TaxTMI 
TaxTMI 
2017 (8) TMI 1479
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....ditional grounds in the matter and accordingly again an opportunity was afforded to both the sides to address their argument before Court. 2. The controversy in brief is regarding the imposition of Penalty for the short-lifting of the liquor during the period in question as against the quantity prescribed under the Rule 14(2) of the Excise Rules of 1968 from the sole Distributor of Liquor in the State, viz. Karnataka State Beverages Corporation Limited (KSBCL). The said Rule 14(2) of the Excise Rules of 1968 which was inserted on the Statute Book with effect from 01/04/2003 was omitted with effect from 01/08/2014 and the demand in question of the said Penalty which has been held to be in the nature of a fiscal liability in the aforesaid judgment of this Court is only for the different periods falling between these two dates when the said Rule was existing on the Statute Book. 3. The relevant part of the aforesaid order passed by this Court on 27/06/2017 is quoted herein below again for ready reference: "7. Having heard the learned counsels, this court is of the opinion that the present Writ Petition has no force and is liable to be dismissed. The reasons are as follows. ....
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....uthorized and properly manufactured liquor from the authorized licencees only to avoid the smuggling of illegal liquor into the market through illegal outlets or source. To check such a menace, if a liability is fixed under the Rule for payment of price for the short lifted quantity of liquor, the same cannot be said to be a penalty requiring any guilty animus on the part of the licencee so as to require prior opportunity of hearing. The fact of short lifting is to be computed as per the minimum quantity prescribed under Rule 14 itself and the rate of penalty of Rs. 100/- per bulk litre is also provided therein. Therefore, nothing much can be achieved to the contrary by giving an opportunity of hearing as demanded in the present case for explaining the reasons for such short lifting of the liquor, attracting the imposition of penalty under Rule 14(2) of the said Rules which now stands deleted from the statute book itself w.e.f. 1.8.2014. The said 2nd Proviso for giving opportunity of hearing can be more usefully pressed into service if the other consequence under Rule 14(2) is to follow namely the cancellation of licence itself and therefore, the application of the said 2^nd provis....
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....ulk litres 25 cases 225 bulk litres. Provided that in case the licensee fails to lift the minimum quantity so fixed consecutively for two months, the license may liable to be cancelled: Provided further that the licensing Authority shall give the licensee, a reasonable opportunity of being heard before levying the penalty or canceling the license. The minimum quantity of liquor (excluding fenny, wine and beer) to be lifted in a month by a CL-2 (Retail shop)/ CL-9 (Bar) licensee is as follows: 12. From the facts in the present case, it is not seen anywhere that the petitioner had raised any objection or has given any explanation suitable or otherwise for such short lifting of the liquor from the respondent - Department or its authorized licencee/manufacturer. Even if the principles of natural justice were to be complied with as argued by the learned counsel for the petitioner, the same cannot yield anything in the facts of the present case. Being already aware of the fact situation, the petitioner was expected at least to raise the objection or give the reasons for such short lifting of the liquor, but nothing of this sort is seen in the present case. 13. On the ot....
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....opportunity in this regard ought to have been provided by the Respondent Authority to the petitioners. III. That the imposition of Penalty at fixed rate of Rs. 100/- per bulk litre and some of them may be costly and some may be of cheaper rates and therefore the "loss of revenue" allegedly caused to the Respondent - State on account of such short-lifting of the liquor was a question of fact to be determined by the Respondent - Assessing Authority for which a notice and opportunity of hearing was necessary and therefore, the aforesaid rate of Penalty at the rate of Rs. 100/- per bulk litre cannot be justified in all the cases alike. IV. Since Rule 14 (2) of the Excise Rules of 1968 for levy of such Penalty is a charging provision therefore with its omission and deletion with effect from 01/08/2014, neither the alleged offence for short-lifting of the liquor remains on the Statute Book nor the charging provision for levy of the same even as a fiscal liability remains and therefore the proceedings determining such liability for the petitioners and the question of recovery of the same does not arise after 01/08/2014. 5. Mr. K.P. Kumar, learned Senior Counsel submitted before t....
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.... except as respects things done or omitted to be done under that rule." The argument of Mr. Sen was that, even if there was a contravention of Rule 132A (2) by the accused when that Rule was in force, the act of contravention cannot be held to be a "thing done or omitted to be done under that rule," so that, after that rule has been omitted, no prosecution in respect of that contravention can be instituted. He conceded the possibility that, if a prosecution had already been started while Rule 132A was in force, that prosecution might have been competently continued. Once the Rule was omitted altogether, no new proceeding by way of prosecution could be initiated even though it might be in respect of an offence committed earlier during the period that the rule was in force. We are inclined to agree with the submission of Mr. Sen that the language contained in clause 2 of the Defence of India (Amendment) Rules, 1965 can only afford protection to action already taken while the rule was in force, but cannot justify initiation of a new proceeding which will not be a thing done or omitted to be done under the rule but a new act of initiating a proceeding after the rule had ceased to ex....
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....onviction could be validly made even after the expiry of the Act in respect of an offence committed before the expiry. In the case before us, the operation of Rule 132A of the D.I. Rs. has not been continued after its omission. The language used in the notification only affords protection to things already done under the rule, so that it cannot permit further application of that rule by instituting a new prosecution in respect of something already done. The offence alleged against the accused in the present case is in respect of acts done by them which cannot be held to be acts under that rule. The difference in the language thus makes it clear that the principle enunciated by the Privy Council in the case cited above cannot apply to the notification with which we are concerned." The said judgment relating to 'offence' and 'prosecution' for alleged breach of Rule 132-A of Defence of India Rules is quite distinguishable from the facts of the present case where this question is of compensation to the State for loss of Revenue caused by short-lifting of liquor quantity under Rule 14(2) of the Excise Rules of 1968 is involved. 7. The second case decided by the Constitution Bench ....
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....Kolhapur Cane Sugar Works Ltd., Kolhapur, do not thus appear to be entitled to the rebate sanctioned to him as a new factory. Whereas it appears that M/s. Kolhapur Cane Sugar Works Ltd., Kolhapur are not eligible to rebate for the season 73-74 under any other provisions of the notification No. 189/73 dated 4-10-73. 2. Now therefore M/s. Kolhapur Cane Sugar Works Ltd., Kolhapur are hereby required to show cause the Assistant Collector, Central Excise Kolhapur, why the rebate of Rs. 61,14,930/- erroneously sanctioned and allowed to the credited to their PLA by the Superintendent under his letter No. Rebate/KCW/73-74/76 dated 23-7-73, should not be recovered from them under Rule 10-A of the Central Excise Rules, 1944. 3. M/s. the Kolhapur Cane Sugar Works Ltd., Kolhapur, are further directed to produce at the time of showing cause all the evidence upon which they intend to rely in support of their defence. 4. M/s. Kolhapur Cane Sugar Works Ltd., Kolhapur should indicate in the written explanation whether they wish to be heard in person before the case is decided. If no mention is made about this in their written explanation, it would be presumed that they do not desire a p....
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....was prescribed for initiating action for realisation of the duty which has not been levied or paid or has been short levied, erroneously refunded or any duty assessed has not been paid in full. No provision regarding residuary power was made in the Rules." 10. Further, the Hon'ble Supreme Court considered the applicability of Section 6 of the General Clauses Act and the case of M/s. Rayala Corporation Limited (supra) in para 22 of the judgment and held that the earlier view in the decisions of the Gujarat High Court in Saurastra Chemicals Case and the Karnataka High Court in the case of Falcon Tyres Ltd. was not sound in law. 11. The Hon'ble Supreme Court in Kolhapur Canesugar Works Ltd. (supra) observed in paragraphs 32 to 35 as follows: "32. We have carefully considered the decisions in Saurashtra Cement and Chemical Industries, (1993 (42) ECC 126) (Gujarat) (FB) (supra) and Falcon Tyres case (1992 (60) ELT 116) (Kant.) (supra). Though the judgments in these cases were rendered after the decision of the Constitution Bench in Rayala Corporation Pvt. Ltd., (AIR 1970 SC 494: 1970 Crl LJ 588) (supra) a different view has been taken by the High Courts for the reasons stated i....
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.... paragraph 17 of the judgment of the Full Bench have no substance as they are not relevant for determination of the question raised for the reasons stated herein. 34. In paragraph 21 of the judgment the Full Bench has noted the decision of a Constitution Bench of this Court in Chief Inspector of Mines v. ICC. Thapar, AIR (1961) SC 838 and has relied upon the principles laid down therein. The Full Bench overlooked the position that that was a case under section 24 of the General Clauses Act which makes provision for continuation of orders, notification, scheme, rule, form or bye-law, issued under the repealed Act or Regulation under an Act after its repeal and re- enactment. In that case section 6 did not come up for consideration. Therefore the ratio of that case is not applicable to the present case. With respect we agree with the principles laid down by the Constitution Bench in M/s. Rayala Corporation case (supra). In our considered view the ratio of the said decision squarely applies to the case on hand. 35. For the reasons set forth above we do not accept the view taken in Saurashtra Cement and Chemical Industries Ltd., (1993 (42) ECC 126) (Gujarat) (FB) (supra), in Falc....
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....s Act, 1897 and such levy cannot be allowed to lapse merely because the provisions of Rule 14 (2) was deleted with effect from 01/08/2014. 12. Both the aforesaid judgments relied upon by the learned Senior Counsel, Mr. Kumar in the case of M/s. Rayala Corporation (P) Ltd. and Kolhapur Canesugar Works Ltd.(supra) were held to be with regard to effect of omission of Rule being not treated as "repeal" saving the Acts done under the repealed provision by virtue of Section 6 of the General Clauses Act, 1897, in later judgments, but it seems that complete upto date research of the relevant case laws was not made by the learned counsels for the petitioners, and these were brought to the notice of the learned counsel for petitioners from Court side. 13. These two Constitutional Bench judgments were held to be on aforesaid issue in the later judgments in the cases of Fibre Boards Private Limited, Bangalore Vs. Commissioner of Income Tax, Bangalore [(2015) 10 SCC 333] = 2015 376 ITR 596 and which was affirmed and followed in a still later decision of the Hon'ble Supreme Court in the case of Shree Bhagwati Steel Rolling Mills Vs. Commissioner of Central Excise and another [(2016) 3 SCC ....
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....different intention appears, the repeal shall not affect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal] 24. Continuation of orders, etc., issued under enactments repealed and re- enacted.- Where any (Central Act) or Regulation, is, after the commencement of this Act, repealed and re-enacted with or without modification, then, unless it is otherwise expressly provided any (appointment notification,) order, scheme, rule, form or bye- law, (made or ) issued under the repealed Act or Regulation, shall, so far as it is not inconsistent with the provisions re-enacted, continue in force and be deemed to have been (made or) issued under the provisions so re- enacted, unless and until it is superseded by any (appointment, notification,) order, scheme, rule, form or bye-law, (made or) issued under the provisions so re-enacted (and when any (Central Act) or Regulation, which, by a notification under Section 5 or 5A of the Scheduled Districts Act, 1874, (14 of 1874) or any like law, has been extended to any local area, has, by a subsequent notification, been withdrawn form the re- extended to such area or any part thereof....
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....the express omission, insertion or substitution of any matter, then, unless a different intention appears, the repeal shall not affect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal] 15. The Hon'ble Supreme Court in the case of Fibre Boards Private Limited (supra) not only held that the view in the cases of M/s. Rayala Corporation (P) Ltd. and Kolhapur Canesugar Works Ltd. (supra) was not only an obiter dicta with regard to express omissions of enactment or Rule, but even an attempt made for referring the matter to the larger bench in the case of General Finance Company Vs. CIT (2002) 7 SCC 1 was negatived by the Hon'ble Supreme Court in the case of Fibre Boards Private Limited (supra). The following extract from paragraphs 25 to 33 of the said judgment is quoted below for ready reference. 25. In Rayala Corpn. (P) Ltd., what fell for decision was whether proceedings could be validly continued on a complaint in respect of a charge made under Rule 132- A of the Defence of India Rules, which ceased to be in existence before the accused were convicted in respect of the charge made under the said Rule. The said R....
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....plies to the case on hand." 27. Kolhapur Canesugar Works Ltd. judgment also concerned itself with the applicability of Section 6 of the General Clauses Act to the deletion of Rules 10 and 10-A of the Central Excise Rules on 6-8-1977. 28. An attempt was made in General Finance Co. v. CIT to refer these two judgments to a larger Bench on the point that an omission would not amount to a repeal for the purpose of Section 6 of the General Clauses Act. Though the Court found substance in the argument favouring the reference to a larger Bench, ultimately it decided that the prosecution in cases of non- compliance with the provision therein contained was only transitional and cases covered by it were few and far between, and hence found on facts that it was not an appropriate case for reference to a larger Bench. 29. We may also point out that in G.P. Singh's Principles of Statutory Interpretation, 12th Edn., the learned author has criticized the aforesaid judgments in the following terms: "Section 6 of the General Clauses Act applies to all types of repeals. The section applies whether the repeal be express or implied, entire or partial or whether it be repeal simplicite....
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....lly superfluous to further state that on an interpretation of the word "repeal", an "omission" would not be included. We are, therefore, of the view that the second so- called ratio of the Constitution Bench in Rayala Corpn. (P) Ltd. cannot be said to be a ratio decidendi at all and is really in the nature of obiter dicta. 32. Secondly, we find no reference to Section 6-A of the General Clauses Act in either of these Constitution Bench judgments. Section 6-A reads as follows: "6-A. Repeal of Act making textual amendment in Act or Regulation:-Where any [Central Act] or Regulation made after the commencement of this Act repeals any enactment by which the text of any [Central Act] or Regulation was amended by the express omission, insertion or substitution of any matter, then, unless a different intention appears, the repeal shall not affect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal] 33. A reading of this Section would show that a repeal by an amending Act can be by way of an express omission. This being the case, obviously the word "repeal" in both Section 6 and Section 24 would, therefore, include rep....
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....aw, invalidate, make void, negate, nullify, obliterate, officially withdraw, override, overrule, quash, recall, render invalid, rescind, rescindere, retract, reverse, revoke, set aside, vacate, void, withdraw." "13. On a conjoint reading of the three expressions "delete", "omit", and "repeal", it becomes clear that "delete" and "omit" are used interchangeably, so that when the expression "repeal" refers to "delete" it would necessarily take within its ken an omission as well. This being the case, we do not find any substance in the argument that a "repeal" amounts to an obliteration from the very beginning, whereas an "omission" is only in futuro. If the expression "delete" would amount to a "repeal", which the appellant's counsel does not deny, it is clear that a conjoint reading of Halsbury's Laws of England and the Legal Thesaurus cited hereinabove both lead to the same result, namely, that an "omission" being tantamount to a "deletion"'' is a form of repeal." 21. It is settled law that Parliament is presumed to know the law when it enacts a particular piece of legislation. The Prevention of Corruption Act was passed in the year 1988, that is long after 1969 when the Const....
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....is found that over the years, these licencees transacted a meagre business which is insufficient even to meet the prescribed licence fee. This clearly indicates that there was purchase and sale of liquor clandestinely leading to evasion of huge amounts of excise duty. With an object to plug these loopholes and in the interest of State revenue and public interest, the excise Department collected details from various Districts and after thorough examination, notified the draft Rules on 21.6.2002, proposing to amend the Rules by insertion of Sub-rule (2) Rule 14, 14A and 14B of the Rules. 12. It is now well settled that Article 14 does not forbid reasonable clarification for the purpose of legislation. In the present case, among the various categories of licencees, it is CL-2 and CL-9 licencees who come into contact with public at large and offer liquor for sale. According to the information collected by the State, the business transacted by these categories of licencees is so meagre and insufficient even to meet the prescribed licence fee. This clearly indicates that there was purchase and sale of liquor clandestinely leading to evasion of huge amounts of excise duty. In order to ....
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....egard to such 'omission' not amounting to 'repeal' has been held to be per incuriam or only obiter dicta in the later decisions in the case of Fibre Boards (2015) and Bhagawathi Steels (2016) and it has been categorically held that such omission of enactment would also amount to 'repeal' and Section 6 of the General Clauses Act would apply and save the action taken under the repealed provision, as discussed above. Secondly, levying of penalty/damages under Rule 14(2) of the State Excise Rules, 1968 in question, as contended by Mr.K.P.Kumar himself is that the said Rule is a charging provision and except the said Rule, there was no other provision for imposing the said penalty/damages for short lifting of liquor quantity. If it is a charging provision, as it appears to be, there is no reason to treat the 'Rule' 14(2) as anything different from a 'Section' or 'enactment' or a 'provision' covered by the scope of Section 6 of the General Clauses Act, 1897. It may also be noticed that in 1897, when India was not independent and no 'Rules' under delegated powers to the State Government were framed at that time therefore absence of word 'Rule' in Section 6 of the General Clauses Act, 1....
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.... There is dichotomy between contravention of section 78(2) of the said Act which invites strict civil liability on the assessee and the evasion of tax. When a statement of import/export is not filed before the A.O. it results in evasion of tax, however, when the goods in movement are carried without the declaration form No.18A/18C then strict liability comes in, in the form of Section 78(5) of the said Act. Breach of section 78(2) imposes strict liability under section 78(5) because as stated above goods in movement cannot be carried without form No.18A/18C. We are not concerned with non-filing of statements before the A.O. We are concerned with the goods in movement being carried without supporting declaration forms. The object behind enactment of Section 78(5) which gives no discretion to the competent authority in the matter of quantum of penalty fixed at 30 per cent of the estimated value is to provide to the State a remedy for the loss of revenue. The object behind enactment of section 78(5) is to emphasise loss of revenue and to provide a remedy for such loss. It is not the object of the said section to punish the offender for having committed an economic offence and to deter....
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.... fully aware that the goods in movement had to be supported by form ST 18A/18C. Therefore, they made the goods travel with the forms. However, the said forms are left blank in all material respects. Therefore, A.O. was right in drawing inference of mens rea against the assessees. It has been repeatedly argued before us that apart from the declaration forms the assessees possessed documentary evidence like invoice, books of accounts, etc., to support the movement of goods and, therefore, it was open to the assessees to show to the competent authority that there was no intention to evade the tax. We find no merit in this argument. Firstly, we are concerned with contravention of section 78(2) which requires the goods in movement to travel with the declaration in form 18A/18C duly filled in. It is section 78(2)(a) which has been contravened in the present case by the assessees by carrying the goods with blank forms though signed by the consignee. In fact, the assessees resorted to the above modus operandi to hoodwink the competent officer at the check-post. As stated above, if the form is left incomplete and if the description of the goods is not given then it is impossible for the ass....
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.... achieved by Section 21(5) of the MMDR Act is to recover the price of the mineral that has been illegally or unlawfully or unauthorisedly raised with an intention to compensate the State for the loss of the mineral owned by it, the loss having been caused by a person who is not authorized by law to raise that mineral. There is no element of penalty involved in this and the recovery of the mineral or its price is not a penal action but is merely compensatory. This is what this Court had to say in Karnataka Rare Earth: "12. Is the sub-section (5) of Section 21 a penal enactment? Can the demand of mineral or its price thereunder be called a penal action or levy of penalty? 13. A penal statute or penal law is a law that defines an offence and prescribes its corresponding fine, penalty or punishment. (Black's Law Dictionary, 7th Edn., p.1421). Penalty is a liability composed (sic imposed) as a punishment on the party committing the breach. The very use of the term "penal" is suggestive of punishment and may also include any extraordinary liability to which the law subjects a wrong-doer in favour of the person wronged, not limited to the damages suffered. (See Aiyar P. Ramanatha: T....
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.... where the mineral has already been disposed of, the price thereof as compensation. The words 'any land' are not confined to the mining lease area. As far as the mining lease area is concerned, extraction of a mineral over and above what is permissible under the mining plan or under the EC undoubtedly attracts the provisions of Section 21(5) of the MMDR Act being extraction without lawful authority. It would also attract Section 21(1) of the MMDR Act. In any event, Section 21(5) of the Act is certainly attracted and is not limited to a violation committed by a person only outside the mining lease area - it includes a violation committed even within the mining lease area. This is also because the MMDR Act is intended, among other things, to penalize illegal or unlawful mining on any land including mining lease land and also preserve and protect the environment. Action under the EPA or the MCR could be the primary action required to be taken with reference to the MCR and Rule 2(ii a) thereof read with the Explanation but that cannot preclude compensation to the State under Section 21(5) of the MMDR Act. The MCR cannot be read to govern the MMDR Act. 151. What is the significance o....
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....ear that the reliance placed by the learned Senior Counsel for the petitioners on the earlier Constitution Bench decisions in the case of M/s. Rayala Corporation (P) Ltd. (supra) and Kolhapur Casesugar Works Limited (supra) is of little assistance to the case of the petitioners before this Court and the action taken against these petitioners with regard to Rule 14 (2) of the Excise Rules for a period prior to its omission on 01/08/2014 is justified and the said demand of Penalty/fiscal liability cannot be struck down on the basis of the aforesaid contention raised on behalf of the petitioners. 27. This Court is further of the view that the said fiscal liability in the name of Penalty under Rule 14 (2) of the Excise Rules of 1968 is actually the price or the liquidated damages to be paid by the Excise Licencees or vendors of liquor for the breach of contract on their part for short-lifting of the prescribed quantity of liquor from the State Beverage Corporation. That is why there is no need to go into the question of mens rea or opportunity of hearing or raising an objection in that regard was considered appropriate in the aforesaid case in Lakshmi Bar and Restaurant case (supra)....