JUDGMENT
S.P. Talukdar, J.
1. The judgment and order dated April 6, 2001 passed by the West Bengal Taxation Tribunal (in short, “the Tribunal”) in Case No. R.N. 346 of 2000 Reported in [2003] 131 STC 485 (WBTT).have been sought to be assailed by the petitioner/appellant, Kodak India Limited, a company within the meaning of the Companies Act, 1956.
2. The appellant’s grievances may briefly be stated as follows :
The appellant/petitioner is, inter alia, carrying on business of photographic film in the State of West Bengal. The petitioner is a dealer registered under the West Bengal Sales Tax Act, 1994 (hereinafter referred to as “the 1994 Act”) holding registration certificate No. TL/19.
3. The petitioner after obtaining blank permit to import consignment of photographic film sent it to its clearing agent in the month of September, 1997. On October 10, 1997, the driver of the vehicle with the consignment of photographic film entered into West Bengal without collecting the blank permit from the agent. The vehicle was detained at Chichira check-post and it was followed by seizure of the entire consignment on October 12, 1997 but due to a public demonstration at Bagnan Railway Station on October 14, 1997 the appellant could not reach Chichira check-post. The petitioner met respondent No. 3, i.e., Commercial Tax Officer, Chichira check-post on October 15, 1997 and produced the permit. Respondent No. 3, however, refused to accept the permit and issued a notice asking the petitioner to show cause as to why penalty should not be imposed under Section 71 of the West Bengal Sales Tax Act, 1994. The value of the consignment was assessed at Rs. 25 lakhs after hearing the petitioner and penalty of Rs. 5 lakhs was imposed. The said amount was deposited by the petitioner for getting goods released. Such order of respondent No. 3 was confirmed by respondent No. 2 in revision. Respondent No. 2 by an order dated November 18, 1997 confirmed the order dated October 15, 1997, passed by respondent No. 3. Being aggrieved by such order of the respondent No. 2, i.e., the Assistant Commissioner of Commercial Taxes, Midnapore Circle, the petitioner preferred a second revision before the respondent No. 1, i.e., the Deputy Commissioner of Commercial Taxes, Midnapore.
4. Being dissatisfied with the revisional order dated May 6, 1998, passed by the respondent No. 1, the petitioner, in good faith filed an application for revision before the Additional Commissioner, Commercial Taxes. The Additional Commissioner, Commercial Taxes disposed of the said revision by an order dated September 26, 1998 by way of rejecting the application on the ground that the said revisional application was filed in a wrong forum and the petitioner had already exhausted all the remedies under “the 1994 Act”, as soon as the second revision before the respondent No. 1 was duly disposed of. Thereafter, the petitioner filed an application under Section 8 of the West Bengal Taxation Tribunal Act, 1987 before the West Bengal Taxation Tribunal praying for setting aside all the three orders dated October 15, 1997, October 18, 1997 and May 6, 1998, passed by the respondent Nos. 3, 2, and 1 respectively. The Tribunal by judgment and order dated April 6, 2001 Reported in [2003] 131 STC 485 (WBTT).dismissed the application. The petitioner/appellant, thereafter, challenged the impugned order dated April 6, 2001, passed by the learned Tribunal on the ground that the Tribunal failed to appreciate the matter in its proper perspective. The Tribunal could not appreciate that the sole purpose of the show cause proceeding is not only meant for a mechanical exercise of power and convert the same to a penalty proceeding without considering the facts and circumstances of a particular case. There had been consistent failure on the part of various authorities as well as the learned Tribunal in appreciating the fact that in absence of any dishonest intention or mala fide motive, there could be hardly any justification for imposition of penalty.
5. In the facts and circumstances, the petitioner/appellant has prayed for setting aside of the impugned judgment and order dated April 6, 2001, passed by the learned Tribunal.
6. In fact, the orders passed by respondent Nos. 1, 2 and 3, as referred to earlier, have also been sought to be cancelled.
7. Learned counsel, Mr. S. Chakraborty, appearing for the appellant submitted at the very outset that the impugned orders including the order of the learned Tribunal suffer from inherent antagonistic contradictions. In this context, he referred to the decision in the case of Maple Exports Private Ltd. v. Commercial Tax Officer, Central Section reported in (2002) 39 STA 52.
8. Our attention was drawn to the decision in the case of Mahaveer Conductors v. Assistant Commercial Taxes Officer, Ward-Ill, Circle-C, Jodhpur, Rajasthan reported in [1997] 104 STC 65 (Raj). Referring to the said decision it was argued by Mr. Chakraborty that breach must be related to evasion or avoidance of tax. If that be so, mens rea or deliberate defiance of the provision with intention to evade or avoid liability of tax that may arise as a result of the transaction must be a necessary ingredient before penalty could be levied.
9. In the decision in the case of WS Tele Systems Ltd. v. Additional Commissioner of Commercial Taxes in Karnataka, Zone-II, Bangalore reported in [1997] 107 STC 568 (Kar) it was held that for levying tax penalty even under taxing statutes, it is incumbent upon the department to prove a guilty intention on the part of the taxpayer in not complying with the statutory requirements.
10. On behalf of the appellant, the decision in the case of Road Transport Corporation v. State of Uttar Pradesh reported in [1987] 66 STC 60 (All.) was also referred to in support of the contention that the concerned authority ought to have taken into consideration the permit which was reportedly produced before it in connection with the assessment and penalty proceeding. The facts and circumstances of the said case arc largely in tune with those of the present case and here too, there could be no justification for not taking intoconsideration the fact that the petitioner/appellant was very well equipped with a permit which unfortunately, due to some communication gap, could not be placed at the check-post.
11. Observations made by a division Bench of this Court in the case of Zarghamaddin Ansari (Anwar) v. Commercial Tax Officer reported in (2001) 38 STA 129, as reproduced here below may be relevant in the context of the present case :
“Whether penalty could be imposed depended on the facts and circumstances of the case and proper satisfaction being arrived at by the authorities that the petitioner had intended to evade payment of tax.”
12. In the case of Hindustan, Steel Ltd. v. State, of Orissa , it was observed that “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.”
13. On the other hand, learned counsel for the respondent submitted that the notion that a penalty or a punishment cannot be cast in the form of an absolute or no fault liability but must be preceded by mens rea is not correct. Mr. Laxmi Gupta, learned counsel for the respondent, drew our attention to the decision in the case of R.S. Joshi, Sales Tax Officer, Gujarat v. Ajit Mills Limited . Mr. Gupta, in fact, went a step further by arguing that in the relevant provision the word “knowing”, “deliberately” or “intentionally” does not find place. Referring to the decision in the case of Sai Electricals (P) Ltd. v. Commissioner of Sales Tax, U.P. reported in [1997] 107 STC 384 (AIL), it was submitted that if mens rea was intended to be imported in the relevant provision, these words would have been inserted in the section.
14. Before proceeding further it is perhaps necessary to refer, to certain findings of the respondent No. 1 in its order dated May 6, 1998, which arc as follows :
“It transpires from the order of the learned Commercial Tax Officer, Chichira check-post that the said permit was produced before him at the time of hearing. It was evident that the permit was procured long before entry of the consignment into Chichira check-post. So the dealer had no mala fide motive to import the consignment without any permit. It is also proved beyond doubt that the dealer had procured the permit for import the said item through Chichira check-post long before it entered. Undoubtedly it is admitted that the dealer could produce the permit before check-post in order to avoid seizure of the item if it was brought to their notice by the driver as they were in possession of a valid sales tax permit for import of the said item. Therefore, the contention of the learned authorised representative as to the communication gap is accepted.
15. If I admit that dealer had no mala fide motive of evasion of taxes by importing the item into West Bengal and if I admit that the due to the communication gap the dealer could not produce the permit in time, i.e., before seizure, the question arises as to whether there was a chance of evasion of sales tax due to the attempt on the part of the driver to pass the check-post without permit. I think there was a chance of loss of Government revenue.”
16. Interestingly enough, learned Tribunal while disposing of the application under Section 8 of the West Bengal Taxation Tribunal Act, held that “even smelling the mala fide attempt of evasion of tax, penalty was reduced to the tune of Rs. 3 lakhs from Rs. 5 lakhs probably for the reasons that the learned Deputy Commissioner had made up his mind to reduce the amount of penalty though the reasons for such remission was neither proper nor justified.”
17. Learned Tribunal, however, did not consider it necessary to interfere with the order of imposition of reduced penalty by the Deputy Commissioner.
18. It thus, appears that the concerned authorities and more significantly, learned Tribunal, were consistent in not appreciating the fact that discretion, if any, could not be arbitrary nor could be based on whims.
“A discretion”, said Lord Wrenbury, “does not empower a man to do what he likes merely because he is minded to do so–he must in the exercise of his discretion do not what he likes but what he ought. In other words, he must, by use of his reason, ascertain and follow the course which reason directs. He must act reasonably.” (Ref : Roberts v. Hopwood [1925] AC 578).
19. In the words of Lord Macnaghten : “It is well-settled that a public body invested with statutory powers……………………………..must take care not to exceed or abuse its powers. It must keep within the limits of the authority committed to it. It must act in good faith. And it must act reasonably.” (Rof : Mayor, etc. of Westminster v. London and North Western Ry. Co. [1905] A.C. 426). Where is the “reason” in the order of the Deputy Commissioner of Commercial Taxes or for that matter, orders passed by his subordinate authorities ? Unfortunately, the judgment and order of the learned Tribunal dated April 6, 2001 which have been sought to be assailed herein, suffer from inherent inconsistencies and lack of reasoning. It is practically not disputed that the petitioner/appellant was very well equipped with necessary permit well before his vehicle was checked at Chichira check-post. The fact that the driver being asked could not produce the permit is also not disputed. Concerned authorities have further appreciated that due to some communication gap, the relevant permit could not be produced. It has been consistently held that there was no mala fide intention. But yet, penalty of Rs. 5 lakhs, subsequently reduced to Rs. 3 lakhs, was imposed without any sufficient reason and it was more or less, on the basis of a strange hypothetical consideration.
20. Respondent No. 1, in its order dated May 6, 1998 observed that he thought there was a chance of loss of Government revenue. There was no convincing reason as to what led him to such conclusion. Learned Tribunal did not consider it necessary to find out the reason nor could give any reason to the satisfaction of the judicial conscience as to why such an order, not duly backed up by reason, should remain unchanged or unaltered. The word “may” in the relevant penal provision indicates that there is scope for exercise of discretion but it is judicial discretion.
21. Considering all such facts and circumstances and having regard to the discussion as made above, we are of the opinion that the order passed by the respondent Nos. 3, 2 and 1 respectively as well as the judgment and order dated April 6, 2001, passed by the West Bengal Taxation Tribunal in Case No. R.N. 346 of 2000 *Reported in [2003] 131 STC 485 (WBTT).need be modified and the order imposing penalty of Rs. 5 lakhs, subsequently reduced to Rs. 3 lakhs, stands set aside. With such observation the instant application under Article 226 of the Constitution of India be disposed of.
22. There is no order as to costs.
23. Interim order, if any, stands vacated.
24. Respondents arc directed to refund the penalty, amounting to Rs. 3 lakhs, assuming that the remaining amount of Rs. 2 lakhs have already been returned, within a period of two months from the date of communication of the order.
Tarun Chatterjee, J.
I agree.