# Durga Steel Rolling Mills v. Commissioner of Commercial Taxes U.P. Lko

- **Citation:** (2024) 3 ILRA 1765
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2024-03-15
- **Case number:** Sales/Trade Tax Revision No. 40 of 2021
- **Bench:** Abdul Moin
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/durga-steel-rolling-mills-v-commissioner-of-commercial-taxes-u-p-lko-51611
- **Pages:** 13

## Headnote

C.S.C.

-Durga Steel Rolling Mills Thru. Partner
Amit
Arora
vs.
Commissioner
of
Commercial Taxes, U.P., Lko
Neutral
Citation
No.
-
2024:AHCLKO:22796

U.P. VAT Act, 2008 - Section 54(1)(2) -
penalty - mens-rea - evasion of payment of tax
- best judgement assessment under Section
28(2) - assessment based on reasonable guess
or well grounded estimate - no finding of willful
attempt to evade tax - mens-rea an essential
pre-requisite condition - penalty cannot be
imposed where assessment is made on the
basis
of
best
judgement
assessment
-
imposition of penalty in excess of three times
not sustainable - judgement and order of
Commercial Tax Tribunal set aside

Revision allowed. (E-9)

Cases Cited:

## Text

_Characters 0–39,995 of 41,244. This is a partial read: ask again with offset=39995 for what follows._

3 All. Durga Steel Rolling Mills Vs. Commissioner of Commercial Taxes U.P. Lko.
1765
incorporated
in
the
order,
which
subsequently was added by the order dated
31.01.2024. The officer concerned had
neither reviewed his order nor had granted
any further relief in the garb of powers
conferred under Section 151/152 CPC. It
was only accidental slip/omission which
was corrected to meet the ends of justice.

164.

Considering
the
overall
submissions advanced by the respective
counsel of the parties and after analysing
the material on record, I find that the
appellant has not made out any case for
interfering in the order dated 17.01.2024
and 31.01.2024 appointing the District
Magistrate, Varanasi as Receiver and
arranging to carry out worship and rituals
in Vyas tehkhana (cellar) under his
supervision by the priest, so appointed.
Moreover, worship has already started in
the cellar since 01.02.2024.

CONCLUSION

165. For the reasons given above, I
find that both the appeal filed under Order
XLIII Rule 1 (s) CPC fails which questions
the order dated 17.01.2024 and 31.01.2024
passed by the District Judge, Varanasi on
application 9-C filed under Order XL Rule
1 CPC appointing District Magistrate,
Varanasi as Receiver of Vyas tehkhana
(cellar) and arranging for worship and
performance of rituals by the priest,
nominated by the plaintiff and Shri Kashi
Vishwanath Trust Board.

166. Thus, both the appeal are hereby
dismissed.

167. However, no order as to cost.
----------
(2024) 3 ILRA 1765
REVISIONAL JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 15.03.2024

BEFORE

THE HON'BLE ABDUL MOIN, J.

Sales/Trade Tax Revision No. 40 of 2021
alongwith
Sales/Trade Tax Revision No. 39 of 2021

Durga Steel Rolling Mills ...Petitioner
Versus
Commissioner of Commercial Taxes U.P.
Lko. ...Respondent

Counsel for the Petitioner:
Mudit Agarwal

Counsel for the Respondent:
C.S.C.

-Durga Steel Rolling Mills Thru. Partner
Amit
Arora
vs.
Commissioner
of
Commercial Taxes, U.P., Lko
Neutral
Citation
No.
-
2024:AHCLKO:22796

U.P. VAT Act, 2008 - Section 54(1)(2) -
penalty - mens-rea - evasion of payment of tax
- best judgement assessment under Section
28(2) - assessment based on reasonable guess
or well grounded estimate - no finding of willful
attempt to evade tax - mens-rea an essential
pre-requisite condition - penalty cannot be
imposed where assessment is made on the
basis
of
best
judgement
assessment
-
imposition of penalty in excess of three times
not sustainable - judgement and order of
Commercial Tax Tribunal set aside

Revision allowed. (E-9)

Cases Cited:

1. M/s Moti Lal Jawahar Lal v. Commissioner of
Sales Tax, U.P., Lucknow, 2003 NTN (Vol. 23)
590.
1766 INDIAN LAW REPORTS ALLAHABAD SERIES
2. Commissioner, Sales Tax, U.P., Lucknow v.
S/s Shanti Swarup Raj Kumar Katra Naj,
Moradabad, STI 1998 Allahabad High Court 394.

3. Commissioner of Sales Tax, Uttar Pradesh v.
Sanjiv Fabrics, (2010) 9 SCC 630.

4. S.S. Flabours v. State of U.P. and another,
2016 (61) NTN DX 100.

5. State of Kerala v. C. Velukutty, 1966 (60) ITR
239 (SC).

6. Commissioner of Income Tax, Calcutta v.
Padamchand Ramgopal, (1970) 3 SCC 866.

7.
M/s
Joharmal
Murlidhar
and
Co.
v.
Agricultural Income Tax Officer, Assam and
others, (1970) 3 SCC 331.

8. Shri S. M. Hasan, S.T.O., Jhansi and another
v. M/s New Gramophone House, Jhansi, (1976)
4 SCC 854.

(Delivered by Hon'ble Abdul Moin, J.)

1. Heard Shri Mudit Agarwal, learned
counsel for the revisionist and Shri Sanjay
Sarin, learned Additional Chief Standing
Counsel appearing for the respondent.

2. Learned counsels appearing for the
parties contend that the issue involved in
SALES/TRADE TAX REVISION No. - 40
of
2021
and
SALES/TRADE
TAX
REVISION No. - 39 of 2021 are the same.
As such, the Court proceeds to hear and
decide both the revisions together. For
convenience, facts of SALES/TRADE
TAX REVISION No. - 40 of 2021 are
being taken.

3. This Court vide the order dated
17.08.2021 had admitted the revision.
However the questions of law were not
framed.

4. Both the learned counsels state that
the questions of law which would be
relevant for deciding the controversy
involved in the instant revision would be as
follows:

"(I) Whether the men-rea on the
part of the assessee is an essential prerequisite condition for imposition of
penalty under Section 54(1)(2) of the U.P.
VAT Act, 2008?

(II)
Whether
penalty
under
Section 54(1)(2) of the Act can be imposed
where the assessment is made on the basis
of Best Judgement Assessment?

(IV)
Whether
imposition
of
penalty of 7 times the total tax imposed
towards alleged concealed turnover was
justified when the express provision of
Section 54(1)(2) of the Act provides for
imposition of a maximum penalty of 3 times
of concealed turnover?"

5. Shri Mudit Agarwal, learned
counsel for the revisionist states that
although a counter affidavit has been filed
in the revision but he does not intend to file
any reply thereto and wants to argue the
matter finally.

6. As such the Court proceeds to hear
and decide the matter finally.

7. The instant revision has been filed
challenging the judgement and order dated
06.04.2021
passed
by
the
learned
Commercial
Tax
Tribunal,
Bench-2,
Lucknow (hereinafter referred to as learned
Tribunal) in Second Appeal No. 50 of
2017.

8. The case set forth by learned
counsel for the revisionist is that a survey
took place on the premises of the
revisionist on 23.12.2008. The stock is
alleged to have been noted by the surveyors
on the basis of presumption. The stock was
3 All. Durga Steel Rolling Mills Vs. Commissioner of Commercial Taxes U.P. Lko.
1767
found to be recorded more in the books of
accounts of the revisionist vis a vis the
physical stock. An assessment order dated
30.10.2010, a copy of which is annexure 1
to the revision, was passed against the
revisionist under the provisions of Section
28(2) of the U.P. V.A.T. Act, 2008
(hereinafter referred to as the Act, 2008).
By the said assessment order the disputed
demand was indicated as Rs 12,44,653/-.
Being aggrieved, the revisionist filed a first
appeal. The learned appellate authority,
vide the order dated 27.06.2012, a copy of
which is annexure 2 to the revision,
reduced the disputed demand by Rs
6,21,875/- and thus a demand of Rs
6,22,778/- remained. Still being aggrieved,
the revisionist filed an appeal before the
learned Tribunal and at the same time the
Department also filed an appeal. Both the
appeals were clubbed together and were
decided vide common judgement and order
dated 22.06.2016, a copy of which is
annexure 3 to the revision, whereby the
appeal of the revisionist was partly allowed
while the appeal of the department was
dismissed. While allowing the appeal,
learned Tribunal gave a relief to the
revisionist of Rs 3,25,625/- thus assessing
the tax liable to be paid by the revisionist at
Rs 2,46,250/- as stated by Shri Mudit
Agarwal,
learned
counsel
for
the
revisionist.

9. Shri Agarwal states that the
judgement and order dated 22.06.2016
passed by the learned Tribunal attained
finality as it was not challenged by the
revisionist rather the revisionist acquiesced
to the said order and has paid the aforesaid
amount of Rs 2,46,250/-.

10. It is contended that during
pendency of the aforesaid proceedings, a
notice dated 30.01.2013 under Section
54(1)(2) of the Act, 2008, a copy of which
is annexure 4 to the revision, had been
issued to the revisionist. The revisionist
filed
his
reply.
Vide
order
dated
08.05.2013, a copy of which is annexure 5
to the revision, an order of penalty was
passed whereby the revisionist has been
required to pay an amount of Rs
18,65,625/- against the assessed tax of Rs
6,21,875/-. Being aggrieved the revisionist
filed an appeal which was rejected vide the
order dated 30.09.2016, a copy of which is
annexure 7 to the petition. Still being
aggrieved the revisionist filed a second
appeal before the learned Tribunal which
has also been dismissed vide the judgement
and order dated 06.04.2021 as annexed to
the revision. Being aggrieved the instant
revision has been filed.

11. The argument of learned counsel
for the revisionist is that a perusal of serial
no. 2 of the table, as provided in Section
54(1) of the Act, 2008, would indicate that
in order to attract the penalty, a finding has
to be specifically recorded that the dealer
has concealed the particulars of his
turnover or has deliberately furnished
inaccurate particulars of such turnover or
has submitted a false tax return or has
evaded payment of tax which he is liable to
pay under the Act and only after such a
finding has been recorded by the competent
authority can the penalty be imposed.

12. The contention is that a perusal of
the order impugned would indicate that no
finding
of
the
revisionist
having
deliberately concealed the particulars of his
turnover or having deliberately furnished
inaccurate
particulars
or
having
deliberately evaded payment of tax has
been indicated and consequently the
competent authority patently erred in
imposing the penalty which aspect has not
1768 INDIAN LAW REPORTS ALLAHABAD SERIES
been considered by the appellate authority
as well as by the learned Tribunal while
dismissing the second appeal filed by the
revisionist vide the judgement and order
dated 06.04.2021.

13. Learned counsel for the revisionist
also states that the provisions of section
54(1) of the Act, 2008 are akin to the
provisions of Section 15A of the UP Sales
Tax Act, 1948 renamed as U.P. Trade Tax
Act, 1948 with retrospective effect (now
repealed).

14. In this regard reliance has been
placed on the judgements of this Court in
the case of M/s Moti Lal Jawahar Lal vs
The Commissioner of Sales Tax, U.P.,
Lucknow, 2003 NTN (Vol.23) 590, The
Commissioner, Sales Tax, U.P., Lucknow
vs S/s Shanti Swarup Raj Kumar Katra
Naj,
Moradabad,
STI
1998
ALLAHABAD HIGH COURT 394, The
Commissioner of Sales Tax, Uttar
Pradesh vs Sanjiv Fabrics, 2010 (9) SCC
630.

15. Placing reliance on the division bench
judgement of this Court in the case of S.S.
Flabours vs State of U.P. and another,
2016 (61) NTN DX 100 the argument of
learned counsel for the revisionist is that
this Court, after considering the provisions
of Section 15A of the Trade Tax Act, 1948
(hereinafter referred to as the Act, 1948)
has held the said provisions to be akin to
Section 54 of the Act, 2008 and has
thereafter held that in order to impose
penalty, specific finding of concealment or
furnishing of wrong particulars of return
has to be made and in absence thereto, the
order of imposition of penalty cannot be
said to be legally sustainable in the eyes of
law meaning thereby that mens-rea is a
necessary ingredient for imposition of
penalty.

16. Reliance has also been placed on
the definition of "Tax Evasion" as per
Blacks' Law Dictionary, 8th Edition.

17. No other argument has been
raised.

18. On the other hand, Shri Sanjay
Sarin, learned Additional Chief Standing
Counsel appearing for the respondent
argues
that
none
of
the
aforesaid
judgements have considered the full
purport of column no. 2 of the table of
Section 54 (1) of the Act 2008 in as much
as one of the wrong on which the penalty
can be imposed, as provided in the table, is
the evasion on the part of the dealer for
payment of tax which he is liable to pay
under the Act.

19. The argument of Shri Sarin is that
when the judgement and order dated
22.06.2016 passed by learned Tribunal
whereby the revisionist has been assessed
for payment of tax of Rs 2,45,250/- has
attained finality and the revisionist has also
deposited the tax as such the said payment
of tax by revisionist would fall within the
ambit of being an evasion of payment of
tax which the revisionist has been held
liable to pay under the provisions of the
Act, 2008 and consequently the penalty can
validly be imposed on the revisionist which
in fact has been been done by means of the
order impugned dated 06.04.2021.

20. Shri Sarin however fairly submits
that as the amount of tax has been reduced
from one stage to another and finally stood
at Rs 2,46,250/- consequently three times
the aforesaid amount can validly be
imposed on the revisionist but in the instant
3 All. Durga Steel Rolling Mills Vs. Commissioner of Commercial Taxes U.P. Lko.
1769
case a still higher amount has been
imposed.

21. So far as the judgements of this
Court in the case of M/s Moti Lal
Jawahar Lal (supra), S/s Shanti Swarup
Raj Kumar Katra Naj (supra), Sanjiv
Fabrics (supra)
and S.S.
Flabours
(supra) are concerned more particularly the
division bench judgement of this Court in
the case of S.S. Flabours (supra) the
argument of Shri Sarin is that the division
bench, although has held that the provisions
of Section 15A of the Act, 1948 are parimateria to provisions of Section 54(1) of
the Act 2008, yet the division bench has not
considered that there was no provision
under the Act 1948 which provided for
imposition of penalty where the dealer has
evaded payment of tax which he is liable to
pay under the said Act and thus it is argued
that the said judgement would not be
applicable in the facts of the instant case.

22. Heard the counsels for the parties
and perused the records.

23. From perusal of the record it
emerges that a survey took place at the
premises of the revisionist on 23.12.2008.
An assessment order dated 30.10.2010 was
passed against the revisionist under the
provisions of section 28(2) of the Act, 2008
whereby disputed demand was indicated as
Rs 12,44,653/-. The revisionist filed the
first appeal and the appellate authority vide
order
dated
27.06.2012
reduced
the
disputed demand by Rs 6,21,875/- and thus
a demand of Rs 6,22,778/- remained. The
revisionist as well as the Revenue filed
second appeals against the said order dated
27.06.2012. Both the appeals were clubbed
together and decided vide judgement and
order dated 22.06.2016 by the learned
Tribunal whereby the appeal of the
revisionist was partly allowed while the
appeal of the Revenue was dismissed.
While allowing the appeal of the revisionist
learned Tribunal has given a relief of Rs
3,25,625/- thus assessing the tax liability to
be paid by the revisionist at Rs 2,46,250/-.
The said order has attained finality. The
amount of tax has also been deposited by
the revisionist.

24. During pendency of the aforesaid
proceedings,
a
notice
under
Section
54(1)(2) of the Act, 2008 was issued to the
revisionist. The revisionist filed his reply.
Vide the order dated 08.05.2013 an order of
penalty has been passed whereby the
revisionists has been required to pay an
amount of Rs 18,65,625/- against the
assessed tax of Rs 6,21,875/-. Being
aggrieved the revisionist filed an appeal
which has been rejected vide the order
dated 30.09.2016. Still being aggrieved, a
second appeal was filed before the learned
Tribunal which has been dismissed vide
judgement and order dated 06.04.2021.
Being aggrieved the instant revision has
been filed.

25. The argument of learned counsel
for the revisionist is that a perusal of serial
no. 2 of table as provided in Section 54 (1)
of the Act, 2008 would indicate that in
order to levy a penalty, a finding has to be
specifically recorded that the dealer, in this
case
the
revisionist,
has
concealed
particulars of turnover or has deliberately
furnished inaccurate particulars of such
turnover or has submitted a false tax return
or has avoided payment of tax which he is
liable to pay under the Act and only when a
specific finding to the said effect has been
recorded by the competent authority can
the penalty be imposed.

26. The argument of learned counsel
for the revisionist is that there has to be a
1770 INDIAN LAW REPORTS ALLAHABAD SERIES
specific finding of mens-rea by the
authorities concerned of a deliberate
attempt to evade tax and only after such a
finding has been recorded can a penalty be
imposed and in the absence of such finding
the penalty as imposed on the revisionist
vide the order impugned dated 08.05.2013
cannot be said to be legal and valid in the
eyes of law.

27. In order to consider the arguments
of learned counsel for the revisionist as to
whether mens-rea would be an essential
ingredient in the levy of penalty under
Section 54(1)(2) of the Act, 2008 the Court
may refer to the provisions of Section 54 of
the Act, 2008.

28. For the sake of convenience, the
relevant extract of Section 54 of the Act
2008 is reproduced as under:

54. Penalties in certain cases

(1) The assessing authority, if he
is satisfied that any dealer or other person,
as the case may, has committed the wrong
described in column (2) of the table below,
it may, after such inquiry, if any, as it may
deem necessary and after giving dealer or
person reasonable opportunity of being
heard, direct that such dealer or person
shall, in addition to the tax, if any, payable
by him, pay by way of penalty, a sum as
provided in column (3) against the same
serial no. of the said table:

Sl.
No.
Wrong
Amount
of
Penalty
1.

.........
............
2.
The
dealer
has
concealed particular
of his turnover or
three
times
of amount of
tax
has
deliberately
furnished inaccurate
particulars of such
turnover; or submits
a false tax return
under this Act or
evades payment of
tax which he is liable
to pay under this Act
concealed or
avoided
3.
.......
.......

Explanation - For the purposes
of this section -

(i)
the
assessing
authority
includes an officer not below the rank of an
officer appointed and posted by the
Commissioner at a check-post or an officer
empowered to exercise powers under
sections 45, 46, 47, 48, 50, 51 and 52 of
this Act;

(ii)
if
the
value
of
goods
described or mentioned in tax invoice, sale
invoice or any such other document is
under valued to the extent of more than fifty
percent of the value of goods prevalent at
the relevant time in the local market area
where the transaction has taken place, the
estimated value prevalent at the relevant
time in such local market area shall be
deemed to be the value of such goods,

(iii) if the value of goods is not
described or mentioned in tax invoice, sale
invoice or any such other document the
estimated value prevalent at the relevant
time in the local market area where the
transaction has taken place, shall be
deemed to be the value of such goods.".

29. From perusal of Section 54 of the
Act, 2008, so far as it is relevant to the
facts of the instant case, it emerges that in
case the assessing authority is satisfied that
any dealer or other person has committed
the wrong described in Column (2) of the
3 All. Durga Steel Rolling Mills Vs. Commissioner of Commercial Taxes U.P. Lko.
1771
table then it may direct such dealer or
person to pay by way of penalty a sum as
provided in column 3 against the same
serial number.

30. Serial no. 2, with which the
present controversy pertains to, describes
the wrong committed by the dealer
whereby where the dealer has concealed
particulars
of
his
turnover
or
has
deliberately furnished inaccurate particulars
of such turnover or submits a false tax
return under the Act 2008 or evades the
payment of tax which he is liable to pay
under the Act, 2008 then three times of
amount of tax concealed or avoided can be
imposed as penalty.

31. So far as the present controversy
is concerned, the wrong as has been
attributed to the revisionist, is evasion of
payment of tax which he is liable to pay
under the Act, 2008. The evasion of
payment of tax has been indicated to be on
the basis of assessment order dated
30.10.2010 as passed under the provisions
of Section 28(2) of the Act, 2008 further
reduced by order dated 27.06.2012 and still
reduced vide the judgement and order dated
22.06.2016 whereby learned Tribunal has
assessed the tax liable to be paid at
2,46,250/-.

32. Here it would also be pertinent to
refer to the provisions of Section 28 of the
Act 2008 per which the initial assessment
order dated 30.10.2010 had been passed.

33. For the sake of convenience, the
provision of Section 28 of the Act, 2008 is
reproduced below:

"28. Assessment of tax after
examination of Records.-

(1) In following types of cases or
dealers, the assessing authority, after
detailed examination of books, accounts
and documents kept by the dealer in
relation to his business and other relevant
records, if any, and after making such
inquiry as it may deem fit, subject to
provision of sub-section (9), shall pass an
assessment order for an assessment year in
the manner provided in this section:

(a) in cases of such dealers as are
specified or selected for tax audit by the
Commissioner or any other officer, not
below the rank of a Joint Commissioner,
authorized by the Commissioner in this
behalf; in such manner and within such
time as may be prescribed;

(b) in case of a dealer falling in
any of the categories below,

(i) dealer who has not submitted
annual return of turnover and tax within
the time prescribed or extended; or

(ii) dealer by whom tax return for
one or more tax periods of the assessment
year have not been submitted; or

(iii)
dealer
in
whose
case
assessing authority has passed provisional
assessment order under section 25 in
respect of one or more tax periods to the
best of its judgment; or

(iv) dealer in whose case, on the
basis of material available on records, if
the assessing authority is satisfied that the
turnover of sales or purchases or both, as
the case may be, and amount of tax shown
payable as disclosed by the dealer in
annual return of turnover and tax are not
worthy of credence or tax shown payable in
the return has not been deposited by the
dealer, or the amount of input tax credit
claimed is wrong or the amount of tax
payable shown is incorrect; or

(v) dealer who has prevented or
obstructed an officer empowered to make
1772 INDIAN LAW REPORTS ALLAHABAD SERIES
audit, survey, inspection, search or seizure
under the provisions of this Act; or

(vi) [Omitted]

(2) Where after examination of
books, accounts, documents and other
records referred to in sub-section (1), -

(i) the assessing authority is
satisfied about correctness of turnover of
sale or purchase or both, as the case may
be, disclosed by the dealer, it may assess
the amount of tax payable by the dealer on
such turnover and determine the amount of
input tax credit admissible to the dealer or
amount of reverse input tax credit payable
by the dealer; and

(ii) where assessing authority is
of the opinion that turnover of sale or
purchase or both, as the case may be,
disclosed by the dealer is not worthy of
credence, it may determine to the best of its
judgment the turnover of sale or purchase
or both, as the case may be, and assess the
tax
payable
on
such
turnover
and
determine admissible amount of input tax
credit and reverse input tax credit payable
by the dealer.

(3) Before making an assessment
under sub-section (2), dealer shall -

(i) be required to furnish annual
return of turnover and tax referred to in
sub-section (7) of section 24, if he has not
already submitted such return;

(ii)
be
given
reasonable
opportunity of being heard; and

(iii) be served with a notice to
show cause, where determination of
turnover, input tax credit or reverse input
tax credit, or assessment of tax, all or any
one of them, as the case may be, are to be
made to the best of the judgment of the
assessing authority.

(4)
The
show cause
notice
referred to in sub-section (3) shall contain
all such reasons on which the assessing
authority has formed its opinion about
incorrectness of the turnover of sale or
purchase or both, as the case may be,
amount of tax, amount of input tax credit or
amount of reverse input tax credit:

(5) Order of assessment shall be
in writing and copy of assessment order
along with prescribed notice of demand of
the balance amount of tax, if any, to be
deposited by the dealer, shall be served on
the dealer.

(6) Dealer shall deposit amount
of tax assessed in excess of amount of tax
deposited by him for the assessment year,
within a period of thirty days after the date
of service of the assessment order and
notice of demand.

(7) Where the amount of tax
deposited by the dealer is found in excess
of tax assessed, the same shall be refunded
to the dealer according to the provisions of
this Act.

(8) Assessing authority shall not
be precluded from making assessment
order under this section on the ground of
passing of any provisional assessment
order in respect of any tax period under
section 25 and such provisional assessment
order, if any, shall stand merged in the
assessment order passed under this section.

[(9) Notwithstanding anything to
the contrary in any other provision of this
Act, where an unregistered dealer brings
any taxable goods from outside the State
more than once during an assessment year,
separate assessment relating to goods
brought on each occasion may be made for
the same assessment year.]

(10) The provisions of this Act
shall apply to each assessment order
passed under sub-section (9) as they apply
to an order passed under sub-section (2).

(11) Dealers under sub-section
(9) shall not be required to furnish annual
return of turnover and tax and in cases of
such dealers assessment under sub-section
3 All. Durga Steel Rolling Mills Vs. Commissioner of Commercial Taxes U.P. Lko.
1773
(9) may be made even before the expiry of
the assessment year.

(12) Provisions of sub-sections
(5), (6) and (7) shall, mutatis mutandis,
apply to every assessment order passed
under any provisions of this Act."

34. A perusal of Section 28(2) of the
Act 2008 would indicate that where after
examination of books, accounts and other
records referred to in Section 28(1) of the
Act, 2008 the assessing authority is
satisfied about correctness of sale or
purchase or both, it may the assess the
amount of tax payable by the dealer. Where
the assessing authority is of the opinion that
turnover of sale or purchase or both,
disclosed by the dealer is not worthy of
credence, it may determine to the best of its
judgement the turnover of sale or purchase
or both and assess the tax payable on such
turnover and determine the taxable amount
of input tax credit and reverse input tax
credit payable by the dealer.

35. A further perusal of Section 28(2)
of the Act 2008 indicates that the power of
assessment of the amount of tax payable by
the dealer on such turnover and for
determining the amount of input tax credit
admissible to the dealer has been given to
the assessing authority and further where
the assessing authority is of the opinion that
turnover of sale or purchase or both
disclosed by the dealer is not worthy of
credence it may determine to the best of its
judgement the turnover of sale or purchase
or both and assess the tax payable on such
turnover. Exercising the power, as vested in
the assessing authority, the order dated
30.10.2010 had been passed which upon
further scrutiny after challenge at various
levels, has resulted in judgement and order
dated 22.06.2016 whereby the second
appeal of the revisionist has been partly
allowed and on the basis of the tax liable to
be paid by the revisionist, the penalty as
provided under Section 54 (1)(2) of the
Act, 2008 has been imposed.

36. The assessment order dated
30.10.2010 would indicate that the same
has been passed considering the provisions
of Section 28(2) of the Act, 2008 on the
basis of best of its judgement meaning
thereby that it is an assessment which has
been made by the assessing authority.

37. The jurisdiction of the assessing
authority while taking recourse to the "best
judgement assessment" is well settled.
Hon'ble Supreme Court in the cases of
State of Kerala vs C. Velukutty 1966 (60)
ITR 239 (SC), The Commissioner of
Income Tax, Calcutta v. Padamchand
Ramgopal, 1970 (3) SCC 866, M/s
Joharmal
Murlidhar
and
co.
v.
Agricultural Income Tax Officer, Assam
and others, 1970 (3) SCC 331 and Shri S.
M. Hasan, S.T.O. Jhansi and another v.
M/s New Gramophone House, Jhansi,
(1976) 4 SCC 854, has categorically held
that while assessing on the basis of "best
judgement" the assessing authority has to
make the assessment honestly and on the
basis of intelligent well grounded estimate
rather
than
pure
surmises
i.e.
the
assessment so made while taking recourse
to the "best judgement assessment" should
be on reasonable guess based upon the
material available before the assessing
authority.

38. Being armed with the aforesaid
interpretation
of
"best
judgement
assessment" it can safely be presumed that
the assessment order dated 30.10.2010
passed under Section 28(2) of the Act,
2008 was passed by the assessing authority
1774 INDIAN LAW REPORTS ALLAHABAD SERIES
on a reasonable guess or well grounded
estimate.

39. At the same time, the penalty
which has been imposed on the revisionist
in terms of Section 54(1)(2) of the Act,
2008 indicates that the same has been
passed on the basis of the assessment order
under Section 28(2) of the Act, 2008 on the
ground of evasion of payment of tax which
the revisionist was liable to pay under the
Act.

40. "Tax evasion" has been defined in
the Black Law Dictionary, 9th Edition as
follows:

"tax evasion. The willful attempt
to defeat or circumvent the tax law in order
to illegally reduce one's tax liability."

41. From perusal of the aforesaid
definition of 'tax evasion' it emerges that
tax evasion has been defined as a willful
attempt to defeat or circumvent the tax law
in order to illegally reduce ones tax
liability. The word "willful" would mean a
deliberate attempt to circumvent the tax
law.

42. As already indicated above, the
order of penalty passed under Section
54(1)(2) of the Act, 2008 is based on the
order of the assessing authority as passed
under Section 28(2) of the Act, 2008. The
assessment order under Section 28(2) of the
Act, 2008 is on the basis of well grounded
estimate or reasonable guess as held by
Hon'ble Supreme Court meaning thereby
that the said order does not indicate the
willful attempt to defeat or circumvent the
tax law to reduce the tax liability. Once the
sine qua non to imposition of penalty is
evasion of payment of tax and for evasion
there has to be a willful act consequently
the Court will have to examine as to
whether there has been willful act on the
part of the revisionist in evasion of tax.

43. For this, the Court will also have
to consider as to whether mens-rea would
be an essential ingredient or element in
order to attract the offences under Section
54(1)(2) of the Act, 2008.

44. In this regard, Hon'ble Supreme
Court in the case of Sanjiv Fabrics
(supra) has held as under:

"24. Whether an offence can be
said to have been committed without the
necessary mens rea is a vexed question.
However, the broad principle applied by
the courts to answer the said question is
that there is a presumption that mens rea is
an essential ingredient in every offence but
the presumption is liable to be displaced
either by the words of the statute creating
the offence or by the subject matter with
which it deals and both must be considered.
(See: Sherras Vs. De Rutzen and State of
Maharashtra vs Mayon Han George).

25. Although in relation to the
taxing statutes, this Court has, on various
occasions, examined the requirement of
mens rea but it has not been possible to
evolve an abstract principle of law which
could be applied to determine the question.
As already stated, answer to the question
depends on the object of the statute and the
language employed in the provision of the
statute creating the offence. There is no
gain saying that a penal provision has to be
strictly construed on its own language.

26. In Nathulal vs State of
Madhya Pradesh 11, while dealing with the
question whether to constitute an offence
under
Section
7
of
the
Essential
Commodities Act, 1955 which provides for
levy of penalty for contravention of any
3 All. Durga Steel Rolling Mills Vs. Commissioner of Commercial Taxes U.P. Lko.
1775
order made under Section 3 of the State Act
mens rea is an essential ingredient, a threeJudge Bench of this Court observed as
follows:

"Mens rea is an essential
ingredient of a criminal offence. Doubtless
a statute may exclude the element of mens
rea, but it is a sound rule of construction
adopted in England and also accepted in
India to construe a statutory provision
creating an offence in conformity with the
common law rather than against it unless
the statute expressly or by necessary
implication excluded mens rea. The mere
fact that the object of the statute is to
promote welfare activities or to eradicate a
grave social evil is by itself not decisive of
the question whether the element of guilty
mind is excluded from the ingredients of an
offence. Mens rea by necessary implication
may be excluded from a statute only where
it
is
absolutely
clear
that
the
implementation of the object of the statute
would otherwise be defeated. The nature of
the mens rea that would be implied in a
statute creating an offence depends on the
object of the Act and the provisions
thereof."

27. In Union of India & Ors Vs
Dharamendra Textile Processors & ors 12
while examining the scope of Section 11AC of the of the Central Excise Act, 1944, a
three judge Bench of this Court, observed
that:

A penalty imposed for a tax
delinquency is a civil obligation, remedial
and coercive in its nature, and is far
different from the penalty for a crime or a
fine or forfeiture provided as punishment
for the violation of criminal or penal laws."

30. To put it succinctly, in
examining whether mens rea is an essential
element of an offence created under a
taxing statute, regard must be had to the
following factors:

(i) the object and scheme of the
statute;

(ii) the language of the section
and;

(iii) the nature of penalty.

31. It is true that the object of
Section 10(b) of the Act is to prevent any
misuse of the registration certificate but the
legislature has, in the said Section, used the
expression
"falsely
represents"
in
contradistinction to "wrongly represents."
Therefore, what we are required to
construe is whether the words "falsely
represents" would cover a mere incorrect
representation or would embrace only such
representations
which
are
knowingly,
wilfully and intentionally false.

32. According to the Black's Law
Dictionary (6th Edition), the word "false"
has two distinct and well-recognized
meanings: (1) intentionally or knowingly or
negligently untrue; (2) untrue by mistake or
accident, or honestly after the exercise of
reasonable care. A thing is called "false"
when it is done, or made, with knowledge,
actual or constructive, that it is untrue or
illegal, or is said to be done falsely when
the meaning is that the party is in fault for
its error.

33.
Likewise,
P.
Ramanatha
Aiyar in Advance Law Lexicon (3rd
Edition, 2005) explains the word "false" as:

"In the more important uses in
jurisprudence the word implies something
more than a mere untruth; it is an untruth
coupled with a lying intent......or an intent
to deceive or to perpetrate some treachery
or fraud. The true meaning of the term
must, as in other instances, often be
determined by the context'."
1776 INDIAN LAW REPORTS ALLAHABAD SERIES

36. In view of the above, we are
of the considered opinion that the use of the
expression "falsely represents" is indicative
of the fact that the offence under Section
10(b) of the Act comes into existence only
where a dealer acts deliberately in defiance
of law or is guilty of contumacious or
dishonest
conduct.
Therefore,
in
proceedings for levy of penalty under
Section 10A of the Act, burden would be on
the revenue to prove the existence of
circumstances
constituting
the
said
offence."

(emphasis by the Court)

45. From perusal of the judgement of
Sanjiv Fabrics (supra) it emerges that
Hon'ble Apex Court has held that in
examining whether the mens-rea is an
essential element of an offence created
under a taxing statute, regard must be had
to the following factors namely:

(i) the object and scheme of the
statute;

(ii) the language of the section;
and

(iii) the nature of penalty.

46. The object of Section 54 of the
Act, 2008 is to impose penalty if any dealer
or person has committed wrong described
in column (2) of the table. So far as serial
no. 2 of the table is concerned the same
reads that where a dealer has concealed the
particulars
of
his
turnover
or
has
deliberately furnished inaccurate particulars
of such turnover or has submitted a false
tax return under the Act or has evaded
payment of tax which he is liable to pay
under the Act then three times the amount
of tax concealed or avoided is to be
imposed as a penalty.

47. From the language of the Section
it is thus clear that, so far as the present
controversy is concerned, the dealer would
be liable to pay penalty for evasion of tax.
'Evasion of tax' is a willful attempt to
defeat or circumvent tax law as defined in
Blacks Law Dictionary. The penalty is
based on the assessment order under
Section 28(2) of the Act, 2008. In turn the
assessment order is based on "best
judgement assessment" which has been
held by the Hon'ble Supreme Court to be
on well grounded estimate or reasonable
guess based.

48. The revisionist has already paid
the tax as assessed after modification by the
learned Tribunal vide the order dated
22.06.2016. At no stage is there any finding
of any willful evasion of tax by the
revisionist or a finding of there being any
deliberate attempt on the part of the
revisionist in avoiding the payment of tax.
It is for the authorities to specifically prove
the evasion of payment of tax on the part of
the revisionist where the evasion has been
defined as a willful attempt i.e. the
authorities would have to prove a willful
attempt on the part of the revisionist to
evade tax. In absence thereto the order
imposing penalty on the revisionist based
on the assessment order passed under
Section 28(2) of 2008 cannot be said to fall
within the ambit of any of the eventualities
as provided under Section 54(1)(2) of the
Act 2008 more particularly it cannot be
considered to be an evasion of payment of
tax by the dealer / revisionist so as to attract
the penalty as has been imposed on the
revisionist.

49. Keeping in view the aforesaid
discussion, the questions of law stand
decided
as
below:
3 All. VISIBLE ALPHA SOLUTIONS INDIA PVT. LTD. Vs. Commissioner CGST
 NOIDA & Anr.
1777

Question of law
Decision
"(I) Whether the men-rea
on the part of the assessee
is an essential pre-requisite
condition for imposition of
penalty
under
Section
54(1)(2) of the U.P. VAT
Act, 2008?
Yes
(II) Whether penalty under
Section 54(1)(2) of the Act
can be imposed where the
assessment is made on the
basis of Best Judgement
Assessment?
No
(IV) Whether imposition of
penalty of 7 times the total
tax
imposed
towards
alleged concealed turnover
was justified when the
express
provision
of
Section 54(1)(2) of the Act
provides for imposition of
a maximum penalty of 3
times
of
concealed
turnover?
Left open to
be
decided
in
appropriate
proceedings

50. The revision is allowed. The
judgement and order dated 06.04.2021
passed
by
learned
Commercial
Tax
Tribunal, Lucknow in Second Appeal No.
50 of 2017 is set aside.

51. Consequences to follow.
----------
(2024) 3 ILRA 1777
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 12.02.2024 &
12.03.2024

BEFORE

THE HON'BLE SHEKHAR B. SARAF, J.
Writ Tax No. 83 of 2024

VISIBLE ALPHA SOLUTIONS INDIA PVT.
LTD. ...Petitioner
Versus
Commissioner CGST NOIDA & Anr.
 ...Respondents

Counsel for the Petitioner:
Sri Mohit Gupta, Sri Somnath Bhattacharya, Sri
Zafar Ahmad Khan

Counsel for the Respondent:
Sri Amit Mahajan