TaxTMI 
TaxTMI 
2013 (3) TMI 338
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....reventive Unit Meerut-I made a surprise visit to the factory premises on 10.1.2011. The officers conducted physical verification of the finished goods. On comparison of stock of finished goods, it was found that 276 numbers of two wheelers of different models were in excess and 365 number of two wheelers of different models were short. A Panchnama was prepared on the spot. The stock of excess finished goods were seized which were subsequently released on bond along with bank guarantee. A show cause notice dated 8.7.2001 was issued to the respondents as to why (i) Seized 276 nos of two wheelers should not be under rule 173Q(I(b) of CEA, 1994. (ii) Duty amounting to Rs. 6,23,391 and automobile Cess of Rs. 4870 should be recovered under section 11A of CEA, 1994 in respect of the 365 nos of two wheelers found short. (iii) Why interest under section 11AB may not be recovered. (iv) And why penalty under rule 173Q of CEA, 1994 may not be imposed. The adjudicating officer by order dated 25.10.2001 confiscated the seized two wheelers. However, since the goods were provisionally released a fine of Rs. 5 lacs in lieu of confiscation was imposed. Demand of Rs. 6,23,391/- levied on ....
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....lty. Before we proceed to consider the respective submissions, it is useful to look into the provisions of Section 11AC. Section 11 AC of the Act, 1944 is as follows: "SECTION 11AC. Penalty for short-levy or nonlevy of duty in certain cases. - The amount of penalty for non-levy or short-levy or non-payment or short payment or erroneous refund shall be as follows : (a) where any duty of excise has not been levied or paid or short-levied or short paid or erroneously refunded, by reason of fraud or collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made there under with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (10) of section 11A shall also be liable to pay a penalty equal to the duty so determined; (b) where details of any transaction available in the specified records, reveal that any duty of excise has not been levied or paid or short-levied or shortpaid or erroneously refunded as referred to in subsection (5) of section 11A, the person who is liable to pay duty as determined under sub-section (10) of section 11A shall also be liabl....
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....pay a penalty equal to the duty so determined. The payment of penalty thus is simultaneous and consequential to the payment of duty under sub-section (10) of Section 11A. Thus, when fraud, collusion or any wilful misstatement or suppression of fact or contravention of any of the provisions of the Act or Rules with intent to evade payment of duty is proved, apart from payment of duty, payment of penalty is consequential. The use of word "shall" indicates an imperative requirement and the payment of penalty is with object to punish person who evade duty on account of fraud collusion or wilful misstatement and with intention to evade payment of duty. The question is as to whether when the Statute itself provides the amount of penalty equal to the duty, whether any discretion is to be read in the adjudicating authority or the appellate authority to reduce the amount of penalty. The answer to the said question is to be found out from the scheme of the Act itself. Proviso to Section 11AC contains a circumstance where a reduced penalty of 25% can be paid by a person on whom duty has been determined under sub-section (2) of Section 11A. The circumstance is that when duty so determined alon....
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....nduct on his failure to levy penalty under Rule 173Q. Appellant has contended that it is only now after insertion of Section 11AC in the Act that levy of penalty has become mandatory and that it was not so under Rule 173Q. This contention does not appear to be correct. In both Rule 173Q and Section 11AC the language is somewhat similar. Under Rule 173Q "such goods shall be liable to 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 ta....
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....xceeding one per cent of the total income computed under this Act without giving effect to the provisions of sections 11 and 12 for each year or part thereof during which the default continued; (b) in any other case, in addition to the amount of the tax, if any, payable by him, a sum equal 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 ....
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....e statement under sub-sections [1] and [2] of Section 7 was not with a view to facilitate the evasion of entry tax. If a registered dealer is unable to satisfy the authorities in this regard then in the absence of satisfaction, the presumption is that non-submission of statement has facilitate the evasion of entry tax. Construing Section 7(5) to contain a rebuttable presumption it does not suffer from any vice. It cannot then he held invalid as conducted by the High Court. It is the misconstruction of the provision which misted the High Court to the contrary conclusion. 12. It is not necessary for us to decide whether the provision for levy of penalty equal to ten times the amount of entry tax would be confiscatory and therefore, ultra vires since Mr. Sanghi, in fairness, submitted that the State treats is as the maximum limit and not fixed amount of penalty leaving no discretion for imposition of lesser penalty. This stand of the State itself concedes that the assessing authorities are not bound to levy fixed penalty equal to ten times the amount of entry tax whenever the provision of Section 7[5] are attracted. Depending upon the facts of each case the assessing authority has ....
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....ion Bench of this Court has referred the controversy involved in these appeals to a larger Bench doubting the correctness of the view expressed in Dilip N. Shroff v. Joint Commissioner of Income Tax, Mumbai and Anr. 2007 (8) SCALE 304. The question which arises for determination in all these appeals is whether Section 11AC of the Central Excise Act, 1944 (in short the `Act') inserted by Finance Act, 1996 with the intention of imposing mandatory penalty on persons who evaded payment of tax should be read to contain mens rea as an essential ingredient and whether there is a scope for levying penalty below the prescribed minimum. Before the Division Bench, stand of the revenue was that said section should be read as penalty for statutory offence and the authority imposing penalty has no discretion in the matter of imposition of penalty and the adjudicating authority in such cases was duty bound to impose penalty equal to the duties so determined. The assessee on the other hand referred to Section 271(1) (c) of the Income Tax Act, 1961 (in short the `IT Act') taking the stand that Section 11AC of the Act is identically worded and in a given case it was open to the assessing officer not....
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....ion as it stands is meaningless or of doubtful meaning. The courts are not entitled to read words into an Act of Parliament unless clear reason for it is to be found within the four corners of the Act itself. (Per Lord Loreburn, L.C. in Vickers Sons") 26. In Union Budget of 1996-97, Section 11AC of the Act was introduced. It has made the position clear that there is no scope for any discretion. In para 136 of the Union Budget reference has been made to the provision stating that the levy of penalty is a mandatory penalty. In the Notes on Clauses also the similar indication has been given." Again in Union of India Vs. Rajasthan Spinning & Weaving Mills (supra), the provision of Section 11AC came up for consideration. In the said case, the judgment of the Apex Court in Dharmendra Textile (supra) was also considered. Paragraphs 17 to 23, which are relevant, are quoted as below: "17. The main body of Section 11AC lays down the conditions and circumstances that would attract penalty and the various provisos enumerate the conditions, subject to which and the extent to which the penalty may be reduced. 18. One cannot fail to notice that both the proviso to Sub section 1 of Sec....
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....ed the controversy involved in these appeals to a larger Bench doubting the correctness of the view expressed in Dilip N. Shroff v. Joint Commissioner of Income Tax, Mumbai and Anr. MANU/SC/3182/2007 :2007 (8) SCALE 304. The question which arises for determination in all these appeals is whether Section 11AC of the Central Excise Act, 1944 (in short the `Act') inserted by Finance Act, 1996 with the intention of imposing mandatory penalty on persons who evaded payment of tax should be read to contain mens rea as an essential ingredient and whether there is a scope for levying penalty below the prescribed minimum. Before the Division Bench, stand of the revenue was that said section should be read as penalty for statutory offence and the authority imposing penalty has no discretion in the matter of imposition of penalty and the adjudicating authority in such cases was duty bound to impose penalty equal to the duties so determined. The assessee on the other hand referred to Section 271(1)(c) of the Income Tax Act, 1961 (in short the `IT Act') taking the stand that Section 11AC of the Act is identically worded and in a given case it was open to the assessing officer not to impose any p....
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....ut that the proviso to Section 11A deals with the time for initiation of action. Section 11AC is only a mechanism for computation and the quantum of penalty. It is stated that the consequences of fraud etc. relate to the extended period of limitation and the onus is on the revenue to establish that the extended period of limitation is applicable. Once that hurdle is crossed by the revenue, the assessee is exposed to penalty and the quantum of penalty is fixed. It is pointed out that even if in some statues mens rea is specifically provided for, so is the limit or imposition of penalty, that is the maximum fixed or the quantum has to be between two limits fixed. In the cases at hand, there is no variable and, therefore, no discretion. It is pointed out that prior to insertion of Section 11AC, Rule 173Q was in vogue in which no mens rea was provided for. It only stated "which he knows or has reason to believe". The said clause referred to wilful action. According to learned Counsel what was inferentially provided in some respects in Rule 173Q, now stands explicitly provided in Section 11AC. Where the outer limit of penalty is fixed and the statute provides that it should not exceed a....