TaxTMI 
TaxTMI 
1999 (8) TMI 142
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....es, 1965 informing him that the President proposes to hold an inquiry against him on the allegation that he favoured M/s. Hari Vishnu Packaging Ltd., Nagpur (assessee) by not imposing penalty on it under Rule 173Q of the Central Excise Rules, 1944 (`Rules' for short) when he passed an Order-in-Original No. 20/95, dated March 2, 1995(sic) holding that the assessee had clandestinely manufactured and cleared the excisable goods wilfully and evaded the excise duty and had ordered confiscation of the goods. 3. The appellant approached the Central Administrative Tribunal, Mumbai (CAT) challenging the proposed inquiry by filing Original Application No. 250 of 1998 on March 18, 1998. While admitting the application CAT granted interim relief and stayed the disciplinary proceedings against the appellant. This application was, however, dismissed by CAT by order dated August 12, 1998 with the result the interim order stood vacated Immediately thereafter the appellant filed a writ petition in the Bombay High Court, it being Writ Petition No. 4717 of 1998. It was dismissed in limine by a Bench of the High Court by order dated September 7, 1998. This led the appellant to come to this Cou....
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...." 6. The assessee was asked to show cause as to why Central excise duty of Rs. 4,81,950/- be not recovered from him under Rule 9(2) read with proviso to Section 11A of the Act and why not 95,000 numbers and 25,500 numbers of HDPE bags seized in transit and from its factory premises be confiscated and why penalty be not imposed on it under Rule 173Q of the Rules. 7. After examining the evidence on record and hearing the assessee the appellant by his Order-in-Original No. 20 of 1995 held as under :- "In view of the foregoing, I hereby pass the following order :- I confirm the excise duty of Rs. 3,57,000/- on 25,500 Nos. of HDPE woven sacks removed by Noticee-1 clandestinely under Rule 9(2) of the Central Excise Rules, 1944 read with proviso to Section 11A of the CESA, 1944. 95,000 bags cleared clandestinely by Noticee-1 and seized on 16-1-1994 are liable for confiscation under Rule 173Q of C. Ex. Rules, 1944. However, I find that the goods had been released provisionally on execution of bond for the full value of the goods and cash security of Rs. 1 lakh. As the goods are not available for confiscation, I appropriate the amount of Rs. 10,000/- in lieu of conf....
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....er of the adjudicating authority and the provisions of this Act regarding appeals, including the provisions of sub-section (4) of Section 35B shall, so far as may be, apply to such application. (5) ......................" 10. By order dated February 26, 1996 made under Section 35E of the Act Board directed the appellant to file appeal to the Appellate Tribunal to determine whether his Order-in-Original No. 20/95, dated March 20, 1995 against the assessee was correct, legal and proper and whether the appellant ought to have imposed penalty. Accordingly appeal was filed before the Appellate Tribunal which, it is stated, is still pending. 11. Mr. Raju Ramachandran, learned Senior Advocate, appearing for the appellant, raised the following points in support of the appeal :- 1. Adjudication order by the appellant is quasi-judicial in nature whereby he confirmed the confiscation of the goods and the duty demanded. He did not choose to impose any penalty in the facts and circumstances of the case. Merely on that ground he could not be subjected to the disciplinary proceedings. 2. The undisputed facts which appear from the record are as follows :- ....
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....ish Chandra, learned Senior Advocate for the Union of India submitted that there was sufficient material to proceed against the appellant and that the CAT and the High Court were right in not interfering in the disciplinary proceedings at the very threshold. He said the appellant would have the opportunity to defend himself in the proceedings which have been initiated against him. He said provisions of Rule 173Q are mandatory and that Section 11AC also mandates levy of penalty. 13. In the course of the arguments in support of the rival contentions we were referred to various judgments of this Court. Before we examine these judgments we may set out the provisions of Rule 173Q and Section 11AC :- "173Q.Confiscation and penalty. - (1) If any manufacturer, producer, registered person of a warehouse or a registered dealer - (a) removes any excisable goods in contravention of any of the provisions of these rules; or (b) does not account for any excisable goods manufactured, produced or stored by him; or (bb) ........ (bbb) ...... (c) ........ (d) contravenes any of the provisions of these rules with intent to evade payment of dut....
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.... and Appeal) Rules, 1965. In the statement of article of charge framed against him, it was alleged that he completed assessment of nine firms in "an irregular manner, in undue haste and apparently with a view to conferring undue favour upon the assessee concerned". An application filed by the respondent against the proposed action was allowed by the Central Administrative Tribunal and it was held that orders passed by the respondent as Income Tax Officer were quasi-judicial and could not have formed the basis of disciplinary action. Charge Memorandum was, thus, set aside. The question before this Court was whether an authority enjoyed immunity from disciplinary proceedings with respect to matters decided by him in exercise of quasi-judicial functions. After examining the early decisions of this Court in V.D. Trivedi v. Union of India [(1993) 2 SCC 55]; Union of India v. R.K. Desai [(1993) 2 SCC 49]; Union of India v. A.N. Saxena [(1992) 3 SCC 124] and also in S. Govinda Menon v. Union of India [AIR 1967 SC 1274] this Court held as under : "Certainly, therefore, the officer who exercises judicial or quasi-judicial powers acts negligently or recklessly or in order to confer undue ....
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....rview of summary assessment scheme of Amnesty Scheme of the Central Board of Direct Taxes and, therefore, respondent had violated Rule 3(1)(i), 3(1)(ii) and 3(1)(iii) of the CCS (Conduct) Rules, 1964. Aggrieved by the interim order of the Tribunal, Union of India come to this Court. Again this Court examined its earlier decisions and said that the Tribunal or Court can interfere only if on the charged framed (read with imputation or particulars of the charges, if any) no misconduct or other irregularity alleged can be said to have been made out or the charges framed are contrary to any law and that at that stage the Tribunal had no jurisdiction to go into the correctness or truth of the charges. Order of the Tribunal was set aside. 17. In Dy. Inspector General of Police v. K.S. Swaminathan [(1996) 11 SCC 498] a charge memo imputing misconduct on the part of the respondent, an inspector of police, was issued to him. Tamil Nadu Administrative Tribunal on an application filed by the respondent set aside the charge memo on the ground that the charges were vague. On appeal to this Court, it was held that at the stage of framing of the charge, the statement of facts and the charg....
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.... on the appellant. One of the question before this Court was whether the Tribunal is right in holding that penalties under Section 12(5) of the Act had been rightly levied and whether in view of the serious dispute of the law it cannot be said that there was sufficient cause for not applying for registration. This Court then said as under : "Under the Act penalty may be imposed for failure to register as a dealer : Section 9(1) read with Section 25(1)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even i....
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.... : "From the aforesaid it follows that Section 7(5) has to be construed to mean that the presumption contained therein is rebuttable and secondly the penalty of ten times the amount of entry tax stipulated therein is only the maximum amount which could be levied and the assessing authority has the discretion to levy lesser amount, depending upon the facts and circumstances of each case. Construing Section 7(5) in this manner the decision of the High Court that Section 7(5) is ultra vires cannot be sustained." 24. It will be thus seen that once there was a case of imposition of penalty only the amount of penalty to be levied was left to the discretion of the assessing authority on the facts of the case. 25. In Government of Tamil Nadu v. K.N. Ramamurthy [1997 (7) SCC 101] it has been held that failure to exercise quasi-judicial power properly amounts to misconduct. In this case, the respondent working as Deputy Commercial Tax Officer was served with the following charges : "(i) That he failed to analyse the facts involved in each and every case referred to above; (ii) that he failed to check the accounts deeply and thoroughly while making final ass....
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.... of precise definition, on reflection receives its connotation from the context, the delinquency in its performance and its effect on the discipline and the nature of the duty. It may involve moral turpitude, it must be improper or wrong behavior; unlawful behavior, wilful in character; forbidden act, a transgression of established and definite rule of action or code of conduct but not mere error of judgment, carelessness or negligence in performance of the duty; the act complained of bears forbidden quality or character. Its ambit has to be construed with reference to the subject matter and the context wherein the term occurs regard being had to the scope of the statute and the public purpose it seeks to serve." 28. Keeping in view the provisions of law and guidelines led by various judgments of this Court, we may now refer to the Article of Charge given to the appellant. It reads as under : "Shri Z.B. Nagarkar while working as Collector, Central Excise, Nagpur (now redesignated as Commissioner of Central Excise) has passed an Order-in-Original No. 20/95, dated 20-3-1995 in which he had favoured M/s. Hari Vishnu Packaging Ltd., Nagpur by not imposing any penalty on the ....
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....o confiscation" and the person concerned "shall be liable to penalty" not exceeding three times the value of excisable goods or five thousand rupees whichever is greater. Under Section 11AC the person, who is liable to pay duty on the excisable goods as determined "shall also be liable to pay penalty equal to the duty so determined". What is the significance of the word "liable" used both in Rule 173Q and Section 11AC? Under Rule 173Q apart from confiscation of the goods the person concerned is liable to penalty. Under Section 11AC the word "also" has been used but that does not appear to be quite material in Interpreting the word "liable" and if liability to pay penalty has to be fixed by the adjudicating authority. The word "liable" in the Concise Oxford Dictionary means, "legally bound, subject to a tax or penalty, under an obligation". In Black's Law Dictionary (sixth edition), the word "liable" means, "bound or obliged in law or equity; responsible; chargeable; answerable; compellable to make satisfaction, compensation, or restitution.......... Obligated; accountable for or chargeable with. Condition of being bound to respond because a wrong has occurred. Condition out of whic....
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....ual to two per cent of the assessed tax for every month during which the default continued. Explanation. - In this clause "assessed tax" means tax as reduced by the sum, if any, deducted at source under Chapter XVII-B or paid in advance under Chapter XVII-C. (ii) in the cases referred to in clause (b), in addition to any tax payable by him, a sum which shall not be less than ten per cent but which shall not exceed fifty per cent of the amount of the tax, if any, which would have been avoided if the Income returned by such person had been accepted as the correct income; (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars, of such income : ..." 32. It would, thus, be seen that under provisions of Section 271 of the Income-Tax Act in the first instance there is a discretion with the assessing authority whether to impose any penalty or not and if the assessing authority finds that it is a case for imposition of penalty t....
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....the material and there is direct evidence substantiating the guilt of the notice and this view was fully supported by the judgments of the High Court, some High Courts and the Tribunal, (4) He had a nagging feeling that had he imposed any penalty on the assessee, they would have gone on appeal before the Appellant Tribunal and the department would have not only lost the case in terms of penal action but probably the confirmation of the duty demanded could have been jeopardized. 34. The question is : If such a stance by the appellant was to "favour" the assessee or the officer was rightly of the view that it was not a case of levy of penalty. It is a quasi-judicial order. Merely because penalty imposable has not been imposed, which was obligatory for the officer to impose, could it be said that if it is a case of misconduct and he is liable to be proceeded against? The officer did impose the excise duty and also ordered confiscation of the goods. What is the evidence before the authority to come to prima facie view of levying charge of misconduct on the officer? He was served with the memorandum dated September 2, 1997. It was accompanied with Annexure 1 (Article of charge) ....
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....ne which has been left to the discretion of the court. In Rajasthan Pharmaceuticals Laboratory, Bangalore & Others v. State of Kanataka [(1981) 1 SCC 645] this Court has taken the view that imprisonment and fine both are imperative when the expression "shall also be liable to fine" was used under Section 34 of the Drug and Cosmetics Act, 1940. In that case, this Court was considering Section 27 of the Drugs and Cosmetics Act, 1940, which enumerates the penalties for illegal manufacture, sale, etc., of drugs and is an under - "Whoever himself or by any other person on his behalf manufacture for sale, sells, stocks or exhibits for sale or distributes - (a) any drug - (i) ..... (ii) without a valid licence as required under clause (c) of Section 18. shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to ten years and shall also be liable to fine : Provided that the court may, for any special reasons to be recorded in writing, impose a sentence of imprisonment of less than one year : ..." 37. This Court said that the High Court imposed a fine of two thousand rupees on each of the three appe....
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.... law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. This Court has said that the penalty will not also be imposed merely because it is lawful so to do. In the present case, it is not that the appellant did not impose penalty because of any negligence on his part but he said it was not a case of imposition of penalty. We are, however, of the view that in a case like this which was being adjudicated upon by the appellant imposition of penalty was imperative. But then, there is nothing wrong or improper on the part of the appellant to form an opinion that imposition of penalty was not mandatory. We have noticed that Patna High Court while interpreting Section 325 IPC held that imposition of penalty was not mandatory which again we have said is not a correct view to take. A wrong interpretation of law cannot be a ground for misconduct. Of course it is a different matter altogether if it is deliberate and actuated by mala fides. 39. When penalty is not levied, the assessee certainly benefits. But, it cannot be said that by not levying the penalty the officer has favoured the assessee or shown undue favour to him. There has t....