@JUDGMENTTAG-ORDER
Rajendra Menon, J.
Petitioner No. 1, M/s Cadbury India Limited is a company registered under the provisions of the Companies Act and have established a industrial unit at Malanpur, Growth Centre, district Bhind (hereinafter referred to as the Company). In this unit, the Company manufactures chocolates. It is the case of the Company that the factory was established at Malanpur on the basis of invitation extended by the Government of Madhya Pradesh arid certain benefits have been granted to the Company by the Government of Madhya Praesh which includes exemption from payment of entry tax as per eligibility certificate, Annexure P/11 dated 13th November, 2001 for the period 17th November, 1997 to 16th November, 2002, so also, facility of deferment of tax payment under the Madhya Pradesh Deferment of Tax Rules, 1994 for the period up to 13th March, 2006. According to the Company for the purpose of manufacturing chocolates at their industrial unit in Malanpur, Cocoa Bean is the raw material, head office of the Company is situated in Mumbai, purchase the raw material is done by the office at Mumbai. The purchased raw material is then sent to M/s Dr. Writers Food Products Private Limited, Phaltan, district Satara, Maharashtra for converting the said beans into Low Moisture Cocoa Mass (hereinafter referred to as LMC). The arrangement with M/s Dr. Writers Food Product Limited is that they will send the consignment of LMC to the Company at Bhind. A consignment of LMC was sent on 26th August, 2002 through M/s Sandeep Transport Company (petitioner No. 2). The driver of the transporter was handed over all the documents, namely; Excise advice-cum-invoice No. 287 dated 26th August, 2002 copy of MTRs., and Form No.75 dated 28th August, 2002 bearing No. B:381x45. However, because of some mistake in the office at Mumbai and due to over sight, Form No. 75 was left in Mumbai but all other documents including Excise advice-cum-invoice and MTRs were sent along with the vehicle. Copies of these documents are filed as Annexure P/2 and Annexure P/3 respectively. It is stated that when truck No. MH04/P-6825 came to Gawadi Check Post in the State of Madhya Pradesh under the jurisdiction of Assistant Commissioner, Commercial Tax, Check Post, Gawadi, Sendhwa and when the vehicle was checked by the authorities at the check post on 26th August, 2004 and it was discovered that Form No. 75 was not available with the driver. Driver of the truck immediately contacted the office at Mumbai and informed about the same. The Form No. 75 was sent vide letter dated 31st August, 2002 and was submitted to the Assistant Commissioner, Check Post at Gawadi, copy of the same is filed as Annexure P/4. However, despite this, the Assistant Commissioner issued a show cause notice, Annexure P/5 and imposed penalty of Rs. 13.00 lacs u/s 45(A) 12 of the Madhya Pradesh Commercial Tax Act, 1994 (hereinafter referred to as the Act). Being aggrieved by the order of imposing penalty, Company preferred a appeal before the Deputy Commissioner, Commercial Tax vide Annexure P/6. The appellate authority vide order dated 6th May, 2003 (Annexure P/7) remanded the matter back to the assessing authority for decision afresh. After remand, assessing authority passed orders on 29th July, 2003 (Annexure P/8) reducing the penalty from Rs. 13.00 lacs to 10.00 lacs. Against this order, revision petition was filed before the Additional Commissioner and the revisional authority vide impugned order, Annexure P/9 dated 25th August, 2004 has affirmed the order. It is the case of the Company that they have deposited amount of Rs. 13.00 lacs (Rupees thirteen lacs only). Inter alia contending that imposition of penalty is unsustainable and seeking quashing of the orders passed in the matter of imposing penalty and seeking refund of the amount, the Company has filed this petition.
Smt. Nandita Dubey, learned counsel for the Company taking me through the provisions of section 45-A sub-section (7), (10) and (12) of the Act, thereof submitted that the purpose of imposing penalty is to check the evasion of tax and to punish a person who evades tax. According to Smt. Nandita Dubey, in the present case, there is no intention for avoiding tax. She pointed out that what was transported by the consignee was not a saleable product, it was only the raw material in the form of LMC which was to be used for manufacturing chocolates in the factory situated at Malanpur, therefore, the same could not be taxed. That apart, inviting my attention to the delivery challan, excise advice-cum-invoice, MTRs and other documents she points out that in all these documents the particulars of the material and other details are clearly mentioned. It was a case where because of oversight and carelessness, Form No. 75 did not accompany the consignment. The Form No. 75 was also produced and submitted within three days but the authorities have imposed the penalty which is unsustainable accordingly the learned counsel submitted that as there is no intention on the part of the Company to evade tax and there being no malice, a bona fide mistake technical in nature is not condoned and tax and penalty imposed without taking note of the totality of the facts and circumstances of the case. It is pointed out by her that under sub-section (7) of section 45-A, three eventualities are contemplated which may entitle imposition of penalty. In the present case, the conditions stipulated in clause (a) to sub-section (7) is found to be breached and this being a technical breach, the authorities should have condoned the delay and should not have been imposed any penalty. Placing reliance on a judgment rendered by the Supreme Court in the case of
Respondents have filed a detailed return and tried to justify their action in the matter of imposing penalty on the Company.
Smt. Ami Prabal, Deputy Advocate General taking me through section 45-A of the Act and other documents available on record emphasized that once a breach, statutory in nature is established, imposition of penalty is the discretion of the competent authority and the discretion having been exercised on the statutory breach being proved, this Court is not required to interfere in the matter. That apart, a preliminary objection is raised by the respondents with regard to territorial jurisdiction of this Bench to deal with the matter. It is stated that the cause of action for imposing penalty arose when the vehicle was checked in Gawadi check post under jurisdiction of Indore Bench and as the entire cause of action arose within the territorial jurisdiction of Indore Bench and as impugned order is passed by the authorities, i.e., Commissioner, Commercial Tax, Indore and Assistant Commissioner, Commercial Tax, Sendhwa, that being so, Gwalior Bench has no jurisdiction in the matter.
Reply to the argument with regard to territorial jurisdiction, Smt. Nandita Dubey points out that the material was going to Malanpur where the factory of the Company is situated, the effect of the impugned order is on the establishment situated in Malanpur and the amount of Rs. 13.00 lacs was deposited from the factory at Malanpur, therefore, this Bench has jurisdiction to deal with the matter. She has invited my attention to a Full Bench decision of this Court in the case of K.P. Govil vs. Jawaharlal Nehru Krishi Vishwa Vidyalaya, Jabalpur and another, 1987 JLJ 341 and certain other cases to point out that a part of cause of action is deemed to have been arisen in a place where the adverse consequence of the order is established.
Having heard learned counsel for the parties, I propose to deal with the preliminary objection raised by the respondents at the very outset.
While considering the question with regard to territorial jurisdiction of this Bench, a Full Bench in the case of K.P. Govil (supra) has taken note of the provisions of Article 226 of the Constitution, the import of the word, "cause of action" and it has been held that the cause of action would also arise in a place not only where the order is passed but also at a place where the consequence of the order has effect on the person concerned. In the present case, the material was being transported from Mumbai and it was coming to Malanpur. Orders have been passed by the authorities of the respondents addressing M/s Cadbury India Limited, Malanpur, district Bhind to pay the amount of Rs. 13.00 lacs and the amount of Rs. 13.00 lacs is also deposited by M/s Cadbury India Limited, Malanpur. The consequence of the orders passed has resulted in adverse effect on the establishment of the Company''s unit situated at Malanpur and they have been penalized for the same. Keeping in view the principle laid down in the case of K.P. Govil (supra), it is to be held that part of cause of action arose within the territorial jurisdiction of this Bench and this Bench has jurisdiction to hear the matter. Accordingly, the preliminary objection raised is overruled.
As far as imposition of penalty is concerned, section 45-A of the Act provides for establishment of check posts. Sub-section (7) therein contemplates that if the check post officer on searching of a vehicle finds that the goods notified are being transported without proper declaration or declaration filed in respect of goods is false or incorrect, either in respect of the kind of goods, or the quantity of goods transported, or the consignor or the consignee of the goods is shown to be a dealer registered under the Act or the records available in his office do not show the existence of such a dealer, the officer may presume, until contrary is proved, that an attempt is being made to facilitate the evasion of tax. Under such a situation, the check post officer may seize the vehicle and goods and ask for particulars from the consignor or consignee of the goods and if the particulars are not given and if the check post officer is not satisfied, he has to record his finding along with reason issue a show cause notice within fifteen days as to why penalty specified in the notice be not imposed. Penalty shall be equal to ten times of the amount which would have been payable if the goods were sold within the State. Under sub-section (11), after noticing as required under sub-section (10), opportunity of hearing has to be granted and order passed under subsection (12) imposing penalty.
In the present case, the irregularity that was detected when the vehicle was checked is the one contemplated under sub-section (7) of section 45-A of the Act as the goods notified under sub-section (4) were being transported and in respect of the same, transporter had not filed any declaration. It is not in dispute in the present case that the declaration as required under Form 75 was not produced by the transporter when the goods were seized. That being so, the check post officer was well within his right in taking action. However, while taking action, the competent authority of the check post and the appellate authority, so also, the re-visional authorities proceeded on a assumption that the declaration under Form No. 75 was not produced and the intention to facilitate evasion of tax was presumed due to non-production of this statutory form in the check post. The presumption was drawn in the matter of evasion of tax without taking note of the circumstances that were existing in the present case. The authorities concerned failed to take notice of a important factor in as much as what was being transported was not a saleable item, as per Annexure P/2, invoice No.283 which is a invoice pertaining to excise advice-cum-invoice, the goods were LMC, according to Company it was transfer of goods (raw material) from depot., to unit for manufacture of chocolates and not for sale. It was in fact transfer of raw material from one place to another. There is nothing on record to indicate that LMC which was being transported was a saleable product, and therefore, subjected to payment of tax. Neither the assessing authority in the check post nor the appellate authority or the re-visional authority have considered this aspect of the matter before holding that there was intention to evade tax, a intention to evade tax would arise if the material was meant for sale, and therefore, liable to be taxed. A pre-condition for the purpose of taking action under sub-sections (7) and (10) of section 45-A of the Act is that the irregularity as contemplated under sub-section (7) is for evading tax and the goods seized were to be sold within the State of Madhya Pradesh. No finding is recorded to the effect that LMC brought into the State of Madhya Pradesh is for sale by the Company. Apart from this, merely because Form No. 75 is not produced that by itself may not be sufficient to assume mala fides or intention on the part of the Company to evade tax. The invoice and other documents produced by the transporter in the check post do not indicate that any attempt was made to evade tax. Except Form No. 75, all the other relevant documents were produced at the time of seizure of the vehicle with the goods being transported. It is not the case of the competent authority or the appellate authority or the re-visional authority that the documents produced at the time of checking and the material being transported showed any difference in the matter of quality, quantity or specification or otherwise. On the contrary, it is stated that Form No. 75 which was a separate document to be carried was not available. Records indicate that all the material particulars and information which were required were available in the documents produced at the time of checking of the vehicle and no mala fides are proved or established and the nexus between the act of non-production of the document and the intention to evade tax is not proved. Under these circumstances, the question is can penalty be imposed merely because some document is not produced at the time of checking of the vehicle. In this regard, the principle laid down by the Supreme Court in the case of M/s Hindustan Steels Ltd. (supra) may be considered. In paragraph 7 of the aforesaid judgment, the Supreme Court has held as under:
An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of.conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the stature.
(Emphasis Supplied)
If the facts and circumstances of the present case are evaluated in the back drop of the aforesaid principle laid down by the Supreme Court in the matter of imposition of penalty, it would be seen that in the present case, penalty has been imposed mechanically without any dishonest intention or malice or mens rea having been established or proved. The bona fide reason given by the Company explaining the circumstances in the matter of nonavailability of Form No. 75 is not at all considered by the authorities concerned while imposing the penalty. Imposition of penalty has penal consequence. Penalty is a measure of punishing a wrong doer and the discretion for imposing (sic) all the relevant tacts and circumstances in a given case. Merely because the law empowers a authority to impose penalty that by itself is not a reason for imposing penalty. Deliberate defiance or the Jaw, guilty conduct and dishonest intention are the necessary ingredients which should be available for imposing penalty. Merely because some technical or venial breach of a statutory provision is established that by itself is not a reason for imposing penalty. In the present case, authorities have proceeded to impose penalty without taking note of all these factors. There is nothing on record to indicate that the act of the Company or concerned transporter in the matter of non-production of Form No. 75 was a deliberate and intentional act for the purpose of evasion of tax. On the contrary, the records indicate that all the necessary information which was required under the law was supplied during the time of verification at the check post. That apart, the Company was granted total exemption from payment of entry tax from 17th November, 1997 to 16th November, 2002 vide order, Annexure P/11 dated 13th November, 2001. Therefore, there cannot be intention on the part of the Company to evade payment of entry tax as they were already exempted from such payment. Similarly, a certificate of eligibility in the matter of deferment in payment of tax has been granted vide notification dated 3rd August, 2001 passed by the Government of Madhya Pradesh, Directorate of Industries, Bhopal Under these circumstances, it was incumbent upon the authorities concerned to examine the entire matter and find out if there was any intention to evade payment of tax before imposing penalty on the Company, a finding should have been recorded as to whether there was any intention on the part of the Company to evade tax, as no such intention is either established or proved, on the contrary, as a matter of course, mechanically penalty is imposed merely on the ground that the statutory provisions are violated and a particular declaration form is not produced. Mere non-production of a document, i.e., Form No. 75 in the facts and circumstances of the present case does not establish any intention on the part of the Company to evade tax. The lapse found established is a technical lapse unaccompanied by any mala fide or dishonest intention and therefore can be classified as a bone fide mistake, and accordingly, under such circumstances, imposition of penalty was not warranted.
Considering the totality of the facts and circumstances of the case, I am of the considered view that in the matter of imposition of penalty on the Company, all the authorities who have passed the orders have not acted in accordance with law and exercise their discretion in a manner which cannot be approved. Accordingly, keeping in view the principles which govern the imposition of penalty as indicated hereinabove, this petition is allowed.
The impugned orders passed by the assessing authority, Assistant Commissioner, Annexure P/5 dated 1st September, 2002, 29th July, 2003 (Annexure P/8), and the revisional authority, Additional Commissioner dated 25th August, 2004 as contained in Annexure P/9 are quashed. Authorities concerned are directed to refund the amount of penalty deposited by the Company.
Petition stands allowed and disposed of without any order so as to cost.
