TMI Blog1991 (5) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Exhibit P1 records were seized. By exhibit P2 dated September 29, 1989, the appellant was directed to produce the accounts for the year 1987-88 for verification, failing which, penalty under section 45A(1)(e) of the Act was threatened. The appellant filed his reply, exhibit P3, dated October 7, 1989, before the Intelligence Officer, who issued exhibit P2. By exhibit P4, dated November 2, 1989, the appellant was again requested to produce the daybook, stock book and all sale and purchase bills. The books seized as per exhibit P1 dated March 8, 1988, were not returned. The appellant filed O.P. No. 9768 of 1989 for the return of the books and the other documents seized. It was allowed by exhibit P5 judgment dated December 6, 1989. Thereafter the 1st respondent, by exhibit P6 dated December 15, 1989, served a notice on the appellant proposing to levy a penalty of Rs. 1,39,944, being twice the amount of tax due on the turnover. According to the Revenue, the firm had not maintained true and correct accounts of its transactions and thereby violated section 27 of the Act. The appellant filed a reply dated January 10, 1990, evidenced by exhibit P7. The very basis of the initiation of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 order dated June 23, 1990 and exhibit P26 order dated June 16, 1990 for the said years under section 45A of the Act, levying a penalty of Rs. 5,900 and Rs. 68,028 which amounted to double the tax sought to be evaded. In the O.P. the petitioner has challenged exhibits P20 and P26 as unauthorised, illegal and arbitrary. It has also challenged the vires of section 45A of the Act as ultra vires and unconstitutional. Finally there is a challenge that in any view of the matter, in levying the maximum of penalty, the 1st respondent has acted arbitrarily and mechanically and the judicial discretion vested in the authority has not been properly exercised. 4.. We will now come to O.P. No. 6316 of 1990. The petitioner herein is the proprietor of a saw mill. According to him he is keeping true and correct books of accounts in the regular course of business. The petitioner's business premises was inspected on July 19, 1986. Certain unaccounted purchases made on March 7, 1985 and sales effected on February 19, 1986, were found out. The Intelligence Officer took the view that the assessee has failed to maintain true and correct accounts and that there is violation of section 27 of the Act. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mits levy of penalty on the satisfaction of the officer without any material or evidence and this is obnoxious to well recognised principles of jurisprudence. Finally it was contended that the section casts the burden on the dealer to prove that he (it) has not committed any offence under the Act. This is a procedure unknown to law. The section, is arbitrary and so it should be struck down. 8.. Section 45A of the Act runs as follows: "45A. Imposition of penalty by officers and authorities.-(1) If the assessing authority or the Appellate Assistant Commissioner is satisfied that any person,- (a) being a person required to register himself as dealer under this Act, did not get himself registered; or (b) has failed to keep true and complete accounts; or (c) has failed to submit any return as required by the provisions of this Act or the rules made thereunder; or (d) has submitted an untrue or incorrect return; or (e) has failed to comply with all or any of the terms of any notice or summons issued to him by or under the provisions of this Act or the rules made thereunder; or (f) after purchasing any goods in respect of which he has made a declaration under proviso to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication within the said period: Provided further that no order enhancing a penalty or cancelling the waiver of a penalty shall be passed unless the person affected thereby is given an opportunity of being heard in the matter. (6) An order of the Board of Revenue under sub-section (5) shall be final." The king-pin of the section is that if the assessing authority or the Appellate Assistant Commissioner is "satisfied" that any person has evaded or sought to evade sales tax or other amount, an amount not exceeding twice the amount of sales tax or other amount evaded or sought to be evaded may be imposed as penalty. In case it is not possible to specify the quantum, the penalty levied shall not exceed Rs. 5,000. In other words, evasion or attempt at evasion of sales tax or other amount exigible under the Act is the very foundation for initiation of proceedings under section 45A of the Act. It is common ground that the section does not impose an absolute liability. At one stage it was suggested feebly that mental element, like knowledge, reason to believe, intention, etc., is not specified under any of the sub-sections of section 45A(1) of the Act and so the concerned authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6). Probably, it may be said that it is in the first of these two meanings that the word is generally used in penal statutes, e.g., section 27 (South Australia) Succession Duties Act, 1893 [which corresponded with section 8 of the Succession Duty Act, 1853 (clause 51)] whereby property comprised in any 'non-testamentary disposition' made 'with the intent to evade the payment' of succession duty, was rendered liable to double duty. 'Evade', there, 'means some device or stratagem; some arrangement, trust, or other device (whether concealed, or apparent on the face of the non-testamentary disposition) by which what is really a part of the estate of the deceased is made to appear to belong to somebody else in order to escape payment of duty.' (per Way, C.J., adopted by P.C. Simms v. Registrar of Probates [1900] AC 323)." From the various shades of meaning given in the above dictionaries for the word "evasion", it is clear that it is not the mere default that is made the foundation for the liability (penalty); it is a contumacious or fraudulent or other blame-worthy or objectionable conduct of an assessee in fulfilling his obligations mentioned in section 45A(1) of the Act, that will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m glad to see that the Secretary of State did so in this case. He had before him the written proposals of the new council and he met their leaders. In addition, however, the Minister must direct himself properly in law. He must call his own attention to the matters he is bound to consider. He must exclude from his consideration matters which are irrelevant to that which he has to consider. And the decision to which he comes must be one which is reasonable in this sense, that it is, or can be, supported with good reasons or at any rate be a decision which a reasonable person might reasonably reach. Such is, I think, plain from Padfield v. Ministry of Agriculture, Fisheries and Food [1968] 1 All ER 694; [1968] AC 997 which is a landmark in our administrative law and which we had in mind in Secretary of State for Employment v. Associated Society of Locomotive Engineers and Firemen [1972] 2 All ER 949; [1972] 2 QB 455. So much for the requirements if the Minister is to be 'satisfied'." Scarman, L.J., went further and said at page 675: "I do not accept that the scope of judicial review is limited quite to the extent suggested by counsel for Secretary of State." [Bad faith, misdirect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Income-tax v. Mahindra and Mahindra Ltd. [1983] 144 ITR 225 (SC) at page 237; AIR 1984 SC 1182 at page 1188, Liberty Oil Mills v. Union of India AIR 1984 SC 1271 at page 1289 and Rampur Distillery and Chemicals Co. Ltd. v. Company Law Board [1970] 40 Comp Cas 916 (SC); AIR 1970 SC 1789. We would also mention that a Full Bench of this Court in Balakrishna Pillai v. State of Kerala [1988] 2 KLT 1039 (FB) at pages 1046-1049, has dealt with the matter in little detail. Suffice it to say that it is not the mere ipse dixit of the officer that will enable him either to initiate the proceedings or to levy the penalty under section 45A of the Act. We cannot accept the plea that section 45A vests in the concerned authority any blanket power to enable him to levy the penalty without any material or evidence. We should remember that the power is vested in a responsible officer who is sufficiently high-placed in the hierarchy. The power is not vested in any minor official. It can be exercised only when one or the other of the matters mentioned in section 45A(1) of the Act, which is the very foundation for the jurisdiction, exists. It should also be remembered that the exercise of pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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." The observations aforesaid were referred to with approval in a subsequent decision in Shiv Dutt Rai Fateh Chand v. Union of India [1983] 53 STC 289 at 314 (SC); AIR 1984 SC 1194 at page 1212, paragraph 35. The court has stated the law thus: "The argument urged on behalf of the dealers in the State of Haryana is that this section which authorises the levy of penalty at 'a sum not less than twice and more than ten times the amount of tax' on proof of the defaults mentioned therein is violative of article 14 as there is no guidance given to the authority levying the penalty about the quantum of penalty. There is no substance in this plea. The provision in question itself suggests that the levy to be made under it is in the nature of a penalty which requires the authority concerned to apply his mind to all relevant aspects of the default alleged to have been committed by a dealer. First the default committ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is alone indicated. No minimum is specified. Before the penalty is imposed on a person, the authorities are bound to give an opportunity to such person. Needless to say that the opportunity afforded should be real, effective and meaningful. That is what is envisaged by expressly providing for observing the principles of natural justice-an opportunity of being heard in the matter. Against the imposition of penalty, the aggrieved person has got a right to canvass the order of the lower authority before the Deputy Commissioner. There is a further right of revision from any order that may be passed by the Deputy Commissioner, to the Board of Revenue. In other words, there are two forums, before which, an order imposing the penalty can be canvassed, to obtain redress. In these circumstances, where the exercise of the power by the statutory authority itself is discretionary and also hedged in by limitations, and the order passed is also examinable by two higher authorities to afford redress, it is idle to contend that section 45A confers unbridled or uncanalised power to impose penalty. The plea is without substance. 12.. The only further plea made out was that under explanation I to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be in a better position to point out the reasons or the special circumstances which disabled him from complying with the obligations imposed by the Act. It is in this background the Legislature has thought fit to change the burden of proof. In cases where proceedings under section 45A are initiated, it is open to a dealer to prove that he has not evaded or sought to evade any sales tax or any other amount due under the Act. Such matters will ordinarily be within the exclusive knowledge of the dealer or the assessee or other person. We are of the view, that there is sufficient nexus or connection between the provision, section 45A(1) and explanation I, and explanation I is not one arbitrarily made. It cannot be stated that explanation I is either unauthorised or otherwise unfair or unreasonable; nor can it be said that explanation I is hit by article 14 of the Constitution of India or any of the constitutional guarantees. In this context, we are reminded of the observations of Holmes, J. in William N. McFarland v. American Sugar Refining Co. [1916] 241 US 79 at pages 86-87, 60 Law Ed 899 at page 904(K) which was quoted with approval by a Constitution Bench of the Supreme Court in A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... babilities in his favour or point out circumstances, which could create doubts, the benefit of which can be given to him. Since the person is required to prove a negative fact, the matter should be evaluated only on preponderance of probabilities--See Commissioner of Income-tax v. Sankarsons and Company [1972] 85 ITR 627 (Ker), Commissioner of Income-tax v. S.P. Bhatt [1974] 97 ITR 440 (Guj), Commissioner of Income-tax v. Patna Timber Works [1977] 106 ITR 452 (Pat), Commissioner of Income-tax v. Prafulla Kumar Mullik [1976] 104 ITR 648 (Orissa), Commissioner of Income-tax v. Ketini Krishnamurty [1976] 103 ITR 487.(Orissa) and Commissioner of Income-tax v. Narang Co. [1975] 98 ITR 462 (Delhi). 14.. In the light of the above discussion, the appellant in W.A. No. 108 of 1990 is not entitled to any relief. All that we need to say is that in the light of the guidelines laid down by us herein, the objections filed by the appellant, exhibit P7, will be considered and disposed of by the concerned Intelligence Officer. The matter is only at the notice stage. It is primarily for the authority, who has initiated the proceedings to determine as to whether the proceedings are maintainable i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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