TMI Blog2015 (11) TMI 1172X X X X Extracts X X X X X X X X Extracts X X X X ..... pees. It is clear that as has been held by this Court, penalty imposable under the aforesaid three Rules is inflexible and mandatory in nature. The High Court is, therefore, correct in saying that an assessee who pays the delayed amount of duty after 100 days is to be on the same footing as an assessee who pays the duty only after one day’s delay and that therefore such rule treats unequals as equals and would, therefore, violate Article 14 of the Constitution of India. It is also correct in saying that there may be circumstances of force majeure which may prevent a bonafide assessee from paying the duty in time, and on certain given factual circumstances, despite there being no fault on the part of the assessee in making the deposit of duty in time, a mandatory penalty of an equivalent amount of duty would be compulsorily leviable and recoverable from such assessee. This would be extremely arbitrary and violative of Article 14 for this reason as well. Even where clandestine removal and intent to evade duty are present, yet the authorities are given a discretion to levy a penalty higher than ₹ 10,000/- but not exceeding the duty leviable. In a given case, therefore, even w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ARISING OUT OF SLP (CIVIL) NO.19966 OF 2011) CIVIL APPEAL NO.13607 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.19968 OF 2011) CIVIL APPEAL NO.13608 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.19969 OF 2011) CIVIL APPEAL NO.13609 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.19972 OF 2011) CIVIL APPEAL NO.13610 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.19975 OF 2011) CIVIL APPEAL NO.13611 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.19979 OF 2011) CIVIL APPEAL NO.13612 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.19983 OF 2011) CIVIL APPEAL NO.13614 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.20667 OF 2011) CIVIL APPEAL NO.13615 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.21584 OF 2011) CIVIL APPEAL NO.13616 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.25881 OF 2011) CIVIL APPEAL NO.13617 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.1796 OF 2012) CIVIL APPEAL NO.13618 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.16249 OF 2012) CIVIL APPEAL NO.13619 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.21273 OF 2012) CIVIL APPEAL NO.13620 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.21402 OF 2012) CIVIL APPEAL NO.13621 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.24139 OF 2012) CIVIL APPEAL NO.13622 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.27752 OF 2012) CIVIL APPEAL N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15) CIVIL APPEAL NO.13657 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.6147 OF 2015) CIVIL APPEAL NO.13658 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.7820 OF 2015) CIVIL APPEAL NO.13659 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.33041 OF 2013) CIVIL APPEAL NO.13660 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.8746 OF 2015) CIVIL APPEAL NO.13661 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.10577 OF 2015) CIVIL APPEAL NO.13662 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.12574 OF 2015) CIVIL APPEAL NO.13663 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.21407 OF 2015) CIVIL APPEAL NO.13664 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.22354 OF 2015) CIVIL APPEAL NO.13665 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.27474 OF 2015) CIVIL APPEAL NO.13666 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.26580 OF 2015) CIVIL APPEAL NO.13667 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.27998 OF 2015) CIVIL APPEAL NO.13668 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.28262 OF 2015) CIVIL APPEAL NO.13669 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.27471 OF 2015) CIVIL APPEAL NO.13670 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.27997 OF 2015) CIVIL APPEAL NO.13671 OF 2015 (ARISING OUT OF SLP (CIVIL) NO.28264 OF 2015) CIVIL APPEAL NO.13672 OF 2015 (ARISING OUT OF SLP (CIVIL) N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Section 3A, the liability of the assessee was not wiped out. 7. Shri Ajay Aggarwal, learned counsel who appeared on behalf of the appellant fairly submitted that a recent judgment delivered by this Bench, namely, M/s Fibre Boards (P) Ltd., Bangalore v. Commissioner of Income Tax, Bangalore, [2015] 376 ITR 596 (SC), would cover the matter before us being directly against the appellant s case. However, he submitted that for various reasons this judgment requires a relook and ought to be referred to a larger Bench of three Judges. Shri Aggarwal argued the matter with great ability and we listened to him with considerable interest. 8. First, it may be stated that the judgment of this Court in the Fibre Board s case has taken the view that an omission would amount to a repeal , after referring to several authorities of this Court, G.P. Singh s Principles of Statutory Interpretation, Section 6A of the General Clauses Act, 1897, and a passage in Halsbury s Laws of England. Ultimately, this Court arrived at the conclusion that an omission would amount to a repeal for the purpose of Section 24 of the General Clauses Act. Since the same expression, namely, repeal is use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is done away with, as opposed to an omission which is applied only when part of the statute is deleted, but said that this is not invariably the case, and referred to Section 1 of the Indian Contract Act in which enactments mentioned in the schedule are repealed not in their entirety but only to the extent provided and, therefore, argued that the expression repeals will apply also to a part of an enactment as opposed to the enactment as a whole. 10. Shri Radhakrishnan, learned senior counsel appearing on behalf of the revenue supported the judgment of this Court in the Fibre Board s case and said that recent judgments delivered which have clarified the law ought not to be disturbed in the larger public interest. 11. Since Shri Aggarwal has made detailed submissions on why according to him the judgment in the Fibre Board s case is not correctly decided, we propose to deal with each of those submissions in some detail. 12. First and foremost, it is important to refer to the definition of enactment contained in Section 3(19) of the General Clauses Act. The said definition clause states that enactment shall mean the following:- enactment shall include a Regulatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts to an obliteration from the very beginning, whereas an omission is only in futuro. If the expression delete would amount to a repeal , which the appellant s counsel does not deny, it is clear that a conjoint reading of Halsbury s Laws of England and the Legal Thesaurus cited hereinabove both lead to the same result, namely that an omission being tantamount to a deletion is a form of repeal. 15. Learned counsel s second argument that Section 6A when it speaks of an omission only speaks of an amendment which omits and, therefore does not refer to a repeal is equally fallacious. In Bhagat Ram Sharma v. Union of India, 1988 Supp SCC 30, this Court held that there is no real distinction between a repeal and an amendment and that amendment is in fact a wider term which includes deletion of a provision in an existing statute. In the said judgment, this Court held:- 17. It is a matter of legislative practice to provide while enacting an amending law, that an existing provision shall be deleted and a new provision substituted. Such deletion has the effect of repeal of the existing provision. Such a law may also provide for the introduction of a new provision. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so by way of an express omission. This being the case, it is clear that Section 6A undisputedly leads to the conclusion that a repeal would include a repeal by way of an express omission. 17. Learned counsel then argued that while distinguishing the Madhya Pradesh High Court s judgment in Rayala Corporation, a Constitution Bench of this Court expressly held as the first reason that Section 6 applies only to repeals and not to omissions. The Fibre Board s judgment has clearly held as follows: First and foremost, it will be noticed that two reasons were given in Rayala Corporation (P) Ltd. for distinguishing the Madhya Pradesh High Court judgment. Ordinarily, both reasons would form the ratio decidendi for the said decision and both reasons would be binding upon us. But we find that once it is held that Section 6 of the General Clauses Act would itself not apply to a rule which is subordinate legislation as it applies only to a Central Act or Regulation, it would be wholly unnecessary to state that on a construction of the word repeal in Section 6 of the General Clauses Act, omissions made by the legislature would not be included. Assume, on the other hand, that the Cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 of the General Clauses Act. 21. It was then urged before us that Section 31 of the Prevention of Corruption Act, 1988 would also lead to the conclusion that Parliament itself is cognizant of the fact that an omission cannot amount to a repeal. Section 31 of the Prevention of Corruption Act, 1988, states as follows:- Section 31 - Omission of certain sections of Act 45 of 1860 Sections 161 to 165A (both inclusive) of the Indian Penal Code, 1860 (45 of 1860) shall be omitted, and section 6 of the General Clauses Act, 1897 (10 of 1897), shall apply to such omission as if the said sections had been repealed by a Central Act. 22. It is settled law that Parliament is presumed to know the law when it enacts a particular piece of legislation. The Prevention of Corruption Act was passed in the year 1988, that is long after 1969 when the Constitution Bench decision in Rayala Corporation had been delivered. It is, therefore, presumed that Parliament enacted Section 31 knowing that the decision in Rayala Corporation had stated that an omission would not amount to a repeal and it is for this reason that Section 31 was enacted. This again does not take us further as this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int of law, it would be open to this Court to hold that though the view taken by the High Court is reasonably possible, the alternative view which is also reasonably possible is better and should be preferred. In such a case, the choice is between the view taken by the High Court whose judgment is under appeal, and the alternative view which appears to this Court to be more reasonable; and in accepting it own view in preference to that of the High Court, this Court would be discharging its duty as Court of Appeal. But different considerations must inevitably arise where a previous decision of this Court has taken a particular view as to the construction of a statutory provision as, for instance, section 66(4) of the Act. When it is urged that the view already taken by this Court should be reviewed and revised, it may not necessarily be an adequate reason for such review and revision to hold that though the earlier view is a reasonably possible view, the alternative view which is pressed on the subsequent occasion is more reasonable. In reviewing and revising its earlier decision, this Court should ask itself whether in interests of the public good or for any other valid and compuls ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , learned senior counsel on behalf of the revenue, clarifies the law in holding that an omission would amount to a repeal. The converse view of the law has led to an omitted provision being treated as if it never existed, as Section 6 of the General Clauses Act would not then apply to allow the previous operation of the provision so omitted or anything duly done or suffered thereunder. Nor may a legal proceeding in respect of any right or liability be instituted, continued or enforced in respect of rights and liabilities acquired or incurred under the enactment so omitted. In the vast majority of cases, this would cause great public mischief, and the decision of Fibre Board s case is therefore clearly delivered by this Court for the public good, being, at the very least a reasonably possible view. Also, no aspect of the question at hand has remained unnoticed. For this reason also we decline to accept Shri Aggarwal s persuasive plea to reconsider the judgment in Fibre Board s case. This being the case, it is clear that on point one the present appeal would have to be dismissed as being concluded by the decision in the Fibre Board s case. 25. Even on the point of limitation, we f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the manufacturer of hot rolled products. (3) . Provided also that where a manufacturer fails to pay the whole of amount of duty payable for any month by the 10th day of such month, he shall be liable to pay, - (i) The outstanding amount of duty along with interest thereon at the rate of eighteen per cent. per annum calculated for the period from the 11th day of such month till the date of actual payment of the outstanding amount; and (ii) A penalty equal to the amount of duty outstanding from him at the end of such month or five thousand rupees, whichever is greater. Rule 96ZQ Procedure to be followed by the independent processor of textile fabrics. (5) If an independent processor fails to pay the amount of duty or any part thereof by the date specified in sub-rule (3), he shall be liable to,- (i) Pay the outstanding amount of duty along with interest at the rate of thirty-six per cent per annum calculated for the outstanding period on the outstanding amount; and (ii) A penalty equal to an amount of duty outstanding from him or rupees five thousand, whichever is greater. 28. Shri Aggarwal in order to buttress his submission that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench decision of this Court, it would be a travesty of justice if we would not to allow Shri Aggarwal to make this submission. 30. On merits, the matter is no longer res integra. A Constitution Bench decision of this Court in VVS Sugars v. Government of A.P., 1999 (4) SCC 192, has held, following two earlier judgments of this Court, as follows:- This Court in India Carbon Ltd. v. State of Assam [(1997) 6 SCC 479] has held, after analysing the Constitution Bench judgment in J.K. Synthetics Ltd. v. CTO [(1994) 4 SCC 276] that interest can be levied and charged on delayed payment of tax only if the statute that levies and charges the tax makes a substantive provision in this behalf. There being no substantive provision in the Act for the levy of interest on arrears of tax that applied to purchases of sugarcane made subsequent to the date of commencement of the amending Act, no interest thereon could be so levied, based on the application of the said Rule 45 or otherwise. 31. Applying the Constitution Bench decision stated above, it will have to be declared that since Section 3A which provides for a separate scheme for availing facilities under a compound levy scheme do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive of Articles 14 and 19(1)(g) of the Constitution. 34. Shri Radhakrishnan, learned senior advocate appearing on behalf of the revenue found it extremely difficult to argue that the aforesaid judgment was wrong. He therefore asked us to limit the effect of the judgment when it further held that after omission of the aforesaid Rules with effect from 1.3.2001 no proceedings could have been initiated thereunder. In this submission he is correct for the simple reason that the Gujarat High Court followed Rayala Corporation in holding that omissions would not amount to repeals , which this Court has now clarified is not the correct legal position. 35. However, insofar the reasoning of the High Court is concerned on the aspects stated hereinabove, we find that on all three counts it is unexceptionable. First and foremost, a delay of even one day would straightaway, without more, attract a penalty of an equivalent amount of duty, which may be in crores of rupees. It is clear that as has been held by this Court, penalty imposable under the aforesaid three Rules is inflexible and mandatory in nature. The High Court is, therefore, correct in saying that an assessee who pays the del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that he is exposed to a huge liability by way of penalty for reasons which may in given circumstances be beyond his control and/or for delay which may be minimal. The possibility of achieving the object of deterrence in such cases can be achieved by imposing a less drastic restraint. In point of fact when we contrast these provisions with Section 37 of the Act, it becomes clear how arbitrary and excessive they are. 37. Section 37(3) and 37(4) of the Central Excise Act reads as follows:- Section 37. Power of Central Government to make rules. - (3) In making rules under this section, the Central Government may provide that any person committing a breach of any rule shall, where no other penalty is provided by this Act, be liable to a penalty not exceeding five thousand rupees. (4) Notwithstanding anything contained in subsection (3), and without prejudice to the provisions of section 9, in making rules under this section, the Central Government may provide that if any anufacturer, producer or licensee of a warehouse - (a) removes any excisable goods in contravention of the provisions of any such rule, or (b) does not account for all such goods m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y penalty equivalent to the amount of duty on the ground that these provisions are violative of Article 14, 19(1)(g) and are ultra vires the Central Excise Act. 40. It now remains to deal with SLP(civil) No.22134 of 2000, (APS Associates v. Commissioner of Central Excise). In this SLP, the Punjab and Haryana High Court has passed a judgment on 20.5.2008 in which it construed Rule 3(2) of the Induction Furnace Annual Capacity Determination Rules, 1997. The said Rule is set out hereinbelow:- 3. The annual capacity of production referred to in Rule 2 shall be determined in the following manner, namely :- The Commissioner of Central Excise (hereinafter referred to as the Commissioner) shall call for an authenticated copy of the manufacturer s invoice or trader s invoice, who have supplied or installed the furnace or crucible to the induction furnace unit, and ascertain the total capacity of the furnaces installed in the factory on the basis of such invoice or document; (1) If the invoice or document referred to in sub rule (1) is not available for any reason with the manufacturer then the Commissioner shall ascertain the capacity of the furnaces installed in the ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctrical units, and therefore this could not be taken into account for the purpose of ascertaining the capacity of the furnaces installed in the induction furnace unit. We find that the Karnataka High Court Bhuwalka Steel Industries Ltd. v. Union Of India 2003(159) ELT 147 (Kar.), after quoting the aforesaid Rule, held as follows:- 11. Section 3-A of the Central Excise Act provides for a power to change the excise duty on the basis of capacity of production in respect of the notified goods. This has been introduced with a view to safeguard the interest of Revenue and to arrest evasion of duty. Sub-section (2) of Section 3-A provides for framing of Rules in the matter of determination of the annual capacity. It specifically provides for taking into consideration such factor or factors relevant for annual capacity of production of the factory in which goods are produced. Therefore, relevant factor like power factor is not alien for determination of annual production capacity in terms of Section 3-A of the Act. At this stage it is to be noticed that the formula provided in Rule 3 of the Induction Furnace Annual Capacity Determination Rules provides for three contingencies. The fir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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