M/S. ELECTRO OPTICS (P) LTD.  versus STATE OF TAMIL NADU
[2016] 3 S.C.R. 500, Supreme Court of India, 2016
Outcome: Disposed off
Segment: Ratio
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[2016] 3 S.C.R. 500 
MIS. ELECTRO OPTICS (P) LTD. 
v. 
STATE OF TAMIL NADU 
(Civil Appeal No. 10554of2010) 
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 -
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 
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%. 
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 
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 
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. 
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 
1970 (1) SCR753 
2010 (11) SCR 627 
distinguished 
referred to 
referred to 
Paras 
Para 7 
Para 7 
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502. 
SUPREME COURT REPORTS 
(2016] 3 S.C.R. 
A 
CIVIL· APPELLATE JURiSDICTION : Civil Appeal No. I 0554 
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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. 
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. 
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 
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 
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 
(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 
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 
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 
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504 
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SUPREME COURT REPORTS 
[2016) 3 S.C.R. 
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 
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 
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· 
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 
"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 
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 
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 
no. 14 such exclusion of electronic variety of any of the machines and
M/S. ELECTRO OPTICS (P) LTD. v. STATE OF TAMIL NADU 
[SHIVA KIRTI SINGH, J.) 
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. 
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. 
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 
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 
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. 
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 
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 
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 
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506 
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SUPREME COURT REPORTS 
(2016] 3 S.C.R. 
of penalty. Hence, it has been submitted that in the interest of justice 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 · 
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 
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 
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 
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 
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 
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 
penalty in accordance with relevant clauses of Section 12. Considering
M/S. ELECTRO OPTICS (P) LTD. v. STATE OF TAMIL NADU 
[SHIVA KIRT! SINGH, J.] 
that the situation of dispute arose on account of amendments in the 
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 
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 
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. 
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. 
Nidhi Jain 
Appeals disposed of. 
507 
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B 
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