1991 (9) TMI 93 - HC - Central Excise

No penalty under Additional Duties of Excise Act; Section 3(3) covers procedure only, Article 265 demands clear authority

HC held that the Additional Duties of Excise (Goods of Special Importance) Act contains no substantive provision authorizing imposition of penalty; the ... Levy and collection - Referential legislation / incorporation by reference - Penalty as substantive charge - Confiscation and forfeiture as penal consequences - So far as may be - Authority of law under Article 265 of the ConstitutionLevy and collection - Referential legislation / incorporation by reference - Penalty as substantive charge - Confiscation and forfeiture as penal consequences - So far as may be - Authority of law under Article 265 of the Constitution - Whether penal and confiscatory provisions of the Central Excises Act and Rules (penalties and forfeiture) are made applicable to proceedings under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 by virtue of Section 3(3) of that Act. - HELD THAT: - The court held that Section 3(3) of the Additional Duties Act does not supply a substantive charging provision for penalties or forfeiture. The phrase 'levy and collection' in sub section (3) must be read with the qualifying words 'including those relating to refunds and exemptions from duty' and, on that textual basis, has a restricted remit confined to procedural machinery necessary for levy and recovery of the additional duty. Referential incorporation of the Central Excises Act and Rules pursuant to 'so far as may be' does not amount to incorporation 'by pen and ink' of all substantive penal provisions. The court examined precedents distinguishing cases where penalties formed part of the same charging or assessment scheme and where express legislative provision for penalties existed, and concluded that penal liabilities cannot be created by implication. In view of Article 265, which requires clear legislative authority for taxation, a penalty (being a substantive imposition or additional tax or punitive consequence such as confiscation) must be created by explicit statutory provision; long usage without challenge cannot substitute for the required clear authority. Consequently, the Central Excises Act/Rules cannot be imported to impose penalties or confiscation in proceedings under the Additional Duties Act in the absence of an express charging provision.Show cause notices insofar as they seek confiscation of plant, machinery, land and building under Rule 173Q(2) and imposition of penalties under Rules 9(2) and 173Q of the Central Excise Rules are set aside; respondents restrained from proceeding under those portions of the notices.Final Conclusion: Writ petitions allowed in part: the High Court set aside the show cause notices to the extent they invoke Central Excise penal and confiscatory provisions against assessees under the Additional Duties Act, holding that there is no express legislative authority to levy penalties or order confiscation by mere referential application of the Central Excises Act and Rules; a writ of prohibition issued restraining respondents from proceeding on those grounds. Issues Involved:1. Legality of invoking penal provisions of the Central Excise Rules under the Additional Duties Act.2. Constitutional validity of the Additional Duties Act.3. Jurisdiction of respondents to impose penalties and confiscate goods under the Central Excise Rules.4. Interpretation of the term 'levy and collection' under Section 3(3) of the Additional Duties Act.Summary:1. Legality of invoking penal provisions of the Central Excise Rules under the Additional Duties Act:The petitioners challenged the show cause notices issued by the Collector of Central Excise, questioning the legality of invoking penal provisions under the Central Excise Rules for infractions related to the Additional Duties Act. They argued that the Additional Duties Act does not provide for penalties, and the mere liability to duty cannot carry with it a liability to penalty. The court examined the relevant provisions and concluded that the term 'levy and collection' in Section 3(3) of the Additional Duties Act has a restricted meaning, and the provisions of the Central Excise Act and Rules regarding penalties cannot be applied to the Additional Duties Act.2. Constitutional validity of the Additional Duties Act:The petitioners also questioned the constitutional validity of the Additional Duties Act, but this challenge was not pressed. The court noted that the validity of the Act had already been upheld in a previous judgment (M/s. Parekh Prints and Others v. Union of India and Others) and that the special leave petition filed in the Supreme Court against that judgment had been dismissed.3. Jurisdiction of respondents to impose penalties and confiscate goods under the Central Excise Rules:The court addressed the question of whether the respondents have the jurisdiction to impose penalties and confiscate goods under the Central Excise Rules for defaults under the Additional Duties Act. It was argued that the Additional Duties Act does not create a charge for penalties, and the provisions of the Central Excise Act and Rules relating to penalties cannot be borrowed for this purpose. The court agreed with this argument, stating that there is no provision in the Additional Duties Act that creates a charge in the nature of a penalty.4. Interpretation of the term 'levy and collection' under Section 3(3) of the Additional Duties Act:The court examined the interpretation of the term 'levy and collection' under Section 3(3) of the Additional Duties Act. It was argued that this term includes both imposition of a tax and its quantification and assessment. However, the court held that the term has a restricted meaning in the context of the Additional Duties Act, and it does not cover penalties and offences. The court concluded that the provisions of the Central Excise Act and Rules regarding penalties cannot be applied to the Additional Duties Act.Conclusion:The court allowed the petitions to the extent that the show cause notices calling upon the petitioners to show cause for confiscation and penalties under the Central Excise Rules were set aside. A writ of prohibition was issued to the respondents restraining them from proceeding under the show cause notices for the purpose of confiscation and penalties. The rule was made absolute to this extent, and parties were ordered to bear their own costs.