TMI Blog2023 (12) TMI 607X X X X Extracts X X X X X X X X Extracts X X X X ..... It is opined that the order of 26 September 2016 cannot possibly be interpreted or understood as confining the challenge of the appellant to the issue of proportionality alone. There are other sub-sections of Section 86 which embody the principles of a statutory penalty. For instance, sub-section (5) deals with the contingency of an assessee failing to comply with Section 21(1). The aforesaid provision obliges a registered dealer to apprise the Commissioner of circumstances which may warrant amendments in its registration. A similar example of a statutory penalty stands embodied in sub-section (6) and which authorises the levy of a penalty in case a dealer violates Section 22(2). An assessee becomes liable to be penalized under Section 86(9) consequent to a failure to furnish a return or failing to append requisite documents with a return or its refusal to comply with a direction to revise a return. As would be manifest from a close scrutiny of sub-sections (5), (6) and (9) of Section 86, those provisions envisage the levy of penalties consequent to a failure on the part of a registered dealer to discharge certain obligations or a failure on the part of an assessee to comply wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the order dated 06 December 2022 passed by the Delhi Value Added Tax, Appellate Tribunal [Tribunal] affirming the imposition of penalty upon the appellant. The appellant questions the aforesaid order asserting that the Tribunal has not only misconstrued the earlier orders of remit as framed by this Court, it has also proceeded in complete ignorance of the ambit of the penalty provision, namely, Section 86 of the Delhi Value Added Tax Act, 2004 [Act] . 2. According to the appellant, the Tribunal has not only misinterpreted the provisions of Section 86 of the Act, as mandating the imposition of a penalty, it has also clearly erred in failing to bear in mind that sub-sections (10), (14) (15) of Section 86 were not attracted in the facts of the present case. According to the appellant, in the absence of it having submitted a false, misleading or deceptive return or having submitted one with particulars which could be said to fall within the meaning of the expressions false , misleading or deceptive , the penalty itself was wholly unjustified. However, and before proceeding further we deem it appropriate to notice the following salient facts. 3. The dispute e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act that the leviability itself was debatable as is evident from the judgment in Citi Bank (supra), and in the absence of clarity, imposition of 200% penalty was not justified and is disproportionate. This court is of the view that imposition of 200% penalty is facially disproportionate. It needs to be recollected that whether sale of repossessed cars in the light of Section 8 of Banking Regulation Act is subject to VAT levy was a question of law framed by this court and answered in Citi Bank (supra). 3. In these circumstances, it could not be said that the point was not debatable; undoubtedly it was. The levy of 200% penalty, therefore, is not sustainable; this court, at the same time, opines that it would not be appropriate to act as an adjudicating authority as to the proportionateness of the penalty to be imposed having regard to the fact that the issue was debatable. The matter is accordingly remitted to the Tribunal on the limited question of extent of penalty to be properly levied under these circumstances. 5. It becomes relevant to note that while framing the aforesaid order of remand, the Division Bench had pertinently observed that the imposition of 200% pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion of law- was framed and answered by the Hon'ble High Court in Citi Bank vs. Commissioner of Sales Tax, decided in March 2016 (reported in 2016 (1) AD (DEL) 581). Having so observed, Hon'ble High Court deemed it appropriate to remit the matter to the Appellate Tribunal for the first time, on the following limited question :- In view of the above and clear observations made by the Hon'ble High Court in the previous remand order, coupled with the second remand order, subject matter or scope of these appeals, on remand, is the limited question of extent of penalty to be properly levied. As regards the submission made on behalf of the appellant before this Appellate Tribunal, while arguing the appeals challenging the penalty, it may be mentioned that Shri Shammi Kapoor, learned counsel then representing the appellant before this Appellate Tribunal, submitted as under: Ld. Counsel for the appellant has submitted that the impugned order passed by the Ld. OHA is disproportionate in the given circumstances, and as such the impugned order deserves to be modified. Therefore, learned counsel for the Revenue has rightly submitted that Shri Sham ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment basis for selling to its wholesale and retail customers. The wholesale consignment imports are on a back to back basis and are priced to the customer based on the price quoted by the supplier. The Bank earns a fee on the wholesale bullion transactions. The fee was classified under commission income. The bank consolidates the sales and prices the bullion with the supplier. The gain or sale is classified under commission income . The bank also borrows and lends gold which is cheated as borrowing or as lending respectively with the interest paid/received classified as interest expense/income. Further, the bank had not declared any income from sales of Gold in the schedules to the accounts declared in the Annual Report. It had shown the income from commission/exchange brokerage under schedule-14 (meant for other income). It required proper examination of all the transactions made on above accounts to know as to whether the tax has properly been charged/paid by the bank for the transactions covered under income from commission /exchange brokerage under schedule-14 (meant for other income) as per the definition of sale? 4. Section 48 of DVAT Act, 2004 read with rule 42 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DVAT Act as also penalty u/s 86 read with sec 33. 2. The Auditee has got work done for his business affairs but he has not deducted TDS as per section 36 of DVAT Act on an admitted paid amount on execution of total contract work of Rs. 8,06,87,702/-. This amount is admitted liability where the auditee is liable to pay the deductible tax with interest u/s 42 of DVAT Act as also penalty under different sub sections 36A of DVAT Act. This clearly demonstrates that the books of accounts of the dealer are not reliable and the dealer was intentionally filing false deceptive returns which has made the dealer liable to pay the tax with interest u/s 42 of DVAT Act as also penalty u/s 86 read with section 33. The comments from the dealer bank were also sought on the report furnished by the auditors appointed by the Commissioner and the dealer has stated that:- 1- The bank has been issued a license by the Reserve Bank of India under sec 22 of the banking regulation Act, 1949 to carry out its activities of banking. On going through the object clauses of the bank as given in its Memorandum of Association, the bank is into the business of borrowing and lending money and su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d objections over the conduct of audit and therefore, clarifications from the auditors were also sought on the dealer comments/contentions to have a fair idea of the process adopted for audit and the auditors had clarified that the audit been conducted after giving sufficient time and opportunities to the dealer to produce the records and other documents etc. in support of his contention and every documents/judgment cited by the dealer has been considered and taken on record though the dealer has not furnished complete required records/document. Further the dealer has failed to prove how he is a facilitator. After examining each and every issue in detail and applying the provisions of the DVAT Act, I am of the considered view that the returns filed by the dealer are incomplete, false and incorrect which attract penalty u/s 86 (10) of DVAT Act. The dealer has not paid due tax by reasons of concealment and has also failed to disclose fully material particulars of sales by not including the turnover of repossessed vehicle/ fixed assets in the returns filed in Form DVAT- 16. Further due to the reasons stated above, there is a tax deficiency which attract penalty u/s 86 (12) of D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in proceeding on the assumption that it was obliged to consider the issue solely on the anvil of proportionality. It was the submission of learned counsel that this Court had in unambiguous terms noted that the position with respect to taxability of revenues generated from the sale of repossessed vehicles was in a state of flux till the issue ultimately came to be laid to rest by the Court in terms of its judgment in Citi Bank. It was contended on behalf of the appellant that the aforesaid question however has still not been conclusively settled bearing in mind the pendency of the appeal of the appellant itself before the Supreme Court and on which an interim order operates. 11. Quite apart from the above, learned counsel submitted that the first order of remand as framed by this Court would itself indicate that that it had found the levy of penalty to be wholly unjustified bearing in mind the indubitable fact that the issue of the present transactions being subject to tax was itself one which was not free from doubt and had remained unsettled till this Court came to pronounce judgment in Citi Bank. According to learned counsel, the order of 26 September 2016 thus cannot possi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ptive disclosure. In view of the aforesaid, learned counsel would contend that the conclusions as recorded by the Tribunal and set out in paragraph 22 of the impugned order are wholly unsustainable. Paragraph 22 is extracted hereinbelow: 22. In view of the above provisions, learned Counsel for the Revenue has rightly contended that levy of penalty under Rajasthan VAT Act was discretionary and not mandatory. He has also rightly contended that levy of penalty as provided under Section 86(10) (15) of DVAT Act is mandatory and not discretionary and that the provisions of Rajasthan VAT Act are not in para materia with the provisions of DVAT Act. 15. Appearing for the respondents, Mr. Aggarwal learned counsel addressed the following submissions. According to Mr. Aggarwal, the terms of the order of remit as framed by this Court upon the earlier appeals would clearly indicate that the Tribunal was only obliged to evaluate whether the penalty as imposed could be said to be disproportionate. According to Mr. Aggarwal, this is evident not just from a reading of the first order of remand, but also from the order dated 31 May 2022, when the appeals were again disposed of and the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 under the SEBI Act and the Regulations and the proceedings under the said Act are not criminal/quasi-criminal proceedings. In paragraphs 34 and 35, it is observed and held as under: 34. The Tribunal has erroneously relied on the judgment in Hindustan Steel Ltd. v. State of Orissa [(1969) 2 SCC 627 : AIR 1970 SC 253] wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creating the offence or by the subject matter 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 SEBI (Mutual Funds) Regulations, 1996. Under the said Regulations there was a restriction placed on the mutual fund on purchasing or selling shares through any broker associated with the sponsor of the mutual fund beyond a specified limit. It is in this context that the Division Bench of this Court held that mens rea was not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 language of the statute indicates the need to establish the element of mens rea, it is generally sufficient to prove that a default in complying with the statute has occurred. the penalty has to follow and only the quantum of penalty is discretionary. 35. In our considered opinion, a penalty is attracted as soon as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns as well as some of the submissions that were addressed in that context. We thus additionally reproduce paragraphs 4.10, 6 6.1 of the report hereinbelow: 4.10 As regards the other preposition that for the purpose of imposition of penalty under Section 45(6), mens rea, etc., must be proved, it is vehemently submitted that it is a general principle of law, based on the maxim of actus non facit reum mens sit rea that an act does not make a man guilty, unless it can also be shown that he was aware that he was doing wrong. It is submitted that legislative attitude towards the concept of mens rea in tax laws and the judicial practice in emphasising its importance therefore, deserves careful consideration. Learned counsel appearing on behalf of the respondent assessee has also relied upon the decision of this Court in the cases of Hindustan Steel Ltd. (supra); Cement Marketing Co. of India Ltd. Vs. Assistant Commissioner of Sales Tax, Indore and Ors.; 1980 (6) ELT 295 (S.C.) and Commissioner of Central Excise, Chandigarh (supra) in support of his above submissions to the effect that before levy of penalty and interest mens rea has to be proved by the department. xxxx xx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion liable to tax, the Commissioner may impose upon the dealer by way of penalty, in addition to any tax assessed under section 41 or reassessed under section 44 or revised under section 67 a sum not exceeding one and one-half times the amount of the tax. (3) If a dealer fails to present his licence, recognition or as the case may be, permit for cancellation as required by section 35 or 36, the Commissioner may impose upon the dealer by way of penalty, a sum not exceeding two thousand rupees. (3A) If a dealer fails to furnish any declaration or any return by the prescribed date as required under subsection (1) of section 40, the commissioner shall impose upon such dealer by way of penalty for each declaration or return, a sum of two hundred rupees for every month or part of a month comprised in the period commencing from the day immediately after the expiry of prescribed date and ending on the date on which a declaration or return is furnished. (4) If a dealer fails without sufficient cause to furnish any declaration or any return [as required by proviso to sub-section (1) or sub section (2) of section 40], the Commissioner may impose upon the dealer by wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided the aforesaid question finally by way of Citi Bank. However, we cannot lose sight of the fact that the appeal of the present appellant and which questions the correctness of the view expressed therein is itself presently engaging the attention of the Supreme Court and on which an interim order is said to operate. While it was feebly argued by the respondents that the decision in Citi Bank was itself based on earlier judgments rendered on the question, we are of the considered opinion that the same clearly lacks merit since the Court had inter-partes itself noted that the question of levy of tax on sale of reprocessed vehicles was clearly debatable till the issue came to be ruled upon in Citi Bank. There thus undoubtedly appears to have been a situation of a flux which operated upon the field till the issue came to be ultimately decided in terms of the judgment pronounced in Citi Bank. 19. Having sketched out the backdrop in which the issues raised in this appeal are liable to be answered, we firstly take up for consideration the correctness of the view as expressed by the Tribunal and which had understood our earlier orders as confining the debate to the question of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nabove, sub-sections (10), (14) (15) embody the principles of mens rea when they speak of false, misleading or deceptive conduct of an assessee. It would thus be wholly incorrect to construe those provisions as being representative of penalties statutorily leviable. 23. We note that there are other sub-sections of Section 86 which embody the principles of a statutory penalty. For instance, sub-section (5) deals with the contingency of an assessee failing to comply with Section 21(1). The aforesaid provision obliges a registered dealer to apprise the Commissioner of circumstances which may warrant amendments in its registration. A similar example of a statutory penalty stands embodied in sub-section (6) and which authorises the levy of a penalty in case a dealer violates Section 22(2). An assessee becomes liable to be penalized under Section 86(9) consequent to a failure to furnish a return or failing to append requisite documents with a return or its refusal to comply with a direction to revise a return. As would be manifest from a close scrutiny of sub-sections (5), (6) and (9) of Section 86, those provisions envisage the levy of penalties consequent to a failure on the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atutory penalties. 26. The penalty under Section 45(6) of the said statute which formed the subject matter of consideration became automatically leviable upon a failure of the assessee to pay the amount of tax as assessed or re-assessed. Similarly, section 47(4A) of the 1969 Act provisioned for the levy of a penalty in a situation where a dealer failed to pay tax within the time prescribed. Those provisions thus contemplated the levy of a penalty and the assessee becoming liable to face penal action in case of an admitted failure to adhere with statutory obligations. The penalty contemplated under Section 45(6) and 47(4A) of the 1969 Act thus did not rest on a discretion which may otherwise have been vested in the authority concerned. It was in the context of the aforenoted two statutory provisions that the observations of the Supreme Court in Saw Pipes Ltd. are liable to be appreciated. 27. Reverting then to the facts of our case, we find that Sections 86(10), (14) (15) of the Act cannot by any stretch of imagination be construed or viewed as provisions pari materia to Sections 45(6) and 47(4A) of the 1969 Act, which formed the bedrock for the ultimate decision rendered by ..... 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