TMI Blog2023 (4) TMI 761X X X X Extracts X X X X X X X X Extracts X X X X ..... ealer has concealed the particulars of any transaction or deliberately furnished inaccurate particulars of any transaction liable to tax. In the present case, it cannot be said that the dealer has concealed the particulars of any transaction or deliberately furnished inaccurate particulars of any transaction liable to tax. However, in so far as penalty leviable under subsection (6) of Section 45 of the Act, 1969 is concerned, the penalty leviable under the said provision is as such, a statutory penalty and there is no discretion vested with the Commissioner as to whether to levy the penalty leviable under subsection (6) of Section 45 of the Act, 1969 or not. Subsection (5) of Section 45 provides that in the case of a dealer where the amount of tax assessed for any period under sections 41 or 50 or reassessed for any period under Section 45 exceeds the amount of tax already paid by the dealer in respect of such period by more than 25% of the amount of tax so paid, the dealer shall be deemed to have failed to pay the tax to the extent of difference between amount so assessed or reassessed as aforesaid and the amount paid - Considering subsection (5) of Section 45 of the Act, 1969, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee dealer was under the bonafide belief that it was liable to pay the tax at the rate of 2%, is unsustainable. The impugned judgment and order passed by the High court is hereby quashed and set aside - Appeal allowed. - M. R. SHAH And B. V. NAGARATHNA , JJ. For the Appellant : Ms. Aastha Mehta, Adv.Ms. Deepanwita Priyanka, AOR For the Respondent : Mr. V. Lakshmikumaran, Adv. Ms. Charanya Lakshmikumaran, AOR Ms. Apeksha Mehta, Adv. Mr. Sahil Parghi, Adv. Ms. Neha Choudhary, Adv. Ms. Falguni Gupta, Adv. JUDGMENT M. R. SHAH, J. 1. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 04.08.2016 passed by the High Court of Gujarat at Ahmedabad in Tax Appeal No. 1283/2006, by which, the Division Bench of the High Court has set aside the penalty and interest levied under subsection (6) of Section 45 of the Gujarat Sales Tax Act, 1969 (hereinafter referred to as the Act, 1969), the State of Gujarat has preferred the present appeal. 2. The respondent company assessee is engaged in the business of executing indivisible works of undertaking contract of coal tar and enamel coating on pipes. The respondent assessee had opt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d fall under Entry1 requiring payment of tax at the rate of 2% only. Reliance was placed on the decision of the High Court in the case of Brooke Bond India Limited Vs. State of Gujarat; 1998 JX (Guj) 128 and it was prayed that the imposition of penalty and interest not be upheld. By the impugned judgment and order, the High Court has set aside the penalty and interest on the ground that the assessee was under the bonafide opinion and following the advice, paid the tax at 2% and that thereafter, when the enhanced tax as imposed has already been paid by the assessee, the penalty and interest is not required to be paid by the assessee. The High Court allowed the appeal to the aforesaid extent, deleting the penalty and interest levied under Section 45(6) and Section 47 (4A) of the Act, 1969. 2.2 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the High Court whereby the penalty and interest has been set aside, the State has preferred the present appeal. 3. Ms. Aastha Mehta, learned counsel has appeared with Ms. Deepanwita Priyanka, on behalf of the State. 3.1 Ms. Mehta learned counsel appearing on behalf of the State has vehemently submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leviable the adjudicating authority will have no discretion. 3.8 It is further submitted that the penalty leviable under subsection (6) of Section 45 of the Act, is a statutory penalty and legislature has consciously used the word shall and even for interest the same language is employed in Section 47(4A) of the Act. That the assessee is statutorily liable to pay the penalty and interest. That therefore, the High Court has committed a serious error in deleting the penalty and interest, mainly, on the ground that the amount of tax has already been paid by the assessee and that the assessee was under the bonafide belief that it was liable to pay the tax at rate of 2%. 3.9 It is further contended by Ms. Mehta, learned counsel appearing on behalf of the State that the nonpayment of penalty is met with consequences under Section 45 of the Act, 1969, and is recoverable as an arrear of land revenue. That it is wellsettled that when noncompliance or violation of a provision is met with a consequence, then, the language of the provision is deemed to be mandatory in nature. It is therefore submitted that the statutory penalty cannot be done away with. 3.10 It is submitted that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise Act. That the Parliament in its wisdom has specifically incorporated the element of mens rea in Section 11AC by employing the words, fraud, collusion or any wilful misrepresentation or any wilful misstatement or suppression of facts and intent to evade payment of duty . It is submitted that only when an intention is built into the provision and when the assessee s intention is made relevant by the Parliament, can the courts interpret and go into the issue as to whether or not the evasion was bonafide or malafide. No such language is employed in Section 45(6) and Section 47(4A) of the Act, 1969. That a similar decision of this Court relied upon on behalf of the assessee in the case of Commissioner of Central Excise, Chandigarh Vs. Pepsi Foods Ltd; (2011) 1 SCC 601 is misconceived and shall not be applicable to the facts of the case at hand since it interprets Section 11AC of Central Excise Act and the language of the provision at hand and that in Section 11AC is starkly opposite. 3.14 Ms. Mehta, learned counsel appearing on behalf of the State has further contended that even the reliance placed by the assessee upon the decision of the Gujarat High Court in the case of J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blameworthy conduct, deliberate violation, evil doing, fraud, suppression (either one or more of them) must be proved. (4) That section 45(6) of the Act, 1969 provides for imposition of penalty not exceeding one and onehalf times the differential tax. The provision provides for an upper limit for imposition of penalty; however, no minimum penalty is prescribed. This indicates that in appropriate cases where there is no mens rea, the authority has the discretion to impose no penalty. (5) That in case the claim of the dealer for payment of composition amount of 2% is rejected, the dealer could pay the tax on actual value of goods involved in the execution of a works contract. Even in such a scenario, the additional tax payable would be less than 25% and hence, the provision for penalty will not be attracted. (6) No interest is payable under Section 47(4A) of Gujarat Sales Tax Act, 1969. 4.2 Elaborating the above submissions, it is submitted that the levy of penalty under Section 45(6) of the Act would depend upon the liability of the dealer to pay tax. That accordingly, in case where there is a dispute regarding imposition of penalty under Section 45(6), it becomes neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lka Steel Industries Ltd. Vs. Union of India; (2017) 5 SCC 598. 4.8 It is next submitted that even otherwise Section 45(5) of the Act creates a presumption against the dealer and such presumption is rebuttable in nature. That the term burden of proof connotes the obligation to prove a fact or facts, by adducing the necessary evidence. It is submitted that any statutory provision by way of which penalty is imposed by tax authorities, the burden of proof to prove mens rea lies with revenue, however, a statute can shift the burden on the dealer in certain circumstances. That therefore, such presumption would be rebuttable in nature. 4.9 It is submitted that Section 45(5) provides a presumption that in case differential tax is more than 25%, the dealer shall be deemed to have failed to pay the tax. That the presumption contained in subsection (5) is not irrebuttable but rebuttable in nature. That this is specifically so because, subsection (6) of Section 45 grants discretionary power to the assessing officer to impose penalty. It is submitted that in case the presumption is rebutted by the dealer, the assessing officer will not impose penalty in exercise of its discretionary po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outset, it is required to be noted that the assessing officer levied the penalty and interest against the respondent assessee under the provisions of Section 45(6) and Section 47(4A) of the Act, 1969, which levy came to be confirmed by the learned Tribunal. However, by the impugned judgment and order, the High Court has set aside the levy of penalty and interest, mainly on the grounds that the tax imposed had already been paid and that the assessee was under a bonafide opinion as to its tax liability and was following expert advice and therefore, paid the tax at the rate of 2%. Therefore, according to the High Court, though not specifically mentioned/opined, there was no mens rea on the part of the respondent assessee in not paying the tax at the rate of 2% and in making the payment of the tax at 2%. Therefore, the short question which is posed for consideration of this Court is whether while imposing/levying penalty and interest leviable under Section 45(6) and Section 47(4A) of the Act, 1969, mens rea on the part of the assessee is required to be considered. 6.1 While appreciating the submissions made on behalf of the respective parties on the levy of the penalty and inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rupees. (5) Where in the case of a dealer the amount of tax (a) assessed for any period under section 41 or 50; or (b) reassessed for any period under section 44; exceeds the amount of tax already paid under subsection (1), (2) or (3) of section 47 by the dealer in respect of such period by more than twenty five per cent of the amount of tax so paid, the dealer shall be deemed to have failed to pay the tax to the extent of the difference between the amount so assessed or reassessed as aforesaid and the amount paid. (6) [Where under subsection (5) a dealer is deemed to have failed to pay the tax to the extent mentioned in the said subsection, there shall be levied on such dealer a penalty not exceeding one and onehalf times the difference referred to in subsection (5).] XXX XXX XXX 47. Payment of Tax and Deferred Payment of Tax, etc. (4A) (a) Where a dealer does not pay the amount of tax within the time prescribed for its payment under subsection (1), (2) or (3), then there shall be paid by such dealer for the period commencing on the date of expiry of the aforesaid prescribed time and ending on the date of payment of the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (5). Under the circumstances, to the aforesaid extent and on the difference of tax, as per subsection (5) of Section 45, the respondent assessee dealer shall be liable to pay the penalty as mentioned under subsection (6) of Section 45. 6.3 Section 45 confers power to levy/impose penalty in certain cases. In certain cases, enumerated in Section 45 of the Act, the penalty imposable is distinct with the assessment such as Section 45(1)(a)(b). However, in so far as penalty imposable under Section 45(5) and 45(6) of the Act is concerned, it has a direct bearing or connection with the order of assessment and the determination of the tax liability. Subsection (5) of Section 45 provides that where in the case of a dealer the amount of tax assessed for any period under Section 41 or 50; or reassessed for any period under Section 44; exceeds the amount of tax already paid by the dealer under subsection (1), (2) or (3) of Section 47 of the Act, in respect of such period by more than 25% of the amount of tax so paid, the dealer shall be deemed to have failed to pay the tax to the extent of the difference between the amount so assessed or reassessed as aforesaid and the amount paid. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this Court in the case of Shriram Mutual Fund (supra), it is observed and held that when the term used shall be leviable, the adjudicating authority will have no discretion. 6.6 In the case of Shriram Mutual Fund (supra) while dealing and/or considering similar provision under the SEBI Act, it is observed and held that mens rea is not an essential ingredient for contravention of the provisions of a civil Act. While interpreting the similar provision of SEBI Act, it is observed that the penalty is attracted as soon as contravention of the statutory obligations as contemplated by the Act is established and, therefore, the intention of the parties committing such violation becomes immaterial. In the case before this Court, the Tribunal relied on the judgment in the case of Hindustan Steel Ltd. (supra). However, this Court did not agree with the view taken by the Tribunal relying upon the decision in the case of Hindustan Steel Ltd. (supra) by observing that it pertained to criminal/quasi criminal proceedings. This Court observed that the decision in the case of Hindustan Steel Ltd. (supra) shall not have any application as the same relates to imposition of civil liabilities u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te in conformity with the common law. However, if it is plain from the statute that it intends to alter the course of the common law, then that plain meaning should be accepted. Existence of mens rea is an essential ingredient in every offence; but that presumption is liable to be displaced either by the words of the statute creating the offence or by the subjectmatter with which it deals. A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is different from the penalty for a crime. That thereafter, after following the decision in the case of Shriram Mutual Fund (supra), this Court observed and held that mens rea is not an essential ingredient for contravention of the provisions of a civil act. It is further observed that the breach of a civil obligation which attracts penalty under the Act would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention. In paragraph 30, it is observed and held as under: 30. In Chairman, SEBI v. Shriram Mutual Fund [(2006) 5 SCC 361] this Court found on facts that a mutual fund had violated the SEB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntentional breach as an essential element for levy of penalty. Section 43A of the Act does not use the expression the failure has to be wilful or mala fide for the purpose of imposition of penalty. The breach of the provision is punishable and considering the nature of the breach, it is open to impose the penalty. 36. In SEBI v. Shriram Mutual Fund [SEBI v. Shriram Mutual Fund, (2006) 5 SCC 361] , with respect to imposition of penalty on failure to comply with the civil obligation this Court has laid down thus: (SCC pp. 371 376, paras 29 35) 29. In our opinion, mens rea is not an essential ingredient for contravention of the provisions of a civil Act. In our view, the penalty is attracted as soon as the contravention of the statutory obligations as contemplated by the Act is established and, therefore, the intention of the parties committing such violation becomes immaterial. In other words, the breach of a civil obligation which attracts penalty under the provisions of an Act would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not. This apart [that] unless the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax assessed. It provides that if the difference of tax paid and tax leviable/assessed is more than twentyfive percent, in that case, the dealer shall be deemed to have failed to pay the tax to the extent of the difference between the amount so assessed/reassessed and the amount paid and, in that case, there shall be levied on such dealer a penalty not extending one and onehalf times the difference as per subsection (5). Therefore, there being difference of more than twenty five percent, penalty to the aforesaid extent shall be leviable. This is a clear case of false and wrong claim of exemption, as the exempted goods were transferred to a third person and used in an ineligible industry. This is a case of deliberate violation and evil doing. 23.1 In the present case, as the difference between total tax paid and the purchase tax is more than twentyfive percent, the respondent is deemed to have failed to pay the tax as per subsection (5) of Section 45 and, therefore, liable to pay the penalty not exceeding one and onehalf times. The words used in subsection (6) of Section 45 is there shall be levied on such dealer a penalty not exceeding one and onehalf times the difference . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47 of the Act, 1969 and the language used therein. 6.13 In so far as the decisions relied upon by the learned counsel appearing on behalf of the respondent assessee dealer, referred to hereinabove, are concerned, none of the decisions shall be applicable to the facts of the case at hand, while dealing with Section 45 and Section 47 of the Act, 1969. The words/language of the relevant provisions that fell for consideration in the decisions relied upon on behalf of the respondent is altogether different from the language used in Section 45 and Section 47 of the Act, 1969. In the case of Dharamendra Textile Processors (supra), this Court was considering Section 11AC of the Central Excise Act. In Section 11AC, the words used are fraud, collusion or any wilful misrepresentation or any wilful misstatement or suppression of facts and intent to evade payment of duty. In that view of the matter, the mens rea will play an important role. Therefore, the said decision shall not be applicable while considering Section 45 and Section 47 of the Act, 1969. A similar decision in the case of Pepsi Foods Ltd (supra) also shall not be applicable and/or of any assistance to the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l specifically found that there was nothing on record to prove that there was in fact a bonafide belief of the respondent herein, that it would be required to pay tax at 2% only. As observed hereinabove and on plain reading of Section 45 and Section 47 of the Act, 1969 and as observed hereinabove, on the eventualities occurring under subsection (5) of Section 45, there shall be levied penalty mentioned in subsection (6) of Section 45 and the liability to pay the interest is incurred as mentioned in Section 47(4A). The impugned judgment and order passed by the High Court on the grounds that the amount of tax has already been paid by the assessee dealer; that the assessee dealer was under the bonafide belief that it was liable to pay the tax at the rate of 2%, is unsustainable. None of the aforesaid grounds would justify deletion of the penalty and interest leviable/payable under Section 45(6) and Section 47(4A) of the Act, 1969. As observed hereinabove, in the case of Shriram Mutual Fund (supra), this Court distinguished the decision in the case of Hindustan Steel Ltd. (supra) and even set aside the order passed by the Tribunal which was relying upon the decision in case of Hind ..... X X X X Extracts X X X X X X X X Extracts X X X X
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