has been imposed under this Section.(2) The penalty imposed upon any dealer under sub-section (1) shall be collected by the Government of India in themanner provided in sub-section (2) of Section 9 -- (a) in the case of an offence falling under clause (b) orclause (d) of Section 10, in the State in which the personpurchasing the goods obtained the form prescribed for thepurposes of clause (a) of sub-section (4) of Section 8 in connectionwith the purchase of such goods;(b) in the case of an offence falling under clause (c) ofSection 10, in the State in which the person purchasing the goodsshould have registered himself if the offence had not beencommitted.”14. This section authorises the assessing authorities or the othercompetent authorities to levy penalty in lieu of prosecution in respect of an offenceunder clause (b) or clause (c) or clause (d) of Section 10 in a sum not exceedingone and a half times the tax which would have been levied under sub-section (2) ofSection 8 in respect of the sale to him of the goods, if the sale had been a sale W.A. NO.1379 OF 2007 :: 6 ::falling within that sub-section. This section requires a reasonable opportunitybeing given to a dealer before the penalty is imposed.15. In the instant case, the assessee is doing business in the distributionof TV signals. It had gone before the competent authority, with a request to grantthe certificate of registration for the purpose of purchase of certain items of goodsfor the purpose of resale. Considering the request so made, the assessingauthority had granted the certificate of registration. The Registering Authority hasspecified that the goods that the assessee can purchase in the course of interstatetrade or commerce are specifically meant for the purpose of 'resale'. It is not thecase of the assessee before this Court or before the Commissioner of CommercialTaxes that after purchase of goods in the course of interstate trade or commerceand after issuing 'C' Forms, the assessee has effected resale of such goods.According to the assessee, though the certificate of registration that was issuedwas only for the purpose of purchase of goods in the course of interstate trade orcommerce for resale, the assessee has used it for his business purpose, namely,for distribution of TV signals. In our view, for the purpose of deciding this appeal,we need not go into the issue whether the business in transmitting T.V. signals iseither distribution of electricity or any other form of power, since in the registrationcertificate issued, the registering authority had specifically authorised the dealer toeffect inter State purchase of certain items which may be used for the purpose ofdistribution of T.V. signals by issuing 'C' forms only for the purpose of re-sale. It isan admitted fact even by the dealer that though inter State purchases were madeby issuing the 'C' forms, they have used it for the purpose of distribution of T.V.signals and not effected any re-sale.16. The next question that would arise is, whether the provisions of Section W.A. NO.1379 OF 2007 :: 7 ::10(d) of the Act would attract in a case of this nature. Before we answer thisissue, it would be appropriate to notice the view of the Assessing Authority. In hisorder, he has observed as under:"In this connection, I am to state that 'mens rea' is aconcept of criminal law which enables the court to scrutinise whathad passed in the mind of an accused person during thecommission of an offence, so as to find him guilty or not guilty.But when 'mens rea' is a relatable tax delinquency which is a civilobligation, it implies a blameworthy conduct. The recording of afinding that the assessee had made a false representation by itselfshows the establishment of the 'blameworthy conduct', whichwould be the establishment of 'mens rea' to the limited extentapplicable to civil obligation. There are numerous decisions toillustrate the fact that as far as imposition of penalty under section10(d) is concerned, no 'mens rea' is required.".17. Section 10(d) makes it clear that if a person after purchasing thegoods in the course of interstate trade or commerce for any of the purposesspecified in clauses (b), (c) or (d) and fails to make use of the said goods withoutany reasonable cause, then penalty under Section 10 would be attracted and thesame can be compounded under Section 10A of the Act in lieu of prosecution.18. In the instant case, as we have already noticed, the purchase effectedby the assessee was for the purpose of resale, but what was done by him is usingthe same for his business purpose, namely, for distribution of TV signals. It wasnot the case of the assessee before the assessing authority that while making theapplication for registration under the Act, he had specifically stated that he intendsto use the goods for the purpose of distribution but a mistake has crept in theCertificate of Registration, and it was not its case also that, it believed honestly thatwith the certificate granted by the assessing authority, it could effect inter-State W.A. NO.1379 OF 2007 :: 8 ::purchase by issuing 'C' forms fir its own use. The assessee in the present casewas fully aware of the goods that were specified in the Certificate of Registrationand the purpose for which those goods could be used, in spite of it, used thegoods purchased without effecting the resale for which purpose the certificate ofregistration was granted. Though the assessing authority has stated that mensrea is not necessary in cases of this nature, which assumption is not correct for thepurpose of Section 10(d) of the Act, keeping in view the huge liability involved, wehave carefully analysed the objections filed by the assessee before the assessingauthority and we are of the opinion that cause shown by the assessee for misuseof 'C' forms is not worthy of acceptance and therefore we hold that there isblameworthy conduct of the assessee and therefore, the penalty imposed by theassessing authority is wholly justified and the same requires to be sustained.Therefore, we do not see any error in the judgment delivered by the learned singleJudge. Therefore, the Writ Appeal requires to be rejected and it is rejected.Ordered accordingly.(H.L.DATTU)Chief Justice(K.T.SANKARAN)Judgeahz/DK.