INTEGRATED ENTERPRISES Vs. STATE OF KERALA

JUDGEMENT

(1.) Petitioner who is an assessee under the Kerala General Sales Tax Act, 1963 and the Central Sales Tax Act, 1956 ("the Central Act" for short) has been registered as a dealer under S.7 of the Central Act in respect of CocoCola. Fanta Orange and Fanta Soda. Ext. A is a copy of the certificate of Registration. This entitled the petitioner to purchase these articles for resale at concessional rate of sales tax after issuing 'C' Forms prescribed by the Rules. The Assistant Commissioner (Assessment), Special Circle, Ernakulam found that the petitioner had purchased bottle coolers for Rs. 1,61,767.40 by issuing C Forms during the year 197071 and 197172. As the registration certificate did not include bottle coolers the Assistant Commissioner thought that the issue of C Forms declaring that bottle coolers were covered by the Registration Certificate constituted prima facie a violation of S.10(b) of the Central Act. He therefore issued a notice (Ext. E) to the petitioner to show cause why penalty of 11 times the tax at 15 per cent due on the purchase of bottle coolers should not be imposed upon them under S.10A. To this the petitioner filed a lengthy reply contending that they had no mens rea in making the purchase by issuing C Forms as they bona fide believed that the Registration Certificate was comprehensive enough to include all categories and classes of goods relating to their business. The Assistant Commissioner thereafter heard the petitioner's representative and rejecting the objections held that the declaration in the 'C' Form clearly stated that the goods purchased were covered by the Registration Certificate, that this was a false representation knowingly and deliberately made so as to earn the benefit of concessional rate of sales tax and that there was clear 'mens rea' to make the petitioner liable. He thus found the petitioner guilty and taking a lenient view levied a penalty of Rs. 24,265. On appeal this order was confirmed successively by the Deputy Commissioner of Agricultural Income Tax and Sales Tax (Appeals), Ernakulam and the Sales Tax Appellate Tribunal, Trivandrum. Aggrieved by these orders the petitioner has preferred this revision.

(2.) S.10 of the Central Act lays down the penalties for infraction of the Act and Rules. Clause (b) of the section penalises a registered dealer who "falsely represents when purchasing any class of goods that goods of such class are covered by the certificate of registration". S.10A, so far as material, provides that if any person purchasing goods is guilty of an offence under clause (b) of S.10, the authority who granted to him or who is competent to grant to him a certificate of registration may instead of prosecuting him impose the prescribed penalty. The competency of the Assistant Commissioner and the extent of the penalty levied by him were not contested before us; nor was it disputed that bottle coolers were not covered by the petitioner's certificate of registration or that the petitioner purchased them by issuing C Forms. The arguments before us were principally devoted to establish that the petitioner had no mens rea which is necessary and which is implicit in the expression "falsely represents" in S.10 and they could not therefore be penalised. That then is the only question that falls to be decided.

(3.) Counsel quoted a long line of cases to support his contention that the words "falsely represents" postulate mens rea in that the representation should be of something as true which in fact and to his knowledge is fake and that this element would be excluded if the purchaser acted in the bona fide belief that his representation is true. We consider it unnecessary to cite all these cases in view of the recent decision of the Supreme Court, Cement Marketing Co. of India v. The Assistant Commissioner of Sales Tax. ( AIR 1980 SC 346 ) In that case the question arose whether the appellant was liable to penalty under S.43 of the Madhya Pradesh General Sales Tax Act and S.9(2) of the Central Sales Tax Act, 1956 for filing 'false' return by not including in the taxable turnover the amount of freight which was part of the 'free on rail destination railway station' price at which the goods were sold. The Supreme Court observed: