Madhya Pradesh High Court
Smt. Kusum Lamba vs The Commissioner on 12 March, 2018
Author: Sanjay Yadav
Bench: Sanjay Yadav
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M.A.C.E. No.7/2007
HIGH COURT OF MADHYA PRADESH :
BENCH AT GWALIOR
M.A.C.E. No.7/2007
Smt. Kusum Lamba ...APPELLANT
Versus
The Commissioner, Central Excise Indore ...RESPONDENT
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CORAM :
Hon'ble Shri Justice Sanjay Yadav
Hon'ble Shri Justice Ashok Kumar Joshi
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Shri Yogesh Chaturvedi, learned counsel for the appellant.
Shri Praveen Surange, learned counsel for the respondent.
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Whether approved for reporting :
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ORDER
(15/03/2018) Per Sanjay Yadav, J.
(1) The substantial question of law which arises for consideration is:-
"Whether Section 11AC of the Central Excise Act is prospective; if so, whether the matter should be remitted to the Tribunal for applying the judgment of the Apex Court in Union of India Vs. Dharmendra :: 2 ::M.A.C.E. No.7/2007
Textile Processors and ors, reported in 2008 (13) SCALE, 233 to the facts of the present case ?"
(2) Evidently, on 10/02/1999 notice was issued to the appellant- assessee under Section 11AC of the Central Excise Act, 1944 in respect of assessment period from 01/04/1994 to 16/01/1997 to show cause as to why for the non-disclosure to the department that they are manufacturing Brake drums and Hubs fully machined and with other brand name with an intention to avail benefit of SSI exemption which otherwise would not have been admissible to them as with effect from 01.04.1997 vide Notification No.59/94-CE SSI exemption was not available on the goods which have been manufactured with other person brand name; therefore extended period of five years under proviso to Section 11-A (i) of the Central Excise Act, 1944 are invokable to recover the duty and why:
"(i) Central Excise duty of Rs.4,19,870/- not paid by the noticee on the clearance of finished goods of others brand name should not be demanded and recovered from them under rule 9(2) of the Central Excise Rules 1944 read with proviso to Section 11-A(1) of the Central Excise Act 1944.
(ii) A penalty should not be imposed upon them under Section 11-AC of the Central Excise Act 1944 read with rule 173-Q of the Rules.
(iii) interest on duty confirmed for payment shall not be recovered from them under section 11-AB of C. Ex.
Act, 1944.
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M.A.C.E. No.7/2007
(iv) Land building plant machinery materials, conveyance or any other thing used in connection with the manufacture, production storage removal or disposal of such goods or any other excisable goods on such land, building or produced or manufactured with such plant, machinery, materials or things should not be confiscated under rule 173Q(2) of the C.Ex.Rules 1944."
(3) The question is whether the said proceeding was maintainable in view of the fact that the provisions of Section 11AC inserted with effect from 28/09/1996 could have been involved as to the period from 01/04/1994 to 16/01/1997.
(4) The said Section 11AC of Central Excise Act envisaged:
"[11AC. Penalty for short-levy or non-levy of duty in certain cases.--
Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) of section 11A, shall also be liable to pay a penalty equal to the duty so determined:
[Provided that where such duty as determined under sub-section (2) of section 11A, and the interest payable thereon under section 11AB, is paid within :: 4 ::M.A.C.E. No.7/2007
thirty days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent of the duty so determined:
Provided further that the benefit of reduced penalty under the first proviso shall be available if the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso:
Provided also that where the duty determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the Court, then, for the purposes of this section, the duty, as reduced or increased, as the case may be, shall be taken into account:
Provided also that in case where the duty determined to be payable is increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the Court, then, the benefit of reduced penalty under the first proviso shall be available, if the amount of duty so increased, the interest payable thereon and twenty-five per cent of the consequential increase of penalty have also been paid within thirty days of the communication of the order by which such increase in the duty takes effect.
Explanation.--For the removal of doubts, it is hereby declared that--
(1) the provisions of this section shall also apply to cases in which the order determining the duty :: 5 ::M.A.C.E. No.7/2007
under sub-section (2) of section 11A relates to notices issued prior to the date on which the Finance Bill, 2000 receives the assent of the President;
(2) any amount paid to the credit of the Central Government prior to the date of communication of the order referred to in the first proviso or the fourth proviso shall be adjusted against the total amount due from such person.]"
(5) True it is , as held in Commissioner of Central Excise, Coimbatore Vs. ELGI Equipments Ltd., (2001) 9 SCC 601 and in Commissioner of C.Ex., Mumbai-I Vs. Lal Mininig Engg. Works, 2007 (215) E.L.T. 167 (S.C.) that Section 11AC of the Act being a penal provision providing for a mandatory penalty will be prospective in operation.
(6) However, the question in the present case is that when the period of non-disclosure includes the period when Section 11AC of the Act is in operation. The contention that in the present case as the notice period is 01/04/1994 to 16/01/1997, the provisions of Section 11AC of the Act cannot be invoked as the same would tantamount to retrospective effect of the provisions. In our considered opinion, it is not a correct interpretation. In respect of discovery of the fact on misrepresentation to evade the duty, it is the law which is prevalent on the date when such an act is discovered would be applicable. The contentions when examined in the context of the present fact situation wherein the period :: 6 ::M.A.C.E. No.7/2007
includes the period when section 11AC of the Act come into existence, deserves to be rejected. In this context, reference can be had of the decision in Brij Mohan vs. Commissioner of Income Tax, New Delhi, AIR 1979 SC 1897 wherein it is held:
"8. The case of the assessee is that an assessment proceeding for the determination of the total income and the computation of the tax liability must ordinarily be made on the basis of the law prevailing during the assessment year, and inasmuch as concealment of income is concerned with the income relevant for assessment during the assessment year any penalty imposed in respect of concealment of such income must also be governed by the law pertaining to that assessment year. We are unable to accept the contention. In our opinion, the assessment of the total income and the computation of tax liability is a proceeding which for that purpose, is governed by entirely different considerations from a proceeding for penalty imposed for concealment of income. And this is so notwithstanding that the income concealed is the income assessed to tax. In the case of the assessment of income and the determination of the consequent tax liability, the relevant law is the law which rules during the assessment year in respect of which the total income is assessed and the tax liability determined. The rate of tax is determined by the relevant Finance Act. In the case of a penalty, however, we must remember that a penalty is imposed on account of the commission of a wrongful act, and :: 7 ::M.A.C.E. No.7/2007
plainly it is the law operating on the date on which the wrongful act is committed which determines the penalty. Where penalty is imposed for concealment of particulars of income, it is the law ruling on the date when the act of concealment takes place which is relevant. It is wholly immaterial that the income concealed was to be assessed in relation to an assessment year in the past."
(7) In our considered opinion, a default, which is a continuing default and not a default once for all, can be dealt with under the provision of new enactment, if it continues when the new enactment came into force, although it commenced when the old enactment was in force.
(8) In Smt. Maya Rani Punj Vs. Commissioner of Income Tax, Delhi, (1986) 1 SCC 445, it is held by Their Lordships:
"17. In 'Words & Phrases', Permanent Edition, under the head 'Continuing Offence', instances have been given which indicate that as long as the default continues the offence is deemed to repeat and, therefore, it is taken as a continuing offence. As has been appropriately indicated in Corpus Juris Secundum, Vol. 85, p. 1027, accrual of penalty depends upon the terms of the statute imposing it and in view of the language used in section 271(1)(a) of the 1961 Act, the position is beyond dispute that the Legislature intended to deem the non-filing of the return to be a continuing default - the wrong for which penalty is to be visited, commences from the date of default and continues :: 8 ::M.A.C.E. No.7/2007
month after month until compliance is made and the default comes to an end. The rule of de die in diem is applicable not on daily but on monthly basis.
19. The imposition of penalty not confined to the first default but with reference to the continued default is obviously on the footing that non-compliance with the obligation of making a return is an infraction as long as the default continued. Without sanction of law no penalty is imposable with reference to the defaulting conduct. The position that penalty is imposable not only for the first default but as long as the default continues and such penalty is to be calculated as a prescribed rate on monthly basis is indicative of the legislative intention in unmistakable terms that as long as the assessee does not comply with the requirements of law he continues to be guilty of the infraction and exposes himself to the penalty provided by law.
20. There are several statutory provisions where such default is stipulated to be visited with daily penalty. For instance, see Ajit Kumar Sarkar, v. Assistant Registrar of Companies, West Bengal 1979 Tax Law Reports 2001, where the Calcutta High Court dealing with the provisions of section 159 and 162 of the Companies Act of 1956, held the liability to be a continuous one; United Savings and Finance Co. Pvt. Ltd. & Anr. v. The Deputy Chief Officer, Reserve Bank of India, 1980 Crl.L.J. 607, where referring to section 58B(2) of the Reserve Bank of India Act it was held that refusal to comply with the terms of the said section created an offence and continued to be an offence so long as such failure or :: 9 ::M.A.C.E. No.7/2007
refusal persisted; Oriental Bank of Commerce Anr. v. Delhi Development Authority & Ors., 1982 Crl.L.J. 2230 (Del HC), where referring to the provisions of the Delhi Development Act of 1957, the Court held that the offence was a continuous one. In G.D. Bhattar & Ors. v. The State, A.I.R. 1957 Cal. 483, it was pointed out that a continuing offence or a continuing wrong is after all a continuing breach of the duty which itself is continuing. If a duty continues from day to day, the non- performance of that duty from day to day is a continuing wrong. We are of the view that the legislative scheme under section 271(1)(a) of the 1961 Act in making provision for a penalty conterminus with the default to be raised provides for a situation of continuing wrong.
(9) In view whereof, the substantial question as to whether Section 11AC of the Central Excise Act is prospective; if so, whether the matter should be remitted to the Tribunal for applying the judgment of the Apex Court in Union of India Vs. Dharmendra Textile Processors and ors, reported in 2008 (13) SCALE, 233 to the facts of the present case, is answered in negative.
(10) Appeal fails and is dismissed. No costs.
(Sanjay Yadav) (Ashok Kumar Joshi)
Judge Judge
Pawar/-
Digitally signed by ASHISH PAWAR
Date: 2018.03.19 14:52:45 +05'30'