TaxTMI 
TaxTMI 
2024 (5) TMI 666
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.... 20.02.2004, issued show cause notice proposing confiscation of seized goods. The appellant, because of non-availability of documents failed to file reply. The adjudicating authority vide order dated 14.05.2004 ordered to confiscate the goods and imposed fine and penalty of 5 lakh each. The adjudicating authority also imposed penalty upon the director. The appellate authority allowed the appeal of the director but dismissed the appeal of the appellant vide order dated 29.07.2004. The Tribunal allowed the appeal of the appellant by way of remand vide order dated 01.03.2005. The adjudicating authority vide order dated 04.01.2006 (A-1) again adjudicated the show cause notice and confirmed the confiscation and imposed fine of 5 lakh and penalty to the tune of Rs.9,29,896/-. The adjudicating authority imposed penalty under section 11AC of Central Excise Act, 1944. The appellant filed reply and furnished returns RG-23A Part-I Register and ER-1 (monthly return) for the month of July, 2003. The appellate authority vide order dated 31.03.2006 (A-2) allowed the appeal of the appellant with finding that raw material and finished goods were seized merely because of non-accountal of goods and t....
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....e in error of law. For these reasons the Court is of the opinion that the question of law framed has to be answered against the revenue and in favour of the assessee." 5. Per contra, learned counsel for the respondent argued on the lines of impugned order dated 01.09.2010. 6. We have heard learned counsel for the parties and perused the whole record of this case. 7. The question of law involved in the present appeal is whether penalty under Rule 25 of the Central Excise Rules, 2002 can be imposed without invoking provisions of Section 11 AC of the Central Excise Act, 1944 wherein 'mens rea' is necessary ingredient? 8. We answer the question of law in favour of the assessee and against the revenue. 9. Hon'ble Supreme Court in the case of Commissioner of Central Excise, Chandigarh Vs. Pepsi Foods Limited [(2011) 1 Supreme Court Cases 601], held as under:- "20. In the instant case in the order-in-original a penalty has been Imposed which is equal to the amount of duty. Such penalty has been imposed in exercise of power under Section 11-AC of the Act. Section 11-AC of the Act as it stood at the relevant point of time runs as under: "11-AC. Penalty for s....
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.... that must have been the intention of Parliament." (See the decision of the House of Lords in Vane v. Yiannopoullos and the opinion of Lord Reid at AC p. 496 E: All ER p. 823.) 24. In Vanes, the word "knowingly" was used in the statute as a condition of creating liability. 25. The aforesaid dictum of Lord Reid has been followed by this Court also. A reference in this connection may be made to Union of India v. Rajasthan Spg. & Wvg. Mills. This Court considering Section 11-AC of the Act held in ELT para 19 at p. 12 of the Report as follows: (SCC p. 459, para 29) "29. From the aforesaid discussion it is clear that penalty under Section 11-AC, as the word suggests, is punishment for an act of deliberate deception by the assessee with the intent to evade duty by adopting any of the means mentioned in the section." ( emphasis supplied ) 26. Following the aforesaid well-settled principles, this Court quashes that part of the order-in-original which imposes penalty without any finding of fraud or misstatement against the respondent. This part of the order-in-original is quashed. Save as aforesaid, the order-in - original is upheld. The....
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.... day immediately after the expiry of prescribed date and ending on the date on which a declaration or return is furnished. (4) If a dealer fails without sufficient cause to furnish any declaration or any return [as required by proviso to subsection (1) or subsection (2) of section 40], the Commissioner may impose upon the dealer by way of penalty, a sum not exceeding two thousand rupees. (5) Where in the case of a dealer the amount of tax - (a) assessed for any period under section 41 or 50; or (b) reassessed for any period under section 44; exceeds the amount of tax already paid under sub-section (1), (2) or (3) of section 47 by the dealer in respect of such period by more than twenty five per cent of the amount of tax so paid, the dealer shall be deemed to have failed to pay the tax to the extent of the difference between the amount so assessed or reassessed as aforesaid and the amount paid. (6) [Where under sub-section (5) a dealer is deemed to have failed to pay the tax to the extent mentioned in the said subsection, there shall be levied on such dealer a penalty not exceeding one and one-half times the difference referred to in subs....
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....all be deemed to have failed to pay the tax to the extent of difference between amount so assessed or re-assessed as aforesaid and the amount paid. Considering sub-section (5) of Section 45 of the Act, 1969, if a dealer is deemed to have failed to pay the tax to the extent mentioned in sub-section (5), there shall be levied on such dealer a penalty not exceeding one and one-half times the difference referred to in sub-section (5). Under the circumstances, to the aforesaid extent and on the difference of tax, as per sub-section (5) of Section 45, the respondent assessee dealer shall be liable to pay the penalty as mentioned under subsection (6) of Section 45. 6.3 Section 45 confers power to levy/impose penalty in certain cases. In certain cases, enumerated in Section 45 of the Act, the penalty imposable is distinct with the assessment such as Section 45(1)(a) (b). However, in so far as penalty imposable under Section 45(5) and 45(6) of the Act is concerned, it has a direct bearing or connection with the order of assessment and the determination of the taх liability. Subsection (5) of Section 45 provides that where in the case of a dealer the amount of tax assessed for....
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....d/mentioned in Section 45(6) of the Act, 1969. In that view of the matter, there is no question of considering any mens rea on the part of the assessee/dealer. 6.5 At this stage, a few decisions of this Court as well as decisions of the Gujarat High Court (on levy of penalty and interest under the Gujarat Sales Tax Act) are required to be referred to. In the case of Dharamendra Textile Processors (supra) after referring and considering another decision of this court in the case of Shriram Mutual Fund (supra), it is observed and held that when the term used "shall be leviable," the adjudicating authority will have no discretion. 6.6 In the case of Shriram Mutual Fund (supra), while dealing and/or considering similar provision under the SEBI, it is observed and held that mens rea is not an essential ingredient for contravention of the provisions of a civil Act. While interpreting the similar provision of SEBI Act, it is observed that the penalty is attracted as soon as contravention of the statutory obligations as contemplated by the Act is established and, therefore, the intention of the parties committing such violation becomes immaterial. In the case before this ....
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.... thirty percent of the value of goods for possession or movement of goods, whether seized or not, in violation of the provisions of Clause (a) of sub-section (2) or for submission of false or forged documents or declaration, this Court in paragraph 9 observed as under: - " 9. Existence of mens rea is an essential ingredient of an offence. However, it is a rule of construction. If there is a conflict between the common law and the statute law, one has to construe a statute in conformity with the common law. However, if it is plain from the statute that it intends to alter the course of the common law, then that plain meaning should be accepted. Existence of mens rea is an essential ingredient in every offence; but that presumption is liable to be displaced either by the words of the statute creating the offence or by the subject-matter with which it deals. A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is different from the penalty for a crime." * * * * 6.11 Even otherwise, the word used in section 45(6) is "shall be levied". The dealer shall be liable to pay the penalty not exceeding one and one hal....
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....section 11AC of the Central Excise Act. In Section 11AC, the words used are "fraud, collusion or any wilful misrepresentation or any wilful misstatement or suppression of facts" and "intent to evade payment of duty." In that view of the matter, the mens rea will play an important role. Therefore, the said decision shall not be applicable while considering Section 45 and Section 47 of the Act, 1969. A similar decision in the case of Pepsi Foods Ltd (supra). also shall not be applicable and/or of any assistance to the respondentassessee- dealer." 11. In view of the above decisions of Hon'ble Apex Court 'mens rea' will play important role while invoking the provisions of Section 11 AC of the Central Excise Act, 1944. 12. Relevant portion of the impugned order dated 01.09.2010 passed by the Customs and Excise Appellate Tribunal is reproduced as under:- "7. I have carefully considered the submission from both sides and perused the records. 8. On perusal of closing balance as on 31.07.2003 and the stock found as on 23.08.03, it is noticed that while there was scrap of 17.574 MTs as on 31.07.03, on 23.08.03 the stock of said material was only 6 MTs. Similarly, stoc....
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....ials and in process materials. There is also no evidence relied upon regarding any clandestine removal by the party during the period prior to 23.08.03. Therefore, such a presumption is not warranted and the provisions of Section 11AC is not attracted. 10. In the light of the above, the appeal is disposed of as follows:- (a) Order of the Commissioner (Appeals) is set aside and order of the original authority is restored. (b) While restoring the order of the original authority. Redemption fine is reduced from 5.00 Lac to 2.5 Lac. (c) While restoring the order of the original authority, penalty imposed is reduced from 9,29,896/- to 2.5 Lac. 13. The order of the Commissioner Appeals dated 04.01.2006 shows that adequate evidence was produced before the adjudicating authority to prove that the stock as per sale and purchase documents worked out to be the same as verified by the officers on 23.08.2003. The invoice for purchase of raw material and those issued for removal of finished goods during 01.08.2003 to 22.08.2003 sufficiently established that the stock found in the office on 23.03.2003 could not be intended for removal without payment of duty....
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....all proceedings in respect of said duty and interest shall be deemed to be concluded; (b) where any duty as determined under sub-section (10) of section 11A and the interest payable thereon under section 11AA in respect of transactions referred to in clause (a) is paid within thirty days of the date of communication of the order of the Central Excise Officer who has determined such duty, the amount of penalty liable to be paid by such person shall be twenty-five per cent of the penalty imposed, subject to the condition that such reduced penalty is also paid within the period so specified; (c) where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by reason of fraud or collusion or any willful mis-statement or suppression of facts. Or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (10) of section 11A shall also be liable to pay a penalty equal to the duty so determined: Provided that in respect of the cases where the details relating to such transactions ....
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.... (1) Subject to the provisions of section 11AC of the Act, if any producer, manufacturer, registered person of a warehouse (or an importer who issues an invoice on which CENVAT credit can be taken] or a registered dealer, - (a) removes any excisable goods in contravention of any of the provisions of these rules or the notifications issued under these rules; (b) does not account for any excisable goods produced or manufactured or stored by him, or (c) engages in the manufacture, production or storage of any excisable goods without having applied for the registration certificate required under section 6 of the Act; or (d) contravenes any of the provisions of these rules or the notifications issued under these rules with intent to evade payment of duty. Then, all such goods shall be liable to confiscation and the producer or manufacturer or registered person of the warehouse [or an importer who issues an invoice on which CENVAT credit can be taken) or a registered dealer, as the case may be, shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contravention of the nature referred to in ....