TaxTMI 
TaxTMI 
2008 (9) TMI 52
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....esh Agarwal, E. C. Agrawala, Manish Kumar, Ansar Ahmad Chaudhary, Anil Bhansali, Satya Prakash, Ms. Promila Matta, E. M. S. Anam, Shanta Kr. Mahale, Rajesh Mahale, Harish, P. C. Jain, Abhishek Jaju, Rajesh Kumar, Atul Mishra, Ms. Sonu Bhatnagar, Ajay Aggarwal, Rajan Narain, Janaranjan Das, Sandeep Narain, M. H. Patil, Shri Narain for M/s. S. Narain and Co., K. L. Janjani, Subramonium Prasad, M/s. K. J. John and Co., Tarun Gulati, Praveen Kumar, Jaiveer Shergill, Tushar Jarwal, Alok Yadav, M. P. Devanath, Ms. Ruby Singh Ahuja, S. Ravi Shankar and Rupesh Kumar. JUDGMENT The judgment of the court was delivered by Dr. ARIJIT PASAYAT, J.- Leave granted in the special leave petitions. 2. A Division Bench of this Court has referred the controversy involved in these appeals to a larger Bench doubting the correctness of the view expressed in Dilip N. Shroff v. Joint Commissioner of Income Tax [2007] (8) Scale 304 (SC). The question which arises for determination in all these appeals is whether Section 11AC of the Central Excise Act, 1944 (in short 'the Act') inserted by Finance Act, 1996 with the intention of imposing mandatory penalty on persons who evaded payment of tax sho....
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....ted that the consequences of fraud etc. relate to the extended period of limitation and the onus is on the revenue to establish that the extended period of limitation is applicable. Once that hurdle is crossed by the revenue, the assessee is exposed to penalty and the quantum of penalty is fixed. It is pointed out that even if in some statutes mens rea is specifically provided for, so is the limit or imposition of penalty, that is the maximum fixed or the quantum has to be between two limits fixed. In the cases at hand, there is no variable and, therefore, no discretion. It is pointed out that prior to insertion of Section11AC, Rule 173Q was in vogue in which no mens rea was provided for. It only stated "which he knows or has reason to believe". The said clause referred to wilful action. According to learned counsel what was inferentially provided in some respects in Rule 173Q, now stands explicitly provided in Section 11AC. Where the outer limit of penalty is fixed and the statute provides that it should not exceed a particular limit, that itself indicates scope for discretion but that is not the case here. 6. It was pointed out that Rule 96ZO refers to manufacturer of ingots a....
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....les made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) of section 11A, shall also be liable to pay a penalty equal to the duty so determined. Provided that where such duty as determined under sub-section (2) of section 11A, and the interest payable thereon under section 11AB, is paid within thirty days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to be paid by such person under this Section be twenty-five per cent of the duty so determined: Provided further that the benefit of reduced penalty under the first proviso shall be available if the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso: Provided also that where the duty determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then for the purposes of this section, the duty, as reduced or increased, as the case may be shall be taken into account: Provided also that in case where the duty determined to be payable is increa....
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....a manufacturer fails to pay the total amount of duty payable under clause (a) by the 31^st day of March, 1998, he shall be liable to pay the outstanding amount (that is the amount of duty which has not been (paid by the 31^st day of March, 1998) along with interest at the rate of eighteen percent per annum on such outstanding amount calculated for the period from the 1^st day of April, 1998 till the date of actual payment of the outstanding amount : Provided that if the manufacturer fails to pay the total amount of duty payable under clause (a) by the 30^th day of April, 1998, he shall also be liable to pay a penalty equal to the outstanding amount of duty as on 30^th day of April, 1998 or five thousand rupees, whichever is greater. II. Total amount of duty liability for a financial year subsequent to 1997-98 (a) a manufacturer shall pay a total amount calculated at the rate of Rs. 750/- per metric tonne on the annual capacity of production of his factory as determined under the Induction Furnace Annual Capacity Determination Rules, 1997. This amount shall be paid by the 31^st day of March of the financial year; (b) the amount of duty already paid, together with on-acco....
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....oduction again, shall inform in writing about the starting of production to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise1, with a copy to the Superintendent of Central Excise, either prior to the date of starting production or on the date of starting production; (d) the manufacturer shall on start of production again along with the closing balance of stock on restarting the factory, intimate the reading of the electricity meter to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise1, with a copy to the Superintendent of Central Excise; (e) the manufacturer shall while sending intimation under clause (c), declare that his factory remained closed for a continuous period starting from-hours on -(date) to-hours on-(date). (3) Notwithstanding anything contained elsewhere in these rules, if a manufacturer having a total furnace capacity of 3 metric tonnes installed in his factory so desires, he may, from the first day of September, 1997 to the 31^st day of March, 1998 or any other financial year, as the case may be, pay a sum of rupees five lakhs per month in two equal installments, the first installment ....
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....ed at (address) hereby wish to avail of the scheme described in sub-rule (3) of rule 9620, for full and final discharge of our duty liability for the manufacture of ingots and billets of non-alloy steel undersection3A of the Central Excise Act, 1944 (l of 1944). Dated............ Sd..................... Name and Designation (With stamp)'." RULE 96ZQ. Procedure to be followed by an Independent processor of textile fabrics (1) An independent processor of textile fabrics falling under heading Nos. 52.07,52.08,52.09,54.06,54.07, 55.11, 55.12, 55.13 or 55.14, or processed textile fabrics of cotton or man-made fibers, falling under heading Nos. or sub-heading Nos. 58.01, 58.02, 5806.10, 5806.40. 6001.12, 6001.22, 6001.92, 6002.20,6002.30, 6002.43 or 6002.93, of the First Schedule to Central Excise Tariff Act, 1985 (5 of 1986), shall debit an amount of duty of Rs.2.0 lakhs per chamber per month, Rs.2.5lakhs per chamber per month, Rs.3.0 lakhs per chamber per month or Rs.3.5 lakhs per chamber per month, as the case may be, on the annual capacity of production as determined under the Hot-air Stenter Independent Textile Processors Annual Capacity Det....
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.... chambers and not in case of closure of anyone or more chambers contained in such stenter; (aa) the independent processor shall not clear any non-stentered fabrics during the period for which abatement is claimed, and any clearance by him of non-stentered fabrics during such period shall be liable to confiscation; (b) the independent processor shall inform, in writing, about such closure to the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, with a copy to the Superintendent of Central Excise, at least three days prior to the date of such closure, giving the following details, namely: - (i) the name of the manufacturer of the stenter; (ii) the date of purchase of the stenter; (iii) the number of chambers as determined under the Hot-air Stenter Independent Textile Processors Annual Capacity Determination Rules, 2000; (iv) the serial number or identification no. of the stenter; (v) reason for closure of the stenter; (vi) approximate number of days for which the stenter shall remain closed; (vii) date and time from which the closure is intended; (c) the stenter or stenters shall be sealed in such man....
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....ppeals) in the course of any proceedings under this Act, is satisfied that any person - (a) Omitted (b) Has failed to comply with a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or fails to comply with a direction issued under sub-section (2A) of section 142; or (c) Has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty, - (i) Omitted (ii) In the cases referred to in clause (b), in addition to any tax payable by him, a sum which shall not be less than one thousand rupees but which may extend to twenty-five thousand rupees for each such failure; (iii) In the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than but which shall not exceed three times the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income : Explanation 1. - Where in respect of any facts material to the computation of the total income of any person under this Act, - (A) Such person fails to offer an explanation or o....
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....cause, to furnish within the period specified in sub-section (1) of section 153 a return of his income which he is required to furnish under section 139 in respect of any assessment year commencing on or after the 1^st day of April, 1989, and, until the expiry of the period aforesaid, no notice has been issued to him under clause (i) of sub-section (1) of section 142 or section 148 and the Assessing Officer or the Commissioner (Appeals) is satisfied that in respect of such assessment year such person has taxable income, then, such person shall, for the purposes of clause (c) of this sub-section, be deemed to have concealed the particulars of his income in respect of such assessment year, notwithstanding that such person furnishes a return of his income at any time after the expiry of the period aforesaid in pursuance of a notice under section 148. Explanation 4 : For the purpose of clause (iii) of this sub-section, the expression "the amount of tax sought to be evaded", - (a) In any case where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished exceeds the total income assessed, means the tax that would have been....
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.... section 139, and also specifies in the statement the manner in which such income has been derived and pays the tax together with interest, if any, in respect of such income. Explanation 6 : Where any adjustment is made in the income or loss declared in the return under the proviso to clause (a) of sub-section (1) of section 143 and additional tax charged under that section, the provisions of this sub-section shall not apply in relation to the adjustment so made. Section 271C. Penalty for failure to deduct tax at source. - (1) If any person fails to - (a) Deduct the whole or any part of the tax as required by or under the provisions of Chapter XVII-B; or (b) Pay the whole or any part of the tax as required by or under, - (i) Sub-section (2) of section 115-O; or (ii) Second proviso to section 194B, then, Such person shall be liable to pay, by way of penalty, a sum equal to the amount of tax which such person failed to deduct or pay as aforesaid. (2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner. 10. It is to be noted that in Chairman SEBI's case [2006] (5) SCC 361, reference was made to the s....
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....15-C, 15-D, 15-E, 15-F, 15-G and 15-H, the Board shall appoint any officer not below the rank of a Division Chief to be an adjudicating officer for holding an inquiry in the prescribed manner after giving any person concerned a reasonable opportunity of being heard for the purpose of imposing any penalty. (2) While holding an inquiry the adjudicating officer shall have power to summon and enforce the attendance of any person acquainted with the facts and circumstances of the case to give evidence or to produce any document which in the opinion of the adjudicating officer, may be useful for or relevant to the subject-matter of the inquiry and if, on such inquiry, he is satisfied that the person has failed to comply with the provisions of any of the sections specified in sub-section (1), he may impose such penalty as he thinks fit in accordance with the provisions of any of those sections. 15-J. Factors to be taken into account by the adjudicating officer.-While adjudging the quantum of penalty under Section 15-I, the adjudicating officer shall have due regard to the following factors, namely- (a) the amount of disproportionate gain or unfair advantage, wherever quantifiable....
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.... him of the provisions of Section 10, FERA, 1947. It is the delinquency of the defaulter itself which establishes his 'blameworthy' conduct, attracting the provisions of Section 23(1)(a) of FERA, 1947 without any further proof of the existence of 'mens rea'. Even after an adjudication by the authorities and levy of penalty under Section 23(1)(a) of FERA, 1947, the defaulter can still be tried and punished for the commission of an offence under the penal law..... 12. In Corpus Juris Secundum, Vol. 85, at page 580, paragraph 1023, it is stated thus: 'A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws.' 13. We are in agreement with the aforesaid view and in our opinion, what applies to 'tax delinquency' equally holds good for the 'blameworthy' conduct for contravention of the provisions of FERA, 1947. We, therefore, hold that mens rea (as is understood in criminal law) is not an essential ingredient for holding a delinquent liable to pay penalty under Section 23(1)(a) of FERA, 1947 for con....
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....orfeiture of the character of penalty." (d) Gujarat Travancore Agency v. CIT: ([1989] 3 SCC 52, page 55, paragraph 4) "It is sufficient for us to refer to Section 271 (1)(a), which provides that a penalty may be imposed if the Income Tax Officer is satisfied that any person has without reasonable cause failed to furnish the return of total income, and to Section 276-C which provides that if a person wilfully fails to furnish in due time the return of income required under Section 139 (1), he shall be punishable with rigorous imprisonment for a term which may extend to one year or with fine. It is clear that in the former case what is intended is a civil obligation while in the latter what is imposed is a criminal sentence. There can be no dispute that having regard to the provisions of Section 276-C, which speaks of wilful failure on the part of the defaulter and taking into consideration the nature of the penalty, which is punitive, no sentence can be imposed under that provision unless the element of mens rea is established. In most cases of criminal liability, the intention of the legislature is that the penalty should serve as a deterrent. The creation of an offence by st....
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....tion of the liability of the contravener and the delinquency. (D) Mens rea is not essential element for imposing penalty for breach of civil obligations or liabilities. (There can be two distinct liabilities, civil and criminal under the same Act..........................' 52. The SEBI Act and the Regulations, are intended to regulate the securities market and the related aspects, the imposition of penalty, in the given facts and circumstances of the case, cannot be tested on the ground of 'no mens rea, no penalty'. For breaches of provisions of the SEBI Act and Regulations, according to us, which are civil in nature, mens rea is not essential. On particular facts and circumstances of the case, proper exercise of judicial discretion is a must, but not on foundation that mens rea is essential to impose penalty in each and every breach of provisions of the SEBI Act..................... 54. However, we are not in agreement with the Appellate Authority in respect of the reasoning given in regard to the necessity of mens rea being essential for imposing the penalty. According to us, mens rea is not essential for imposing civil penalties under the SEBI Act and Regulations." (....
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....jibhai Patel [1998] (3) SCC 234. It is contrary to all rules of construction to read words into an Act unless it is absolutely necessary to do so. [See Stock v. Frank Jones (Tipton) Ltd [1978] (1) ALL ER 948 (HL). Rules of interpretation do not permit the courts to do so, unless the provision as it stands is meaningless or of doubtful meaning. The courts are not entitled to read words into an Act of Parliament unless clear reason for it is to be found within the four corners of the Act itself. (Per Lord Loreburn, L.C. in Vickers Sons") 16. The question is not what may be supposed and has been intended but what has been said. "Statutes should be construed not as theorems of Euclid", Judge Learned Hand said, "but words must be construed with some imagination of the purposes which lie behind them". (See Lenigh Valley Coal Co. v. Yensavage 218 FR 547) The view was reiterated in Union of India v. Filip Tiago De Gama of Vedem Vasco De Gama (1990) 1 SCC 277 (SCC page 284, paragraph 16). 17. In D.R. Venkatachalam v. Deputy Transport Commissioner (1977) 2 SCC 273, it was observed that the courts must avoid the danger of a priori determination of the meaning of a provision based on the....
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.... intended quae frequentius accidunt." 21. "But", on the other hand, "it is no reason, when the words of a law do enough extend to an inconvenience seldom happening, that they should not extend to it as well as if it happened more frequently, because it happens but seldom". (See Fenton v. Hampton (1858) 11 MOO PC 347). 22. A casus omissus ought not to be created by interpretation, save in some case of strong necessity. Where, however, a casus omissus does really occur, either through the inadvertence of the legislature, or on the principle quod enim semel aut bis existit praetereunt legislatores, the rule is that the particular case, thus left unprovided for, must be disposed of according to the law as it existed before such statute - casus omissus et oblivioni datus dispositioni communis juris relinquitur; "a casus omissus", observed Buller, J. in Jones v. Smart 1785 (1) TR 44: (99 ER 963 (ER page 967) "can in no case be supplied by a court of law, for that would be to make laws". The principles were examined in detail in Maulavi Hussein Haji Abraham Umarji v. State of Gujarat (2004 (6) SCC 672). 23. The golden rule for construing all written instruments has....