MENS REA IS A PRE REQUISITE TO PROVE ATTEMPT TO EVADE TAX
Penalty proceeding in an attempt to evade tax are quasi criminal in nature, so if the checking officer fails to establish the same, then there is left no scope for remanding the case back to the checking officer and the order passed by him is liable to be set aside as held in the case of M/s J.S.W. Steel Ltd., Faridabad Vs State of Haryana 40 PHT 319 (HTT).
In my opinion there are five ingredients which may be looked into while imposing the penalty under section 31(8) after proper enquiry. First there must be intention, second there must be some preparation for evasion of tax, thirdly there must be the execution of that preparation, fourthly the goods must be in transit and lastly there must be the evasion of tax to the State of Haryana.
A guilty mind will go for tax evasion and the first thing is the intention which can be seen from the facts and circumstances of the case since every case has his own set of occurrences. Mens rea constitutes part of the offence and can not be excluded for levy of penalty. Levy of penalty is not automatic as held in the case of M/s Sadhu Ram Sham Lal, Tohana Vs State of Haryana 31PHT329(HTT).
Full Bench of Haryana Tax Tribunal in the case of M/s Hyderabad Industries Ltd., Faridabad Vs State of Haryana 37PHT66 (HTT)(FB) answered the question referred to them by holding that mens rea is an essential ingredient of section 31(8) of the HVAT Act because offence under the said section is ‘attempt to evade tax’ and not simply non production of dully filled and signed declaration (in form VAT D-3) prescribed under section 31(2) before the officer checking the goods during the course of their movement. Non production of dully filled and signed declaration which will include production of a blank or an incomplete declaration in material particulars does raise a presumption of suspicion of an attempt to evade tax, vide Note to section 31(6). The checking officer may on the basis of such suspicion order detention of the goods and launch inquiry to find out if there has been an attempt to evade tax but it is only on proof of an attempt to evade tax that he can impose penalty and charge advance tax under section 31(8).
In the case of Haryana Conductors (P) Ltd., GT Road, Sonepat Vs State of Haryana 38PHT239 (HTT) held that both the Checking Officer imposing the penalty as well as first Appellate Authority fell in error by following the decision of the Hon’ble Supreme Court in Guljag Industries Vs Commercial Tax Officer, Rajasthan, (2007) 30PHT300 (SC) in stating that mens rea is not required to be proved for imposition of penalty under section 31(8) of the Act while proof of an attempt to evade tax is since qua non of section 31(8) which is nothing but establishing mens rea as an attempt to evade tax predicates a guilty scheming mind.
The mind filled with greediness to earn more money in competitive market will start preparation of documents like false bills and temper other declaration forms issued by the State with utmost care so that he could not be caught by any State machinery empowered to check the evasion of tax. Therefore, a proper enquiry is must to find the actual culprit and a bonafide dealer should not be harassed on minor mistakes which do not lead to evasion of tax to the State of Haryana.
The preparation must be with the intention and there must be execution of that preparation. A dealer is holding the false bills and declaration form but not executed that document with the movement/sale of goods and then there is no case against him under section 31, he may be charged with penalty in any other section of the Act but not under section 31.
A penalty was levied because the date and month recorded on the form was not punched but crossed by pen and the driver ran away leaving the truck when it was chased and caught. ETO suspected that it was not genuine and levied penalty believing that Form ST -38 could be re used and this could be kept out of record if not detected. Penalty levied set aside by the Tribunal (28 PHT 571 HTT) observing that there is nothing in the record to suggest that there was intention to evade the tax. Consignment was accompanied by all the necessary documents. Burden of proof lay of the Revenue that there was intention to evade tax. Revenue has not been able to discharge the burden by any sustainable yard stick.