G.K. Misra, C.J.
1. The petitioner is a limited liability company governed by the Indian Companies Act, 1956. It has its registered Office in Calcutta and its place of business is at Biramitrapur in the district of Sundergarh. The Petitioner is a lessee of mines for mining limestone and dolomite, that is for winning and getting the same from the earth and processing and selling them in the State of Orissa. It holds a certificate of registration under the Central Sales Tax (Registration and Turnover) Rules, 1957 (Annexure-A). The relevant entry in the Certificate of Registration is to the effect that for use in mining the petitioner can purchase machinery, plant (Productive and Auxiliary) tools . . . .equipment. The Petitioner's case is that in accordance with the entry in the certificate of Registration it purchased the following goods: (i) Drilling rods, (ii) Laboratory chemicals, (in) M. S. Rods, (iv) Tyre-Tube, (v) Leyland Dumper, (vi) Dumper spares and (vii) Gasoline. According to the petitioner these goods are covered, by the entry in the certificate of registration and it is entitled to purchase them on payment of concessional rate of sales tax as prescribed in Section 8 of the Central Sales Tax Act, 1956 (hereinafter to be referred to as the Act).
On 29-9-66, Opposite Party No. 1 (Sales Tax Officer, Rourkela Circle), served a notice on the petitioner stating that the aforesaid goods were not specified in the certificate of registration, but that they were purchased on a false representation made by the petitioner that they were covered by the certificate of registration. He was called upon to show cause why penalty should not be imposed for making a false representation. The notice did not specify the period during which the purchase took place. Despite that, the petitioner showed cause and at the time of hearing, Opposite Party No. 1 clarified the position by saying that the transactions took place between 30-11-64 and 22-3-65. Ultimately, penalty was imposed on the petitioner in respect of the period between 1-8-64 and 30-11-64. The Sales Tax Officer was of opinion that the petitioner was to pay penalty of Rs. 48,000/- but taking a lenient view of the matter penalty of Rs. 25,000/-was imposed.
This writ application was filed under Articles 226 and 227 of the Constitution for quashing the impugned order imposing penalty -- dated 9-11-66.
2. Mr. B. M. Patnaik for the petitioner raised the following contentions:--
(i) The imposition of the penalty was in violation of the principles of natural justice, inasmuch as no notice was given of the period for which the penalty was imposed.
(ii) Opposite Party No. 1 did not record any finding that the petitioner purchased the goods on a false representation.
(iii) The penalty is illegal as it exceeds 1% times the tax payable at the concessional rate.
(iv). (a) The impugned goods purchased by the petitioner were covered by the certificate of registration.
(b) Gasoline in respect of which penalty was imposed, was not subject to Central Sales Tax during the relevant period, under Section 8(2A) of the Act.
Mr. Patnaik also raised another contention based on Article 14 of the Constitution, but ultimately he wanted the point to be left open and accordingly we do not propose to deal with it in this judgment.
3. The first contention of Mr. Patnaik is that there was a violation of the principles of natural justice as the notice to show cause did not specify the period in respect of which the penalty was levied on the ground of purchase on false representation. This contention is sound. As already stated at the time of hearing, clarification was made that the relevant period was 30-11-64 to 22-3-65. But the penalty has been imposed for the period 1-8-64 to 30-11-64 which was anterior to the period in respect of which notice had been given. On this ground, the order imposing penalty is liable to be quashed. The Sales Tax Officer would re-examine the entire matter in respect of the relevant period, after giving opportunity to the petitioner of being heard.
4. In the order of the Sales Tax Officer to the seller, when purchasing the aforesaid goods, that they were covered by the certificate of Registration (sic).
Section 10(b) of the Act which deals with penalties, runs thus:--
"10. If any person
(b) being a registered dealer, falsely represents while purchasing any class of foods that goods of such class are covered y his certificate of registration.
He shall be punishable with simple imprisonment which may extend to six months or with fine, or with both; and when the offence is a continuing offence, with a daily fine which may extend to fifty rupees for every day during which the offence continues."
Section 10A(1) is as follows:
"10A(1) If any person purchasing goods is guilty of an offence under Clause (b) or Clause (c) of Section 10, the authority who granted to him or as the case may be, is competent to grant to him, a certificate of registration under this Act, may, after giving him a reasonable opportunity of being heard, by order in writing, impose upon him by way of penalty a sum not exceeding one and a half times the tax which would have been levied under this Act, in respect of the sale to him of the goods if the offence had not been committed:
Provided that no prosecution for an offence under Section 10, shall be instituted in respect of the same facts on which a penalty has been imposed under this section."
It would thus appear that before penalty under Section 10A(1) is imposed, there must be a finding that the person purchasing the goods is guilty of an offence under Section 10(b). The ingredient of the offence under Section 10(b) is false representation. There may be cases where the dealer may purchase the articles bona fide, in good faith, that they are covered by the certificate of registration even though there may be ultimate finding that the goods are not covered by the certificate of registration. Even though there may be ultimate finding that the goods are not covered by the certificate of registration no offence under Section 10(b) would be made out, as there was no false representation. To bring home the offence under Section 10(b), guilty animus or mens rea is essential. This view is concluded by a series of decisions. Reference may be made to (1969) 23 STC 428 (Mys), Manjunatha Tyre Retreading Works v. State of Mysore and 23 STC 449 -- (AIR 1969 Madh Pra 213), Commr. of Sales Tax, Indore v. Bombay General Stores. It is unnecessary to refer to a plethora of authorities.
There is no finding in the order of the Sales Tax Officer that the representation was false. In fact, even now, Mr. Patnaik contends that the articles are covered by the certificate of registration. The Sales Tax Officer, without making a thorough examination of the point, was not justified in saying that the representation was false. On the other hand, it would appear from a letter written by him in reply to a querry made by the petitioner that some of the goods were covered by the certificate of registration. The relevant portion of that letter--marked Annexure E-- runs thus:--
"Under Section 8(3) of the Central Sales Tax Act, a dealer is entitled to purchase goods in the course of inter-state trade and commerce at a concessional rate for re-sale, for use in manufacture, and for use in mining or processing etc. Accordingly yon are entitled to purchase machineries and spare parts which are directly used in mining. It appears from your letter that the earth-moving machineries, dumpers and shovels are directly user in mining and you are entitled to purchase them at a concessional rate, as provided in Section 8(1)(b) of the Act".
Even assuming -- after the case goes back -- that the Sales Tax Officer is of opinion that the goods purchased are not covered by the certificate of Registration, the petitioner can legitimately advance an argument that Annexure E, supports its stand that the articles purchased are covered by the certificate of registration. In such a case the representation cannot be false. In the absence of mens rea, no penalty can be imposed under Section 10A. The second contention of Mr. Patnaik must accordingly be upheld. This would be re-examined by the assessing officer.
5. The third contention of Mr. Patnaik is based on the language of Section 10A(1) which says that the penalty should not exceed one and half times "the tax which would have been levied under this Act in respect of the sale to him of the goods if the offence had not been committed". According to him, even if the goods are purchased at a concessional rate on a false representation that they were covered by the certification of registration, the penalty that can be imposed cannot exceed one and a half times the concessional rate, and not the normal rate. The contention is not sound. If the goods are mentioned in the certificate of registration and such goods are purchased at the concessional rates the purchasing dealer commits no offence under Section 10(b) and the question of imposing penalty does not arise at all. The question of penalty would arise only when the goods are not mentioned in the certificate of registration and purchase of the same is made on a false representation made by the purchasing dealer that they were so mentioned. If the normal rate had been paid for the goods, without making any false representation, no offence under Section 10(b) would be committed at all. It is only to such cases that the expression "if the offence had not been committed" has application and the penalty payable would be one and a half times the normal rate. The Mysore High Court took this view in (1966) 17 STC 161 (Mys), Pais and Sons v. State of Mysore. Though this decision was held to be not laying down good law in a later decision of the Madras High Court in (1969) 24 STC 507 (Mad), State of Madras v. Prem Industrial Corporation on which Mr. Patnaik relied, with respect, we are inclined to agree with the view taken by the Mysore High Court. Mr. Patnaik's contention on this point is therefore rejected.
6. Lastly Mr. Patnaik contended that the goods were in fact covered by the certificate of registration. This is a matter which should be carefully gone into by the Sales Tax Officer. The Certificate of Registration contains the entry "Machinery, plant (Productive and Auxiliary) equipment." The Sales Tax Officer would have to come to a conclusion as to whether any of the goods purchased would come within the entry.
So far as gasoline is concerned, Mr. Patnaik's contention is that during the relevant period gasoline was exempt from payment of Central Sales Tax, under Section 8(2A), in Orissa and West Bengal. The Sales Tax Officer would examine this question also.
7. Mr. Patnaik also advanced an argument that Section 10A(1) is ultra vires, as it contravened Article 14 of the Constitution. But, as already stated, we do not express any view on this matter as he wanted that it may be left open.
8. In the result, the impugned order dated 9-11-66 and the demand notice dated 9-12-66 issued in pursuance of the order are quashed. The case would go back to the Sales Tax Officer who would re-examine the entire matter in accordance with law and in the light of the observations made in this judgment.
9. The writ application is allowed, but in the circumstances there will be no order as to costs.
S. Acharya, J.
10. I agree.