TaxTMI 
TaxTMI 
2026 (7) TMI 237
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.... of Section 77(2) of the Finance Act, 1994 are liable to be imposed upon the appellant. The impugned Order-in-Original No. 63/AC/DSML/2021-22 dated 06.07.2022 is accordingly liable to be modified to the above extent. 5. Accordingly, the subject appeal [Appeal No. No. 122ST/APPL-MRT/MRT/2022-23 dated 09.09.2022] filed by M/s Jain & Company (Prop. Ajit Prasad Jain), Main Bazar, Near Jain Sthanak, Gangeru, Shamli, Uttar Pradesh- 247775 is disposed on above terms and the Order-in-Original No. 63/AC/D-SML/2021-22 dated 06.07.2022 passed by the Assistant Commissioner, CGST. Division- Shamli also stands modified to the above extent." 2.1 The appellant, at the relevant time period, was registered with the Service Tax Department vide Registration No. ADXPJ4660PSD001 for providing taxable services as per the Finance Act, 1994 2.2 As per the third-party data received from the Income Tax Department for the Financial year 2014-15. it was observed that gross amount declared as sale of services in Income Tax Return was Rs. 1,03,73,100/-, while as per ST-3 returns filed by the appellant, gross value of services provided was Rs. 55,58,583/-. Thus, it became apparent that during the p....
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....der Section 78 of Finance Act, 1994 for the reason of suppressing the material fact and value willfully with the department with intent to evade payment of Service Tax. iv) penalty should not be imposed upon them under Section 77(2) of the Finance Act, 1994 for violation of Rule 7 of Service Tax Rules, 2004 2.6 The show cause notice was adjudicated by the Assistant Commissioner, vide Order-in-Original No. 63/AC/D-SML/2021-22 dated 06.07.2022 holding as follows: "ORDER i) I confirm the demand of Service tax amounting to Rs.1148709/-(Rupees Eleven Lac forty eight thousand seven hundred nine only) (including all Cesses) which is recoverable from M/s JAIN & COMPANY, MAIN BAZAR, NEAR JAIN STHANAK, GANGERU, Shamli-247775 under the proviso to Section 73(1) of Finance Act 1994 read with Section 83 of the Act, and further read with Section 38A of Central Excise Act, 1944 and Section 174 of the Central Goods and Services Tax Act, 2017. ii) I confirm the demand of Interest at the applicable rate on the service tax amour confirmed in Para(i) under the provisions of Section 75 of the Finance Act, 1994, iii) I impose Penalty of Rs.1148709/-(Rupees Eleven....
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....s clearly mentioned that the Technocraft construction Pvt. Ltd VAT, Service Tax & labour tax will be borne by the Technocraft construction Pvt. Ltd. appellant is not liable to pay tax. Admittedly, no investigation has been conducted in this case at the Appellant's end by the Adjudicating and first Appellate Authority. ⮚ Due to 100% deduction of Service tax procedure obtained by the Technocraft Construction Pvt. Ltd. they said to Subcontractor (appellant) you are not liable to pay service tax. Under bonafide belief appellant are never collected service tax nor deposited. Even the payment received by the appellant in F.Y.2014-15 is related to work done in F.Y 2013-14. ⮚ Appellant is eligible to get the benefit of rule 2A of the service (determination of value) Rules, 2006 and liable to get the benefit of Notification No. 30/2012-ST dated:20.06.2012. ⮚ ITR/ Form 26AS is not statutory documents for determining taxable turnover of the taxpayer under the Service Tax provisions. Form 26AS is maintained by the Income Tax Department on cash / receipt basis for the purpose of tax deducted at source which is the relevant data for income purp....
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....ing the course of arguments. 4.2 Impugned order records the findings as follows: "4.6 First, I proceed to scrutinize the claim of them having provided works contract services to NKG Infrastructure, Paschimanchal Vidyut Vitran Nigam Ltd. and Technocraft Construction Pvt. Ltd. and accordingly benefit of Notification Nos. 24/2012-ST and 30/2012-ST is admissible to them. In this regard my findings are as under 4.6.1 As regarding receipt of consideration of Rs. 90420/- from NKG Infrastructure, I find that the TDS had been deducted under Section 194C of the Income Tax Act, 1961 which inter alia covers TDS on works contract service. Further, I find that the appellant has submitted copies of the following documents :: copy of letter bearing Ref. No. JC/NKG/PVVNL/005 dated 04.04.2011 (regarding PO for civil work of PVVNL at 33KV sub-station, Shahdubber, Muzaffarnagar, copy of hand written letter dated 14.11.2011 by the appellant to NKG Infrastructure regarding bill of Rs.7,58,983/-, copy of Form 27 Funning Account Bill dated 4.12.2010, and hand written letter dated 25.01.2012 by the appellant to NKG Infrastructure regarding bill of Rs.3,49,049/-, I find that the appella....
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....thereto, 50% of the tax liability was to be paid by the service provider i.e.. the appellant and the remaining 50% liability was to be discharged by the service recipient i.e. Paschimanchal Vidyut Vitran Nigam Ltd. Thus, I find that the service tax liability of the appellant in respect of services provided to Paschimanchal Vidyut Vitran Nigam Ltd. is as under: Amount received as per 26 AS Gross Value Taxable Value (40% of the Gross Value) Service Tax @ 12.36% RCM @ 50 % Tax liability of the appellant (Value in Rupees) 54,32,639. 00 55,58,583. 00 22,23,433. 20 2,74,816. 34 1,37,408. 00 1,37,408. 00 4.6.3 As regarding receipt of consideration of Rs.48,50,000/- from Technocraft Construction Pvt. Ltd. as per Form 26AS for 2014-15, I find that thereon too the TDS had been deducted under Section 194C of the Income Tax Act, 1961 which inter alia covers TDS on works contract service. Further, I find that the appellant has submitted copies of the following documents:: copy of letter bearing Ref. NoLOI-02/Tehsil/Civil Work/13-14 dated 03.01.2014 (regarding LOI for civil work of PVVNL at 33/11 KV sub-station at Kairana Project entailing therein ....
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.... service tax came to the notice of the Department. Had it not been for the receipt of the subject data from the Income Tax Department the subject short payment of service tax would have not come to the notice of the department for it was never the intention of the appellant to reveal the same on their own accord, as accentuated from the fact that the appellant had wilfully and deliberatively not declared the same in their statutory returns. Thus, I find that the ingredients to invoke the extended period of time limitation to raise the subject demand was intrinsically inherent in the facts of the subject case and consequently the penal provisions under Section 78 of the Finance Act, 1994 are automatically attracted. Further, I find that once it is established that ingredients to attract operation of Section 78 of the Finance Act, 1994 are present in a case, the discretion to quantify the amount of penalty ends. Accordingly, equivalent penalty under Section 78 has rightly been imposed upon the appellant. Further, penalty under Section 77(2) is also liable to be imposed upon the appellant for breach of provisions of the service tax rules in as much they had failed to correctly assess ....
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....Prathyusha Associates Shipping P. Limited Vs CCE, C & ST, Visakhapatnam-I [2014 (36) STR 1145 (Trib-Bang)]: Held :: Demand - Limitation - Extended period -Where the responsibility of assessment is on assessee and not on the department, no one has the liberty to make assumption about the liability - Extended period of limitation invokable (v) R S Joshi Vs Ajit Mills [AIR1977SC2279 = (1977)40STC497 = 1979UPTC171 (SC 7 Member Bench)]: Held "in economic crimes and departmental penalties, 'mens rea is not essential for imposing penalty": (vi) UOI Vs Dharamendra Textile Processors [2008 (231) ELT 3 (SC)]: Held : "Penalty -Mandatory penalty-Lesser penalty not imposable - No discretion available on quantum of penalty under Section 11AC of Central Excise Act, 1944 - Mens rea not an essential ingredient thereunder" [Parallel provisions in Service Tax matters]. (vii) CCE & C, Aurangabad Vs Padmashri V. V. Patil S.S.K. Limited [2007 (215) ELT 23 (Bom)]:: Held :: Penalty-Quantum of- Evasion of excise dury - Discretion to reduce mandatory penalty - Section 11AC of Central Excise Act, 1944 providing for imposition of penalty equal to duty - Impugned Section 11AC ibi....
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.... this condition I have to rely only on the documents available in the record. As there is no doubt that they have received the said amount on account of services provided by them and also no defence reply received from the Noticee regarding receipt of the Amount Rs. 10373100/- thus they are agreed with the demand raised vide the said Show Cause Notice.. Thus, I find that the Noticee is liable to pay Service Tax amounting to Rs.1148709/-(Rupees Eleven Lac forty eight thousand seven hundred nine only) and the same is recoverable from them under Proviso to Section 73(1) of the Finance Act, 1994 along with interest at appropriate rate under Section 75 of the Finance Act, 1994 read with Section 83 of the Act, and further read with Section 38A of Central Excise Act, 1944 and Section 174 of the Central Goods and Services Tax Act, 2017. I find that the party have will fully suppressed the material fact by way of showing gross amount Receipt as 'Detail not available for the period April 2014 to March 2015, instead of actual amount receipt/billed during the subject period with intent to evade payment of service tax, the extended period of limitation is invokable under Section 78....
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....ted at source, etc. being the relevant data for Income Tax. Whereas under the Service Tax provisions, the service tax is chargeable on mercantile basis (accrual basis) on the service provided whether the value of such service is received or not. Thus, we find that the whole basis of show cause notice is incorrect and/or misconceived." 4.5 In the present case the demand has been made by taking the gross receipts towards the provisions of services not from the 26AS of the appellant but on the basis of the declaration made by them in the income tax return filed by the him. Though 26AS is on the accrual basis, but the financial records and Income Tax Return is on the accrual basis or the mercantile basis. Post amendments made in the 2010, and introduction of the Point of Taxation Rules, 2011, the manner of determination of the Service Tax liability was shifted from the receipt basis to the accrual basis. This was done to align the provisions of the service tax, with general accounting standards followed in the country. Thus I find that this decision is distinguishable. The demand in that case was based on comparison of the figures in the 26AS with the ST-3 return, whereas in the pre....
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.... or, as the case may be, the discount received, that is to say, the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such ticket. (b) [ * * * * ] (c) "gross amount charged" includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and [book adjustment, and any amount credited or debited, as the case may be, to any account, whether called "Suspense account" or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise. To further examine the issue it becomes necessary to look into the format of the ST-3 return wherein the appellant was required to declare the gross receipts towards the services and then determine the taxable value after claiming any abatements. B. Value of taxable service and service tax payable 9to be displayed service wise) Month/Quarter Apr-Oct May-Nov Jun-Dec Jul-Jan Aug-Feb Sep-Mar B1.1 Gross amount (excluding amounts received in advance, amounts taxable on receipt basis, for which ....
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....f the work contract services. He was required to declare the exact amount received B1.1 to B1.5 and then claim the deduction/ abatement at B1.8 to B1.12. It is not in dispute in fact it was the submission of the appellant that he had paid the service tax on the receipts after reducing the same by the abatements. It is settled position in law that when the statue prescribes a manner for performance than the act should be performed in that manner only. A three-Judge Bench of the Hon'ble Supreme Court in Chandra Kishore Jha v. Mahavir Prasad & Ors. [(1999) 8 SCC 266] observed as follows: "17....................It is a well-settled salutary principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner. (See with advantage: Nazir Ahmad v. King Emperor [(1935-36) 63 IA 372 : AIR 1936 PC 253 (II)], Rao Shiv Bahadur Singh v. State of V.P. [AIR 1954 SC 322 : 1954 SCR 1098], State of U.P. v. Singhara Singh [AIR 1964 SC 358 : (1964) 1 SCWR 57] .) An election petition under the rules could only have been presented in the open court up to 16-5-1995 till 4.15 p.m. (working hours of the Court) in the manne....
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....ry where a person on the one hand comes before a Court seeking that his own actions be nullified on the ground that it was void and on the other hand wants relief in his favour, which is consequential to and traceable to his own wrong. It would not be proper for a Court of law to assist or aid such person who states that the wrong he committed be set aside and a relief be granted de hors the wrong committed, after condoning the same. In the present case, the plaintiff cannot be allowed to benefit from his own wrong and the Court will not be a party to a perpetuation of illegality. In Ram Pyare v Ram Narain, (1985) 2 SCC 162, a 3-Judge Bench of this Court, in the circumstances therein, did not void a transaction even though the transaction was void being prohibited by law. The principle that no party can take advantage of his/her own wrong i.e. ex injuria sua nemo habere debet is squarely attracted. In Kusheshwar Prasad Singh v State of Bihar, (2007) 11 SCC 447, following was held: '13. The appellant is also right in contending before this Court that the power under Section 32-B of the Act to initiate fresh proceedings could not have been exercised. Admittedly, Section 32-B....
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....permitted to make a profit out of his own wrong".' (emphasis supplied) 33. On an overall circumspection, the learned Single Judge and the Division Bench have not committed any error. 4.8 As I find that appellant has suppressed the gross amounts received by not stating the same in their ST-3 return with the intent to evade payment of service tax, I find that extended period of limitation as per proviso to Section 73 (1) of the Finance Act, 1994 has been rightly invoked for making the demand. During the course of the argument counsel for appellant stated that the show cause notice could not have been issued after expiry of five years from the relevant date, even when Supreme Court taking note of prevailing pandemic conditions have by its order in Suo Motto Writ Petition No 3 of 2022 has extended the period of limitation for the institution of legal proceedings. Authorized representative had argued against. This ground was not taken by the appellant before the lower authorities or even in the appeal filed or in the written submissions filed by the counsel at the time of hearing. Counsel for the Appellant was asked to provide a submission with the relevant case laws on t....
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....where the limitation would have expired during the period between 15-3-2020 till 14-3-2021, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 15-3-2021. In the event the actual balance period of limitation remaining, with effect from 15-3-2021, is greater than 90 days, that longer period shall apply. 3. The period from 15-3-2020 till 14-3-2021 shall also stand excluded in computing the periods prescribed under Sections 23(4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings." [Emphasis Supplied] 106. Likewise, on 27-4-2021 [2021 (48) G.S.T.L. 225 (S.C.) = 2021 (376) E.L.T. 401 (S.C.)], the Supreme Court directed as under : "We also take judicial notice of the fact that the steep rise in COVID-19 Virus cases is not limited to Delhi alone but it has engulfed t....
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....ions 23(4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings." [Emphasis Supplied] 108. Lastly, on 10-1-2022 [2022 (56) G.S.T.L. 385 (S.C.) = 2022 (379) E.L.T. 276 (S.C.)], the Supreme Court directed as under : "(III) In cases where the limitation would have expired during the period between 15-3-2020 till 282-2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 1-3-2022. In the event the actual balance period of limitation remaining, with effect from 1-3-2022 is greater than 90 days, that longer period shall apply. (IV) It is further clarified that the period from 15-32020 till 28-2-2022 shall also stand excluded in computing the periods prescribed under Sections 23(4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial C....
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....ion 27 of the Drugs and Cosmetics Act, 1940 came up for construction. By this section whoever 'manufactures for sale, sells, stocks or exhibits for sale or distributes a drug without a licence is liable for punishment. In holding that mere stocking is not an offence within the section, the Supreme Court pointed out the presence of comma after 'manufactures for sale' and 'sells' and absence of any comma after 'stocks'. It was, therefore, held that only stocking for sale could amount to offence and not mere stocking. For another example of the use of punctuation, reference may be made to M.K. Salpekar (Dr.) Sunil Kumar Shamsunder Chaudhari (AIR 1988 SC 1841) where the court construed clause 13(3)(v) of the C.P. and Berar Letting of Houses and Rent Control Order. This provision permits ejectment of a tenant on the ground that "the tenant has secured alternative accommodation, or has left the area for a continuous period of four months and does not reasonably need the house". In holding that the requirement that the tenant 'does not reasonably need the house' has no application when he 'has secured alternative accommodation' the court referred and relied upon the punctuation comma afte....
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....sion of statute says and it is not for the executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law." [Emphasis Supplied] This view is recently followed by the Supreme Court in Commissioner of Central Excise and Service Tax, Rohtak v. Merino Panel Product Limited [(2023) 2 SCC 597 = 2023 (383) E.L.T. 129 (S.C.) = (2022) 1 Centax 59 (S.C.)]. 115. We concur with the view taken by the Patna High Court. The High Court, in our respectful view, rightly opined that issuance of impugned notifications may be an exercise in abundant caution. Relevant portion reads as under : "40. We emphasize that insofar as the three-year period; relatable to the statutory limitation, there is substantial exclusion, as provided for by the Hon'ble Supreme Court in Para-1 of the directions in its decision. Hence, it is paragraph-5(I) which is applicable to the instant case, and not paragraph5(III) and there can be no ground raised that the issuance of orders should have been within three months from 28-2-2022, especially since, as per the extension of time for filing final returns, the limitation for th....
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....erspective. 118. In view of our finding that period between 15-32020 to 28-2-2022 stood excluded for limitation as per Supreme Court's order, remaining points raised by the petitioners relating to legality of impugned notifications need not be dealt with." 4.9 Thus I do not find any merits in the submissions made by the appellant to effect that the demand is barred by limitation. 4.10 Appellant has claimed that Service Tax in respect of the services provided by them was paid by the main contractor i.e. Technocraft Construction Pvt. Ltd. and they as sub contractor were not required to pay any service tax. However I do not find any merits in the said submission, in view of decision of the larger bench in case of Melange Developers Private Limited [2020 (33) G.S.T.L. 116 (Tri. - LB)]. This decision was followed by the Mumbai Bench in case of Om Sai Fabricators [(2023) 6 Centax 208 (Tri.-Bom)] and following was observed: "4.3 On merits we find that issue has been decided by larger bench of tribunal in the case of Melange Developers Private Limited [2020 (33) G.S.T.L. 116 (Tri. - LB) wherein larger bench has held as follows: "12. It is true that prior to....
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....the taxability of the service provided. 13. The Master Circular clarifies that the services provided by sub-contractors are in the nature of input services and since a sub-contractor is a essentially taxable service provider, Service Tax would be leviable on the taxable services provided. It has also been clarified that even if a taxable service is intended for use as an input service by another service provider, it would still continue to be a taxable service. 14. It can be used that if a main contractor has paid Service Tax on the entire amount of the main contract out of which a portion has been given to a sub-contractor, then if a subcontractor is required to pay Service Tax, it may amount to 'Double Taxation', but this issue has to be examined in the light of the credit mechanism earlier introduced through Service Tax Credit Rules, 2002 granting benefit of tax paid on input services if the input services and the output services fell under the same taxable services and the subsequent amendment made on 14 May, 2003 granting benefit of tax paid on input services even if the input service and the output service belonged to different taxable categories. Th....
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....8 -CESTAT - Allahabad; (iv) Power Mech Projects Ltd. v. Commissioner of Customs, Guntur, reported in 2017 (48) S.T.R. 165 (Tri.- Hyd.); and (v) M/s. Edac Engg. Ltd. v. CST, Chennai, reported in 2017 (6) TMI 685 CESTAT Chennai. 17. In Urvi Construction a Learned Member of the Tribunal observed : "2. Further the learned advocate also submits that in the Master Circular issued by the Board vide Circular No. 96/7/2007-S.T., dated 23-82007, a stand has been taken that there is no exemption to a sub-contractor from payment of service tax merely because the contractor pays the tax. However, he submits that for the period circular issued late by the Board in 1997 was applicable and according to this Circular where the services have been provided by the sub-contractors such sub-contractors are not liable to pay service tax and service tax liability is on the main contractor. Taking note of the fact of the contention that main contractor has paid the service tax and charging service tax on the sub-contractor again would amount to taxing the same service twice and also taking note of the circular cited by the learned advocate and the decisions of the Tribun....
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.... discharged by them has already been paid up by the main contractor. If that is provided, their will obviously be no demand for interest unless such demands have been made belatedly. Once this aspect is also able to be proved by the appellant, imposition of penalty will also not arise." 21. The aforesaid decisions do not take into consideration the impact of the Cenvat Rules. It would, therefore, not be correct to conclude that double taxation would result if a sub-contractor is required to discharge the Service Tax liability even if the main contractor has discharged the tax liability. 22. The decisions of the Tribunal holding that double taxation will not result if a sub-contractor discharges the tax liability because of the Cenvat Rules, now need to be referred to. 23. In Max Tech Oil & Gas Services Pvt. Ltd. v. Commissioner of Service Tax, Delhi, reported in 2017 (52) S.T.R. 508 (Tri. - Del.), the Division Bench has held : "6. Regarding the contention of the appellant that they have acted only as a sub-contractor and demanding service tax from them will amount to double taxation as the main contractor also is rendering similar service to ONGC....
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....ctor has also paid Service Tax and observed that if service tax is paid by a sub-broker in respect of same taxable service provided by the stock broker, the stock broker is entitled to the credit of the tax so paid in view of the provisions of the Cenvat Credit Rules. The relevant paragraph 9 is reproduced below : "9. It is true that there is no provision under Finance Act, 1994 for double taxation. The scheme of service tax law suggest that it is a single point tax law without being a multiple taxation legislation. In absence of any statutory provision to the contrary, providing of service being event of levy, self same service provided shall not be doubly taxable. If Service tax is paid by a sub-broker in respect of same taxable service provided by the stockbroker, the stock broker is entitled to the credit of the tax so paid on such service if entire chain of identity of sub-broker and stock broker is established and transactions are provided to be one and the same. In other words, if the main stock broker is subjected to levy of service tax on the self same taxable service provided by sub-broker to the stock broker and the sub-broker has paid service tax on such servic....
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....ed that the value of the work entrusted to the subcontractors or payments made to them shall not be taken into consideration while computing total turnover for the purposes of Section 6B of the Karnataka Sales Tax Act. This decision of the Supreme Court will not come to the aid of the Respondent in this case in view of the specific provisions of Section 66 and 68 of the Act as also the Cenvat Rules discussed in the foregoing paragraphs of this order. It also needs to be noted that there is no provision for input tax credit on deemed sales in levy of VAT. 29. The submission of the Learned Counsel for the Respondent regarding 'revenue neutrality' cannot also be accepted in view of the specific provisions of Section 66 and 68 of the Act. A subcontractor has to discharge the Service Tax liability when he renders taxable service. The contractor can, as noticed above, take credit in the manner provided for in the Cenvat Credit Rules of 2004. 30. Thus, for all the reasons stated above, it is not possible to accept the contention of the Learned Counsel for the Respondent that a sub-contractor is not required to discharge Service Tax liability if the main contracto....
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....g tax cannot be accepted in the face of clear provision of law. Thus, it is not possible to accept the contention that the Appellant had bona fide belief of for non-payment of tax, so as to invoke Section 80 of the Act." 4.9 A statement of Shri Sukhdeo Vasudeo Yadav (proprietor of appellant} was recorded on 10-11-2008 wherein he stated that he has paid the service tax but has not filed any service tax return so far and submitted copies of taxable invoices, bank pass book and bank statement for 2006-07; that as a sub-contractor, he has provided commercial & industrial construction service to Gammon India Ltd, Mumbai, Japsin Jacob Wire Drawing P Ltd, New Delhi and Man Infra Project Ltd, Mumbai but has not paid any service tax till 31-3-2008 being a sub-contractor; that from 1-4-2008, he started charging service tax on the service provided as sub-contract and that the same would be credited to the service tax department; that he does not have any agreement with these 3 firms but has letter of indent from Gammon India Ltd. 4.10 Shri Sukhdeo Vasudeo Yadav, in his statement dated 21-11-2008 deposed that he paid service tax for the year 2006-07 but did not pay service ta....
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.... stage, we need to examine the recent decision of this Court in Dharamendra Textile (supra). In almost every case relating to penalty, the decision is referred to on behalf of the Revenue as if it laid down that in every case of non-payment or short payment of duty the penalty clause would automatically get attracted and the authority had no discretion in the matter. One of us (Aftab Alam, J.) was a party to the decision in Dharamendra Textile and we see no reason to understand or read that decision in that manner. In Dharamendra Textile the court framed the issues before it, in paragraph 2 of the decision, as follows : "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, Mumbai & Anr. [2007 (8) SCALE 304]. 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 should be read to contain mens rea as an essential ing....
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.... for its application. 22. There is another very strong reason for holding that Dharamendra Textile could not have interpreted Section 11AC in the manner as suggested because in that case that was not even the stand of the revenue. In paragraph 5 of the decision the court noted the submission made on behalf of the revenue as follows : "5. Mr. Chandrashekharan, Additional Solicitor General submitted that in Rules 96ZQ and 96ZO there is no reference to any mens rea as in section 11AC where mens rea is prescribed statutorily. This is clear from the extended period of limitation permissible under section 11A of the Act. It is in essence submitted that the penalty is for statutory offence. It is pointed out that the proviso to Section 11A deals with the time for initiation of action. Section 11AC is only a mechanism for computation and the quantum of penalty. It is stated 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 poi....
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.... natural corollary and is upheld. 4.13 I also uphold the penalty imposed upon the appellant under ⮚ Section 78 of the Finance Act, 1994 following the decision of Hon'ble Supreme Court in case of Rajasthan Spinning and Weaving Mills Ltd. [2009 (238) ELT 3 (SC)] ⮚ Penalty under Section 77 (2) of the Finance Act, 1994 by following the decision of the Hon'ble Supreme Court in case of Gujarat Travancore Agency [1989 (42) E.L.T. 350 (S.C.)] relied by Hon'ble Gujarat High Court in case of Synergy Fertichem Pvt. Ltd. [2020 (33) G.S.T.L. 513 (Guj.)] observing as follows: "115. The Hon'ble Supreme Court in Gujarat Travancore Agency v. Commissioner of Income Tax, AIR 1989 SC 1971 = 1989 (42) E.L.T. 350 (S.C.), wherein the Court considered the provision of Section 271(1)(a) of the Income-tax Act and held that the element of mens rea is not involved because the penalty imposed in civil matters is always of a civil nature and it is misnomer to treat such proceedings as quasi-criminal merely because penalty is imposed, and observed as under :- "In most cases of criminal liability, the intention of Legislature is that penalty should serve as a d....
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....kaji Dadabhai & Co, AIR 1961 SC 1265, the Apex Court held that penalty is an additional tax imposed upon a person in view of his dishonesty or contumacious conduct. 120. In Corpus Juris Secundum, 85 580, it has been stated as under :- "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 of a fine or forfeiture provided as punishment for the violation of criminal or penal laws." 121. In M/s. Hindustan Steel Ltd. v. The State of Orissa, AIR 1970 SC 253 = 1978 (2) E.L.T. (J159) (S.C.), the Hon'ble Supreme Court considered the provisions of the Orissa Sales Tax Act, 1947, particularly the provisions relating to imposition of penalty imposed for default in registering as a dealer under Section 9(1) read with Section 25(1)(a) of the said Act, and held as under :- "But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. 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 eit....
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....ce under any law for the time being in force unless the other conditions provided therein are complied with. The Hon'ble Apex Court considered a large number of its earlier judgments, including the meaning and definition of "penalty" and reached the conclusion that "a penalty imposed by the Sales Tax Authority is only a civil liability, though penal in nature, and it can be imposed provided the default committed by the dealer is established at an inquiry after giving the dealer concerned an opportunity of being heard. Moreso, the degree of remissness involved in the default is a relevant factor to be taken into account while levying penalty. As the Act provides both the minimum and the maximum amount of penalty leviable and it is corelated to the amount of tax which would have have been avoided if the turnover returned by such dealer had been accepted as correct. The order levying penalty is quasi-judicial in character and involves exercise of judicial discretion. 124. A Constitution Bench of the Hon'ble Supreme Court, in Khemka and Co. (Agencies) Pvt. Ltd. v. State of Maharashtra, AIR 1975 SC 1549, considered the provisions of the Central Sales Tax Act, 1956 in a case of ....
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....forfeiture' is a penalty by which one loses his rights and interest in his property. ......The word 'forfeiture' must bear the same meaning of a penalty for breach of a prohibitory direction. The fact that there is arithmetical identity, assuming it to be so, between the figures of the illegal collections made by the dealers and the amounts forfeited to the State cannot create a conceptual confusion that what is provided is not punishment but a transference of funds. If this view be correct, and we hold so the legislature, by inflicting the forfeiture, does not go outside the crease when it hits out against the dealer and deprives him, by the penalty of the law, of the amount illegally gathered from the customers. The Criminal Procedure Code. Customs and Excise Laws and several other penal statutes in India have used diction, which accepts forfeiture as a kind of penalty. When discussing the relings of this Court we will explore whether this true nature of 'forfeiture' is contradicted by anything we can find in Section 37(1), 46 or 63. Even here we may reject the notion that a penalty or a punishment cannot be cast in the form of an absolute or no fault liability but must ....
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.... 128. In Bengal Iron Merchant Association and Anr. v. Commissioner, Commercial Tax and Anr., (1996) 7 SCC 537, the Hon'ble Supreme Court examined the provisions of Rule 89A(2) of the Bengal Sales Tax Rules, 1941, and held that the said provisions of Rule 89A(2) of the said Rules, 1941 required that any consignment of notified goods shall be accompanied by a declaration by the consignor or his authorised agent in relation to the consignment or to comply with them. The rule squarely placed an obligation upon the consignor/vendor to issue such a declaration and the consignee/purchasers to carry the declaration. The consignees were not entitled to complain that because iron and steel were taxable only at the first point of sale, the sellers (manufacturers) were not issuing the declaration as contemplated by Rule 89A(2) and they were, therefore, not in a position to produce the declaration when demanded by the authorities, in case of failure to produce the said declaration form, they were liable to pay the penalty, as per the said Rules, 1941. 129. In Kishori Lal Rakesh Kumar Mandi v. Commissioner of Sales Tax, 1985 UPTC 211, a Division Bench of the Allahabad High Court, while....
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.... 134. Similar view was reiterated by the Division Bench of the Madhya Pradesh High Court in Central India Motors v. C.L. Sharma, Assistant Commissioner of Sales Tax, Indore Region, Indore and Anr., 1980 46 STC. 135. In State of Madhya Pradesh v. Narain Singh and Ors., (1983) 3 SCC 596, the Hon'ble Supreme Court considered as case where two trucks carrying fertilizers were intercepted by the Madhya Pradesh Authorities under the Essential Commodities Act and the accused did not deny the transport of fertilizer bags or interception of its lorries or seizure of fertilizer bags and the only defence taken therein was than they were not aware of the contents of the documents seized from them and they were not engaged in exporting the fertilizer bags from Madhya Pradesh to Maharashtra in conscious violation of provisions of the Fertilizer Movement Control Order, 1973 read with Sections 3 and 7 of the Essential Commodities Act, 1955. The Hon'ble Supreme Court, reversing the order of acquittal, held that mens rea was not at all attracted as the provisions of Section 7(1) of the Essential Commodities Act required to be interpreted in true perspective and it provided that if any perso....
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....spect of the goods carried in or on the vehicle, boat or animal, as the case may be, and produce the same before any officer in charge of check post or barrier or any other officer as may be empowered by the Government in that behalf. The owner or person in charge of a vehicle, boat or animal entering the State limits or leaving the State limits shall also give a declaration containing such particulars as may be prescribed of the goods carried in or on the vehicle, boat or animal, as the case may be, before the officer in charge of the check post or barrier or the officer empowered as aforesaid and give one copy of the declaration to such officer, and keep one copy with him. (7) (a) The officer incharge of the check post or barrier or any other officer not below the rank of an Assistant Commercial Taxes Officer, empowered in this behalf may, after giving the owner or person incharge of the goods reasonable opportunity of being heard and after holding such further enquiry as he may deem fit, impose on him for possession of goods not covered by goods vehicle record, any other documents prescribed under Subsection (3) or for submission of false declaration or documents, a pen....
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....to mislead the authorities. Thus, it is not always necessary that the doctrine of mens rea is attracted in every fiscal statute in all situations. The Court further held as under :- "The requirement of law is meant to be strictly construed, particularly in areas of evasion of tax. We cannot lose sight of the fact that of the there are attempts to avoid statutory obligation or requirement of oblique reason. An undue indulgence and leniency in favour of the tax-evaders on technical or misplaced sympathetic grounds leads to serious consequences affecting the revenue, and as such, development and security of the State. We are not oblivious of the fact that the penalty provisions cannot be used as a revenue-yielding provision. The object to the penalty provision is to ensure compliance in the larger public interest." 142. Finally in the aforesaid context, we may refer to a decision of the Supreme Court in the case of Tamil Nadu Housing Board v. Collector of Central Excise, reported in 1994 Supp. 4 SCR 62 = 1994 (74) E.L.T. 9 (S.C.), wherein the Supreme Court, while dealing with the scope of the proviso to Section 11A of the Central Excises & Salt Act, 1944, observed as....