TMI Blog2006 (8) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... Tariff Act, 1985 which were chargeable to duty up to 31-3-2000 in terms of Section 3A of the Central Excise Act, 1944 (in short, 'the Act') read with Notification No. 30/97-C.E.(N.T.), dated 1-8-1997. The assessee opted to pay duty on lump sum basis in terms of Rule 96ZO(3) of the Central Excise Rules, 1944 (in short, 'the Rules'). Monthly liability of the assessee was determined at Rs. 5 lacs, which was to be discharged into two instalments, first instalment by 15th of the month and second instalment by the last day of the month. During the month of December 1997, the assessee failed to discharge its liability. Show cause notice for recovery of Rs. 1,12.903/- with interest and penalty under Rule 96ZO(3) of the Rules was issued. After considering the defence of the assessee, the duty alongwith interest and penalty of Rs. 1,12,903/- was confirmed. The assessee preferred an appeal. The Commissioner (Appeals) reduced the penalty to Rs. 30,000/-. The Tribunal dismissed the appeal of the revenue following judgment of the Allahabad High Court in Pee Aar Steels (P) Ltd. v. Commissioner of Central Excise, Merrut, 2004 (170) E.L.T. 406, observing that imposition of penalty being discretion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he outstanding amount of duty along with interest thereon at the rate of eighteen per cent per annum, calculated for the period from the 16th day of such month or the 1st day of next month, as the case may be, till the date of actual payment of the outstanding amount; and (ii) a penalty equal to such outstanding amount of duty or five thousand rupees, whichever is greater : Provided that if the manufacturer fails to pay the total amount of duty payable for each of the months from September, 1997 to March, 1988 by the 30th day of April, 1998, he shall also be liable to pay a penalty equal to the outstanding amount of duty as on 30th day of April, 1998 or five thousand rupees, whichever is greater." 7. A bare perusal of the rule shows that the amount of compounded duty of Rs. 5,00,000/- per month determined under the Rules is to be paid into two equal instalments i.e. first instalment latest by 15th of the month and the second instalment latest by the last day of each month. Proviso of sub-rule (3) of Rule 96ZO provides that in case a manufacturer fails to pay the whole of the amount of the duty as required above, he shall also be liable to pay interest for the delayed p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was judicial function, where minimum sentence was not laid down (Dadu alias Tulsidas etc. v. State of Maharashtra, AIR 2000 SC 3203). (v) In a given case, minimum sentence could be held to be arbitrary and violative of Article 21 of the Constitution. (Mithu v. State of Punjab, AIR 1983 SC 473. Maneka Gandhi v. Union of India, AIR 1978 SC 597 and Sunil Batra v. Delhi Administration, AIR 1978 SC 1675). (vi) Reference was also made to judgments of Hon'ble the Supreme Court in Zunjarrao Bhikaji Nagarkar v. Union of India, 1999 (112) E.L.T. 772 and Sony India limited v. Commissioner of Central Excise, Delhi, 2004 (167) E.L.T. 385, wherein penalty equal to the duty was held to be minimum. (vii) Judgment of Hon'ble the Supreme Court in State of Madhya Pradesh v. Bharat Heavy Electricals, 1998 (99) E.L.T. 33 was distinguished which was based on concession and which laid down ten times penalty. Judgment of Gujarat High Court in Ambuja Synthetics Mills v. Union of India, 2004 (175) E.L.T. 85 was held to be distinguishable in its application to Section 11AC of the Act, the same having been rendered in the context of Rule 96ZQ(5) of the Rules. 10. Having regard to la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty requiring mens rea, which will also be arbitrary and against the principle of fairness. 13. It may also be noticed that though, normally, element of mens rea is mandatory requirement before penalty can be imposed but it is not always so required. Reference may be made to the provisions of Section 271(1)(a) of the Income tax Act, 1961, prior to amendment in the year 1988, wherein penalty was provided for failure to furnish return. Considering the question of requirement of mens rea, the Hon'ble Supreme Court in Gujarat Travancore Agency v. Commissioner of Income-tax, Kerala, 1989 (177) ITR 455 observed :- " In the case of a proceeding under Section 271(1)(a), however, it seems that the intention of the Legislature is to emphasise the fact of loss of revenue and to provide a remedy for such loss, although no doubt an element of coercion is present in the penalty. In this connection, the terms in which the penalty falls to be measured are significant. Unless there is something in the language of the statute indicating 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. In our opinion, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent with Article 14 of the Constitution, have been laid down. Referring to the principle of proportionality, it was held in Om Kumar and others v. Union of India, 2001 (2) SCC 386, Para 28 :- "28 ..Under the principle, the court will see that the legislature and the administrative authority "maintain a proper balance between the adverse effects which the legislation or the administrative order may have on the rights, liberties or interests of persons keeping in mind the purpose which they were intended to serve". The legislature and the administrative authority are, however, given an area of discretion or a range of choices but as to whether the choice made infringes the rights excessively or not is for the court. That is what is meant by proportionality." 18. In K.P. Royappa v. State of Tamil Nadu, (1974) 4 SCC 3, it was held that any action of administrative authority will be liable to be struck down if the same is arbitrary. Arbitrary action is described as one that is irrational and not based on sound reasons. 19. It is well-known that discretionary authority may be conferred without express guidelines. In such a situation, guideline is to be collected from the purpose fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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