2003 (11) TMI 75 - SC - Central Excise

Whether it is permissible to resort to penalty proceedings or forfeiture of goods for non-payment of additional duty in terms of the Additional Duties of Excise (Goods of Special Importance) Act , 1957 by taking recourse to the provisions of the Central Excise Act and Rules framed thereunder? Held that - The Parliament by reason of the Amending Act 32 of 1994 consciously brought in the expression offences and penalties' in sub-section (3) of Section 3 of the Act. The mischief rule, if applied, would clearly show that such amendment was brought with a view to remedy the defect contained in the unamended provisions of sub-section (3) of Section 3 of the Act. Offences having regard to the provisions contained in Article 20 of the Constitution of India cannot be given a retrospective effect. In that view of the matter too sub-section (3) of Section 3 of the Act as amended cannot be said to have any application at all. The confiscation proceedings taken against the respondents and the penalty imposed upon them were totally without the authority of law and were rightly set aside by the Tribunal. Appeal dismissed.

Issues Involved:
1. Jurisdiction of authorities under the Central Excise Act.
2. Applicability of penalty proceedings or forfeiture of goods for non-payment of additional duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957.
3. Interpretation of Section 3(3) of the Additional Duties of Excise Act.
4. Application of amended provisions of Section 3(3) of the Additional Duties of Excise Act.
5. Validity of confiscation proceedings and penalties imposed.

Detailed Analysis:

1. Jurisdiction of Authorities under the Central Excise Act:
The core issue was whether authorities under the Central Excise Act could resort to penalty proceedings or forfeiture of goods for non-payment of additional duty as per the Additional Duties of Excise Act, 1957. The respondents, engaged in manufacturing man-made fabrics, were accused of misdisclosing fabric composition and undervaluing goods. The Collector confirmed the duty levy and imposed penalties, which the Tribunal later overturned, citing the inapplicability of Central Excise Act provisions to breaches under the Additional Duties of Excise Act.

2. Applicability of Penalty Proceedings or Forfeiture of Goods:
The Tribunal's decision, based on the Pioneer Silk Mills Pvt. Ltd. case, concluded that Central Excise Act provisions regarding confiscation could not apply to breaches under the Additional Duties of Excise Act. The appellant contested this, arguing that the Tribunal's reliance was erroneous and contrary to precedents set by M/s. Khemka & Co. (Agencies) Pvt. Ltd. and Commissioner of Central Excise v. Ashok Fashion Ltd.

3. Interpretation of Section 3(3) of the Additional Duties of Excise Act:
Section 3(3) of the Additional Duties of Excise Act was scrutinized. The original text did not explicitly make breaches penal or provide for confiscation. It only allowed procedural application of the Central Excise Act. The Court highlighted that imposing penalties or additional taxes requires clear legal authority, as mandated by Article 265 of the Constitution. Since the Act did not create a liability for penalties, the confiscation proceedings were deemed unauthorized.

4. Application of Amended Provisions of Section 3(3):
The 1994 amendment to Section 3(3) included "offences and penalties" within its scope. However, since the cause of action arose in 1987, the amendment did not apply. The Gujarat High Court's decision in Ashok Fashion Ltd. was criticized for misapplying the amended provisions to a pre-amendment case. The Court reaffirmed that penalties and confiscation under the unamended Act were not legally supported.

5. Validity of Confiscation Proceedings and Penalties Imposed:
The Court reiterated the principles from M/s. Khemka & Co. (Agencies) Pvt. Ltd., emphasizing that penalties are distinct from tax assessments and require explicit legislative authority. The Tribunal's decision to set aside the confiscation and penalties was upheld, as the original Act did not authorize such actions. The Court also noted that expropriatory and penal statutes must be strictly construed, and retrospective application of penal provisions is constitutionally barred.

Conclusion:
The Supreme Court dismissed the appeals, affirming that the confiscation proceedings and penalties imposed on the respondents were without legal authority. The Tribunal's decision to annul these actions was correct, as the Additional Duties of Excise Act, prior to its amendment, did not provide for penalties or confiscation for breaches.

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