G.P. Singh, C.J.
1. This is a reference made by the Sales Tax Tribunal under Section 44 of the Madhya Pradesh General Sales Tax Act, 1958, referring for our answer the following questions of law:
(1) Whether, in the facts and circumstances of the case, theTribunal was justified in holding that within the meaning of Section 43(1) ofthe M.P. General Sales Tax Act, 1958, the assessee had deliberately furnisheda false return by claiming a deduction for supplies of coal to electricityundertakings to the tune of Rs. 19,18,010? And
(2) If the Tribunal was justified in this conclusion, whether the penalty of Rs. 8,000 imposed on the assessee is excessive in the circumstances of the case
2. The period with which we are concerned in this case is from 1st October, 1962,to 30th September, 1963. A penalty of Rs. 8,000 was imposed on the assesseeunder Section 43(1) of the Madhya Pradesh Act, read with Section 9(3) of the Central Sales Tax Act, 1956. The assessee filed its returns in form V underRule 7-A of the Madhya Pradesh Sales Tax (Central) Rules, 1957. The assesseedisclosed all the sales made by It during the relevant period. The assessee,however, claimed exemption from payment of tax in respect of sales toelectrical undertakings. Sales to electrical undertakings were exempt from taxunder Section 2(j)(a) of the C.P. and Berar Sales Tax Act, 1947. The M.P.General Sales Tax Act, 1958, came into force from 1st April, 1959. There is nosuch exemption provided in the Madhya Pradesh Act. The penalty of Rs. 8,000was imposed on the assessee on the ground that it filed false returns, in thatit falsely claimed exemption in respect of sales to electrical undertakingsamounting to Rs. 19,18,010, when such sales were not exempt.
3. Theassessee contended before the sales tax authorities that it had claimed theexemption on legal advice. The assessee, however, failed to establish thatany such legal advice was obtained by him. It was also not disputed that theassessee had collected sales tax from the electrical undertakings. TheTribunal observed that the assessee knew that the exemption claimed by it wasnot tenable and, therefore, it must be held that the assessee filed falsereturns within the meaning of Section 43(1).
4. The Learned Counselfor the assessee submitted before us that, on the facts and circumstances ofthe case, the finding of the Tribunal that the assessee knew that the claimfor exemption from tax in respect of sales to electrical undertakings made byit in the returns was not tenable, is not justified. We are not inclined togo into this question because it is essentially a question of fact. On thematerial placed before it, the. Tribunal was justified in drawing theconclusion that the assessee knew that it was not entitled to any exemption inrespect of sales to electrical undertakings. The point, however, is whether,even in such a situation, it can be said that the assessee filed false returnswithin the meaning of Section 43(1) by claiming exemption in respect of salesto electrical undertakings. The form of return does not contain any columnfor exemption. The turnover and the sales were fully disclosed in the returnsfiled by the assessee. The sales to electrical undertakings in respect ofwhich the assessee claimed exemption were also fully disclosed. The assesseetook only a legal plea that the sales to electrical undertakings were nottaxable. In our opinion, when the facts are fully disclosed in a return andare misstated, the raising of a legal plea of exemption cannot make the returna false return within the meaning of Section 43(1), even if the assessee knewthat the plea of exemption was not sustainable. A return will be a falsereturn when some statement of fact in the return is falsely made. But whenthe facts are fully and correctly disclosed, raising of a false legal pleacannot make the return false. The assessing authority can, in such cases,easily assess the correct amount of tax on the facts disclosed by the assesseeafter negativing the untenable legal plea. In Agricultural ImplementsDealers Syndicate, Morena v. Commissioner of Sales Tax, 1970 M.P.L.J. 976 aDivision Bench of this Court held that merely putting forward a legal plea inthe return does not amount to making a false return. We fully agree withthis view. As earlier stated, to make Section 43(1) applicable, falsityshould be in the disclosure of facts required to be stated in the return andnot in taking a legal plea.
5. For the reasons given above, weanswer the questions referred to us as follows:
Question No. (1): The Tribunal was not justified in holding that the assessee haddeliberately furnished a false return within the meaning of Section 43(1) ofthe M.P. Act.
Question No. (2): The Tribunal was not justified in its conclusion that the assessee was liable to any penalty.
There shall be no order as to costs.