TMI Blog1995 (12) TMI 344X X X X Extracts X X X X X X X X Extracts X X X X ..... on 8-A of the Act, by the Government the rate of tax payable on the sale of milk powder was reduced to 4 per cent regardless whether the product was sold loose or in sealed containers. The relevant portion of the Government order is extracted below: "From the 1st day of April 1986, the rate of tax payable by a dealer under section 5 of the Act, on the sale of milk powder whether sold loose or in sealed containers is reduced to 4 per cent." The petitioner claims that the issue of the above notification gave rise to a genuine doubt as to whether sale of "Amul spray" would be exigible to tax at the reduced rate albeit the same could be used as baby food also. A clarification was accordingly sought from the Commissioner of Commercial Taxes in terms of section 3-A of the Act. The clarification did come but only on October 16, 1986, stating that "Amul spray" would attract only 4 per cent tax on sales. The petitioner had during the interregnum collected sales tax at 8 per cent ostensibly with a view to guard against a situation where the product may be held to be disentitled to the benefit of the reduced rate of tax in which event it would have been impossible for it to chase the cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering the impugned orders liable to be set aside. 5.. We have given our anxious consideration to the submissions made at the Bar and propose to deal with the same seriatim. 6.. Actus non facit reum nisi mens sit rea, i.e., an act does not itself constitute an offence unless done with the guilty mind, is one of the most familiar maxims known to criminal jurisprudence. It implies that an evil intention or a knowledge of the wrongfulness of the act is an essential ingredient of every offence. The principle has universal application and is recognised by both English courts as well as courts in India. 7. The presumption arising under the maxim however has a significant exception. The exception comprises cases in which the Legislature has either specifically or by necessary implication dispensed with the requirement of proof of mens rea in the commission of an offence under a given statute. The maxim has to that extent undergone a modification owing to the greater precision of modern statutes making it impossible to apply the same generally to all statutes. The substance of the reported cases is that it is necessary to look at the object of each Act that is under consideration to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on November 24, 1962, whereas the accused having left Zurich on November 27, 1962, could not possibly have had any knowledge in regard to the new restrictions imposed by the Indian authorities on the import of gold into the Indian territory. Repelling the contention, the Supreme Court by majority held that the accused had been rightly convicted and that the knowledge of the existence or content of a law by an individual would not always be relevant, save on the question of the sentence to be imposed on its violation. The following passage from the judgment is illustrative as well as instructive: "But if the bringing into India was a conscious act and was done with the intention of bringing it into India the mere 'bringing' constitutes the offence and there is no other ingredient that is necessary in order to constitute a contravention of section 8(1) than that conscious physical act of bringing. If then under section 8(1) the conscious physical act of 'bringing' constitutes the offence, section 23(1-A) does not import any further condition for the imposition of liability than what is provided for in section 8(1). On the language, therefore, of section 8(1) read with section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esh Grain Seed Merchants' Association v. Union of India)." 13.. To the same effect is the view taken by the apex Court in Dineshchandra Jamnadas Gandhi v. State of Gujarat AIR 1989 SC 1011, where also the court was dealing with the provisions of the Food Adulteration Act, 1954, and was considering whether a guilty mind was an essential condition for constituting an offence under the Act. Repelling the submission made, the court observed thus: "The offences under the 'Act' are really acts prohibited by the police-powers of the State in the interests of public health and well being. The prohibition is backed by the sanction of a penalty. The offences are strict statutory offences. Intention or mental state is irrelevant. ............................. The statute we are concerned with prescribes a strict liability, without need to establish mens rea. The actus reus is itself the offence. There might be cases where some mental element might be a part of the actus reus itself. This is not one of those cases where anything more than the mere doing of the prescribed act required to be proved. There is thus no merit in the second point either." 14.. The court also referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessing authority to necessarily impose a penalty, and that the matter vested in the discretion of the authority concerned although exercise of such discretion could not be arbitrary. 17.. The legal position can therefore be summarised thus: That the presumption that mens rea is an essential ingredient in every offence, gets displaced both by the words used in the relevant statute creating the offence as also by subject-matter with which the same deals. For a correct view on the question whether mens rea is essential for the imposition of a penalty, not only the language used in the statute but also the subject with which it deals ought to be considered. In so far as the fiscal statutes are concerned, the acceptance of the non-application of the doctrine has been recognised more readily by the courts. As observed by their Lordships in Joshi's case [1977] 40 STC 497 (SC); AIR 1977 SC 2279, the classical view that "no mens rea no crime" has been long ago eroded especially regarding economic crimes. Absence of mens rea would be relevant only in the matter of fixing the quantum of penalty and the imposition of the penalty as also the quantum thereof is in the discretion of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elf, all the same gives room for the assumption that the prohibition contained was total and absolute in terms. Super-added to this is the fact that the provisions of section 18 appear in a taxing statute, and the object behind the prohibition, inter alia, is to prevent in absolute terms the recovery of any amount by a registered dealer, which is in excess of what is otherwise recoverable under the Act. The provision is manifestly aimed at protecting the consumers at large against dealers, recovering from them more than what is otherwise legally recoverable in the garb of sales tax. It serves the purpose of preventing undue and undeserved enrichment of the dealers at the expense of the gullible and unsuspecting consumer public a phenomenon which is not uncommon in the existing fiscal system. The subject-matter with which the enactment deals and the language employed in the provision containing the prohibition apart, the nature of penalty envisaged by the provisions of section 18-A also lends itself to the interpretation that the strict rules of mens rea were never meant to be included as an essential ingredient of an offence (if one may use that expressions) of contravention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f doubt that penalty does not follow as an inexorable consequence of a contravention. The use of the expression "may by order in writing impose by way of penalty" leaves the matter entirely in the discretion of the assessing authority, whether or not to impose any penalty upon the defaulting party in the peculiar facts and circumstances of each case. In other words there is nothing like an automatic penalty upon proof of a contravention. It is significant to note that the Supreme Court in Joshi's case [1977] 40 STC 497; AIR 1977 SC 2279, while dealing with the provisions of section 37 of the Bombay Act, interpreted the forfeiture clause to be only directory in nature notwithstanding the mandatory language employed in the provision. The following passage from the judgment is in this connection relevant: "The expression 'forfeiture' may now be examined. For one thing, there is authority to hold that 'shall be forfeited' means 'liable to be forfeited', depending on the setting and the sense of the statute. Lord Porter, in Attorney General v. Parsons (1956) AC 421 observed, in the context of language suggestive of automatic forfeiture, negativing such inference: The strength of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessing authorities, shall be bound to take into consideration all the circumstances relevant to the question of imposition and the quantum of penalty imposed. Of these circumstances two factors shall have to be particularly kept in view, these are-the bona fides of the dealer in making the excess collection and his conduct after having done so. An order imposing penalty which is passed for no better reason than the proof of a contravention or is demonstrably oblivious of the relevant consideration would be liable to be interfered with in appeal, revision or even writ jurisdiction under article 226 of the Constitution. Assessing authorities exercising the statutory powers of imposing penalties would therefore do well to act fairly and objectively *Here italicised. and let not their exuberance in collection of taxes overtake their onerous obligation of discharging their statutory powers along judicial lines. Ample support for this view is available from a Division Bench judgment of this Court in Manilal Monaji Somayya v. Commercial Tax Officer [1973] 32 STC 541; where this Court observed thus: "The Act provides for imposition of penalty for failure to pay every month th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nataka [1992] 87 STC 349 and State of Karnataka v. Begees Foods (P) Ltd. [1993] 88 STC 451, all delivered by Shiva Shankar Bhat, J., as his Lordship then was. It was urged that the view taken Here italicised. by this Court in the aforesaid cases was in favour of reading mens rea as a necessary ingredient of an offence under section 18-A of the Act. We do not find it to be so. 25.. In Subramanian's case [1992] 84 STC 230 (Kar) certain observations have no doubt been made suggesting that a guilty mind is necessary for the imposition of a penalty under section 18-A of the Act, but with utmost respect to the honourable Judges who decided the said case, their Lordships attention does not appear to have been drawn to the judgment of the apex Court in Joshi's case [1977] 40 STC 497; AIR 1977 SC 2279, which has taken a contrary view and dispelled the impression that mens rea is necessary even in cases involving penalties under the fiscal laws of the land. In the face of the said judgment Subramanian's case [1992] 84 STC 230 (Kar) must be held to have been decided per incuriam. 26.. In Southern Founders v. State of Karnataka [1992] 87 STC 349 (Kar) the Supreme Court decision in Joshi's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealer it was observed would in such a situation be a very relevant factor while considering the question of imposing the penalty. There is no quarrel with this proposition nor can it be disputed that the conduct of a dealer before and after the illegal collection of the excess amount as tax would be a relevant factor for deciding as to whether any penalty should at all be imposed and if so the quantum thereof. 29.. Mr. Narayan however placed particular reliance upon the following para in the above judgment: "Section 18A being a penal provision it is attracted only when the conduct of the person charged with the contravention actually requires to be dealt with by penalising him; the bona fides and the conduct of the assessee are certainly very relevant factors. This aspect also has been referred in the aforesaid decision rendered in Southern Founders' case [1992] 87 STC 349 (Kar)." There is no substance in the submission that the above lines are an authority for the proposition canvassed by Mr. Narayan, that mens rea is an essential requirement for a legally sustainable order of penalty under section 18-A of the Act. 30.. Coming then to the alternative submission made by M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meant that the amount was utilised by the dealer for its own benefit rather than that of the customers. As if that was not enough the petitioner filed Writ Petitions Nos. 9580 and 9581 of 1989 in this Court, to force the tax authorities to adjust the amount refunded to it towards the tax dues from it for the subsequent period. Having acted thus qua the amount in question, any offer for refund when the penalty had already been imposed was anything but bona fide, and was rightly held by the Tribunal to be insufficient to escape the penalty. 32.. Thirdly, the offer or the efforts, made by a dealer to refund the excess amount collected, to the customers concerned is at best one of the circumstances that may weigh with the assessing authority in the matter of imposition of a penalty or the quantum thereof. Such a circumstance is not by itself conclusive and would not in itself make the penalty if any imposed for wrongful collection unsustainable in law. The assessing authority while passing an order under section 18-A is entitled to take into consideration the totality of the circumstances, and impose an appropriate penalty considered just and proper in the circumstances of the case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." 34.. It is also noteworthy that after the introduction of section 18-AA with effect from April 1, 1992 the deposit or the forfeiture of the excess amount collected by the dealer absolves the dealer of his obligation to refund the excess amount to the customers concerned. By reason of the provisions of section 18-AA(4) any such customer would be entitled to claim a refund of the excess amount to him by making an application to the Commissioner, no matter the collection was made before the insertion of section 18-AA in the statute book. This appears to be so, because of the provisions of sub-section (5) of section 18-AA which makes sub-sections (3) and (4) applicable even to collections made prior to April 1, 1992 as is the position in the present case. 35.. Suffice it to say that the order passed by the sales tax authorities and the view taken by the Tribunal, restricting the penalty amount to the amount collected improperly cannot be said to be suffering from any error of law or jurisdiction nor can it be said to be so arb ..... X X X X Extracts X X X X X X X X Extracts X X X X
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