TaxTMI 
TaxTMI 
2008 (3) TMI 450
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....rtificate under section 4B to purchase iron scrap without payment of any tax against form IIIB has been granted to it. In the relevant assessment year 1985-86 it purchased iron scraps in various lots, from railway in auction. Part of iron scrap, thus purchased from the railway was utilised in rerolling. But scrap weighing 239-966 metric ton was sold which was purchased for Rs. 10,73,850.89 without payment of any tax the purchaser being recognition certificate holder. The dispute relates to this part sold by the applicant and not utilised in manufacture of iron steel. The total purchases of iron scrap for the entire assessment year is 2,344-228 tons. The assessing authority did not accept the explanation of the dealer that the iron weighing 239.966 metric tons was not of any use to the applicant and imposed penalty to the tune of Rs. 85,690. This order was confirmed by the first appellate authority, and has been set aside by the Tribunal under revision. Heard the counsel for the parties and perused the record. The Tribunal has set aside the penalty order on the finding that the goods were sold to the dealer-opposite party on the basis of "as is where is". No sorting or picking und....
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.... This case was decided on its own facts. No principle of law relevant to the controversy presently involved in the case in hand has been laid down. There was some dispute as to whether the refined oil was one of the notified goods or not. The assessee has applied for and was granted recognition certificate to manufacture refined, rapeseed oil and it made purchases of rapeseed oil. In that view of the matter the case was decided. This court in the case of Sai Electricals (P) Ltd. [1997] 107 STC 384 (All); [1997] UPTC 721 has placed reliance upon three judgments of the Supreme Court given in the case of Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211 (SC); AIR 1970 SC 253, R.S. Joshi, Sales Tax Officer, Gujarat v. Ajit Mills Limited [1977] 40 STC 497 (SC); [1977] 4 SCC 98; [1979] UPTC 171 and Director of Enforcement v. MCT Municipal Corporation P. Ltd. [1996] JT 1 SC 79; [1996] 2 SCC 471 to hold that the classic view "no mens rea no crime" is not applicable to the economic crimes and departmental penalties. Plain language of sub- section (5) of section 4B also does not show that mens rea is an essential ingredient for imposition of penalty. The reasoning given by the Trib....
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....erms of section 4B(2) of the Act had furnished an undertaking whereby and whereunder it undertook to utilise the entire material for manufacturing purposes, which was breached by reason of the said transfer, a proceeding for levy of penalty was initiated against it whereupon a show cause notice was issued. Cause was shown by the appellant on March 5, 1990 contending that the said quantity of scrap being not usable, it had no other option but to dispose of the same. By reason of an order dated March 26, 1990, the assessing officer rejected the said contention. It levied penalty of Rs. 85,619 on the appellant. An appeal preferred thereagainst before the Deputy Commissioner (Appeals) was dismissed by an order dated February 8, 1991. An appeal to the Tribunal preferred by the appellant was, however, allowed by an order dated April 29, 1993, stating: "6. Having given our deep consideration and anxious thoughts to the rival submissions and perused the relevant record, we feel that the learned authorities below have not appreciated the facts of the case in right perspective. It is not disputed that the scrap has been purchased y the appellant in lots from the railway, in which there re....
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.... contend: (1) In a case of this nature as no duty can be imposed, the minimum penalty which has been prescribed would amount to the duty payable to the State. (2) The High Court, in a case of this nature, had ordinarily been ordering levy of penalty only twice the amount of the duty keeping in view the fact that the dealer admittedly has not utilised the goods for manufacturing purposes wherefor it had furnished an undertaking. (3) In any event, as the assessing authority and the appellate authority had assigned sufficient and cogent reasons for imposition of the penalty having found that: (i) it has not been proved that the goods were not suitable for manufacturing purposes; (ii) the goods which were sold to another dealer had been used by the vendee for manufacturing purposes; (iii) the appellant could have given an advance intimation to the authorities pointing out its genuine difficulty; (iv) 10 per cent of the total stock cannot be said to be a miniscule portion which can be ignored by the authorities and, thus, there must be something more than which meets the eye; and (v) in any event such a process of getting away in regard to payment of duty should not be encourage....
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....on certificate has been granted under sub-section (2) has purchased the goods after payment of tax at concessional rate under this section or, as the case may be, without payment of tax and has used such goods for a purpose other than that for which the recognition certificate was granted or has otherwise disposed of the said goods, such dealer shall be liable to pay as penalty such amount as the assessing authority may fix which shall not be less than the difference between the amount of tax on the sale or purchase of such goods payable under this section and the amount of tax payable under any other provisions of this Act but not exceeding three times the amount of such difference . . ." It is not in dispute that the appellant was exempted from payment of the entire amount of tax, subject to the conditions and restrictions specified in the notification. For the said purpose, it holds a recognition certificate. The assessing authority while opining that the appellant should have taken all precautions to see that the goods it had purchased were capable of being utilised or consumed for manufacture of ingots, arrived, inter alia, at the following finding of fact: "(i) The trader c....
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....pellants, while extending his co-operation/bona fides and informed the learned tax assessing authority and got inspected the goods which they intended to sell and that that material could not be utilised in the manufacturing of the notified articles produced by them. But the appellants have not done so. The appellants have also not paid any tax against such sales and have knowingly sold away the aforesaid goods to other manufacturers and have also obtained the form IIIB from them. In this way, the appellants have also not paid any tax against such sales . . ." (emphasis supplied) The Tribunal, however, as noticed hereinbefore, allowed the appeal on the ground that the appellant did not have any mens rea. The High Court by reason of its impugned judgment, following some of its earlier decisions, opined: "This court in the case of Sai Electrical (P) Ltd. See [1997] 107 STC 384 (All) has placed reliance upon three judgments of the Supreme Court given in the case of Hindustan Steel Ltd. v. State of Orissa AIR 1970 SC 253 [1970] 25 STC 211 (SC)., R.S. Joshi, Sales Tax Officer, Gujarat v. Ajit Mills Limited [1979] UPTC 171 See [1977] 40 STC 497 (SC) and Director of Enforcement v. MCT ....
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....eel Ltd. v. State of Orissa [1969] 2 SCC 627 See [1970] 25 STC 211 (SC). stating: "8. . . . An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, 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 liable to act in the manner prescribed by the statute . . ." Mr. Banerjee, however, urged that Hindustan Steel Ltd. [1969] 2 SCC 627 See [1970] 25 STC 211 (SC)., is not applicable to the facts of the ....
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....am satisfied that the provisions of section 37(1) are within the competence of the State Legislature." We are not concerned with such a question here. Reliance has also been placed on Director of Enforcement v. MCT Municipal Corporation Pvt. Ltd. [1996] 2 SCC 471. This court was dealing therein with Foreign Exchange Regulation Act, 1947. It was opined that section 23(1)(a) of the Act confers adjudicatory function on the conduct of the delinquent, stating: "8. It is true the breach of a 'civil obligation' which attracts 'penalty' under section 23(1)(a), FERA, 1947 and a finding that the delinquent has contravened the provisions of section 10, FERA, 1947 would immediately attract the levy of 'penalty' under section 23, irrespective of the fact whether the contravention was made by the defaulter with any 'guilty intention' or not. Therefore, unlike in a criminal case, where it is essential for the 'prosecution' to establish that the 'accused' had the necessary guilty intention or in other words the requisite 'mens rea' to commit the alleged offence with which he is charged before recording his conviction, the obligation on the part of the Directorate of Enforcement, in cases of con....
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....ed order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice. (See Malabar Industrial Co. Ltd. v. CIT See [2000] 2 SCC 718; [2000] 243 ITR 83 (SC).) 87.. We have, however, noticed hereinbefore that the Income-tax Officer had merely held that the assessee is guilty of furnishing of inaccurate particulars and not of concealment of income; which finding was arrived at also by the Commissioner of Income-tax and the Income-tax Appellate Tribunal." In Chairman, S.E.B.I. v. Shriram Mutual Fund [2006] 5 SCC 361 See [2006] 131 Comp Cas 591., this court held: "35. In our considered opinion, penalty is attracted as soon as the contravention of the statutory obligation as contemplated by the Act and the regulation is established and hence the intention of the parties committing such violation becomes wholly irrelevant. A breach of civil obligation which attracts penalty in the nature of fine under the provisions of the Act and the regulations would immediately attract the levy of penalty irrespective of the fact whether contravention must made by the defaulter with guilty intention or not. We also further held that unless the l....