M/S. ELECTRO OPTICS (P) LTD.versusSTATE OF TAMIL NADU

                            [2016] 3 S.C.R. 500


A                   MIS. ELECTRO OPTICS (P) LTD.
                                    v.
                        STATE OF TAMIL NADU
                     (Civil Appeal No. 10554of2010)
B                          FEB RU ARY 26, 2016
          [SHIVA KIRTI SINGH AND R. BANUMATHI, JJ.)
          Tamil Nadu General Sales Tax Act, 1959 - Entry 50, Part B
    of Schedule I, Entry 14, Part F of Schedule I - Sale of electronic
    goods (survey instruments) imported from other countries -
c   Classification of. under Entry 50, Part B of Schedule L chargeable
    @ 3% or Entry 14, Part F of Schedule I. chargeable @ 16% -
    Held: Electronic survey instruments are covered by Entry 14, Part
    F of Schedule.
          Disposing of the appeals, the Court
D
          HELD: 1.1 Part-B of the Schedule covers various kinds of
    goods such as agricultural products, vegetable oils, kerosene,
    aluminium domestic utensils, raw wool, hosiery goods, gold and
    silver articles, cycles, tractors, different electronic items,
    television sets, gramophones, all chargeable at the rate of3%.
E   In this background, Entry 50 of Part-B is meant to accommodate
    only such left over electronic system, apparatus etc. which are
    not specified elsewhere in the Schedule and are therefore,
    chargeable at the rate of 3%. Clearly, if specified elsewhere and
    chargeable at a different rate, they cannot be included under Entry
F   50. This conclusion is further strengthened by a look at some of
    the entries in Part-F, just preceding Entry 14. Entries 10, 11, 12
    and 13 cover goods chargeable at the rate of 16%, such as
    typewriters, teleprinters, tabulating, calculating machines and
    duplicating machines etc. In all these four entries there is a
    specific exclusion of electronic variety of these machines. On
G   the other hand in relevant Entry no. 14 such exclusion of
    electronic variety of any of the machines and apparatus such as
    survey instruments is conspicuously missing. Clearly the intended
    effect is deliberate so as to include binoculars, monoculars, survey
    instruments etc. of all varieties, be they manual or electronic.
H   Had the intention been different, in Entry 14 also exclusion of
                                    500
 MIS. ELECTRO OPTICS (P) LTD. v. STATE OF TAMIL NADU                    501



'electronic' survey instruments could have been inserted and             A
specified as in Entry Nos. 10 to 13 in respect of other different
machines or instruments. Hence, even electronic survey
instruments are covered by Entry No. 14 in Part-F of the First
Schedule of the Act. [Para 4) [504-E-H; 505-A-B)
      1.2 The penalty is imposable by the assessing authority            B
under Section 12 of the Act, both, for failure to submit return or
for submission of incorrect or incomplete return. Appellant, in
the eyes of the Authorities submitted incorrect return leading to
imposition of penalty in accordance with relevant clauses of
Section 12. Considering that the situation of dispute arose on
account of amendments in the Schedule in 1993 and was confined           C
only to immediate two assessment years and also considering
that the appellant had a good arguable case even in this Court
which had stayed the.penalty orders, the return submitted by the
appellant was on account of bona fide belief in correctness of
appellant's stand that the goods in question were chargeable only        0
at the rate of 3%. In the facts of the case, it would not be proper
to hold that the appellant had submitted a return which was
incorrect to its knowledge or belief. Only after the outcome of
the legal dispute by virtue of this judgment, the authorities can
be justified in holding henceforth that the return was incorrect.
In such a situation it would not be just and proper exercise of          E
discretion to hold the appellant guilty of submitting incorrect
return so as to attract penalty for the same. Hence, in the peculiar
facts of the case and in the interest of justice, the balance dues of
penalty is set aside. However, the penalty already paid by the
appellant would not be refunded.[Para 8] [506-H; 507-A-D]                F
      Mis BPL Ltd. v. State of Andhra Pradesh (2001) 2 SCC
      139 : 2001 (1) SCR 195 - distinguished.
      Mis Hindustan Steel Ltd. v. State of Orissa (1969) 2
      SCC 627 : 1970 (1) SCR 753; Co111111issio11er of Sales
      Tax, Uttar Pradesh v. Sanjiv Fabrics (2010) 9 SCC 630              G
      : 2010 (11) SCR 627 - referred to.
                        Case Law Reference
      2001 (1) SCR 195         distinguished          Paras
      1970 (1) SCR753          referred to            Para 7
      2010 (11) SCR 627        referred to            Para 7             H
502.            SUPREME COURT REPORTS                           (2016] 3 S.C.R.


A           CIVIL· APPELLATE JURiSDICTION : Civil Appeal No. I 0554
       of2010.

             From the Judgment and Order dated 29.09.2009 of the High Court
       of Judicature at Madras in Tax Case Nos. 1834 of 2006.

B                                       WITH

             C.A.Nos.10562and 10563of2010

             Su brat Birla, S. C. Birla, Ad vs. for the Appellant.

             B. Balaji, Muthuvel Pakani, Advs. for the Respondent.
c
             The Judgment of the Comt was delivered by

              SHIVA KIRTI SINGH, J. 1. Common judgment and order of
       the High Court of Judicature at Madras. dated 29.09.2009 in Tax Case
       Nos.1834 of2006,2307 of2008 and Writ Petition No.18770 of2000 is
D      under challenge in these appeals. The High Court has rejected the case
       of the appellant assessee in respect of Assessment Years 1993-94 and
       1994-95 and as a consequence also rejected the challenge to the penalty
       an~ thereby upheld order of Sales Tax Appellate Tribunal which arose
       out oforders under Tamil Nadu General Sales Tax Act, 1959 (hereinafter
E      referred to as 'the Act') passed by the original authority as well as
       appellate authority, all against the appellant.

              2. For both the assessment years the dispute is confined to an
       issue oflaw relating to classification of the goods sold by the appellant.
       According to the appellant it is engaged in the sale of electronic goods
 F     (survey instruments) imported from other com1tries and such goods should
       rightfully fall within Entry 50, Part 8 of Schedule I of the Act attracting
       rate of3%. On the other hand the authorities have taken the stand that
       survey instruments, whether eJectronic or otherwise, are covered by
       Entry 14, Part F of Schedule I, chargeable @ 16%. Since appellant's
       claim was not accepted by the Commercial Tax Officer who assessed
u-     the appellant at 16% leading to demand of tax as wet I as penalty, the
       appellant preferred appeal before the Appellate Commissioner. On being
       unsuccessful, the appellant preferred further appeal before the Tribunal
       and then the matter reached the High Court leading to the impugned
       order under appeal. The two relev&11t entries, i.e., Entry 50 of Part 8
H      and Entry 14 of Part F of Schedule I are as follows:
 MIS. ELECTRO OPTICS (P) LTD. v. STATE OF TAMIL NADU                         503
               [SHIVA KIRT! SINGH, J.]

                                   "Part 8                                   A

 SJ.        Description of Goods             Point of"levy        Rate of
 No.                                                              tax
 50       Electronic          systems,        At the point of         3%
          instruments,       apparatus,       first sale in the
          appliances     and      other            ·State                     8
          electronic goods (other than               -.
          those specified elsewhere in_
          the Schedule) but including
          electronic cash registering,
          indexing, card punching,
          franking,         addressing                                        c
          machines, and compuiers of
          analog and digital varieties,
          one record units, word
          processor      and      other
          electronic goods and parts
        . and accessories of all such                                         D
          2oods


                                   "Pait F
                               -
  .   SI.        Description of Goods     Point of                 Rate
      No.                                  levv                    of tax     E
       14   Binoculars,    monoculars, Atthe                       16%
            opera glasses, other optical point of
            telescope,     astronomical first sale
            instruments, microscopes, in the
            binocular      microscopes, State
            magnifying           glasses,                                     F
            diffraction apparatus and
            mountings           therefore
            including    .    theodolite,
            survey instruments and
            optical lenses parts and
            accessories thereof                                               G
        3. There is no difficulty in accepting the consistent finding of
the authorities based upon appellant's own declaration in respect of goods
which were imported and declared before the customs authorities as
survey instruments, that the goods are covered by the generic expression
'survey instruments'. The main controversy is whether on account of           H
504             SUPREME COURT REPORTS                               [2016) 3 S.C.R.


A     being electronic survey instruments the goods would be out of Entry 14
      so as to fall under Entry 50. The High Court and all the authorities have
      taken a consistent view that Entry 50 itself clarifies that it covers all
      electronic instruments, apparatus, other than those specified elsewhere
      in the Schedule and since the goods in question are specified under the
      generic tenn 'survey instruments' in Part F Entry 14, they will stand
8
      excluded from Entry 50 of Part B.
                4. We have heard learned counsel appearing for the parties at
      length. In order to persuade us to take a different view than that of the
      High Court and the Authorities, learned counsel for the appellant reiterated
      the submissions advanced before the High Court and further highlighted
c     some entries in Pa11 - 8 of Schedule I such as Entries 38 to 42 and
      pointed out that these entries, all providing for rate of tax at 3% use the
      word "electronic" in all the entries before various machines such as
      duplicating machines, teleprinters, typewriters, tabulating/calculating
      machines and clocks/time pieces. The submission is that after·
D     enumerating such electronic machines in the various entries noted above,
      the policy was to charge same 3% rate of tax for all residuary electronic
      system, apparatus and other electronic goods and if any other meaning
      is given by placing reliance upon words used in Entry 50, especially
      those in parenthesis - "other than those specified elsewhere in the
      Schedule" then there would be no rationale for using the word
E     "electronic" to qualify duplicating machines, teleprinters etc. covered by
      Entries 38 to 42. The submission lacks merits. Part-8 of the Schedule
      covers various kinds of goods such as agricultural products, vegetable
      oils, kerosene, aluminium domestic utensils, raw wool, hosiery goods,
      gold and silver articles, cycles, tractors, different electronic items, television
F     sets, gramophones, all chargeable at the rate of3%. Jn this background,
      Entry 50 of Part-8 is meant to accommodate only such left over
      electronic system, apparatus etc. which are not specified elsewhere in
      the Schedule and are therefore chargeable at the rate of3%. Clearly, if
      specified elsewhere and chargeable at a different rate, they cannot be
      included under Entry 50. This conclusion is further strengthened by a
G      look at some of the entries in Part-F,just preceding Entry 14. Entries 10,
       11, 12 and 13 cover goods chargeable at the rate of 16%, such as
      typewriters, teleprinters, tabulating, calculating machines and duplicating
      machines etc. In all these four entries there is a specific exclusion of
      electronic variety of these machines. On the other hand in relevant Entry
H     no. 14 such exclusion of electronic variety of any of the machines and
 M/S. ELECTRO OPTICS (P) LTD. v. STATE OF TAMIL NADU                          505
               [SHIVA KIRTI SINGH, J.)

apparatus such as survey instruments is conspicuously missing. Clearly        A
the intended effect is deliberate so as to include binoculars, monoculars,
survey instruments etc. of all varieties, be they manual or electronic.
Had the intention been different, in Entry 14 also exclusion of'electronic'
survey instruments could have been inserted and specified as in Entry
Nos. 10 to 13 in respect of other different machines or instruments.
                                                                               B
Hence, the conclusion is obvious that even electronic survey instruments
are covered by Entry No. 14 in Part-F of the First Schedule of the Act.
         5. Learned Counsel for the appellant has placed reliance upon
judgment in the case of Mis BPL Ltd. v. State of Andhra Pradesh
reported in (2001) 2 SCC 139. This judgment has been elaborately
discussed by the High Court and held to be not applicable to the facts of      c
this case. We have also considered the facts and law involved in the said
judgment and we agree with the conclusion of the High Court. In that
case the dispute under the Andhra Pradesh General Sales Tax Act, 1957
was on the interpretation of definition of the term "Electronic Goods".
On the basis of the definition it was held that the goods "automatic           D
washing machine" was covered by the term electronic goods and not
under the other item i.e, Entry 38 (IV) which related to electrical items
including electrical washing machine. The wordings and expressions used
and interpreted in that case were entirely different and are of no help to
the appellant in the present case.
                                                                               E
         6. As a result, the Civil Appeals arising out of Tax Case Nos.
1834 of2006 and 2307 of 2008 must fail. However, the Appeal arising
out from Writ Petition containing challenge to imposition of penalty
deserves further consideration in the light of submissions to the effect
that appellant has been in same business since 1985 and no controversy
or dispute of this nature ever arose except for the two assessment years       F
under consideration. It has been pointed out that all earlier Schedules
were re-written on account of extensive amendments in the year 1993
and since most of the electronic items were brought under Part-B, a
genuine controversy or misunderstanding arose as to whether the goods
in question would be covered by Entry No. 50 of Part B or not. Genuinely
                                                                               G
believing that it is so covered, the appellant contested the matter and in
the process suffered penalty for both the assessment years in total
amounting to Rs. 15.48 lakhs approximately. Out of this, appellant claims
to have paid approximately Rs. 3.74 lakhs but still about Rs. 11.73 lakhs
remain as balance payable towards penalty. It was pointed out that
considering the merit of appellant's case this Court has stayed realization    H
506             SUPREME COURT REPORTS                           (2016] 3 S.C.R.



A     of penalty. Hence, it has been submitted that in the interest ofjustice the
      balance penalty be set aside on account of bona fide belief on the part of
      the appellant that it was liable to pay only at the rate of3% and therefore
      there was absolute lack of any mens rea in not paying in time the tax
      assessed by the authorities. It was also pointed out that against the total
      tax demand of Rs. 16.39 lakhs approximately the appellant has by now ·
B
      paid about Rs. 16.18 lakhs.
              7. Learned counsel for the appellant has supported the
      submissions against imposition of penalty by placing reliance upon the
      followingjudgments:-
           (1) Mis Hindustan Steel Ltd. v. State of Orissa, ( 1969) 2
c
      SCC627
             (2) Commissioner of Sales Tax, Uttar Pradesh v. Sanjiv
      Fabrics, (20 I 0) 9 SCC 630
               In Ws Hindustan Steel Ltd. in paragraph 8 it was held that
D     although the Statute permitted imposition of penalty but still the authority
      concerned had the judicial discretion to consider whether penalty should
      be imposed for failure to perform a statutory obligation. In such a situation
      the discretion has to be exercised judicially after consideration of all the
      relevant circumstances. Even if minimum penalty is prescribed, the
      authority may be justifie~ in refusing to impose any penalty in some
E     peculiar situations, such as, where the breach flows from a bona fide
      belief that the offender is not liable to act in the manner prescribed by
      the Statute. In Sanjiv Fabrics it was reiterated that there is a rebuttable
      presumption that mens rea is essential ingredient in every offence. For
      examining whether mens rea is essential for an offence created under a
 F    tax Statute, three factors require particular attention, (i) the object and
      scheme of the Statute; (ii) the language o.fthe section; and (iii) the nature
      of penalty. Since the relevant expression for constituting the offence in
      that case was - "falsely represents", the Court held that the offence
      attracting penalty would be established only where it is proved that the
      dealer has acted deliberately in defiance of law and is guilty of
G     contumacious or dishonest conduct.
              8. In the present case penalty is imposable by the assessing
      authority under Section 12 of the Act, both, for failure to submit return or
      for submission of incorrect or incomplete return. Appellant, in the eyes
      of the Authorities has submitted incorrect return leading to imposition of
H     penalty in accordance with relevant clauses of Section 12. Considering
 M/S. ELECTRO OPTICS (P) LTD. v. STATE OF TAMIL NADU                          507
                [SHIVA KIRT! SINGH, J.]

that the situation of dispute arose on account of amendments in the           A
Schedule in 1993 and was confined only to immediate two assessmen.t
years and also considering that the appellant had a good arguable case
even in this Court which had stayed the penalty orders, we find that the
return submitted by the appellant was on account of bona fide belief in
correctness of appellant's stand that the goods in question were
                                                                              B
chargeable only at the rate of3%. In our considered view, in the facts of
the case it would not be proper to hold that the appellant had submitted
a return which was incorrect to its.knowledge or belief. Only after the
outcome of the legal dispute by virtue of this judgment, the authorities
can be justified in holding henceforth that the return was incorrect. In
such a situation it would not be just and proper exercise of discretion to    .C
hold the appellant guilty of submitting incorrect return so as to attract
penalty for the same. Hence, in the peculiar facts of the case and in the
interest of justice, we set aside the balance dues of penalty. However,
the penalty already paid by the appellant shall not be refunded and the
same may be retained by the respondent authorities by way of cost of
this protracted litigation.
                                                                               D

        9. In the result, the Civil Appeal Nos. I 0554 and I 0562 of2010
containing challenge to assessments orders are dismissed. The remaining
appeal Civil Appeal No. I 0563 of2010 relating to penalty is allowed to
the extent that balance amount of penalty shall not be realised from the
appellant. There shall be no order as to fut1her costs.                        E


Nidhi Jain                                             Appeals disposed of.