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Assistant Commercial Taxes Officer v. Kansai Nerolac Paints Limited .
Factual and Procedural Background
Vehicle No. RJ 19G 3661 transported general merchandise along with 377 paint drum buckets from Ughna (Surat) to Jodhpur under Bilty No. 014951 dated 17-6-1997, consigned to M/s Goodlass Nerolac Paints Ltd. During inspection the Customs Enforcement Department discovered that although the consignment was described as a “stock transfer,” the statutory Declaration Form ST-18-A accompanying the goods was blank.
Treating the incomplete form as a breach of Section 78(2) of the Rajasthan Sales Tax Act, 1994, the competent authority issued notice and, on 23-6-1997, levied a penalty of ₹1,24,920 under Section 78(5).
The owner appealed. The Deputy Commissioner (Appeals) set aside the penalty on 3-11-2003, holding there was no intention to evade tax. The Department’s further appeal to the Rajasthan Tax Board was dismissed on 4-4-2005 with the Board reiterating that prior to 22-3-2002 no penalty could be imposed on the owner under Section 78(5) and that mens rea was absent.
Invoking Section 86, the Department filed a revision in the Rajasthan High Court at Jodhpur, raising several questions of law. On 17-12-2007 the High Court rejected the revision by a brief order, effectively affirming the Tax Board. The Assistant Commercial Taxes Officer sought special-leave relief before the Supreme Court under Article 136 of the Constitution.
Legal Issues Presented
- Whether mens rea (intention to evade tax) is a necessary ingredient for imposing penalty under Section 78(5) for violation of Section 78(2).
- Whether carrying a blank Declaration Form ST-18-A with goods in transit by itself attracts penalty under Section 78(5).
- Whether, prior to 22-3-2002, penalty under Section 78(5) could be imposed upon the owner of the goods.
- Whether the findings of the Tax Board were perverse or contrary to law and fact.
- Any other question the court considered just and proper in the circumstances.
Arguments of the Parties
Appellant (Assistant Commercial Taxes Officer)
- The High Court disposed of the revision petition through a cryptic, unreasoned order, failing to address the substantial questions of law raised.
- The impugned decision conflicts with the Supreme Court ruling in Guljag Industries v. CTO (2007) 7 SCC 269, which mandates complete declaration forms and recognises mens rea where material particulars are omitted.
- A reasoned judgment was necessary because similar questions arise in numerous cases under the Rajasthan Sales Tax regime.
Respondent (Owner of Goods)
This information was not available in the provided opinion.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Guljag Industries v. CTO (2007) 7 SCC 269 | A blank or incomplete Form ST 18-A automatically attracts penalty under Section 78(5); such modus operandi evidences mens rea. | Referenced to show the legal landscape the High Court was obliged to consider and to illustrate why detailed reasoning was required. |
| CTO v. Bajaj Electricals Ltd. (2009) 1 SCC 308 | Clarified “person in charge of the goods” and reaffirmed that omission of particulars in Form ST 18-A itself meets the mens rea requirement. | Cited to demonstrate the settled position post-Guljag, reinforcing the need for a reasoned order. |
Court's Reasoning and Analysis
The Supreme Court noted that the High Court’s dismissal consisted of four brief sentences and provided no independent reasoning. Absent such analysis, the Court could not ascertain whether the High Court had applied the governing principles articulated in Guljag Industries and further explained in Bajaj Electricals. The Supreme Court emphasised that appellate courts must record reasons, particularly when resolving questions likely to recur.
Observing that neither party’s cited authorities had been discussed, the Court concluded that the impugned order suffered from “non-application of mind” and was therefore legally infirm.
Holding and Implications
ORDER SET ASIDE; MATTER REMITTED.
The Supreme Court vacated the High Court’s order dated 17-12-2007 and remanded the revision petition for de novo hearing with instructions to pass a reasoned judgment in accordance with law. No costs were awarded.
Implications are confined to the parties: the High Court must now re-examine the Department’s revision and provide detailed findings. While no new substantive precedent was set, the decision reinforces the judiciary’s duty to deliver reasoned orders, especially where statutory interpretation and recurring tax-penalty issues are involved.
Swatanter Kumar, J.— Delay condoned. Leave granted.
2. We may notice the necessary facts giving rise to the present appeal. Vehicle No. RJ 19G 3661 was carrying parchun materials and in addition 377 pieces of drum bucket paints. These goods were transported from Ughna (Surat) to Jodhpur under Bilty No. 014951 dated 17-6-1997 issued by M/s Deshbandhu Transport Company and the goods were consigned to M/s Goodlass Nerolac Paints Ltd. This vehicle was intercepted and checked by the Customs Enforcement Department (for short “the Department”).
3. The competent authority during the course of the enquiry found that the Nerolac paint buckets were transferred by stock transfer but the Declaration Form ST 18-A was completely blank. Treating the consignment under the category of incomplete documents in terms of Section 78(2) of the Rajasthan Sales Tax Act, 1994 (for short “the Act”) and forming an opinion that there was an intention to commit evasion of tax, a notice to show cause was issued that why penalty be not imposed. Reply thereto was filed by the owner of the goods. Finding the reply without any merit and rejecting the same, the competent authority vide its order dated 23-6-1997 imposed a penalty of Rs 1,24,920 in terms of Section 78(5) of the Act.
4. This order of the competent authority was challenged in appeal by the owner of the goods before the Deputy Commissioner (Appeals), Commercial Taxes II, Jaipur which, vide order dated 3-11-2003, allowed the appeal and held that the penalty against the owner of the goods could not be imposed as there was no intention to commit evasion of tax and thus set aside the order of the lower authority. The Department challenged this order before the Rajasthan Tax Board, Ajmer Bench (for short “the Board”) on different grounds.
5. The appeal preferred by the Department came to be dismissed by the order of the Board dated 4-4-2005. The Board, while setting aside the order, expressed the view that prior to 22-3-2002 penalty could not be imposed on the owner of the goods under Section 78(5) of the Act besides that there was no intention to commit any evasion of tax.
6. Aggrieved by the order of the Board, the Department preferred revision petition under Section 86 of the Act before the High Court of Judicature for Rajasthan at Jodhpur, and after stating the facts, the Department raised, inter alia, the following important questions of law:
“(i) Whether mens rea to evade the tax on the part of the dealer is a necessary ingredient for imposition of penalty under Section 78(5) of the Act of 1994, for violation of provisions of Section 78(2) of the Act of 1994?
(ii) Whether the blank Declaration Form ST 18-A with the goods in transit by itself attracts the provisions of penalty under Section 78(5) of the Act of 1994 for violation of the provisions of Section 78(2) of the Act of 1994?
(iii) Whether the learned Tax Board has erred in law in holding that prior to 22-3-2002 the penalty under Section 78(5) of the Act of 1994 for violation of Section 78(2) of the Act of 1994 could not have been imposed against the owner of the goods?
(iv) Whether the findings arrived at by the learned Tax Board are contrary to law and facts and perverse?
(v) Any other question of law which this Hon'ble Court considers just and proper in the facts and circumstances of the case may also be decided.”
7. The High Court vide its order dated 17-12-2007 dismissed the revision petition. This order is impugned by the Assistant Commercial Taxes Officer in the present appeal under Article 136 of the Constitution of India.
8. The primary challenge before us is that the High Court has not recorded any reason for rejecting the revision petition of the appellant despite the fact that the matter was argued at length and various questions of law were raised before the High Court. We may also notice that in the grounds taken before us, various questions of fact and law have been raised and it is specifically urged that the impugned judgment of the High Court is contrary to the principles stated by this Court in Guljag Industries v. CTO (2007) 7 SCC 269 where the Court has held that the form should be complete in all respects and should be supported by requisite declaration/documents.
9. It will be more appropriate to reproduce the order impugned in the present appeal at this stage itself:
“Heard learned counsel for the petitioner.
The Tax Board set aside the penalty imposed upon the owner of the goods in a transaction which took place prior to 22-3-2002.
After going through the reasons given by the Tax Board, I do not find any illegality in the impugned order passed by the Tax Board.
Consequently, this revision petition, having no merits, is hereby dismissed.”
10. As already noticed, the principal challenge raised before us is that the High Court has disposed of the matter by a cryptic order and has not given any reason for rejecting the revision petition preferred by the Department. It is urged that the questions raised in the revision petition were likely to arise in a number of cases and as such it was expected of the High Court to deal with the contentions raised in some elaboration.
11. We have noticed that the High Court has not recorded its own reasoning for dismissing the revision petition in accordance with law. It would have certainly been more appropriate for the High Court to examine the matter at some length and deal with the arguments/grounds raised in the petition before it. Be that as it may, another aspect of the matter which this Court has to take note of is that, in Guljag Industries (2007) 7 SCC 269 to which one of us (Kapadia, J.) was a party, this Court had held that the object of Section 78(5) of the Act was to remedy the loss of revenue and where Form ST 18-A/18-C was duly signed but without giving material particulars, would automatically attract levy of penalty for breach of Section 78(2) of the Act. It was also stated in the judgment that this modus operandi of the owner of goods in that case did indicate mens rea.
12. This principle was further explained and was finally settled in a subsequent judgment of this Court in CTO v. Bajaj Electricals Ltd. (2009) 1 SCC 308 to which again one of us (Kapadia, J.) was a party. In this case the Court explained the expression “person in charge of the goods” with reference to the Declaration Form ST 18-A prescribed under Rule 53 of the Rajasthan Sales Tax Rules, 1995 and substitution of this expression by “the owner of the goods or person in charge of the goods” by amending Act 7 of 2002. The Court also reiterated with approval the dictum in relation to the presence of mens rea in such cases holding that the modus operandi adopted by the consignee of not giving material particulars in Form ST 18-A would by itself meet the object of mens rea.
13. The records and the above noticed facts clearly show that the High Court erred in law in not recording any reasons for rejecting the respective contentions raised before the Court. We have also noticed that some of the judgments of this Court referred by the Department and/or by the owner of the goods have not been referred to, much less, commented upon in accordance with law. Thus, we have no option except to say that the order of the High Court is unreasoned and suffers from the infirmity of non-application of mind.
14. For the reasons aforerecorded, we set aside the order dated 17-12-2007 and remit the case to the High Court with a request to hear the case de novo and pass appropriate order in accordance with law. To that extent the appeal is allowed. There shall be no order as to costs.
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