TMI Blog2014 (6) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout any element of discretion is beyond the purpose of legislation. The object of the rule is to safeguard the revenue against loss, if any. The penalty has been provided in addition to interest. Mere fact that without mens rea, one can be punished or a penalty could be imposed is not a blanket power without providing for any justification. In the Indian Constitutional scheme, power of legislature is circumscribed by fundamental rights. Judicial review of legislation is permissible on the ground of excessive restriction as against reasonable restriction which is also described as proportionality test. When Section 37, which is the rule making power, is clear that penalty can be imposed only when the assessee is guilty of intending to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stantial questions of law: 1. Whether merely demanding interest and imposing penalty from/on the assessee in case of violation of certain Sections/Rules, the provisions in Rules 96(ZO), (ZP) and (ZQ) permitting minimum penalty for delay in payment, without any discretion and without having regard to extent and circumstances for delay can be held to be ultra vires of the Act and the Constitution? 2. Whether the provisions in Rules 96(ZO), (ZP) and (ZQ) permitting minimum penalty for delay in payment, without any discretion and without having regard to extent and circumstances for delay can be held to be ultra vires of the Act and the Constitution, when on merits it has been decided by the same High Court that the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st fortnight whereas in January, 2000, it paid only Rs. 1 lac in the first fortnight. In the months of February and March, 2000, the assessee failed to deposit any amount and, therefore, rendered itself liable to pay interest @ 18% per annum on the outstanding amount of Rs. 18.80 lacs and also liable to equal penalty in terms of the Rules. Accordingly, the show cause notices dated 15.11.1999 and 27.4.2000 (Annexure P-1 Colly) for the recovery of interest at the rate of 18% per annum on the outstanding amount of Rs. 6.25 lacs and Rs. 18.80 lacs, respectively along with penalty in terms of 3rd proviso to Rule 96ZO(3) of the Rules subject to the final decision of the Supreme Steel Industries v. Union of India, Civil Appeal No. 52-83/98 dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the assessee. 6. After hearing learned counsel for the parties, we do not find any merit in the appeal. This Court in Bansal Alloys Metals (P.) Ltd's case (supra) deciding the question of vires of Rules 96ZO(3), 96ZP and 96ZQ of the Rules held the said provisions to the extent of providing for mandatory minimum penalty without mens rea and without any element of discretion as excessive and unreasonable restriction on fundamental rights being arbitrary and were accordingly declared to be ultra vires the Act and the Constitution. It was recorded as under: 15. Applying the above principles to the present situation, the provision for minimum mandatory penalty equal to the amount of duty even for slightest bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed without prejudice to any fresh order being passed in accordance with law. It is made clear that if penalty has attained finality as in CWP No. 18099 of 2009 upto this Court, this order will not affect the finality of such order. The appeals filed by the revenue against the orders of the Tribunal sustaining penalty proportionate to the default will stand dismissed.' 7. Following the aforesaid judgment in Bansal Alloys Metals (P.) Ltd's case (supra), Gujarat High Court in Krishna Processor's case (supra) had recorded as under: 20.15 The above view taken by this court finds support in the decision of the Punjab Haryana High Court in the case of Bansal Alloys Metals (P.) Ltd. v. Union of India (supra) wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest. Mere fact that without mens rea, an can be punished or a penalty could be imposed is not a blanket power without providing for any justification. In the Indian Constitutional scheme, power of legislature is circumscribed by fundamental rights. Judicial review of legislation is permissible on the ground of excessive restriction as against reasonable restriction which is also described as proportionality test. 16. For the above reasons, we hold that the impugned provision to the extent of providing for mandatory minimum penalty without any mens rea and without any element of discretion is excessive and unreasonable restriction on fundamental rights and is arbitrary. Moreover, exercise of such power by way of subordinate legislation i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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