Bishambhar Dayal, C.J.
1. This is a reference under Section 44 of the Madhya Pradesh General Sales Tax Act. The applicant filed his return in 1961 for sales during the previous year. In that return he showed a turnover of Rs. 1,16,215 and 11 annas as sales of kutti machines, but he claimed that this turnover was exempt from tax as kutti machine was an agricultural implement. This view was at first accepted by the Board of Revenue in 1964, but later on it was reversed by the High Court, and the Supreme Court has also held that kutti machine is not an agricultural implement and, therefore, not exempt from tax. The applicant has however been assessed to sales tax on this turnover and the sales tax authorities have also imposed a penalty of Rs. 900 under Section 43(1) of the Act.
2. The applicant contended that his case was not covered by Section 43(1) of the Act and no penalty could, therefore, be imposed. The following question has accordingly been referred to this court :
Whether, under the facts and circumstances of this case, the applicant 'furnished false returns' and also whether the penalty of Rs. 900 under Section 43(1) of the Act was legal and justified?
3. After hearing learned counsel for both sides we are satisfied that this is not a case in which penalty could be imposed. In Section 43(1) two conditions are given under which a penalty could be imposed, namely,--(i) that the dealer has concealed his turnover or aggregate amount of purchase price in respect of any goods..., or (ii) that a false return has been furnished. Learned counsel for the department has contended that since the applicant claimed in his return that kutti machine was not liable to sales tax, and since he must be presumed to know the law that it was liable to sales tax, the case comes within the second clause, namely, furnishing a false return. We are unable to agree with this interpretation of the law. If the assessee interprets the law in a particular way, disclosing all the relevant facts in the return so that if the legal position taken by the applicant is not accepted, full tax can be imposed, it cannot be said that the assessee has filed a false return. The assessee can always argue that under the law a particular item is not taxable. In this particular case the argument does not even seem to have been very absurd. At one time the Board of Revenue had held that view. However, the opinion of the Board of Revenue is not material. The question is whether merely putting forward a legal plea in the return amounts to making a false return. We are of opinion that such a statement in the return cannot be called a false return.
4. The result, therefore, is that the question referred must be answered in the negative, i.e., the applicant cannot be said to have furnished a false return, and consequently the penalty of Rs. 900 imposed was neither legal nor justified. Parties will bear their own costs.