9911796707
TMI Blog2004 (8) TMI 675X X X X Extracts X X X X X X X X Extracts X X X X ..... bed time for the assessment year 1993-94, the assessing authority in his proposition notice issued under section 12B(3) of the Act dated August 26, 1995 had proposed to levy penalty under section 12B(3) of the Act, 1957. In the notice, it was informed to the petitioner as under: M/s. H. Dasappa and Son's Private Limited., Peenya Industrial Area, Bangalore, have filed monthly statement of turnover in form 3 admitting taxable turnover and paid tax through cheques. The cheques for all the months when presented to the bank were returned back unrealised. Said admitted tax is paid quarterly through demand drafts. Thereby the dealer has failed to pay the admitted advance tax within the stipulated time and committed an offence punishable under section 12B(3) of the KST Act, 1957. Therefore, it is proposed to levy penalty both under the KST and the CST Act as stipulated unde section 12B(3) of the KST Act, 1957. This notice was served on the respondent-company, but in the reply by it, the respondent-company did not advert to the proposed penalty. The assessing authority while concluding the assessment order for the assessment year in question, passed an order under section 12B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal is that, the assessee has not delayed payment of advance tax with mala fide intention and that nonpayment of advance tax along with the monthly return was not deliberate, in defiance of law, nor was it guilty of a conduct indicating a conscious disregard of its obligations. Secondly, in Karnataka Appellate Tribunal's opinion, levy of penalty of more than Rs. 11 lakhs (rupees eleven lakhs) (interest) under section 13(2) of the Act was a sufficient penalty on the respondent and that a lenient view was required to be taken in the levy of penalty under section 12B(3) of the Act. In support of its reasoning, the Tribunal has placed reliance on the observations made by the apex court in the case of Hindustan Steel Limited v. State of Orissa [1970] 25 STC 211. Sri Manilal Monaji Somayya v. Commercial Tax Officer [1973] 32 STC 541 (Mys) and Eleston's case [1983] 54 STC 341 (Karn); [1983] 2 Kar LJ 345. The reasons assigned by the Tribunal, which are relevant, are extracted below: 25. Considering all the facts only, the FAA has reduced the penalty to some extent. Thus, meeting the demands of the appellant less than half way through. When he is convinced about the bona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision in Eleston's case [1983] 54 STC 341 (Karn) and whether it could be a ground for waiving the levy of penalty under section 12-B(3) of the KST Act, 1957? 2.. Whether it would not render section 12B(3) of the Act, 1957 otiose if it is held that the levy of penalty under section 13(2) by the very fact, required the authorities to consider waiving levy of penalty under section 12B(3) of the Act, 1957? 3.. Whether it is a condition precedent to demonstrate or identify the guilty intention or mens rea before imposing any penalty, in the light of the judgment in the case of R.S. Joshi, Sales Tax Officer v. Ajit Mills Limited [1977] 40 STC 497 (SC)? The learned Government Advocate Sri Anand, appearing for the Revenue would contend that the findings of the Tribunal and the conclusion reached by it for allowing the appeal are arbitrary and perverse they being contrary to the provisions of the Act and the settled legal principles and that therefore, the order requires to be set aside. Per contra, Sri Shankar, learned counsel appearing for the respondent justifies the impugned order passed by the Tribunal. The learned counsel relies also on the rulings of this court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceed to demand and collect the tax on the basis of such assessment: Provided that before taking action under this sub-section the dealer shall be given a reasonable opportunity of being heard. (3) If at the end of the year it is found that the amount of tax paid in advance by any dealer for any month or quarter or for the whole year in the aggregate was less than the tax payable for that month or quarter or the tax for the whole year as finally assessed, as the case may be, by more than fifteen per cent, the assessing authority may direct such dealer to pay, in addition to the tax, by way of penalty, a sum not exceeding one and a half times the amount by which the tax so paid falls short of the tax payable for the month or quarter or for the whole year, as the case may be: Provided that no penalty under this sub-section shall be imposed unless the dealer affected has had a reasonable opportunity of showing cause against such imposition. The provisions of the Act provide for submission of the monthly returns by a dealer registered under the Act on his own, declaring his monthly turnover and tax payable thereon and these returns become the base for determination of his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If it exceeds by more than fifteen percent, then only the provisions of section 12B(3) of the Act are attracted. In other words, the assessing authority gets jurisdiction to levy penalty under sub-section (3) of section 12B of the Act, only if the finally assessed tax exceeds the aggregate advance tax paid by more than fifteen percent. In such circumstances, the assessing authority while directing the dealer to pay the quantified tax may also direct the dealer to pay a penalty in a sum not exceeding one and a half times the tax not paid. The word may used in the sub-section gives discretion to the assessing authority to levy penalty or not to levy penalty, but if he decides to levy penalty it should not exceed the limit prescribed in the provisions itself. Whether a penalty should be levied or not and if so, what should be the quantum of penalty will depend on facts and circumstances of each case which will primarily depend on whether the default was wilful, deliberate or merely accidental. In order to justify the imposition of penalty, the assessing authority should not only find that there is a default but also consider the question whether there was good and sufficient reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the present case, it is not in dispute nor can it be disputed by the respondent that it is one of the established dealers in arrack doing business from few decades in arrack with one of the highest turnover in the State of Karnataka and therefore, it knows fully well that it is required to file monthly returns as required by section 12B(1) of the Act. Infact, in this case, it is seen that it filed monthly returns within due dates as prescribed under the Act and issued cheques towards its tax liability. But all those cheques were dishonoured and this happens not for one month but throughout the assessment year 1993-94. This in our opinion, is not only willful, but also deliberate. To demonstrate this aspect, we have gone through the entire assessment records for the assessment year 1993-94 and n that we observe: Statement of monthly payment paid for the year 1993-94 in the case of M/s. H. Dasappa and Sons Pvt. Ltd. Sl. No. Month Date of receipt Page No. Amount payable Paid Remarks Page No. 1 Apr. 93 20.5.93 3-4 10,04,713 10,04,713 Ch No. 037085/20.5.1993 bounced paid vide D.D's are as follows: 50,000, 50,000, 2,50,000, 3,00,000, 1,00,000, 1,00,000, 16 11 1,54,713=10,04,713 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... department by issuing cheques knowing fully well that requisite amount to satisfy the cheques in question was not available in its accounts, the Karnataka Appellate Tribunal in its order holds that the defaults committed by the assessee were unintentional and without mala fide intention. The findings and conclusion reached by the Tribunal are not only difficult to comprehend, but also difficult to accept. The wrong approach relating to the burden of proof adopted by the Tribunal also might have contributed to the conclusion reached by the Tribunal in setting aside the penalty levied by the authorities under the Act. The assessee is not a small time dealer or mere casual trader. The assessee is a dealer doing business from the last two decades. The assessee knowing the provisions of law had promptly filed its monthly returns and had also enclosed cheques for the amounts due under the Act for those months, but had allowed those cheques to be dishonoured not once, but several times during the entire year. It is only when the authorities under the Act resorted to take coercive measure to recover the tax that the assessee paid the tax due under the Act unwillingly by way of demand dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns rea is an essential ingredient in every offence, gets displaced both by the words used in the relevant statute creating the offence as also by subject-matter with which the same deals. For the correct view on the question whether mean rea is essential for the imposition of a penalty, not only the language used in the statute but also the subject with which it deals ought to be considered. In so far as the fiscal statutes are concerned, the acceptance of the non-application of the above mentioned doctrine has been recognised more readily by the courts. The classical view that no mens rea, no crime has been inapplicable from a long time regarding economic crimes. Absence of mens rea would be relevant only in the matter of fixing the quantum of penalty; and the imposition of the penalty as also the quantum thereof are in the discretion of the authority concerned which discretion has to be exercised fairly and reasonably and not arbitrarily or whimsically. In a recent decision, the Madras High Court(1) following the observations made by the Supreme Court in the case of Director of Enforcement v. MCTM Corporation Pvt. Ltd. AIR 1996 SC 1100 has stated that a penalty imposed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tamil Nadu [2002] 125 STC 107 (Mad) in its order, he invites our attention to the observations made by the Delhi High Court in the case of Addl. Commissioner of Income-tax, Delhi-II v. Free Wheels India Ltd. [1982] 137 ITR 378, a decision of this court in the case of Mysore Kirloskar Ltd. v. State of Karnataka [1997] 107 STC 601. In Hindustan Limited's case [1970] 25 STC 211, the Supreme Court has observed that an order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct dishonest or acted in conscious disregard of its obligation. In Sri Manilal Monaji Somayya case [1973] 32 STC 541, this court has observed that the observation of the Supreme Court in the case of Hindustan Limited's case [1970] 25 STC 211 equally applies to cases of imposition of penalty under section 12B(2) of the KST Act, 1957. In Elestone Estates and Industries Ltd. v. State of Karnataka [1983] 54 STC 341, this court has observed that the penalty under section 13(2) of the Act cannot form the basis for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The authorities under the Act are vested with the powers to exercise their discretion while quantifying the quantum of penalty by taking into consideration the facts and circumstances of each case. The section only prescribes the maximum penalty that could be levied if there is default committed by the assessee in not filing the monthly returns or filing incorrect or incomplete returns. The appellate authority after coming to the conclusion that the penalty levied by the assessing authority is slightly disproportionate, has modified the penalty imposed by the assessing authority by reducing it from Rs. 25,00,000 to Rs. 15,00,000. In our opinion, the Tribunal could not have taken exception to the order passed by the first appellate authority by showing undue indulgence to an assessee, who attempted to create an impression of payment of tax promptly but in effect, he had not made the payment. We therefore, hold that the reasoning of the Tribunal is not based on facts and is illegal and consequently, the order of the Tribunal must be held to be erroneous. In the result, the revision petition is allowed. The order made by the Karnataka Appellate Tribunal in STA No. 1033 of 1999 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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