(a) Sales Tax Act (VII of 1990)-----

----Ss. 33(4-A), 34 & 36---Securing sales tax refund of Rs.2,057 on basis of fake invoices---Plea of assessee was that claim of such refund was made due to lack of knowledge as to status of suppliers---Authority directed for recovery of such amount from assessee alongwith additional tax under Ss. 34 & 36 and penalty of Rs.25,000 under S. 33(4-A) of Sales Tax Act, 1990---Tribunal reduced amount of penalty to Rs.10,000 as assessee had paid principal amount and additional tax ---Validity-- Imposition of penalty and its reduction by Tribunal was still on higher side---Intention of assessee to commit fraud did. not exist---Department and Tribunal should have allowed assessee an allowance for absence of mens rea and for not contesting charge and having willingly repaid refund alongwith additional tax---Purpose of penalty provisions and intended deterrence would be well-served, if amount of penalty was reduced to a token sum of Rs.250---High Court allowed appeal.

Additional Commissioner of Income-tax v: Narayandas Ramkishan 1994 PTD 199 rel.

(b) Sales Tax Act (VII of 1990)-----

----S. 33--Penalty---Mens rea---Proof of ---Mens rea is an essential ingredient in penalty proceedings taken against assessee---Levy of penalty is a matter of discretion to be exercised judiciously---Penalty should not be imposed merely because doing so would be lawful---Levy of penalty should be refused, where offence is of technical or venial in nature.

The nature of penalty provisions in taxing statutes and the proceedings held to bring assessee home are criminal or at least quasi criminal in nature. In such-like proceedings, proving of mens rea is an essential ingredient. Revenue is under a statutory obligation to prove that assessee had acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of his obligation.

Levy of penalty is a matter of discretion, which must be exercised by the Authorities judiciously on consideration of relevant circumstances. Penalty should not be imposed merely because it is lawful to do so. If the offence is of a technical or venial in nature, the Authorities will be justified in refusing to levy penalty.

Additional Commissioner of Incomes-tax v. Narayandas Ramkishan 1994 PTD 199 fol.

Shafaqat Mahmood Chohan for Appellant.

A. Karim Malik for the Revenue.

ORDER

Through this consolidated order we intend to dispose of Custom Appeals Nos.312, 313, 314, 315, 316, 317, 318, 319, 320, 321, 322, 323, 324, 325 and 326 of 2002 filed by registered persons against imposition of penalty as finally reduced by the learned Customs Excise and Sales Tax Appellate Tribunal, Lahore to Rs.10,000 in case of each appellant by way of their consolidated judgment, dated 3-4-2002.

2. The appellants were charged and finally found to have received different sums of sales tax refunds on the basis of fake invoices ranging between Rs.2057 in case of Messrs Ramzan Majeed Weaving Factory, Faisalabad and Rs.7241 in case of Messrs Tayyab Factory, Faisalabad.

3. In the consolidated order-in-original recorded by Deputy Collector (Adjudication) Faisalabad, dated 30-1-2002 it was observed that the respondents did not contest the charge. Before him it was contended that claim of these sums of refunds was only on account of lack of knowledge as regards the status of the suppliers and that if they had an intention to commit tax fraud, they would have claimed heavy amounts against fake invoices.

4. The Adjudicating Authority however, recorded the following consolidated order against all the appellants.

"The charges as enumerated in the show-cause notice are, however established.

I, therefore, adjudge an amount of Rs.2049 upon the respondents to be recovered from them alongwith additional tax under section 34 & 36 of Sales Tax Act, 1990 As the charges are admittedly established, the undersigned is left with no option but to impose a penalty of Rs.25,000 upon the respondent under section 33(4a) of the. Act."

5. Learned Tribunal in their order, dated 3-4-2002 noted the claim of the learned counsel for the appellants that principal amount of tax as well as additional tax had already been paid. The prayer for remission of penalty in toto was however, declined though the total amount of penalty of Rs.25,000 found to be somewhat harsh. Accordingly, it was directed to be reduced to Rs.10,000 in case of every appellant.

6. Learned, counsel for the appellants claims that the amount of penalty is still on the higher side as there was no intention to commit tax fraud on the part of any of the appellants. Secondly, that in view of S.R.O. 396(I)/2001, dated 18-6-2001 the appellants are entitled to total remission of penalty in each case.

7. Learned counsel for the Revenue on the other hand claims that the order of' the learned Tribunal in reducing the amount of penalty from Rs.25,000 to Rs.10,000 is rather beneficial to the appellants. Also states that the aforesaid S.R.O. relied upon at the bar is not applicable to the case of the appellants being manufacturers inasmuch as that S.R.O. is available to registered, enrolled or enlisted retailers and not manufacturers.

8. Having heard the learned counsel for the parties we will agree that the aforesaid S.R.O. is not applicable to the case of the appellants. However, we will readily agree that the imposition of penalty of Rs.25,000 and then its reduction to Rs.10,000 by the Tribunal is still on the higher side. We are in agreement with the contention put forth at the bar that had there been any intention to commit fraud, the appellants would not have attempted it for as meagre a sum as Rs.2057. The Department as well as the Tribunal should have allowed the appellants an allowance for absence of mens rea coupled with the fact that not only they did not contest the charge but also willingly re-paid the refunds alongwith additional tax.

9. The nature of penalty provisions in taxing statutes and the proceedings held to bring them home are criminal or at least quasi criminal in nature. In such-like proceedings proving of mens rea, in the view of their Lordships in re Additional Commissioner of Income-tax v. Narayandas Ramkishan 1994 PTD 199 is an essential ingredient. It was held that the Revenue was under a statutory obligation to prove that the assessee had acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of his obligation. Although the issue before their Lordships was slightly different from the one before us yet the principle laid applies on all fours to the facts in hand. Their Lordships were considering the legality of penalty for the late filing of return in the perspective of the legal provisions requiring an assessee to show reasonable cause for such late filing. The principle that was laid down by their Lordships needs to be kept in mind by all Revenue Authorities while enforcing penalty provisions. It is that:

"Levy of penalty is a matter of discretion which must be exercised by the Authorities judiciously on consideration or relevant circumstances. Penalty should not be imposed merely because it is lawful to do so. If the offence is of a technical or venial in nature, the Authorities. will be justified in refusing to levy penalty."

10. Judging the impugned order on this touchstone we are of the view that the purpose of penalty provisions as also the intended deterrence will be very well-served if the amount of penalty in the case of every appellant is reduced to a token sum of Rs.250.

11. Appeals allowed in the above terms.

S.A.K./B-192/LAppeals allowed.