Holding

Good faith must be established on the facts and cannot be presumed; the Assessing Officer’s action was unjustified and the direction to impose cost on him was set aside.

Summary

Mis. Amtek India Ltd. purchased plant and machinery and was assessed a penalty under Section 78(5) of the Rajasthan Sales Tax Act, 1994 on the ground that the invoice and delivery challan dates did not match, leading the Assessing Officer to deem the documents non‑genuine. The assessee successfully challenged the penalty before the DC (Appeals) and the Tax Board, which set it aside; the revenue department then filed a revision petition before the Rajasthan High Court. The High Court dismissed the revision, upheld the penalty and ordered a cost of Rs 5,000 to be paid personally by the Commercial Tax Officer. On appeal, the Supreme Court examined whether the Assessing Officer could rely on a claim of “good faith” and held that good faith must be proved by the facts and cannot be presumed. The Court found the officer’s action unjustified, set aside the direction to impose cost, and disposed of the appeal without reinstating the penalty.

Issues considered

Whether the Assessing Officer can rely on a presumption of good faith when imposing penalty under Section 78(5) of the Rajasthan Sales Tax Act, 1994.
What is the legal meaning and test for “good faith” under the General Clauses Act, Limitation Act and Indian Penal Code.
Whether the penalty imposed on the assessee was justified in view of the genuineness of the documents.
Whether cost may be imposed personally on the Commercial Tax Officer for the unjustified assessment.

Legislation cited

General Clauses Act, 1897s. 3(22)
Indian Penal Code, 1860s. 52
Limitation Acts. 2(h)
Rajasthan Sales Tax Act, 1994s. 38(5), s. 78(2)(a), s. 78(5), s. 86

Subjects

good faithpenaltysales taxRajasthan Sales Tax Actassessmentcostcommercial taxdocument genuinenessrevision petition

Judgment

A ASSISTANT COMMISSIONER ANTI EVASION COMMERCIAL TAXES,
BHARATPUR

MIS. AMTEK INDlA LIMITED

FEBRUARY 22, 2007
B
[DR. ARIJIT PASA VAT AND S.H. KAPADIA, JJ.]

...
Rajasthan Sales Tax Act. 1994-Section 78(5)-Penalty imposed on
C consignee by Assessing Authority for producing non-genuine documents-
High Court holding the transactions genuine and held the Assessing Officer
cannot take plea of good faith and imposed cost to be paid personally by
the Officer-On appeal held: Assessing Officer overlooked the documents
produced and held that there was manipulation without any reasonable
basis, thus, its action was not justified-However, cost imposed set aside.
D
Words and Phrases: 'Good Faith"-Meaning of

'Respondent-assessee purchased certain goods from·the consignors.
Vehicle of the assessee was checked and the Assessing Authority held the
documents produced as not genuine since the date of invoice and the delivery
E challan was different and imposed penalty under section 78(5) of the Rajasthan
Sales Tax Act, 1994. It was assessee's case that the goods were purchased
under invoice in which the seller charged excise duty and Central sales tax
though they received the goods after one year. Appellate Authorities set aside
the penalty. Revenue filed Revision Petition. High Court dismissed the petition
F and imposed cost on the Assessing Officer. It held that the transit and
transactions were perfectly genuine; that the action of the authorities cannot
be countenanced; and that they cannot take the plea of good faith which was
not established. Hence the present appeal.

Disposing of the appeal, the Court

G HELD: 1.1. Whether an act has been done in good faith would depend
upon the factual scenario. In order to establish "good faith", it has to be
established that what has been imputed concerning the person cl:.iming it to
be so, is true. Anything done with due care and attention, which is not ma/a

1092
H
ASSISTANTCOM/'o.1NR. A~il EVASION COMMERCIAL TAXES. BHARATPUR 1·. AMTEJ.; INOIA LTD. !PASAYAT. J.i ) 093

fide is presumed to have been done in 'good faith'. (Paras 10 and 12) A
1.2. In the instant case, though the action of the Assessing Officer, in
overlooking the documents produced coming to the conclusion about
manipulation appears to be totally uncalled for and without any reasonable
basis. This is a case where the officer should have been more careful and
should not have acted in a manner as if he was a bloodhound and not a watchdog B
of revenue. It is unfortunate that in large number of cases, orders totally bereft
of rationality are being passed. They do not in any manner serve public interest,
much less the interest of revenue. Therefore, while holding that the action of
the Assessing Authority was clearly unjustified, direction for imposition of
cost is set aside. (Paras 16 and 17) (1095-G; 1096-A) C
Deena v. Bharat Singh, (2002) 6 Supreme Court 336, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 896 of2007.

From the Judgment and final Order dated 3.5.2006 of the High Court of
Judicature for Rajasthan at Jaipur Bench, Jaipur in SB Sales Tax Revision D
; Petition No. 12 of 2006.

Sushi! Kumar Jain, Puneet Jain, Chrishti Jain, Sarad Singhania, H.D.
Thanvi and Rani Maheshwari for the Appellant.

The Judgment of the Court was delivered by E

DR."ARIJIT PASAYAT, J. I. Leave granted.

2. Challenge in this appeal is to the order passed by a learned Single
~· Judge of the Rajasthan High Court at Jaipur. By the impugned order the High
Court dismissed the revision petition, filed by the appellant, and imposed cost F
of Rs.5,000/- to be paid personally by the Commercial Tax Officer, Anti Evasion,
Bharatpur who passed the assessment order dated 14.9.2001.

3. Background facts in a nutshell are as follows:

Penalty under Section 78(5) of the Rajasthan Sales Tax Act, 1994 G
(hereinafter refen-ed to as the 'Act') was imposed on the respondent (hereinafter
referred to as the 'assessee') on the ground that at the time of checking of
vehicle on 7.9.2001, the documents produced showed that bill No.155 dated
29.9.2000 ofM/s. Georg Fischer Disa Limited, Satyamangala Industrial Area,
H

I
{

1094 SUPREME COURT REPORTS [2007] 2 S.C.R.

A Tumkur, Karnataka raised on the respondent-assessee M/s. Amtek India Ltd.,
Biwadi along with delivery challan No. 5259 dated 3.9.2001 form No. ST-ISA
in which invoice No.155 was also mentioned and form No.ST -39 prescribed
under Kamataka Sales Tax Act and bilty of North Eastern Carrying Corporation
accompanying the said goods were produced for verification. However, date
of the said invoice No.155 dated 16.2.2000, was held to be of an earlier point
B of time than the date mentioned in the delivery challan of 3.9.2001. Therefore,
the Assessing Authority held that said document was doubtful and there was
non-compliance with Section 78(2)(a) of the Act, and imposed the penalty of
Rs.1,36,200/- @ 30% of value of goods on the respondent-assessee, the
consignee or purchaser.
c 4. According to the assessee, plant and machinery and equipments
purchased by respondent-assessee from the consignor though purchased
under invoice No.155 dated 16.2.2000 in which due excise duty and Central
Sales Tax@ 4% against C-Fonn was charged by the seller, but the goods were
consigned and received after the lapse of about one year.
D
f• But that cannot mean th~t invoice raised by seller-company was not
genuine and, therefore, the penalty was not justified.

6. Both the Appellate Authorities i.e. D.C. (Appeals) as well as Tax
Board found the said explanation of the assessee satisfactory and correct
E and, therctore, set aside the penalty under Sec. 78(5) of the Act. The revenue
filed a revision petition before the High Court under Section 86 of the Act
on the supposed question of law arising in the matter. The High Court found
that as a matter of fact none arises.

7. In the Re vi's ion Petition filed, the correctness of views expressed by
F the Appellate Authority i.e. the DC (Appeals) and the Tax Board were
questioned. The High Court found that all relevant documents were produced,
the declarations issued by the Sales Tax Authorities of both the States clearly
established that transit and transactions were perfectly genuine and there was
no reason for the Assessing Authority to hold the document to be non-
G genuine so as to attract levy of penalty at the rate of 30% of the value of
goods under Section 38(5) of the Act. The High Court felt that the action of
the authorities cannot be countenanced and they cannot take the plea of
good faith. The alleged good faith was not established and on the contrary
the action clearly indicated that the assessing officer was bent upon levying
the demand overlooking the genuine documents. Accordingly, the revision
H
ASSISTANTCOMMNR. ANTI EVASION COMMERCIAL TAXES. BHARATPUR 1•. AMTEK INDIA LTD. !PASAYAT. J.I ) 095

petition was dismissed and costs were imposed. A
8. Learned counsel for the appellant submitted that an error of judgment
should not be treated as a ma/a fide action so as to warrant the severe
criticism as done by •the High Court and also to warrant imposition of cost.

9. There is no appearance on behalf of the respondent in spite ofnotice. B
I0. Whether an act has been done in good faith would depend upon
the factual scenario. In order to establish "good faith'', it has to be established
that what has been imputed concerning the person claiming it to be so, is true.

11. "Good Faith" according to the definition in Section 3(22) of the C
General Clauses Act, 1897 means a thing, which is in fact done honestly
whether it is done negligently or not.

12. Anything done with due care and attention, which is not ma/a fide
is presumed to have been done in 'good faith'.
D
13. "Good Faith" is defined under Section 2(h) of the Limitation Act, as
) 'good faith'- nothing shall be deemed to be done in good faith which is not
done with due care and attention"

14. Dealing with a case under the Indian Limitation Act, 1963, this Court
held that the expression 'good faith' as used in Section 14 means "exercise E
of due care and attention". In the context of Section 14, the expression 'good
faith' qualifies prosecuting the proceeding in the court, which ultimately is
found to have no jurisdiction. The finding as to good faith or the absence
of it is a finding of fact. [See Deena v. Bharat Singh. [2002] 6 SC 336]

15. Section 52 of the Indian Penal Code, 1860 (in short '!PC') emphasizes F
due care and attention in relation to "good faith".

16. In this case though the action of the concerned assessing officer,
in overlooking the documents produced coming to the conclusion about
manipulation appears to be totally tmcalled for and without any reasonable G
basis. This is a case where the officer should have been more careful and
should not have acted in a manner as if he was a bloodhound and not a
watchdog of revenue. It is unfortunate that in large number of cases, orders
totally bereft of rationality are being passed. They do not in any manner serve
public interest, much less the interest of revenue.
H
1096 SUPREME COURT REPORTS [2007] 2 S. C.R.

A 17. Therefore, while holding that the action of the Assessing Authority
was clearly unjustified, we direct deletign of the direction for imposition of
cost. We, however, make it clear that in future if any such action comes to
the notice of the Courts/Authorities, appropriate action shall be taken in
accordance with law and the observations made in this case about lack of
B bona fide shall also be a factor to be taken note of.

18. The appeal is accordingly disposed of.

N.J. Appeal disposed of.

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