TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 1479
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....gly 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. 8. Before deletion of Sub Rule (2) of Rule 14 of t....
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....zed 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 2nd proviso should be limited for that part of first proviso to Rule 1....
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....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 other hand, the petitioner seems to have even concealed the material facts from this court, interalia, the fact of the subsequent order having been passed....
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....tre 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 the Court that in the case of M/s. Rayala Corporation (P) Ltd. (supra), in a case relating to prosecution under the provisions of Foreign Exchange Regulation Act, 1947 (hereinafter refe....
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....orce, 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 exist. On this interpretation, the complaint made for the offence under Rule 132A (4) of the D.I. Rs., after 1st April, 1965 when the rule was omitted, has to be held invalid." "14. On the other hand....
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....ntinued 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 of the Hon'ble Supreme Court in the case of Kolhapur Canesugar works (supra) and relied upon by Mr. Kumar pertain to the provisions for levy of Excise Duty under the provisions of the Central Excise Act, ....
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.... 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 personal hearing. 5. If no cause is shown against the action proposed to be taken within ten days of the receipt of this notice, or they do not appear before the Assistant Collector, Central Excise, Kolhapur, when the case p....
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....e 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 in the judgments. The Full Bench of the Gujarat High Court in Saurashtra Cement and Chemical Industries, (1993 (42) ECC 126) (supra), as it appears from the discussions in the judgment, tried to distinguish the decision of the Constitution Bench i....
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....itution 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 Falcon Tyres Ltd., (1992 (60) ELT 116) (Kant) (supra) and the other decisions taking similar view. It is not correct to say that in considering the question of maintainability of pending proceedings initiated under a particular provision of the rule after ....
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....orporation (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 P.643]. The following extracts from these aforesaid two judgments quoted below after noticing the below quoted provisions of Sections 2 (19), 2(50), 2(51) 6, 6-A and 24 of the General Clauses Act, 1987. 2(19): "enactment" shall include a Regulation (as here....
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....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, the provisions of such Act or Regulations shall be deemed to have been repealed and re- enacted in such area or part within the meaning of this Section). 14. The definitions of enactment, Rule, Regulation and Repeal from Mysore General Clauses Act, 1899 are also quoted below: 2(19): "enactment" shall....
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....t 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 Rule 132-A was omitted by a Notification dated 30-3- 1966. What was decided in that case is set out by para 17 of the said judgment, which is as follows: (SCC p.424) "17. Reference was next made to a decision of the Madhya Pradesh High Court in State of M.P. v. Hiralal Sutwala but, there again, the accused was sought to be prosecuted for an offence puni....
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....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 simpliciter or repeal accompanied by fresh legislation. The Section also applies when a temporary statute is repealed before its expiry, but it has no application when such a statute is not repealed but comes to an end by expiry. The section on its own terms is limited to a repeal brought about by a Central Act or Regulation. A rule made under an Act is not a Central Act or Regulation an....
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....eneral 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 repeals by express omission. The absence of any reference to Section 6-A, therefore, again undoes the binding effect of these two judgments on an application of the per incuriam principle." 16. In a later case in the case of Shree Bhagwati Steel Rolling Mills (supra), it was again argued before the Hon'ble Supreme Court that the judgment in the case of Fibre Boards Private Limited (supra) ....
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....ers 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 Constitution Bench decision in Rayala Corpn. had been delivered. It is, therefore, presumed that Parliament enacted Section 31 knowing that the decision in Rayala Corpn. had stated that an omission would not amount to a repeal and it is for this reason that Section 31 was enacted. This again does not take us further as this statement of the law in Rayala Corpn. is no longer the law declared by the Supreme Cour....
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....ious 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 plug these loopholes and in the interest of revenue, the State under the impugned notification referred only CL-2 and CL-9 licencees and excluded the other categories of licencees. This classification by the State can neither be said to be arbitrary nor discriminatory. To achieve the object which is expedient, the State in its wisdom included the CL-2 and CL-9 licencees in the impugned notification. It is clear t....
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....dly, 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, 1897 in the context of situation then obtaining should not allow the levy of Penalty/damages under Rule like Rule 14 (2) of present Excise Rules to lapse by holding that Section 6 of the General Clauses Act does not apply to Rules. It is only after the State Re-organization Act, 1956 that States in India started enacting such Rules under their delegated powers under the relevant Acts. Merely because it is a 'Rule' enacted ....
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.... 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 him from committing such offences. The penalty imposed under the said Section 78(5) is a civil liability. Willful consignment is not an essential ingredient for attracting the civil liability as in the case of prosecution. Section 78(2) is a mandatory provision. If the declaration form 18A/18C does not support the goods in movement because it is left blank then in that event section 78(5) provides for imposition of monetary penal....
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....s, 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 assessing officer to assess the taxable goods. Moreover, in the absence of value/price it is not possible for the A.O. to arrive at the taxable turnover as defined under section 2(42) of the said Act. Therefore, we have emphasized the words "material particulars" in the present case. It is not open to the assessees to contend that in certain cases of inter-State transactions they were not liable in any event for being taxed under the....
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....s 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: The Law Lexicon, 2nd Edn., p.1431). 14. In support of the submission that the demand for the price of mineral raised and exported is in the nature of penalty, the learned counsel for the appellants has relied on the marginal note of Section 21. According to Justice Singh, G.P.: Principles of Statutory Interpretation (8th Edn., 2001, at p.147) though the opinion is not uniform but the weight of authority is in favour of the view that the mar....
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....ct. 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 of this discussion? It was submitted that the CEC has taken the following view: " ..... it may be appropriate that 30% of the notional value of the iron and manganese produced by each of the lessees without/in excess of the environmental clearances may be directed to be recovered from the concerned lessees and with the explicit understanding the concerned lessees as well as the officers will continue to be liable for action under the provisions of t....
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....and 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), decided by this Court on 27/06/2017 and the requirement of giving such opportunity wherein Rule 14(2) was restricted in the case where the licence itself was sought to be cancelled for the said reason of short-lifting of the liquor. 28. This Court also does not find any merit in the contention No.III that measure of Penalty under Rule 14 (2) cannot be assailed on different price range for different types of liquor. It is for the Legislature to adopt such measure a....