JUDGMENT : Aravind Kumar, J. 1. The above appeal and STRPs have been admitted to consider the following question of law: Whether levy of penalty on assessee/dealer under Section 10(b) of CST Act, 1956 by respondent - Authorities is sustainable on the ground of assessee/dealer had deviated the use and purpose for which 'class of goods' had been permitted for availing concessional rate of tax under Section 8 of the CST Act, 1956 and there was an intention to erroneously avail concessional rate of tax and thereby penalty was leviable under such circumstances? OR Whether penalty under Section 10(b) of CST Act can be levied even in respect of "class of goods" being exempted from payment of tax, when such goods are permitted to be purchased as per the list annexed to the Certificate of Registration? BRIEF BACKGROUND OF THE CASE Appellant in STA No. 154/2016 and respondent in STRP Nos. 200010/2016 and 200012-15/2016 are engaged in the business of manufacture and sale of cement and are having their registered offices at Kalaburagi. They are registered under Section 64(1) of the Karnataka Value Added Tax Act, 2003 (for short 'KVAT' Act) read with Section 9(2) of the Central Sales Tax Act, 1956 (for short 'CST' Act). 2. On an inspection made by the officers of the enforcement a report came to be forwarded that C-Forms issued to the dealers for the purchase of goods at concessional rate from outside the State for using the same in mining of ore and manufacturing of cement, has been utilized for the purpose other than mining or manufacturing activity and dealers had purchased the goods which are neither used in the manufacture of new goods or as packing materials used in mining activity and thereby they have violated the provision of Section 10(b) read with Section 10-A of the CST Act and thereby proposed to levy penalty on account of alleged violation of Section 8(3)(b) of the CST Act. 3. The proposed levy of penalty in respect of appellant in STA No. 154/2016 was in respect of purchase of 'rail and spares for rail' and 'dump trucks', whereas the proposed levy of penalty in respect of respondent in STRP Nos. 200010/2016 and 200012-15/2016 related to purchase of 'closed Wagons, locomotives and Iron and Steel' against C-Forms. Show-cause notices came to be issued to appellant/respondent and same was duly replied by them. 200010/2016 and 200012-15/2016 related to purchase of 'closed Wagons, locomotives and Iron and Steel' against C-Forms. Show-cause notices came to be issued to appellant/respondent and same was duly replied by them. Thereafter, adjudicating authority by orders dated 07.12.2015 and 02.06.2012 (2 orders) respectively rejected the contentions of the appellant and respondent respectively and confirmed the demand of penalty made in the show-cause notices. However, in respect of the appellant in STA No. 154/2016 the adjudicating authority dropped the proposal to impose penalty in respect of purchase of 'Dump Trucks' by accepting the contention of the assessee/dealer that said goods were being used in the manufacturing-processing of goods for sale. 4. Both the dealers filed an appeal before the first appellate authority and in respect of the appellant in STA No. 154/2016 the appellate authority accepted the plea of the assessee and allowed the appeal by setting aside the order of the adjudicating authority and also setting aside the levy of penalty on the ground that once goods are included in the registration certificate issued by the department and the assessee is permitted to purchase the goods against the C-Form, mens rea would not be present, which is a pre-requisite for levy of penalty. The respondent in STRP Nos. 200010/2016 and 200012-15/2016 preferred appeals before the First Appellate Authority who by orders dated 31.08.2012 dismissed the appeals and confirmed the order of levy of penalty passed by the adjudicating authority. 5. The respondent in STRP 200010/2016 and 200012-15/2016 preferred an appeal in STA No. 2577-2581/2012 against the order of the First Appellate Authority. Tribunal after hearing the parties by order dated 30.11.2015 allowed the appeals filed by the assessee/dealer and set aside the orders passed by the first appellate authority and adjudicating authority by accepting the plea raised by the assessee-petitioner and imposition of penalty was set-aside. 6. Tribunal after hearing the parties by order dated 30.11.2015 allowed the appeals filed by the assessee/dealer and set aside the orders passed by the first appellate authority and adjudicating authority by accepting the plea raised by the assessee-petitioner and imposition of penalty was set-aside. 6. Insofar as the appellant in STA No. 154/2016 who was successful before the first appellate authority was visited with suo moto revision proceedings by issue of notice under Section 64(1) of the KVAT Act where under Revisional Authority proposed to set aside the order of the First Appellate Authority and as such called upon the appellant to show-cause as to why the order of the adjudicating authority should not be restored on the ground that dealer had misrepresented facts and used the goods purchased against C-Forms which were not directly connected with the manufacturing and processing activity. After considering the detailed reply submitted by the dealer and after hearing the parties, the revisional authority by order dated 24.10.2016 set aside the order of the first appellate authority and upheld the order of levy of penalty passed by the adjudicating authority by confirming the show-cause notice. 7. In the light of the aforestated factual matrix the appellant is aggrieved by the levy of penalty and State-Revenue being aggrieved by the order of the Tribunal setting aside the order of levy of penalty are before this Court. 8. We have heard the arguments of Sri G. Shivadas learned counsel appearing for the appellant, Sri Tirumalesh, learned counsel appearing for the respondent in revision petition and Sri R.V. Nadagouda, learned Additional Advocate General appearing for the State. 9. It is the contention of Sriyuths Shivadas and Tirumalesh, learned Advocates appearing for the appellant and respondent respectively that both the dealers have fulfilled all the conditions prescribed under Section 8(3) of CST Act and have legitimately purchased the goods against C-Form and there is no suppression of fact at any point of time. 9. It is the contention of Sriyuths Shivadas and Tirumalesh, learned Advocates appearing for the appellant and respondent respectively that both the dealers have fulfilled all the conditions prescribed under Section 8(3) of CST Act and have legitimately purchased the goods against C-Form and there is no suppression of fact at any point of time. It is further contended that a combined reading of Section 8(1), 8(3) and 8(4) of CST Act along with Rule 12(1) and Rule 13 of CST (Registration and Turn Over) Rules 1957 (for short 'CST' Rules) would indicate that goods purchased by the dealer should be class or classes of goods specified in the certificate of registration of such registered dealer and said goods are 'for use by the dealer in the manufacture or processing of goods for sale' and at no point of time either the adjudicating authority or the revisional authority have held that the goods have not been purchased by the dealers on an inter State basis but it was the case of revenue that issuance of Form-C by dealer for inter-State purchase amounts to misuse of Form-C on the premise that these "goods are not integrally connected with the manufacturing or processing of the goods." They would also elaborate their submission by contending that goods purchased by them against C-Form are specifically indicated in the list appended to the registration certificate and once these goods are included in the certificate of registration issued to a dealer the eligibility to purchase such goods against Form-C cannot be disputed on the ground that such goods are not used in the manufacturing or processing of the goods for sale. In support of their submission they have relied upon the following judgments: (i) (1966) 18 STC 222 (SC) (State of Madras v. Radio and Electricals Ltd. and Anr.) (ii) (2007) 5 VST 529 (SC) (CTO, Udaipur v. Rajasthan Taxchem Ltd.,) (iii) (1956) 16 STC 563 (SC) (J.K. Cotton Spinning and Weaving Mills C. Ltd. v. Sales Tax Officer & Anr.) (iv) (1997) 104 STC 089 (SC) (CTO, Circle D, Jaipur v. Rajasthan Electricity Board) (v) (2010) 35 VST 1 (SC) (Commissioner of Sales Tax, UP v. Sanjiv Fabrics) (vi) (1986) 62 STC 374 (Rajasthan) 10. Hence, they are seeking for allowing the appeal and dismissal of the revision petitions filed by the State. 11. Hence, they are seeking for allowing the appeal and dismissal of the revision petitions filed by the State. 11. Per contra, Sri R.V. Nadagouda, learned Additional Advocate General appearing for the State would contend that as per the registration certificate the dealer is authorized to purchase goods outside the State at concessional rate as indicated in Section 8(2) of the CST Act of 1956, against issuance of C-Form for using such goods in the mining of ore and manufacture of cement and the interpretation adopted by the Tribunal in case of the respondent in STRP 200010/2016 and 200012-15/2016 is erroneous inasmuch as it was without considering the conditions enumerated in registration certificate with regard to use of C-Form where under it has been specified that misuse of C-Form would entail levy of penalty. He would also contend that enforcement authorities had visited both the companies engaged in the activity of manufacture of cement and had observed that C-Forms issued to the dealer have been used for purpose other than which they were actually meant or issued and such levy of penalty is sustainable. He would also contend that as per Section 8(3)(1)(b) a dealer can issue C-Forms for purchase of such goods which are used exclusively in mining or manufacturing activity but the dealers herein had purchased the goods which are neither used in the manufacture of cement or packing materials and those goods were also not used in mining activities. He would draw the attention of the Court to the goods purchased by the dealers herein namely "locomotives, closed Wagons, Iron and Steel, rail and spares for rail" which according to him are in no way concerned with the manufacturing of cement and as such they would not be eligible to take the benefit of Section 8 of the CST Act 1956. On these grounds he seeks for dismissal of the appeal filed by the dealer and prays for allowing the revision petitions filed by the State. 12. In support of his submissions he has relied upon the following judgments: (i) AIR 1965 SC 891 (Indian Copper Corporation Ltd. vs. Commissioner of Commercial...) (ii) (2010) 9 SCC 630 (Commissioner of Sales Tax, Uttar Pradesh vs. Sanjiv Fabrics) (iii) (2014) 15 SCC 136 (State of Jharkhand and others vs. LA Opala R.G. Limited) 13. 12. In support of his submissions he has relied upon the following judgments: (i) AIR 1965 SC 891 (Indian Copper Corporation Ltd. vs. Commissioner of Commercial...) (ii) (2010) 9 SCC 630 (Commissioner of Sales Tax, Uttar Pradesh vs. Sanjiv Fabrics) (iii) (2014) 15 SCC 136 (State of Jharkhand and others vs. LA Opala R.G. Limited) 13. Having heard the learned Advocates appearing for the parties, and on perusal of the records and the orders passed by all the authorities we have proceeded to adjudicate the question of law formulated hereinabove. RE. QUESTION OF LAW: 14. In order to adjudicate the question of law formulated by us it would be necessary to extract the relevant provisions of the CST Act 1956 and the CST Rules 1957 which would have bearing on the adjudication of question of law. Hence, they are extracted herein below: "7. Registration of dealers - (1) Every dealer liable to pay tax under this Act shall, within such time as may be prescribed for the purpose, make an application for registration under this Act to such authority in the appropriate State as the Central Government may, by general or special order, specify, and every such application shall contain such particulars as may be prescribed. [(2) xxx Explanation.- xxx [(2-A) Where it appears necessary to the authority to whom an application is made under sub-section (1) or sub-section (2) so to do for the proper realization of the tax payable under his Act or of the proper custody and use of the forms referred to in clause (a) of the first proviso to sub-section (2) of Section 6 or sub-section (1) of Section 6-A or [sub-section (4) of section 8], he may, by an order in writing and for reasons to be recorded therein, impose as a condition for the issue of a certificate of registration a requirement that the dealer shall furnish in the prescribed manner and within such time as may be specified in the order such security as may be so specified, for all or any of the aforesaid purposes.] (3) If the authority to whom an application under sub-section (1) or sub-section (2) is made is satisfied that the application is in conformity with the provisions of this Act and the rules made there under [and the condition, if any, imposed under sub-section (2-A), has been complied with], he shall register the applicant and grant to him a certificate of registration in the prescribed form which shall specify the class or classes of goods for the purposes of sub-section (1) of Section 8. [(3-A) Where it appears necessary to the authority granting a certificate of registration under this section so to do for the proper realisation of tax payable under this Act or for the proper custody and use of the forms referred to in sub-section (2-A), he may, at any time while such certificate is in force, by an order in writing and for reasons to be recorded therein, require the dealer, to whom the certificate has been granted, to furnish within such time as may be specified in the order and in the prescribed manner such security, or, if the dealer has already furnished any security in pursuance of an order under this sub-section or sub-section (2-A), such additional security, as may be specified in the order, for all or any of the aforesaid purposes.] [(3-B) xxx (3-BB) xxx (a) xxx (b) xxx [3-C) xxx (3-D) xxx (a) xxx (b) xxx (3-E) xxx (3-F) The authority issuing the forms referred to in sub-section (2-A) may refuse to issue such forms to a dealer who has failed to comply with an order under that sub-section or sub-section (3-A), or with the provisions of sub-section (3-C) or sub-section (3-E), until the dealer has complied with such order or such provisions, as the case may be. (3-G) xxx (3-H) xxx (3-I) xxx (3-J) xxx [(4) A certificate of registration granted under this section may - (a) either on the application of the dealer to who it has been granted, or, where no such application has been made, after due notice to the dealer, be amended by the authority granting it if he is satisfied that by reason of the registered dealer having changed the name, place or nature of his business or for any other reason the certificate of registration granted to him requires to be amended; or, (b) xxx (5) xxx "8. Rates of tax on sales in the course of inter-State trade or commerce-- (1) Every dealer, who in the course of inter-State trade or commerce, sells to a registered dealer goods of the description referred to in sub-section (3), shall be liable to pay tax under this Act, which shall be two percent, of his turnover or at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sales tax law of that State, whichever is lower: Provided that the Central Government may, by notification in the Official Gazette, reduce the rate of tax under this sub-section. (2) The tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of goods in the course of inter-State trade or commerce not falling within sub-section (1), shall be at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sales tax law of that State. Explanation-- For the purposes of this sub-section, a dealer shall be deemed to be a dealer liable to pay tax under the sales tax law of the appropriate State, notwithstanding that he, in fact, may not be so liable under that law.] [(2-A) xxxxx.] (3) [The goods referred to in sub-section (1)].- [(a) xxxxxx]; (b) are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for re-sale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or [in the telecommunications network or] in mining or in the generation or distribution of electricity or any other form of power; (c) xxxxxx (d) xxxxxx (4) The provisions of sub-section (1) shall not apply to any sale in the course of inter-State trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority: Provided that the declaration is furnished within the prescribed time or within such further time as that authority may, for sufficient cause, permit." (5) xxx (6) xxx (7) xxx (8) xxx 10. Penalties. Penalties. - If any person.- (a) furnishes a declaration under sub-section (2) of Section 6 or sub-section (1) of Section 6-A or sub-section (4) [sub-section (8)] of Section 8, which he knows, or has reason to believe, to be false; or (aa) xxx (b) being a registered dealer, falsely represents when purchasing any class of goods that goods of such class are covered by his certificate of registration; or (c) xxx (d) after purchasing any goods for any of the purposes specified in [clause (b) or clause (c) or clause (d) of sub-section (3) [or sub-section (6)] of Section 8 fails, without reasonable excuse, to make use of the goods for any such purpose; (e) xxx [(f) xxx 10-A. 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 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 sub-section (2) of Section 8 in respect of the sale to him of the goods, if the sale had been a sale falling within that sub-section: 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. (2) xxx (a) xxx (b) xxx THE CENTRAL SALES TAX (REGISTRATION AND TURN OVER) RULES, 1957 PRESCRIPTION OF GOODS FOR CERTAIN PURPOSES Rule 13: The goods referred to in clause (b) of sub-section (3) of Section 8, which a registered dealer may purchase, shall be goods intended for use by him as raw materials, processing materials, machinery, plant, equipment, tools, stores, spare parts, accessories, fuel or lubricants, in the manufacture or processing of goods for sale or in the telecommunications network or in mining, or in the generation or distribution of electricity or any other form of power. 15. Every dealer who is liable to pay tax under the CST Act is required to make an application for registration under the Act as indicated under Section 7(1) of CST Act. 15. Every dealer who is liable to pay tax under the CST Act is required to make an application for registration under the Act as indicated under Section 7(1) of CST Act. Such application should contain the particulars as may be prescribed. Sub-section (2-A) of Section 7 of CST Act indicate that the authority may impose as a condition for issue of a certificate of registration by recording reasons and such authority on being satisfied with the application being in conformity with the provisions of the Act and the Rules made there under and also on being satisfied that the condition imposed under sub-section (2-A) has been complied, shall register the application and grant a certificate of registration in the prescribed Form as per sub-section (3) of Section 7 of CST Act. If it appears to the authority while granting a certificate of registration he may at any time while such certificate is in force pass an order in writing by recording reasons there under requiring the dealer to whom the certificate has been granted to furnish such security and additional security if the dealer has already furnished any security in pursuance of an order under sub-section (3-A) or sub-section (2-A) by specifying the same in the order. Sub-section (3-F) of Section 7 also enable the authority issuing the forms referred to in sub-section (2-A) to refuse to issue such forms to a dealer who has failed to comply with an order under that sub-section or sub-section (3-A) or with the provisions of sub-section (3-C) of (3-E), until the dealer has complied with such order or such provisions as the case may be. 16. Clause (a) of sub-section (4) of Section 7 of CST Act enables the authority to amend the certificate of registration either on the application of the dealer or after due notice to the dealer if satisfied by reason of such dealer having changed the name, place xxx or the class or classes of goods in which he carries on business or for any other reason the certificate of registration granted to the dealer requires to be amended. Clause (b) of sub-section (4) of Section 7 of CST Act enables the authority to cancel the certificate of registration after due notice to the dealer if he is satisfied that dealer has ceased to carry on the business xxx has failed to comply with the order passed under sub-section (3-A), (3-E) without sufficient cause or has failed to pay any tax or penalty under the Act or has ceased to pay tax under the Sales Tax law of the appropriate State registered under sub-section (2) or for any other sufficient reason. 17. A bare reading of Section 8(1) of the CST Act would indicate that every dealer who in the course of inter state trade and commerce, sells to a registered dealer goods of the description referred to in sub-section (3) shall be liable to pay tax under the Act at 2% of his turn over or at the rate applicable to the sale or purchase of such goods inside the appropriate state under the sales tax law of that state, whichever is lower. Section 8(3)(b) of the Act inter alia provides that the goods referred to in Section 8(1) of the CST Act are goods of the class or classes specified in the certificate of registration of the registered dealer as being intended for: (i) Re-sale, or (ii) Use by him in manufacturing or processing of goods for sale, or (iii) Use by him in the telecommunication network, or (iv) Use by him in mining, or (v) Use by him generation or distribution of electricity or any other form of power. 18. Section 8(4) of the Act provides that provisions of Section 8(1) shall apply to any sale in the course of inter state trade or commerce only if the dealer selling such goods furnishes to the prescribed authority in the prescribed manner a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form. 19. 19. Rule 12(1) of CST Rules inter alia provides that the declaration referred to in section 8(4) of CST Act shall be in Form-C. Rule 13 of CST Rules indicate that the goods referred to in Section 8(3)(b) of the CST Act shall be the goods purchased by the registered dealer which are intended for use by him as raw materials, processing materials, machinery, plant, equipment, tools, stores, spare parts, accessories, fuel or lubricants, in the manufacture or processing of goods for sale or in the telecommunication network or in mining, or in the generation or distribution of electricity or any other form. 20. Section 10-A would indicate the acts and omissions on the part of the dealer as indicated therein would attract the levy of penalty namely (i) false representation by a registered dealer that the goods being purchased is covered under the certificate of registration - attracting levy of penalty under Section 10(b) of CST Act. (ii) though not a registered dealer but falsely representing that he is a registered dealer would attract levy of penalty under Section 10(c). (iii) making use of goods without reasonable excuse for other than prescribed purposes after purchasing the goods at concessional rate against Form - C attracts levy of penalty under Section 10(b) of the CST Act. 21. Section 10(b) provides for levy of penalty 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. The expression "falsely represents" connotes that element of mens rea is a necessary component of the offence. If the dealer with an honest belief that particular goods purchased by him would fall within the list of goods or class of goods specified in the list appended to the certificate of registration makes a representation to the seller and avails the concessional rate of tax by submitting Form-C he cannot be held guilty of the offence under Section 10(b). Under Section 10(d) penalty can be levied on a dealer if after purchasing any goods for any of the purposes specified in clause (b) (c) (d) of sub-section (3) or sub-section (b) of Section 8 fails, without reasonable excuse, make use of the goods for any such purpose. Under Section 10(d) penalty can be levied on a dealer if after purchasing any goods for any of the purposes specified in clause (b) (c) (d) of sub-section (3) or sub-section (b) of Section 8 fails, without reasonable excuse, make use of the goods for any such purpose. Existence of mens rea is one of the basic ingredients for levy of penalty under Section 10 read with Section 10(a) of the CST Act and it cannot be imposed merely because it would be lawful to do so. The statute itself provides for issuance of notice before imposition of penalty and this makes it explicitly clear that penalty cannot be levied automatically. The authority proposing to levy penalty would be at liberty to decide whether or not to impose the penalty depending upon the facts obtained in each case and such exercise of jurisdiction by the authority is discretionary and cannot be exercised perfunctorily. Consideration of circumstances relevant to the decision to impose penalty is a necessary part of the quasi judicial function of the authority. 22. In the background of the discussion of the statutory provisions, the orders impugned in this appeal/revision petitions and the order of levy of penalty imposed on appellant and respondent are perused it would indicate that authorities have held that the goods are not directly connected with the manufacturing or processing activity carried out by dealers and therefore they were not eligible for purchasing the goods at a concessional rate against Form-C. 23. In the instant case the goods which have been purchased by the dealer against Form-C were undisputedly included in the certificate of registration. The very fact that the goods purchased by the dealers were included in the certificate of registration and those goods alone have been purchased by them against Form-C establishes the bona fides of the dealers or in other words there was no intention to suppress at the time of purchasing the goods. The respective adjudicating authorities have not disputed or rejected the contention or plea of the dealers that the goods purchased by them does not find a place in the certificate of registration. The respective adjudicating authorities have not disputed or rejected the contention or plea of the dealers that the goods purchased by them does not find a place in the certificate of registration. In fact, the dealers while submitting the application for registration had included these goods in their applications and the authorities have also approved, accorded their permission by including the said goods in the list certified by them as "class of goods" entitled for availment of concessional rate of tax. Hence, it has to be presumed that the authorities were satisfied the said goods are for use in the manufacturing and processing of goods for sale by the dealers. In terms of Rule 3(5) of the CST Rules, the notified authority while granting the certificate of registration would have included the goods in the said certificate only upon satisfying itself that the said goods are indeed eligible for inclusion in terms of the end use and as such a presumption has to be raised in favour of the dealers. Hence, it cannot be gainsaid by the authorities that the dealers had misrepresented or gave a wrong impression regarding the usage of goods to attract levy of penalty. 24. The full Bench of Madras High Court in the case of State of Tamil Nadu vs. Nu-Tread Tyres and connected matters reported in (2006) 148 STC 256 (FB) has held that condition precedent for levy of penalty - mens rea must be established and in the context of examining the rigour of Section 10(b) and Section 10-A of CST Act and has held as under: "21. Section 10(b) of the Act provides for an offence if any person being registered dealer falsely represents when purchasing any class of goods that goods of such class are covered by his certificate of registration. The expression "falsely represents" clearly shows that the element of mens rea is the necessary component of the offence. In the absence of mens rea, resort to penal provision would not be proper unless it is established that the conduct of the dealer was contumacious or that there was deliberate violation of the statutory provision or willful disregard thereof. The expression "falsely represents" clearly shows that the element of mens rea is the necessary component of the offence. In the absence of mens rea, resort to penal provision would not be proper unless it is established that the conduct of the dealer was contumacious or that there was deliberate violation of the statutory provision or willful disregard thereof. 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 under Section 10(b) of the Act and no penalty can be imposed under Section 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 under Section 10(b) of the Central Sales Tax Act, 1956. The reference is answered accordingly." 25. It was not the case of the adjudicating authorities that the goods in question which have been purchased by the appellant/dealer had not been purchased by them on inter state basis. But on the other hand it was their specific case that appellant/respondent had misused Form-C as these goods are not integrally connected with the manufacturing process. 26. The Hon'ble Apex Court in the case of Indian Copper Corporation Ltd. vs. Commissioner of Commercial, reported in AIR 1965 SC 891 was examining as to whether locomotives and motor vehicles which came to be purchased by the Indian Copper Corporation for being used in its factory would be entitled to the concessional rate of tax which had been excluded, since High Court had opined that said goods was not intended for use in the manufacture or processing of goods for sale or in the mining operations and it was held: "11. The High Court excluded from item (i) "Locomotives and motor-vehicles" those vehicles which were used by the Corporation after the mining operations were concluded and before the manufacturing process commenced and also vehicles used in carrying finished products from the factory on the conclusion of the process of manufacture. Those excluded vehicles were, in the view of the High Court, not intended for use in the manufacture or processing of goods for sale or in the mining operations. Those excluded vehicles were, in the view of the High Court, not intended for use in the manufacture or processing of goods for sale or in the mining operations. On that view the High Court excluded also the accessories and spare parts for locomotives and motor-vehicles [item (ii)] and tyres and tubes of those motor-vehicles [item (vi)]. The High Court further held that the laboratory fittings used for sampling and analysis of ore and other raw materials in initial stages of mining operation and in the process of manufacture should be specified, but not the hospital equipment with furnishings and fittings. These in the view of the High Court were not liable to be specified in the certificate of registration even though the Corporation was under a statutory duty to provide hospital facilities for workers. The High Court then held that neither stationery nor cane baskets for carrying refuse for protecting the health and cleanliness of the colony of the workmen employed in the mines and factory were liable to be so included. Even cane baskets used for carrying ore and other materials, the High Court held, did not fall within the description under section 8(3)(b) read with rule 13. The Commissioner of Commercial Taxes, Bihar, did not file any affidavit in rejoinder to the petition filed by the Corporation. The Commissioner was, it appears, prepared to meet the claim made by the Corporation on the footing that the averments made in the petition and the annexure B-2 which supplied particulars about the intended use of the goods were true. It is in the circumstances difficult to appreciate the ground on which the High Court sought to exclude from the "locomotives and motor-vehicles" those vehicles which were used by the Corporation after the mining operations were concluded and before the manufacturing process commenced, and those which were used in carrying finished products. There was not even an averment that vehicles which were used for the excluded purposes were different from the vehicles used in carrying and removing raw materials during the process of manufacture and vehicles used underground and on the surface in mining operations. This by itself would be sufficient to reject the reservation made by the High Court. There was not even an averment that vehicles which were used for the excluded purposes were different from the vehicles used in carrying and removing raw materials during the process of manufacture and vehicles used underground and on the surface in mining operations. This by itself would be sufficient to reject the reservation made by the High Court. We are also of the opinion that in a case where a dealer is engaged both in mining operations and in the manufacturing process - the two processes being interdependent - it would be impossible to exclude vehicles which are used for removing from the place where the mining operations are concluded to the factory where the manufacturing process starts. It appears that the process of mining ore and manufacture with the aid of ore copper goods is an integrated process and there would be no ground for exclusion from the vehicles those which are used for removing goods to the factory after the mining operations are concluded. Nor is there any ground for excluding locomotives and motor-vehicles used in carrying finished products from the factory. The expression "goods intended for use in the manufacturing or processing of goods for sale" may ordinarily include such vehicles as are intended to be used for removal of processed goods from the factory to the place of storage. If this be the correct view, the restrictions imposed by the High Court in respect of the vehicles and also the spare parts, tyres and tubes would not be justifiable. We are, therefore, of the opinion that the Corporation was entitled to specification as set out in the petition and explained in annexure B-2 to the petition in respect of items (i), (ii) and (vi). The statutes relating to factories and mines impose upon the owner of the factory and the mine obligation to maintain effective health services for the benefit of the workmen. But it cannot on that account be said that the goods purchased for the hospital such as equipment, furnishings and fittings are intended for use in the manufacture or processing of goods for sale or in the mining operations. But it cannot on that account be said that the goods purchased for the hospital such as equipment, furnishings and fittings are intended for use in the manufacture or processing of goods for sale or in the mining operations. The mere fact that there is a statutory obligation imposed upon the owner of the factory or the mine to maintain hospital facilities would not supply a connection between the goods and the manufacturing or processing of goods or the mining operations so as to make them goods intended for use in those operations for the Corporation contended that the expression "equipment" used in rule 13 is wide enough to include hospital equipment, furnishings and fittings and maintenance of such equipment being made obligatory by statute, it fell within rule 13. But rule 13 requires that the goods including equipment should be intended for use by the owner as equipment in the manufacture or processing of goods for sale or mining operations. If the equipment is not so intended to be used, rule 13 will not be attracted. For reasons already mentioned, we are unable to hold that hospital equipment, furnishings and fittings fall within the description of equipment intended for use in the manufacture or processing of goods for sale or in mining operations. The High Court was therefore right in declining to specify hospital equipment, furnishings and fittings. The same considerations would apply to medical supplies [item (iv)]. In respect of household furnishings and fittings, there is not even a statutory obligation to which our attention has been invited which requires the Corporation to provide them. The goods falling under that description therefore cannot be specified under section 8(3)(b) read with rule 13. "Stationery" also is not intended for use in the manufacture or processing of goods for sale or for mining operations. The goods falling under that description therefore cannot be specified under section 8(3)(b) read with rule 13. "Stationery" also is not intended for use in the manufacture or processing of goods for sale or for mining operations. Use of stationery undoubtedly facilitates the carrying on of a business of manufacturing goods or of processing goods or even mining operations; but the expression "intended to be used" cannot be equated with "likely to facilitate" the conduct of the business of manufacturing or of processing goods or of mining." Sri R.V. Nadagaouda, learned AAG has drawn our attention to the very same judgment to contend that the expression "intended to be used" has been held by the Apex Court as not to be equated with the expression "likely to facilitate" and the said opinion expressed by the Hon'ble Apex Court is squarely applicable to the facts on hand since the goods in question namely rail and spares for rail, 'closed Wagons, locomotives and Iron and Steel' are not the goods integrally connected with the manufacturing or processing of the goods and as such there has been misuse of Form-C. 27. At the outset it requires to be noticed that the goods which have been purchased by the dealers are specifically enumerated in the certificate of registration which is also admitted by the respondent authorities or in other words the goods in dispute have been specifically covered under the certificate of registration and as such it cannot be held that dealers had falsely represented and as such Section 10(b) of the CST Act is attracted. Under Rule 3(5) of the CST Rules the notified authority at the time of granting registration certificate is required to conduct an enquiry as it deems fit and then issues the registration certificate containing list of goods upon being fully satisfied that the particulars contained in the application are correct. Once the goods are included in the certificate of registration which in terms of Rule 5 of the CST Rules is done, an enquiry regarding the feasibility of use of such goods in the manufacturing process or processing of goods for sale etc. the eligibility to purchase such goods against Form-C would not be a ground available to the adjudicating authority and deprive the dealer such benefit on the ground that the goods are not used in the manufacture or processing of goods for sale. the eligibility to purchase such goods against Form-C would not be a ground available to the adjudicating authority and deprive the dealer such benefit on the ground that the goods are not used in the manufacture or processing of goods for sale. It is because of this precise reason as noticed by us herein above Section 7(4)(a) of the CST Act provides for the authority to amend the registration certificate by passing appropriate orders if in their opinion that certain goods mentioned in the list appended to the registration certificate are not the goods required or to be used for manufacture or processing of goods for sale or for mining etc. 28. The Hon'ble Apex Court in the case of State of Madras vs. Radio and Electricals Ltd. & Anr. reported in (1966) 18 STC 222 (SC) has held that authority issuing the certificate under Rule 5(1) of CST Rules is to be satisfied after making such enquiry as it thinks necessary that the particulars contained in the application are correct and complete. It is held as under: "The authority issuing the certificate under r. 5(1), as expressly stated in the rule, has, before issuing a registration certificate, to be satisfied after making such enquiry as it thinks necessary that the particulars contained in the application are correct and complete. "The enquiry would obviously be made in the light of the nature of the business and goods which are likely to be needed either for resale, or for use in the manufacture of goods for sale, or for use in the execution of contracts. Satisfaction which is contemplated by r. 5 is objective, and may be arrived at upon a quasi judicial enquiry This Court has in several cases had occasion to consider the legality of orders of the notified authority refusing to grant certificates of registration in Form 'B' in respect of certain classes of goods which it was claimed by the tax-payer were necessary for the purpose of his business and were therefore requested to be specified in the certificate of registration: e.g. Indian Copper Corporation Ltd. v. Commissioner of Commercial Taxes, Bihar & Others (1) and J.K. Cotton Spinning & Weaving Co. Ltd., v. The Sales Tax Officer, Kanpur & Another (1). Ltd., v. The Sales Tax Officer, Kanpur & Another (1). On the plain words used in s. 7 and the Rules, it is contemplated that the certificate of registration may only be issued after an objective satisfaction by the notified authority that the specified goods are likely to be needed for the purpose of the business of the registered dealer, and that satisfaction is open to challenge in an appropriate proceeding before the High Court and even before this Court. Correctness or priority of satisfaction of the notified authority in issuing the certificate in Form-B that the goods are likely to be required for the purpose of the business would not however be again open to challenged before another taxing authority in proceedings for assessment of tax." 29. The Hon'ble Apex Court in the case of CTO vs. Rajasthan Taxchem Limited reported in 2007 5 VST 529 (SC) while examining as to whether the specific entry of 'diesel' found in the registration certificate being purchased at a concessional rate of tax and used for generating electricity by DG sets by the dealer would be 'raw material' as meaning goods used as an ingredient in the manufacture of other goods and including preservatives, fuel, lubricants required for the process of manufacture and held as under: "Once the commodity is recorded in the registration certificate as raw material, then the department cannot roll hack from their stand to the detriment of the assessee as the assessee has not violated any condition hut acted on the belief of the department." 30. The basis on which the concessional rate of tax availed by the assessee which is sought to be staved off by the respondent is on the ground that these goods are not directly connected with the manufacturing or processing activity. 31. When once the item has been included in the registration certificate, automatically it would be eligible for the concession until and unless the registration certificate is either amended, cancelled or annulled. 32. In the instant case the rail and its spares for rail used by the appellant for movement of raw materials (fly ash) to the manufacturing unit and also loose cement from the manufacturing unit to the packing unit have direct link to the activities carried on by the appellant namely manufacture of cement and it is an integral part of the said activity. The whole process of operation is integral and is essentially of mining nature. In fact a co-ordinate bench of this Court in the case of Hind Nippon Rural Industries Private Limited vs. State of Karnataka reported in (1991) 81 STC 46 while examining as to whether the crane used by the dealer for the purposes of lifting the blocks of granite would be a process to bring the end product to sale has held in the affirmative by opining as under: "Held, allowing the petition, that it was clear from the record that the raw granite slabs or blocks, which the petitioner-company bought, were subjected to a form of processing by which the raw granite was brought to salable state. The petitioner was entitled to purchase a crane from Calcutta for using it to lift the blocks of granite to subject them to a process to bring the end-product to sale. It had not committed any offence under clause (d) of section 10 of the Central Sales Tax Act and therefore was not liable for imposition of any penalty." 33. As could be seen in the case of the appellant in STA No. 154/2016 the goods in question are rails and its spare parts, had been purchased by the appellant-dealer by submitting Form-C by availing concessional rate of tax. The said goods have been used for the purposes of laying down railway tracks for movement of goods to and from the factory and finished goods i.e. cement from factory to railway yard. It is not the case of revenue that rail tracks have been used for purpose other than transporting raw materials and finished goods to and from the dealer's factory. However, it has been held by the authorities that said rail tracks is neither covered in Section 8(3)(b) of the CST Act nor Rule 13 of the CST Rules and the dealer had misrepresented that such goods are used for the intended purpose of manufacture/process of goods for sale. 34. In these circumstances what is required to be considered is the 'commercial expediency' in ascertaining as to whether the goods have been used for the intended purpose. In this background the phraseology used in Section 8(3)(b) acquires significance namely the expression for use by him in the manufacture or processing of goods'. 34. In these circumstances what is required to be considered is the 'commercial expediency' in ascertaining as to whether the goods have been used for the intended purpose. In this background the phraseology used in Section 8(3)(b) acquires significance namely the expression for use by him in the manufacture or processing of goods'. The Hon'ble Apex Court in the case of G.K. Cotton Spinning and Weaving Mills Company Limited vs. Sales Tax Officer and another reported in (1956) 16 STC 563 (SC) had examined as to whether "drawing instruments, photographic materials, building materials including iron, steel, cement, lime, and coal" would qualify to be goods which were "intended for use in the manufacture or processing of goods for sale", by the assessee who was carrying on the business of manufacturing textile goods, tiles and other commodities. It came to be held that "commercial expediency" would be the tool to consider such claim and held to the following effect: "10. Section 8(3)(b) authorises the Sales Tax Officer to specify, subject to any rules made by the Central Government, goods intended for use by the dealer in the manufacture or processing of goods for sale or in mining, or in the generation or distribution of electricity or any other form of power. By Rule 13 the Central Government has prescribed the goods referred to in s. 8(3)(b): such goods must be intended for use in the manufacture or processing of goods for sale or in mining or generation or distribution of power, and the intended use of the goods must be as specified in Rule 13. It is true that under Rule 13, read with s. 8(3)(b) mere intention to use the goods in the manufacture or processing of goods for sale, will not be a sufficient ground for specification: the intention must be to use the goods as raw materials as processing materials, as machinery, as plant, as equipment, as tools, as stores, as spare parts, as accessories, as fuel or as lubricants. A bare survey of the diverse uses to which the goods may be intended to be put in the manufacture or processing of goods, clearly shows that the restricted interpretation placed by the High Court is not warranted. The expression "in the manufacture of goods" would normally encompass the entire process carried on by the dealer of converting raw materials into finished goods. The expression "in the manufacture of goods" would normally encompass the entire process carried on by the dealer of converting raw materials into finished goods. Where any particular process is so integrally connected with the ultimate production of goods that but for that process, manufacture or processing of goods would be commercially inexpedient, goods required in that process would, in our judgment, fall within the expression "in the manufacture of goods". For instance, in the case of a cotton textile manufacturing concern, raw cotton undergoes various processes before cloth is finally turned out. Cotton is cleaned, carded, spun into yarn, then cloth is woven, put on rolls, dyed, calendared and pressed. All these processes would be regarded as integrated processes and included "in the manufacture" of cloth. It would be difficult to regard goods used only in the process of weaving cloth and not goods used in the anterior processes as goods used in the manufacture of cloth. To read the expression "in the manufacture" of cloth in that restricted sense, would raise many anomalies. Raw cotton and machinery for weaving cotton and even vehicles for transporting raw and finished goods would qualify under Rule 13, hut not spinning machinery, without which the business cannot be carried on. In our judgment, Rule 13 does not justify the importation of restrictions which are not clearly expressed nor imperatively intended. Goods used as equipment, as tools, as stores, as spare parts, or as accessories in the manufacture or processing of goods, in mining, and in the generation and distribution of power need not, to qualify for special treatment under S. 8(1), be ingredients or commodities used in the processes, nor must they be directly and actually needed for "turning out or the creation of goods." 11. In our judgment if a process or activity is so integrally related to the ultimate manufacture of goods so that without that process or activity manufacture may, even if theoretically possible, be commercially inexpedient, goods intended for use in the process or activity as specified in Rule 13 will qualify for special treatment. This is not to say that every category of goods "in' connection with" manufacture of or "in relation to" manufacture, or which facilitates the conduct of the business of manufacture will be included within Rule 13. This is not to say that every category of goods "in' connection with" manufacture of or "in relation to" manufacture, or which facilitates the conduct of the business of manufacture will be included within Rule 13. Attention in this connection may be invited to a judgment of this Court in which it was held that vehicles used by a Company (which mined ore and turned out copper in carrying on activities as a miner and as a manufacturer) fell within Rule 13, even if the vehicles were used merely for removing ore from the mine to the factory, and finished goods from the factory to the place of storage. Spare parts and accessories required for the effective operation of those vehicles were also held to fall within Rule 13. See Indian Copper Corporation Ltd. v. Commissioner of Commercial Taxes, Bihar and Ors." 35. Thus, the broad test of commercial expediency' will have to be applied to ascertain as to whether a particular "class of goods" included in the list appended to certificate of registration and same can be said to have been used in the manufacture of goods. Where any particular process is so integrally connected with the ultimate production of goods and in the absence thereof the process, manufacture or processing of goods would be though theoretically possible and commercially inexpedient, then necessarily such goods would fall within the expression in the manufacture of goods'. Thus, it is not necessary that the class of goods must necessarily be goods which are used as ingredient or commodity in creation of the goods' or which are directly and actually needed for turning out or making the goods'. 36. The Hon'ble Apex Court in the case of Grasim Industries vs. Union of India reported in (2011) 10 SCC 653 has held process in relation to manufacture means a process so integrally connected to manufacturing of end product without which, manufacture of end product would be impossible or commercially inexpedient. It is held as under: "Manufacture" in terms of Section 2(f) includes any process incidental or ancillary to the completion of the manufactured product. This "any process" can he a process in manufacture or process in relation to manufacture of the end product, which involves bringing some kind of change to the raw material at various stages by different operations. It is held as under: "Manufacture" in terms of Section 2(f) includes any process incidental or ancillary to the completion of the manufactured product. This "any process" can he a process in manufacture or process in relation to manufacture of the end product, which involves bringing some kind of change to the raw material at various stages by different operations. The process in manufacture must have the effect of bringing change or transformation in the raw material and this should also lead to creation of any new or distinct and excisable product. The process in relation to manufacture means a process which is so integrally connected to the manufacturing of the end product without which, the manufacture of the end product would be impossible or commercially inexpedient. 37. In the case of the respondent in revision petition the class of goods which came to be purchased by the dealer are "closed wagons, locomotives and iron and steel" against Form-C which undisputedly found their entry in the list appended to the certificate of registration. The said goods fit into entry of "other transport vehicles" and materials handling equipments, iron and steel which is part of "ferrous and non-ferrous metals and alloys" which all finds a place in the certificate of registration and they are goods which form integral part in the activity of manufacturing and sale of cement and ready mix concrete and also mining. It is in this background the appellate tribunal has held that respondent in revision petition neither had mens rea nor had deviated the use and purpose of the goods purchased against Form-C and they are all goods which are necessary in the process of manufacturing of cement and it forms integral activity of such manufacture. 38. While examining as to whether in particular goods can be considered to be eligible for purchase against Form-C, the nature of the business of the assessee-dealer will have to be taken into account as to whether the railway tracks or the closed wagons, locomotives are required for the nature of business being carried on by the assessee in question, by use of railway tracks for movement of raw materials and finished goods to and from the factory will have to be examined. In the case of appellant in STA No. 154/2016 in addition to the rail tracks, appellant is also using dumpers for movement of raw materials from the mines to the factory site, which fact was accepted by the authorities. These dumpers as well as the goods in dispute namely the rails etc. are both used for the same purpose of manufacturing activity i.e. movement of raw materials to the factory site. Hence, when dumpers has been accepted as a goods necessary for manufacturing process and accepting its commercial expediency, it would not stand to logic that rails and its spare parts would not qualify to be goods which are used in the manufacture of the commodity being sold by the appellant. 39. As already noticed hereinabove, the goods in question namely "rail lines" have been used by the appellant to lay the railway track from its factory premises to the main rail line of Indian Railways for transportation of raw material to the appellant's factory and also for transpiration of finished goods from the factory for further dispatch by rail. The authorities do not dispute that loose cement is also being transported from the factory to the main rail line of Indian Railway for further dispatch. Thus, the expression goods intended for use in the manufacturing or processing of goods for sale' would ordinarily include such vehicles as are intended to be used for removal of the processed goods from the factory to the place of storage. For manufacturing cement at its plant, the appellant requires to move the raw materials to the factory. Similarly, goods manufactured by the appellant are also required to be moved to various places outside the factory for sale to its customers. The movement of raw materials to the factory and the movement of finished goods from the factory for being sold has to be necessarily carried out by either road transport or by rail transport and it is the latter mode which has been adopted by the appellant. 40. The appellant is carrying the business of manufacturing of cement at its plant and for moving the raw materials to the factory or moving the finished goods from the factory, it has laid railway lines to connect main railway track of the Indian Railways. 40. The appellant is carrying the business of manufacturing of cement at its plant and for moving the raw materials to the factory or moving the finished goods from the factory, it has laid railway lines to connect main railway track of the Indian Railways. The raw materials like fly ash or coal is bought by the appellant and it comes into the factory via Indian Railways in the wagons and it is emptied using material handling equipment and then taken to the factory for manufacture of goods. The railway line laid is used for the movement of these wagons. This fact has also been verified and accepted by the adjudicating authority. This would only indicate that these rail lines have a crucial role in the activity of movement of raw materials to the factory of the appellant and without the process of such movement of raw materials the manufacturing activity will neither be possible and it would also not be commercially expedient. 41. Thus, the activity of transporting the goods from railway yard to the manufacturing location is an activity which is integrally connected to the manufacturing process and the goods purchased in respect of such transpiration would also be covered under Section 8(3)(b) of CST Act. Hence, the goods purchased by the appellant in STA No. 154/2016 would not contravene the provisions of the act and therefore the order of levy of penalty in the case of the appellant under suo moto proceedings cannot be sustained. 42. In the light of the aforestated discussion we are of the considered view that question of law formulated herein above has to be answered in the negative i.e. against the State - revenue and in favour of the appellant - respondent/dealer-assessee in the light of facts obtained. Hence, we proceed to pass the following: ORDER (i) STA 154/2016 is hereby allowed. Order dated 24.10.2016 passed by the respondent is hereby set aside and consequentially the demand dated 29.11.2016 raised under Annexure-A is hereby set aside. (ii) The revisions petitions STRP Nos. 200010/2016 and 200012-15/2016 are hereby dismissed and the order dated 30.11.2015 passed by Karnataka Appellate Tribunal at Bengaluru in STA Nos. 2577-2581/2012 are hereby confirmed. (iii) No order as to costs.