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Judgment
Chitra Venkataraman, J.—The assessee is on revision as against the order of the Sales Tax Appellate Tribunal, relating to the assessment year 1998-99, raising the following substantial questions of law:
(i) Whether the Tribunal was justified in passing order without following the guidelines framed by the Full Bench of this court in the judgment reported in The State of Tamilnadu Vs. Tvl. Nu-Tread Tyres,
(ii) Whether the Tribunal was justified in passing order ignoring the inclusion of items in the certificate of registration immediately after passing the impugned order of assessment in accordance with G.O.Ms. No. 61 CT & RE dated January 24, 1984?
The appeal arises under the Central Sales Tax Act as regards the levy of penalty u/s 10A. The registration certificate of the assessee originally contained the following entries:
Yarn, cloth, knitting sewing textile machines, dyeing winch, boiler, calendering machines, dyes, chemicals, tag gun, spray gun, elastic, zip, buttons, drier, generator, oil engine, alternator, electric motor, needle, LSD and HSD oil, jiggers.
The assessee further purchased furnace oil, copper cable, transformers, electrical goods, distribution pipes, demineralising plant, weighing machineries, M.S. trolley, steel and circular trolley, water storage container and aluminium sheets. It was stated that the assessee had purchased these items by issuing declaration in form C. Considering the fact that these items were not entered in the registration certificate, the issuance of form C was a violation attracting penal action u/s 10A of the Central Sales Tax Act, 1956. The assessee contended that they were under a bona fide impression that furnace oil could be purchased as against the declaration made under form C, since it was one of those essential items in their manufacturing activity. It further stated that for generating steam from the boiler, furnace oil is used and the steam generated from the boiler is a basic requirement in the dyeing process. Thus the assessee contended that insofar as the purchase of furnace oil was concerned, there was no lacking of bona fide.
As regards other items, namely, electrical cables, transformers, electrical goods, distribution pipes, demineralising plant, weighing machinery, M.S. trolley and steel circular trolley in their business relating to manufacture of hosiery goods and for trading, entertaining a bona fide belief that the enumerated entries in the registration certificate would include all incidental items too, the assessee had issued form C. Thus, the assessee submitted that there was no conscious violation of the registration certificate.
The assessing officer accepted the assessee''s case to the extant of local purchase of furnace oil. However, in respect of inter-State purchases using declaration under C forms, he rejected the assessee''s case; so too other items. Thus the assessing officer levied penalty at 150 per cent on the differential tax.
Aggrieved by this, the assessee went on appeal before the Appellate Assistant Commissioner, who modified the assessment by reducing the penalty to 50 per cent. Pointing out to the bona fide impression that the assessee had for purchasing the items as against form C, the first appellate authority held that the items in questions, namely, furnace oil, distribution pipes, copper cable, transformer, electrical goods, demineralising plant, circular trolley and M.S. trolley, even though purchased as against C forms, they were all part of the machineries engaged in the manufacturing process and items involved in the generation of electricity. Thus, a minimum penalty was confirmed. However, in respect of water storage container and aluminium sheets, in the absence of even an indirect, involvement in the manufacturing activity, the penalty levied was confirmed.
Aggrieved by this, the assessee went on appeal before the Sales Tax Appellate Tribunal. It is a matter of record that the assessee''s Central sales tax registration certificate was granted to include commodities which were not originally the subject-matter of penalty. The amendment including these items in the registration certificate was made with effect from June 7, 1999. The Tribunal pointed out that as far as the assessment year 1998-99 was concerned, the assessee, admittedly, had not got these items included in the registration certificate. However, pointing out to the arguments made by the assessee that despite furnace oil and other items not being included in the registration certificate, the assessee could nevertheless claim concessional levy, it held that the mala fide intention of the assessee was very much seen. The fact of inclusion of these items in the registration certificate subsequent to the purchase, thus established the lack of bona fides for the purpose of levy of penalty. In the circumstances, the Tribunal held that the penalty levied by the Appellate Assistant Commissioner was reasonable and the same was confirmed. Aggrieved by this, the present revision has been filed by the assessee.
The learned counsel appearing for the assessee drew our attention to the circular issued by the Special Commissioner and Commissioner of Commercial Taxes dated May 15, 2001, referring to G.O.Ms. No. 61, CT and RE dated January 24, 1984, wherein, the Government had requested the Commissioner of Commercial Taxes to issue instruction to the assessing officers to take a lenient view wherever a dealer purchased goods on the basis of C forms without including the item in the Central sales tax registration certification either inadvertently or ignorantly as to avoid a lot of complaints of harassments in the case of selected dealers and complaints of corruption also, provided, the dealer was eligible to have those goods included in the registration certificate. Based on the office letter D.Dis.Acts.Cell.IV/87729/84 dated July 6, 1984, the Commissioner also issued instructions that wherever a dealer had purchased goods on the basis of C form without including them in the certificate under the Central Sales Tax Act either inadvertently, or out of ignorance, no penalty need be levied.
In this decision reported in The State of Tamilnadu Vs. Tvl. Nu-Tread Tyres, by the Deputy Commissioner of Commercial Taxes, Madras (Central) Division)), a Full Bench of this court considered the expression "falsely" in section 10(b) of the Central Sales Tax Act and held that the use of the word "falsely" itself implies that the person making the representation knew that the certificate of registration does not cover that item, but knowing fully well that it is not nevertheless contends that it is covered. What is required plainly u/s 10(b) is knowledge that the item is not covered by the certificate and the representation that it is covered by the certificate. This court observed: ". . . Before a penalty can be imposed, the circumstances established must 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. Thus, in a proceeding for levy of penalty u/s 10A the Department must prove the existence of facts and circumstances constituting the offence in question." This court further observed: ". . . 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 u/s 10(b) of the Act and no penalty can be imposed u/s 10A 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 u/s 10(b) of the Central Sales Tax Act, 1956. . .
Guided by the abovesaid decision and taking note of the Government letter on the levy of penalty, when we look at the items dealt with for the purpose of levying penalty, one has to necessarily keep in mind the nature of business of the assessee. There is no denial of the fact that the assessee is engaged in the manufacture and trading in hosiery goods. The registration certificate of the assessee included yarn, cloth, knitting sewing textile machines, dyeing winch, boiler, calendering machines, dyes, chemicals, tag gun, spray gun, elastic, zip, buttons, drier, generator, oil engine, alternator, electric motor, needle, LSD and HSO oil and jiggers. The Revenue does not deny the fact that the items purchased by the assessee have a close link with the business activity of the assessee. In considering the claim of the assessee, the first appellate authority considered the claim of the assessee in depth and found out that the use of furnace oil, distribution pipes, copper cable, transformer and electrical goods are purchased to facilitate generating electricity and demineralising plant used in the dyeing process, circular trolley, M.S. trolley, and water storage tank, in turn, have a bearing in the assessee''s business. If at all there is one item which is not directly used, it would be aluminium sheets, which is used for factory roofing purposes. Thus, read in the context of the enumerated entries in the registration certificate and the items in question purchased, which were subsequently incorporated in the registration certificate, we do agree with the submission of the assessee that they were under a bona fide impression that the enumerated entries in the registration certificate would include the above items too. As pointed out in the office letter D.Dis.Acts.Cell.IV/87729/84 dated July 6, 1984, wherein, the Commissioner had issued instructions that wherever a dealer had purchased goods on the basis of C form without, including them in the certificate under the Central Sales Tax Act either inadvertently or out of ignorance, no penalty need be levied u/s 10(b) of the Central Sales Tax Act, we have no hesitation in holding that the assessee is entitled to succeed in this tax case revision that in respect of furnace oil, distribution pipes, copper cable, transformer and electrical goods, demineralising plant, circular trolley, M.S. trolley and water storage tank, there can be no levy of penalty. However, as regards aluminium sheets, cannot, in any manner be brought anywhere near the enumerated entries, to contend that the assessee was under a bona fide belief that they would get included in the enumerated entries. In the circumstances, we reject the assessee''s contention in respect of aluminium sheets. As far as the levy of penalty is concerned, we restrict the levy of penalty at 50 per cent to purchase of aluminium sheets alone. The tax case revision stands disposed of accordingly. No costs.