State of Tamil Nadu v. S. D. Rangwala and Company — 1997 DIGILAW 349 (MAD)

Judgment :- ABDUL HADI, J. This revision by the Revenue, under section 38(1) of the Tamil Nadu General Sales Tax Act, 1959 read with section9(2) of the Central Sales Tax Act, 1956 (hereinafter referred to as "the Act"), is against the deletion, by the Tribunal of the penalty under section10-A of the Act read with section10(b) of the Act. Originally the assessing authority levied a penalty of Rs. 1, 85, 130. But, the Appellate Assistant Commissioner reduced it to Rs. 72, 952 and the Tribunal has set aside the penalty in entirety. Hence, this revision. 2. Section 10-A of the Act, inter alia, provides for penalty in lieu of prosecution under section10(b) of the Act. The said section 10(b) provides, "if any person being a registered dealer falsely represents when purchasing any class of goods that goods of such class are covered by his certificate of registration, he shall be punishable with simple imprisonment which may extend to six months or with fine, or with both". So, the question to be seen, in the present case, is whether the assessee has so falsely represented. 3. The assessee is a firm carrying on business in hardware and non-ferrous metals. Verification of its accounts revealed that it has purchased in the course of inter-State trade or commerce "brass sheets, brass rods, copper sheets, aluminium sheets, stainless steel sheets, etc.", by issue of C form declaration spoken to in the relevant rule read with section 8(4)(a) of the Act. Its registration certificate authorises it to purchase "hardware items". On the footing that the abovesaid purchase was not covered by its registration certificate, the assessing officer concluded that the assessee had falsely represented that the aforesaid goods purchased were covered by its registration certificate. He, therefore, issued a show cause notice dated February 12, 1981 to the assessee asking why in lieu of prosecution, a penalty amounting to 1 1/12 times the tax leviable under section8(2) of the Act (10 per cent tax) should not be levied under the abovesaid section10-A read with section10(b) of the Act. He, therefore, issued a show cause notice dated February 12, 1981 to the assessee asking why in lieu of prosecution, a penalty amounting to 1 1/12 times the tax leviable under section8(2) of the Act (10 per cent tax) should not be levied under the abovesaid section10-A read with section10(b) of the Act. In its reply the assessee, inter alia, contended that there was no false representation in purchasing the said goods, since its accounts were checked while the assessment was made for 1977-78 assessment year and that hardware is a genetic term to cover so many materials including the aforesaid goods and that there was no mala fide representation in the issue of C form. But, these objections in the reply notice were rejected by the assessing officer and the abovesaid penalty was levied. In the first appeal preferred by the assessee before the Appellate Assistant Commissioner, as already mentioned, the Appellate Assistant Commissioner only reduced the quantum of penalty. Further, he also concluded that the abovesaid goods purchased by the assessee did not belong to the category "hardware". 4. In the second appeal filed by the assessee, before the Tribunal, the Tribunal allowed the appeal and cancelled the levy of penalty in its entirety. The reasonings by the Tribunal in its order are briefly as follows : (i) The assessment order itself, even, for the earlier year 1975-76 shows that the nature of the business of the assessee is "general hardware and non-ferrous metals". If really the abovesaid goods purchased, do not fall within the term "hardware", the assessee, who had been doing the business since two decades must have been brought to book under section 19(b) even earlier. Even while completing the assessment for 1977-78 on March 9, 1979, the assessing officer did not think of initiating the penalty proceeding under section 10(b). If there could be two options as to the classification of the goods in question, then the penalty cannot be levied. (ii) The above items purchased did fall in the line of business of the assessee and the said fact was known to the department and there is no misuse of C form by the assessee. If there could be two options as to the classification of the goods in question, then the penalty cannot be levied. (ii) The above items purchased did fall in the line of business of the assessee and the said fact was known to the department and there is no misuse of C form by the assessee. (iii) The assessee after having come to know of the department's belated view that the goods purchased were not hardware, applied on July 29, 1980 (i.e., even before referred to show cause notice dated February 12, 1981) for modification of its registration certificate and the certificate stood amended with effect from July 29, 1980, to include all ferrous and non-ferrous metals. (iv) Neither the Appellate Assistant Commissioner nor the assessing officer in the case has charged the assessee, attributing to it, false representation, with material adequate enough to establish the charge. The absence of bona fides on the part of the assessee is also not alleged by the Revenue. (v) The department itself in G.O. Ms. No. 61, Commercial Taxes and Religious Endowments Department, dated January 24, 1984 has stated that the assessing authorities are to take a lenient view, wherever the assessees purchased goods on the basis of C forms, without including them in the registration certificate inadvertently, provided the assessee is eligible to have those goods included in the registration certificate. 5. In view of the abovesaid factual reasonings, and the findings of the Tribunal that the assessee acted bona fide in having issued the C forms for purchasing the above referred to goods, we posed a question to the learned counsel for the Revenue how an error of law has been committed by the Tribunal in passing the abovesaid order, holding that section10(b) of the Act is not attracted. To the said question, the said counsel mainly submitted that the Tribunal's observation that the above referred to amendment sought for, would show the assessee's bona fides, cannot be accepted at all, in law. Learned counsel for the Revenue also relied on the decision reported in Coimbatore District Central Co-operative Supply and Marketing Society Ltd. v. State of Tamil Nadu 1980 (45) STC 21 (Mad.) in support of his contention. 6. But, first of all, we must state that the said decision is actually not helpful to him. Learned counsel for the Revenue also relied on the decision reported in Coimbatore District Central Co-operative Supply and Marketing Society Ltd. v. State of Tamil Nadu 1980 (45) STC 21 (Mad.) in support of his contention. 6. But, first of all, we must state that the said decision is actually not helpful to him. In the said case the assessee himself admitted that the goods mentioned in its registration certificate do not enable it to purchase the goods which it purchased by the issue of C forms. In that context, this Court held that the plea of bona fide set out by the assessee therein did not appear to be a justifiable contention. But, in the present case, the assessee did not so admit, but its contention throughout was that the abovesaid goods purchased would also come under the term "hardware". No doubt after the assessee came to know of the aforesaid department's belated view that those goods would not come under the term "hardware", the assessee sought for the above referred to amendment of the registration certificate. This fact by itself cannot be taken as any admission by the assessee as spoken to in the abovesaid decision, particularly in the light of the fact that in all the earlier assessment orders, the department itself described the assessee as dealer in "general hardware and non-ferrous metals". Therefore, the decision, Coimbatore District Central Co-operative Supply and Marketing Society Ltd. v. State of Tamil Nadu 1980 (45) STC 2 (Mad.), will have no application to the present case. 7. That apart, apart from the abovesaid reason given by the Tribunal that in view of the abovesaid amendment sought for it can be taken that the assessee acted bona fide in issuing C forms in the way it did, there were also the above referred to other reasons for the Tribunal holding that the assessee acted bona fide in issuing C forms as stated above and that therefore there is no case for levying penalty under section10(b) of the Act. While so, we are unable to hold that there is an error of law in the Tribunal's order. 8. While so, we are unable to hold that there is an error of law in the Tribunal's order. 8. Further in the decision reported in Sri Lakshmi Machine Works v. State of Madras 1973 (32) STC 407 , this Court held that the phrase "falsely represents" in section10(b) of the Act, indicates that means rea is an important ingredient for the offence contemplated therein. No doubt in the decision reported in Vijaya Electricals v. State of Tamil Nadu 1991 (82) STC 268 this Court has held that if there is a finding of "false representation" spoken to in section10(b) of the Act, it is sufficient to impose penalty and there need not to be a specific finding of "mens rea" or "guilty intention" by the Tribunal. But in our view, it cannot be taken that Vijaya Electricals v. State of Tamil Nadu (supra) in any way departed from the view taken by the earlier decision of the Division Bench of this Court in Sri Lakshmi Machine Works v. State of Madras (supra). All that Vijaya Electricals v. State of Tamil Nadu (supra) seeks to say, in our view, is that it is enough if there is a finding of "false representation" spoken to in section 10(b), even if there is no specific finding of "means rea" or "guilty intention", in relation to the offence spoken to in section 10(b). 8A. In fact (supra) (Vijaya Electricals v. State of Tamil Nadu), the earlier Sri Lakshmi Machine Works v. State of Madras (supra) was also considered. The relevant observation in (supra) relating to (supra) is as follows : "10. Reliance was also placed on Sri Lakshmi Machine Works v. State of Madras (supra) wherein it was held that section10(b) of the Act specifically uses the words 'falsely represents', which shows that mere representation based on a bona fide belief would not bring an assessee within the mischief of that provision. Merely because the plea entertained by the assessee turned out to be not proper or correct, it did not imply that the issue of C form certificate was on the basis of a false representation. Merely because the plea entertained by the assessee turned out to be not proper or correct, it did not imply that the issue of C form certificate was on the basis of a false representation. The Bench then opined that whether there is means rea or not in a given case, is a question of fact, to be decided on the fats of each case, but since no finding had been recorded that the representation made by the assessee was false, the proceedings under section10(b) of the Act could not be sustained." * 9. In the present case, there are very many materials as stated above, for the Tribunal coming to the conclusion that the assessee was acting bona fide in issuing C forms as it did. In other words, the decision of the Tribunal in the present case did not merely rest on the mere claim of the assessee that it had acted bona fide in issuing C form as it did. But there were enough materials to hold that the assessee acted bona fide in this regard. 9A. One of the contentions of the learned counsel for the Revenue is that "hardware goods" must be necessarily made up of iron or ferrous metal only and that since brass and copper goods have been purchased by the assessee by issuing C form, the assessee must be taken to have made the requisite false representation spoken to in section10(b) of the Act. We are unable to accept this contention. As per the Webster's Dictionary (3rd new International Dictionary), the term "hardware" means, "ware (as fittings, trimmings, cutlery, tools, parts of machines and appliances, metal, building equipment, utensils) made of metal". Further in the decision reported in Pioneer Plastic Containers Ltd. v. Commissioner of Customs and Excise 1968 (1) All(ER) 192, we find the following observations; "As regards the word "hardware" I was referred to the definition in the Oxford English Dictionary, namely 'small ware of goods of metal; iron-mongery;'" All these show that the term "hardware" need not confine itself only to wares made up of iron alone, as contended by the learned counsel for the Revenue. In the decision reported in Municipal Board, Benares v. Krishna & Co. In the decision reported in Municipal Board, Benares v. Krishna & Co. 1934 AIR(All) 550, also we find the following observation : "An investigation of various dictionaries makes this to my mind clear that hardware includes pots, pans and domestic appliances of that sort and simple articles made of metal." 10. Anyway, even assuming, there are two views possible regarding the meaning of the term "hardware", one as contended by the learned counsel for the Revenue and the another as contended by the learned counsel for the assessee, there cannot be levy of penalty under section 10(b) of the Act since in such cases it is easier to accept the contention of the assessee that the bona fide believed that the goods purchased by him were covered by the goods described in his certificate of registration. 11. Further, the above referred to G.O. Ms. No. 61, dated January 24, 1984, also enjoins the assessing officers to take a lenient view particularly when the assessee is eligible to have the goods purchased by him included in registration certificate. In the present case, pursuant to the above referred to amendment sought for, non-ferrous metals also were included in the registration certificate of the assessee. This also shows that the assessee was eligible to have then included in his registration certificate. 12. For all these reasons, we are unable to see any error of law in the Tribunal's order and hence we dismiss this revision. But, in the circumstances, no costs.