TaxTMI 
TaxTMI 
TaxTMI 
2014 (10) TMI 829
X X X X Extracts X X X X
X X X X Extracts X X X X
....peals to the levy of penalty. Counsel for the appellant has filed three amended questions of law, in Court today, which are taken on record. 3. Counsel for the appellant submits that finding recorded by the Additional Commissioner, Central Excise, Ludhiana, that penalty, can be levied irrespective of mens rea, is illegal. A bare perusal of Section 11AC(1)(a) of the Central Excise Act, 1944 (hereinafter to be referred as "the Act"), reveals that penalty can only be levied, if duty has not been levied, paid, has been short levied, paid or erroneously refunded, by reason of fraud, collusion or any wilful misstatement or suppression of facts or contravention of any of the provisions of the Act or Rules. The exercise of power to impose pen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and penalty, by holding that for imposing penalty there is no need to prove mens rea. 7. Aggrieved by this order, the appellant filed an appeal before the Commissioner (Appeals), Customs and Central Excise, Chandigarh. The appeal was allowed, vide order dated 11-7-2008, by holding that as gum, wax and fatty acids are waste products they are exempted, and therefore, not exigible to Excise duty. As a consequence, duty, penalty and interest were set aside. 8. The respondents filed an appeal before CESTAT which was allowed vide order dated 25-7-2011, by reversing order passed by the Appellate Authority and restoring the order passed by the Assessing Authority, including the penalty. 9. Counsel for the appellant having confined....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee has not paid or short-paid duty or duty has not been levied or has been short-levied by reason of (a) fraud or collusion, wilful misstatement or suppression of facts, or (b) contravention of any provisions of the Act/Rules, with intent to evade duty. A plain reading of Section 11AC(1)(a) of the Act, particularly the words and expressions used therein unequivocally postulate that penalty, under Section 11AC(1)(a) of the Act, can only be levied, if fraud, collusion, wilful misstatement or suppression of facts or contravention of the provisions of the Act and Rule with intent to evade duty, is proved. 12. Section 11AC(1)(a) of the Act came up for consideration before the Hon'ble Supreme Court of India in Union of India v. Rajasth....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 word....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is answered............". 21. From the above, we fail to see how the decision in Dharamendra Textile can be said to hold that Section 11AC would apply to every case of non-payment or short payment of duty regardless of the conditions expressly mentioned in the section for its application. 22. There is another very strong reason for holding that Dharamendra Textile could not have interpreted Section 11AC in the manner as suggested because in that case that was not even the stand of the Revenue. In Paragraph 5 of the decision the court noted the submission made on behalf of the Revenue as follows : "5. Mr. Chandrashekharan, Additional Solicitor General submitted that in Rules 96ZQ and 96ZO there is no reference to any mens r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....scretion but that is not the case here." 23. The decision in Dharamendra Textile must, therefore, be understood to mean that though the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A. That is what Dharamendra Textile decides." 13. The above extract leaves no ambiguity that penalty may only be imposed, if failure to deposit duty is occasioned by wilful misstatement, fraud and collusion, etc., i.e. mens rea. Thus, before an adjudicating authority pr....