Whether mens rea is essential for levy of penalty under the taxation laws?
State of Gujarat and Anr Vs Saw Pipes Ltd(Supreme Court)
Date-17th April, 2023
The highest court of the country in this case was considering the levy of penalty and interest under the provisions of Gujarat Sales tax Act 1969 when the high court gave relief by setting aside interest and penalty in relation to tax paid on execution of works contract of coating of coal tar and enamel coating on pipes whereas the AO held it to be taxable under a different entry. While conceding the liability to pay tax at higher rate before the High court, the respondent assessee pleaded bonafide belief based on expert opinion, to be absolved of interest and penalty.
The Supreme Court while considering the language of the statute, the element mens rea and decisions rendered in relation to levy of penalty particularly Hindustan Steels Ltd Vs State of Orissa, Dharmendra Textiles and other cases, held that the language of the statute was very clear in this case and there was no option with the commissioner but to impose the penalty which was mandatory.
This judgement will have repercussions under all the laws including income-tax ,GST and other laws while dealing with imposition of penalty.
The Copy of the order is as under :