REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No. ................ OF 2010 (@ SLP (C) No. 23763 of 2008)

Assistant Commercial Taxes Officer  …Appellant

Versus

M/s. Kansai Nerolac Paints Ltd.           …Respondent

JUDGMENT

Swatanter Kumar, J.

1.      Delay condoned.

2.      Leave granted.

3. We may notice 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 17.06.1997 issued by M/s. Deshbandhu Transport

Company and the goods were consigned to M/s. Goodlass Nerolac  

Paints Limited.  This vehicle was intercepted and checked by the  

Customs Enforcement Department  (for  short  ‘the Department’).  

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 18A 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 goods. Finding the reply without any merit and rejecting  

the same, the competent authority vide its order dated 23.06.1997  

imposed a penalty of Rs.1,24,920/-  in terms of Section 78(5) of  

the Act.  This order of the competent authority was challenged in  

appeal by the owner of goods before the Deputy Commissioner  

(Appeals), Commercial Taxes-II, Jaipur which, vide order dated  

03.11.2003, allowed the appeal and held that the penalty against  

the  owner of  the  goods could not  be imposed as there  was no  

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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.  

4. The appeal preferred by the Department came to be dismissed by  

the order of the Board dated 04.04.2005.  The Board, while setting  

aside  the  order,  expressed  the  view  that  prior  to  22.03.2002  

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.

5. 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 u/s  78(5)  of  the  Act  of  1994,  for  violation  of  provisions  of  Section 78(2) of the Act of 1994?

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(ii) Whether the blank declaration form ST-18A 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 u/s 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.”

6. 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.  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  

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High Court is contrary to the principles stated by this Court in the  

case of Guljag Industries v.  Commercial  Tax Officer  [(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.

7. 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.”

8. 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  

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and as such it was expected of the High Court to deal with the  

contentions raised in some elaboration.

9. 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 the case of Guljag Industries (supra) 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  18A/18C  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.   This  principle  was  

further explained and was finally settled in a subsequent judgment  

of  this  Court  in  Assistant  Commercial  Taxes  Officer  v.  Bajaj  

Electricals  Ltd.  [(2009)  1  SCC 308]  to  which  again  one  of  us  

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(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  18A  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 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.   

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  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.

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10. For  the  reasons  afore-recorded,  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.  

There shall be no order as to costs. To that extent the appeal is allowed.

........................................J.  [ S.H. KAPADIA ]

........................................J.       [ SWATANTER KUMAR ]

New Delhi April 15, 2010

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