TaxTMI 
TaxTMI 
2016 (3) TMI 1327
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....thin the meaning of Section 4 and whether while deciding the issue relating to imposition of penalty under Section 27(b) or its proviso, the Commission is required to follow some objective criteria and take into consideration factors like the nature of anti-competitive agreement and/or abuse of dominant position, appreciable adverse effect on competition, financial health of the enterprise and market condition. 2. RELEVANT FACTS: "(i) M/s. ECP Industries Ltd. (Appellant in Appeal No. 47/2014) is engaged in the manufacture of LPG cylinders of various capacities, i.e., 14.2 kg., 12 kg. and 5 kg., regulators which are fitted on the cylinders, industrial valves and other engineering products. SKN Industries Ltd. (Appellant in Appeal No. 57 of 2015) is also engaged in manufacturing various products including LPG cylinders. (ii) In response to the tender notice issued by Indian Oil Corporation Limited (IOCL) in February, 2010 for supply of 105 Lacs 14.2 Kg. capacity LPG cylinders with SC valves, the appellants and 61 other manufacturers/suppliers of LPG cylinders submitted their bids in two parts, i.e., technical-bid and price-bid. Fifty of the bidders including the appe....
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....r response and supplied the required information. The DG also issued summons to the officers of IOCL and others and recorded their statements. (viii) After completing the investigation, the DG submitted report dated 11.05.2011 with the finding that 50 LPG cylinder manufacturers across India had formed cartel and indulged in collusive bidding in violation of Section 3(3) of the Act. For arriving at this finding, the DG relied upon the meetings held by the Cylinder Manufacturers Association at Mumbai on 01.03.2010 and 02.03.2010 and the fact that they had quoted identical price. (ix) The Commission considered the investigation report and directed that copies thereof be supplied to the bidders to enable them to file their replies/objections. Both the appellants filed written objections to contest the findings recorded by the DG. Along with the objections, M/s. ECP Industries Ltd. furnished details of its turnover of three preceding financial years. SKN Industries Ltd. furnished details of the turnover of the preceding two financial years. The other bidders also filed their replies and raised various objections to contest the findings recorded by the DG. In addition, th....
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....CA21. For M/s. ECP Industries Ltd., the average of the turnovers of the three preceding financial years 2008, 2009 and 2010 i.e. Rs. 2,14,99,939/- was taken into consideration and penalty of Rs. 150,49,366/- was imposed. In the case of SKN Industries Ltd., the average of the turnover of the financial years 2010 and 2011 was taken into consideration and penalty of Rs. 80,38,616/- was imposed. (xii) The appellants and 43 other of LPG cylinder manufacturers challenged the order of the Commission by filing appeals under Section 53B of the Act, which were disposed of by the Tribunal vide order dated 23.12.2013. While confirming the finding recorded by the Commission that the appellants and other LPG cylinder manufacturers had formed a cartel, indulged in collusive bidding and acted in violation of Section 3(3) read with Section 3(1) of the Act, the Tribunal set aside the penalty imposed by the Commission by recording the following observations: "53. This takes us to the next question about the penalty under Section 27 of the Act. The CCI has observed in paragraph 15.2 that all the bidding companies who had infringed the provision of Section 3(3) are responsible in equal ....
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....licted at the rate of 7% of the said average turnover of either two years' or three years' or even one year. The CCI has undoubtedly acted under Section 27(b) the first part. 56. Under Section 27(b), the only rider is that penalty should not be more than 10% of the average turnover for the last three preceding financial years. That is a maximum limit. In effect, the CCI has chosen to inflict 7% of average turnover on all the appellants without doing any comparative study. The CCI also applied the rule of 7% penalty to all the appellants without considering that in case of some only two years' or one year's turnover was available. We do not agree with this exercise. This would amount to an arbitrary approach. 57. We also do not find any reason, why the CCI has chosen to inflict the penalty at 7%. We have considered question of necessity of reasons in MDD Medical Systems India Pvt. Ltd. v. Foundation for Common Cause &Ors. (Appeal No. 93 of 2012). In the aforementioned decision of MDD's case, where the CCI fixed the penalty at 5% of the average turnover, relying on a reported decision in Hindustan Steel Ltd. v. State of Orissa reported in AIR 1970 SC 253 where....
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....ppearing for the CCI to address the question of penalties. It is unfortunate, that the learned counsel did not choose to argue that question, as some of the learned counsel candidly admitted that they did not address the CCI on the question of penalty. Some other counsel canvassed the argument that CCI should have separately heard them on the question of penalty after the conclusion of the verdict of guilty. We do not think such a course was possible particularly in view of the latest position in the regulation on the question of penalty. We would not ordinarily permit the question of penalty to be raised for the first time before us, however, in this case, there are as many as 44 parties involved. Considering the number of parties and stakes involved and all the other relevant considerations, we feel it will be better, if the parties are given one more opportunity to address on the question about penalties to the CCI, so that the CCI could give an active consideration, while deciding the penalties. It would be, therefore, better if the matter is remanded to the CCI on the question of penalties. The parties are therefore, directed to report to the CCI on or before 1st February, 201....
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....; and 'shall' and the penalty provisions contained in the Income Tax Act. Reference was also made to the judgment of the Supreme Court in Hindustan Steel Ltd. v. State of Orissa, AIR 1970 SC 253, orders passed by the Tribunal in Appeals Nos. 93 to 95 of 2012, MDD Medical Systems India Pvt. Ltd. v. Foundation for Common Cause and Others decided on 25.02.2013, Gulf Oil Corporation and others v. Competition Commission of India decided on 18.04.2013 and Appeal No. 81/2012, M/s. United Phosphorus Limited v. Competition Commission of India and others decided on 29.10.2013 along with Appeal No. 79/2012 M/s. Excel Corp Care Ltd. v. Competition Commission of India and others and Appeal No. 80/2010 M/s. Sandhya Organic Chemicals (P) Limited v. Competition Commission of India and others. The attention of the Commission was also drawn to several mitigating factors as is evident from the following extracts of the representation: "Mitigating Factors & Reasons why No Penalty Should Be Levied On the Company The Company herein submits the following mitigating factors available to the Company in addition to and without prejudice to the grounds above:-- (i) It is submi....
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.... the few years whereas the cost of cylinders supplied to IOCL has not, in fact it has increased by only about 36%. (ix) The Commission also failed to consider that the input cost of manufacture of a cylinders, the input raw materials such as steel, SC valves, labour, zinc, paint, freight, power, cost of financing, are the same for everyone and price between producers cannot vary substantially. (x) The Commission cannot ignore that IOCL got lower prices than HPCL and BPCL and consequently if no loss had accrued to HPCL and BPCL can it be held that IOCL had suffered a loss. (xi) The Commission shall also consider that JBM and Punjab are similarly placed as the Company and hence everybody including the Company should be treated equally. It is reiterated that the Company did not participate in any meeting nor was a member of the Association and also did not appoint any common agents, therefore, there was no scope for the Commission/Competition Appellate Tribunal to hold the Company had any sort of agreement with any of the bidders to collude and rig the bids." [Underlining is ours] 7. On behalf of M/s. ECP Industries Ltd., written submissions dated 26.03....
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....rp Care Ltd. &Ors. v. Competition Commission of India and EU Guidelines on the method of setting fines, 2006). i) Very first competition law violation on the part of ECP Industries Ltd. (M/s. Gulf Oil Corporation Ltd. &Ors. v. Competition Commission of India). j) Nascent stage of competition jurisdiction in India. (MDD Medical Systems India Private Limited 7 Ors. v. Competition Commission of India & ors.) k) Uninterrupted supplies were always made by ECP Industries Ltd. to IOCL (M/s. Gulf Oil Corporation Ltd. &Ors. v. Competition Commission of India). l) ECP Industries Ltd. is not the perpetrator or ring leader of alleged cartel. (EU Guidelines on the method of setting fines, 2006 and International Competition Network - Setting of Fines for Cartels in ICN Jurisdictions). m) ECP Industries Ltd. has effectively cooperated with the DG and Commission outside the scope of any Leniency Notice and beyond its legal obligation to do so. (EU Guidelines on the method of setting fines, 2006 and International Competition Network - Setting of Fines for Cartels in ICN Jurisdiction). n) CCI has failed to apply consistent applications in various carte....
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.... health of the company, and the likelihood of the company being closed down on account of the harsh penalty. The judgment reiterated the doctrine of proportionality while imposing penalties. Further, COMPAT found that the relevant turnover to be used as the basis for the fine is the turnover in the product subject to the bid rigging; not the turnover of the entire multi-product enterprise. While concluding so, the Hon'ble Tribunal relied on the EU and UK fining guidelines. 25. CCI imposed a penalty of INR 1,50,49,366.00 crore on the entire turnover of the ECP. It is submitted that ECP is a multi-product company. Apart from selling and manufacturer LPG Cylinder, ECP is also engaged in manufacturing Domestic Pressure Regulator and other small ancillary items connected with the manufacture of LPG cylinders, and is also engaged in repairing of Cylinders and scrap sale sales, as well as export of cylinders which are also included in the total sales revenue of ECP. 26. Thus, it is submitted that based on the jurisprudence laid down by the Hon'ble Tribunal, as stated above, ECP Industries Ltd. is of the firm view that, even without considering the above mitigating factor....
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....t on record either about any delayed supply or any deficiency in the quality of cylinders supplied to IOCL. (iv) Few firms submitted that they are willing to give undertakings to the Commission for implementing a competition compliance programme as a part of corporate governance. (v) Cost of production is substantial of the total cost. No unreasonable profit earned. Procurement of all raw material including pricing is regulated. (vi) No freedom to the bidders to determine the sale prices as IOCL negotiates the final prices with the bidders by offering counter rates. (vii) Demand-side collective monophony of PSU-OMCs in buying 14.2 Kg cylinders. (viii) There is no direct evidence to establish cartelization and bid rigging. 123. The Commission has very carefully examined these pleas. It was contended by the parties that there is no direct evidence to establish contravention by the firms in rigging the bids. The plea is misconceived besides being inconsequential. Since the prohibition on participating in anti-competitive agreements and the penalties which offenders may incur are well known, it is normal for the activities which those pra....
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....indings of bid rigging were held against them. 130. Before examining the pleas, the Commission deems it appropriate to clarify its holding in M/s. Orissa Concrete and Allied Industries Ltd. (supra). In the said order, it was observed by the Commission as follows: As regards penalty under section 27 of the Act, the Commission notes that there are circumstances in this case which require the issue of penalty to be looked into somewhat differently. The facts as projected in the present reference reveal a complete lack of awareness by the opposite parties which are small and micro enterprises. The replies of many of these parties are effectively incriminating in nature. Further, none of these parties quoted for more than 50% quantity which was a requirement under the tender. Thus, right in the beginning the offers made by these parties were not in accordance with the requirement of the tender and hence they could not have got supplies as per the tender conditions. Moreover, the bid given by these parties was not the lowest and so they could not have been awarded the contract. 131. From a plain reading of the above, it would appear that there were myriad considerations....
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....ssion to refer to the value of the sales of goods or services to which the infringement related. We had also referred to the OFT guidelines to the same effect and we had commented upon the factor of a relevant turnover. Ultimately, we had held that where a particular concern is a multi-commodity company, the relevant turnover should be considered and not the total turnover. 135. The opposite parties would further submit that in the present case, the relevant turnover is that which has been obtained by the opposite parties from the alleged acts of infringement/violation of section 3 of the Act, and hence would-be restricted to the income obtained from the 14.2 kg LPG cylinder tender in question. In this regard, the opposite parties relied on the judgement of the Hon'ble Tribunal in Excel Crop Care limited v. Competition Commission of India, where accepting the arguments set forth in paras 43 and 55, the Hon'ble Tribunal in Para 62 established the concept of 'relevant market'. The relevant paras read as under: 43........ The learned counsel and more particularly Shri Ravinder Narain for United Phosphorus Limited argued that the CCI atleast in its case ....
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.... act is completely silent regarding any specific factors to be taken into consideration or the methodology to be adopted for imposition of penalty. --------- 55...... He also relied on the decision in the case of Southern Pipeline Contractors Conrite Walls (Pty) Ltd. and the Competition Commission (Case No. 105/CAC/Dec 10) (106/CAC/Dec 10) - Page 27: [51.] "The concept of 'turnover' is not defined in the act and is only referred to in Section 59(2), being annual turnover. There is thus some uncertainty as to the precise meaning of 'turnover'. However, section 59(3) refers on more than one occasion to 'the contravention', in particular, in dealing with the nature, duration, gravity and extent 'of the contravention', the loss or damage suffered as a result of the 'contravention' the market circumstances in which 'the contravention' took place and the level of profit derived from 'the contravention'. Thus there is a legislative link between the damage caused and the profits which accrue from the cartel activity. The inquiry, in terms of section 59 (3), appears to envisage that consideration be given to the....
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....ers cited before the Commission rendered in the context of multi-product firm are of little assistance to the parties. 137. It was also argued by some of the parties that provisions of section 27 of the Act are discretionary and enabling and hence it is not mandatory or necessary for the Commissions to impose penalty in each and every case. The Commission notes that the instant case emanates out of public procurement and as such it is a fit case to impose penalties upon the infringing parties. Any collusion in rigging tenders in public procurement costs exchequer on account of anti-competitive bids besides resulting in higher cost to end-consumers for whom a cylinder is a necessary input for their daily requirements. This itself is a compelling factor for the Commission to not only impose penalty but to view the contravention seriously." [Underlining is ours] 10. Learned counsel for the appellants argued that the term 'turnover' used in Section 27(b) and its proviso should be read as confined to the turnover of the product i.e. 14.2 Kg. LPG cylinders qua which the allegation of cartel formation was investigated and the turnover of other products cannot be cl....
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....ducts. Learned counsel also countered the argument that the imposition of penalty @ 7% of the average of the turnover of the preceding three financial year is arbitrary. He submitted that once the appellants were found guilty of having formed cartel for fixing the price of cylinders, the Commission was fully justified in imposing heavy penalty, else the parties would be encouraged to indulge in similar activities causing grave loss to the public exchequer. In support of this submission, Shri Sen relied upon articles published in various journals. 12. We have considered the respective arguments/submissions and carefully scrutinized the impugned order and other records. For deciding whether the term 'turnover' used in Section 27(b) and its proviso means the total turnover of any enterprise or association of enterprise or person or association of persons involved in violation of Section 3 or any enterprise or group found guilty of abuse of dominant position, it will be useful to notice the definitions of the terms, 'cartel', 'enterprise', 'goods', 'relevant market', 'relevant geographic market', 'relevant product market', 's....
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....elevant geographic market or with reference to both the markets. (s) "relevant geographic market" means a market comprising the area in which the conditions of competition for supply of goods or provision of services or demand of goods or services are distinctly homogenous and can be distinguished from the conditions prevailing in the neighbouring areas. (t) "relevant product market" means a market comprising all those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use. (u) "service" means service of any description which is made available to potential users and includes the provision of services in connection with business of any industrial or commercial matters such as banking, communication, education, financing, insurance, chit funds, real estate, transport, storage, material treatment, processing, supply of electrical or other energy, boarding, lodging, entertainment, amusement, construction, repair, conveying of news or information and advertising. (x) "trade" means any trade, business, industry, profession or occupa....
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....t markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services, including- (a) tie-in arrangement; (b) exclusive supply agreement; (c) exclusive distribution agreement; (d) refusal to deal; (e) resale price maintenance, shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause an appreciable adverse effect on competition in India. Explanation.--For the purposes of this sub-section,- (a) "tie-in arrangement" includes any agreement requiring a purchaser of goods, as a condition of such purchase, to purchase some other goods; (b) "exclusive supply agreement" includes any agreement restricting in any manner the purchaser in the course of his trade from acquiring or otherwise dealing in any goods other than those of the seller or any other person; (c) "exclusive distribution agreement" includes any agreement to limit, restrict or withhold the output or supply of any goods or allocate any area or market for the disposal or sale of the goods; (d) "refusal to deal" includes any agreement whic....
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....s to the prejudice of consumers; or (c) indulges in practice or practices resulting in denial of market access in any manner; or (d) makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts; or (e) uses its dominant position in one relevant market to enter into, or protect, other relevant market. Explanation.--For the purposes of this section, the expression- (a) "dominant position" means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to- (i) operate independently of competitive forces prevailing in the relevant market; or (ii) affect its competitors or consumers or the relevant market in its favour; (b) "predatory price" means the sale of goods or provision of services, at a price which is below the cost, as may be determined by regulations, of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors. (c) "group" shall have the same meaning as assigned ....
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.... "Provided that in case any agreement referred to in Section 3 has been entered into by any cartel, the Commission shall impose upon each producer, seller, distributor, trader or service provider included in that cartel, a penalty equivalent to three times of the amount of profits made out of such agreement by the cartel or ten per cent of the average of the turnover of the cartel for the last preceding three financial years, whichever is higher." 14. One of the well-recognized rules of interpretation of statutes is the rule of contextual interpretation. This rule requires that the Court should examine every word of a statute in its context. In doing so, the Court has to keep in view preamble of the statute, other provisions thereof, pari materia statutes, if any, and the mischief intended to be remedied. Context often provides the key to the meaning of the word and the sense it carries. Its setting gives colour to it and provides a cue to the intention of the legislature in using it. In his famous work on Statutory Interpretation, Justice G.P. Singh has quoted Professor H.A. Smith in the following words: "No word', says Professor H.A. Smith 'as an absolute m....
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....t, with the glasses of the statute-maker, provided by such context, its scheme, the sections, clauses, phrases and words may take colour and appear different than when the statute is looked at without the glasses provided by the context. With these glasses we must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation. Statutes have to be construed so that every word has a place and everything is in its place. It is by looking at the definition as a whole in the setting of the entire Act and by reference to what preceded the enactment and the reasons for it that the Court construed the expression 'prize chit' in Srinivasa (1980) 4 SCC 507 and we find no reason to depart from the Court's construction. In R. v. National Asylum Support Services (2002) 4 All ER 654, LORD STEYN observed "the starting point is that language in all legal texts conveys meaning according to the circumstances in which it was used. It follows that context must always be identified and considered befor....
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....p;"(i) Industry-wise or product wise concentration existed in so far as a limited number of producers had a comparatively large share of the market. In 65 out of 100 selected products, a high degree of concentration existed in the sense that the share of the top producers was more than 75 per cent of the total production. (ii) As regards country wise concentration (overall size being the consideration), the total paid-up capital and assets of the companies belonging to 75 business groups, each with assets of not less than Rs. 5 crores, accounted for about 44% and 47%, respectively, of the total paid-up capital and total assets of the companies in the corporate sector. (iii) There were instances where some of these monopoly houses attempted to keep out fresh competitors in various ways. (iv) There was some evidence of the prevalence on a fairly large scale of practices, such as hoarding and creating artificial scarcity, arbitrary price fixation, resale price maintenance, exclusive dealing contracts and tie-in sales by manufacturers." The Commission also recommended that a legislation should be enacted to control monopolies. After examining the report of the....
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.... enact a law on Competition. 3. The Competition Bill, 2001 seeks to ensure fair competition in India by prohibiting trade practices, which cause appreciable adverse effect on competition in markets within India and, for this purpose, provides for the establishment of a quasi-judicial body to be called the Competition Commission of India (hereinafter referred to as CCI) which shall also undertake competition advocacy for creating awareness and imparting training on competition issues. 4. The Bill also aims at curbing negative aspects of competition through the medium of CCI. CCI will have a Principal Bench and Additional Benches and will also have one or more Merger Benches. It will look into violations of the Act, a task which could be undertaken by the Commission based on its own knowledge or information or complaints received and references made by the Central Government, the State Governments or statutory authorities. The Commission can pass orders for granting interim relief or any other appropriate relief and compensation or an order imposing penalties, etc. An appeal from the orders of the Commission shall lie to the Supreme Court. The Central Government will ....
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....markets, in India, and for matters connected therewith or incidental thereto." 19. Keeping in view the rule of contextual interpretation and the background in which the Act was enacted as also the objectives sought to be achieved by it, we shall now analyse the provisions extracted hereinabove. The term 'cartel' as defined in Section 2(c) includes an association of producers, sellers, distributors traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or, trade in goods or provision of services. The term 'enterprise' as defined in Section 2(h) means a person [this term has an inclusive definition in Section 2(l)] or a department of the Government, who or which is, or has been, engaged in any activity, relating to the production, storage, supply, distribution, acquisition or control of articles or goods, or the provision of services, of any kind, or in investment, or in the business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body corporate, either directly or through one or more of its units or divisions or sub....
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.... the agreement which increases efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services. Sub-section (4) deals with tie-in arrangement, exclusive supply agreement, exclusive distribution agreement, refusal to deal, resale price maintenance and declares that any agreement among the enterprises or persons at different stages or levels of production chain in different markets in respect of production, supply, distribution, storage, acquisition or control of goods or provisions of services shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause an appreciable adverse effect on competition in India. Section 4(1) declares that no enterprise or group shall abuse its dominant position. Sub-section (2) of Section 4 lays down that there shall be an abuse of dominant position in case the ingredients specified in any of the five clauses i.e. (a) to (e) of that sub-section are found existing. 21. A combined reading of the definitions of the terms 'cartel', 'enterprise', 'service', and Sections 3,4 and 27 of the Act makes it crystal clear that an enterprise or associ....
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....ervice qua which the allegation of violation of Section 3 and/or Section 4 is made and which is subjected to an investigation. Therefore, the term 'turnover' used in Section 27(b) and its proviso will necessarily relate to the goods, products or services qua which finding of violation of Section 3 and/or Section 4 is recorded and while imposing penalty, the Commission cannot take average of the turnover of the last three preceding financial years in respect of other products, goods or services of an enterprise or associations of enterprises or a person or associations of persons. The definition of the term 'turnover' which includes value of sale of goods or services will necessarily mean the value of goods or services which are made subject-matter of investigation under Section 26 and order of punishment under Section 27. If the accusation/allegation relates to abuse of dominant position, then the Commission is required to take into consideration the factors enumerated in Section 19(4), (5), (6) and (7). 23. Neither the Act nor the Regulations empower the Commission to order an investigation into the product, goods or service other than those qua which allegation o....
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....r. Time and again we have been reiterating the necessity of the reasons while ordering the penalty. We hope that the CCI take serious note of that factor. This is particularly true as the CCI is an adjudicatory body as declared by two Supreme Court judgments. The role as an adjudicatory body would cover all the aspects of hearing and deciding. 61. There can be no dispute that where harsh financial penalties are inflicted the reasons become all the more necessary. 62. All the learned counsels very seriously canvassed the question of "relevant turn over". The argument that the appellants, United Phosphorous Ltd. and M/s. Excel Crop Limited, are the multi product companies was not seriously disputed by Shri Balaji Subramanian, learned counsel for the CCI. We have no reason not to accept that factor. As regards the arguments based on EU and OFT guidelines, we are of the opinion that those guidelines are undoubtedly relevant in arriving at the issue of deciding upon the turn over. However, those guidelines cannot be treated as be all and end all in the matter and would have to be considered in the light of the facts of each case. We, however, accept the contention that i....
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....hat the appellant was a multi-speciality hospital and was providing various services including stem cell banking. After noticing the relevant facts and statutory provisions, the Tribunal observed: "(ii) It is not in dispute that the appellant is a multi-speciality hospital and its total annual turnover is the income derived from the services provided in different specialities and not maternity services alone. The figures provided by the appellant (paragraph 47 of the written submissions filed on 20.03.2015) show that the total commission earned by the appellant from Cryobanks was Rs. 85,45,567/- from September, 2011 to August, 2012 and September, 2012 to August, 2013. The total maternity revenue generated from maternity patients who availed Cryobanks' services during the aforesaid period from 2011 to 2013 was Rs. 3,96,76,307/- and overall maternity revenue for the same period was Rs. 4,92,80,090/-. The average maternity turnover for preceding three financial years i.e. 2009-10, 2010-11 and 2011-12 was Rs. 2,01,89,412/-. Unfortunately, the Commission clubbed the revenue generated from all the services provided by the appellant hospital and accordingly imposed penalty, wh....
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....e Commission that the agreement entered into between the appellant and Cryobanks is violative of Section 3(1) of the Act is to be upheld, the turnover of the appellant with reference to stem cell banking services only could be taken into consideration for the purpose of imposing penalty and not the turnover with reference to other services or income derived from other sources." 27. The issue deserved to be considered from another angle. Proviso to Section 27(b) (unamended) was couched in a language, which made it mandatory for the Commission to impose on each producer, seller, distributor, trader or service provider included in a cartel, a penalty equivalent to three times of the amount of profits made out of such agreement by the cartel or 10% of the average of the turnover of the cartel for the last preceding three financial years, whichever was higher. It is thus clear that if the proviso to Section 27(b) had not been amended, then the Commission had no option but to impose penalty on each producer, seller, distributor, trader or service provider in cases involving formation of cartel. However, in its wisdom, Parliament amended the proviso and substituted the word 'shall....
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....mittee, only to harass the assessee. The approach of the Assessing Officer in this behalf must be fair and objective." [Emphasis supplied] 29. In Hindustan Steel Ltd. v. State of Orissa [1970] SC 253, the Supreme Court made the following observations on the issue of imposing penalty: "An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi criminal proceedings 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 if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not l....