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TMI Blog1997 (2) TMI 137X X X X Extracts X X X X X X X X Extracts X X X X ..... he Customs Act (hereinafter referred to as the Act ) which purported to show that the goods were shipped within the validity period of the O.G.L., the goods were allowed clearance by the proper officer under Section 47 of the Act under the authority of the above said O.G.L. By a Public Notice No. 91, dated 2-12-1978 import of palmolein under the O.G.L. was cancelled and its import was canalised through STC, with effect from 2-12-1978. The respondent on further enquiries found that the vessel which brought the applicant's cargo of palmolein arrived at the loading port of Kelang on 24-12-1978 and worked till 30-12-1978 and therefore, could not have loaded the cargo on 29-11-1978 as shown to have been done on that date in the bill of lading produced at the time of clearance through Customs. The bill of lading though normally accepted as evidence of loading of goods issued by the career to the consignor, the respondent's Department felt that the order of release under O.G.L. was passed on a misdeclaration of the date of shipment in the bill of lading by the applicant and after issue of show cause notice, it was held that the bill of lading could not possibly have borne a genui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the absence of the required mens rea would be totally without the authority of law. The learned Senior Counsel invited our attention to some of the decisions of the Apex Court and other various Courts, to which reference will be made at the appropriate stage. 4.Per contra, Mr. S. Veeraraghavan, learned Additional Central Government Standing Counsel contended with equal force that the view taken by the authorities below including the Tribunal was well justified and that in matters of the nature and type of violations complained of and the scope and object of the provisions under consideration, the element of mens rea cannot be insisted upon as an essential ingredient and a condition precedent for levying personal penalty under Section 112(a) of the Act. 5.We have carefully considered the submissions of the learned Counsel on either side. The learned Senior Counsel for the applicant placed strong reliance upon a Division Bench judgment of this Court, to which one of us (Raju, J.) was a party, in Union of India v. Raja Agencies [1993 (42) ECC 166] wherein the Division Bench had an occasion to deal with the issue while summarily rejecting the appeal filed by the Department a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en according to the finding of the Tribunal acted bona fide and therefore heavy fine is not warranted and justified. In coming to such a conclusion, Their Lordships have adverted to the earlier decision of the Supreme Court in Hindustan Steel Ltd. v. State of Orissa [1978 (2) E.L.T. (J 159) (S.C.) = AIR 1970 S.C. 253] wherein it was held that the discretion to impose penalty must be exercised judicially and penalty should ordinarily be imposed, where the party acts deliberately in defiance of law, or is guilty of contumacious or dishonest conduct, or acts in conscious disregard of its obligation; but not in cases where there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. In J.K. Synthetics Ltd. v. Commercial Tax Officer [1994 (4) SCC 276], the Apex Court held that on a conjoint reading of Section 7(1), (2) and (2A) of the Act and Rule 25 of the Rules relating to Rajasthan Sales Tax Act, 1954, makes it clear that the use of the words `without reasonable cause' implied that if reasonable cause is shown by the dealer, he cannot be visited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocedure prescribed in the section, in lieu of prosecution, impose upon him by way of penalty a sum not exceeding one and a half times the tax which would have been levied in respect of the sale to him of the goods, if the sale fell within Section 8(2) of the Act. It is, thus, clear that what is imposed by Section 10A of the Act is a civil obligation while what is contemplated under Section 10(b) is a sentence . The creation of an offence by a statute proceeds on the assumption that the society suffers injury by the act of omission of the defaulter and in most cases of criminal liability, the intention of the Legislature is that the penalty should serve as a deterrent to discourage repetition of an offence. In the case of proceedings under Section 10A of the Act, however, it seems that the intention of the Legislature is to emphasise the fact of loss of revenue and to provide for remedy for such a loss. This becomes evident from the terms in which the penalty falls to be measured under Section 10A of the Act itself. Therefore, unless there is something in the language of the statute indicating the need to also establish the element of mens rea in proceedings under Section 10A of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws.' We are in agreement with the above statement. Therefore, we hold, to the limited extent that mens rea has application in tax default cases, it would stand established, if the conduct of the assessee is found to be blameworthy, within the meaning of the particular provision of the given tax statute. Where a finding is recorded on facts about the existence of the blameworthy conduct, which the Legislature has treated as an offence or a default on the part of the assessee, like the making of a false representation , it would attract the provisions of Section 10(b) of the Act and no further finding would be required to be recorded about the existence of mens rea on the part of the assessee, as it would be inherently included in the earlier finding. We, therefore, cannot accept the proposition that even if a finding has been recorded on facts by the competent authorities that an assessee has made a false representation , as contemplated by Section 10(b) of the Act, in the absence of an additional finding tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them were considered by the High Court and are referred to in the judgment under appeal. It is sufficient for us to refer to Section 271(1)(a) which provides that a penalty may be imposed if the Income-tax Officer is satisfied that any person has without reasonable cause failed to furnish the return of total income, and to Section 276C which provides that if a person wilfully fails to furnish in due time the return of income required under Section 139(1), he shall be punishable with rigorous imprisonment for a term which may extent to one year or with fine. It is clear that in the former case what is intended is a civil obligation while in the latter what is imposed is a criminal sentence. There can be no dispute that having regard to the provisions of Section 276C which speaks of wilful failure on the part of the defaulter and taking into consideration the nature of the penalty, which is punitive, no sentence can be imposed under that provision unless the element of mens rea is established. In most cases of criminal liability, the intention of the Legislature is that the penalty should serve as a deterrent. The creation of an offence by statute proceeds on the assumption that soc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 SC 1100), (i) the Supreme Court had an occasion to directly consider the issue in the context of a case arising under Foreign Exchange Regulation Act, 1947. That was a case, wherein a Private Limited Company and its Directors were proceeded against departmentally for having contravened the provisions of Section 10(1)(a) of the said Act, the gravamen of the charge of the Department being that the offending Company failed to repatriate the Foreign Exchange lying in Malaysia, which they had a right to receive in India and thereby failed to take or refrained from taking, which had the effect of not securing the receipt of the Foreign Exchange in this Country. They had no special or general permission from the Reserve Bank of India authorising them to hold the aforesaid foreign exchange lying with their Branch at Kualalumpur in Malaysia without repatriating the same to India. In the Departmental proceedings, taken for such violation by an order dated 19-9-1977, it was held that the Company and its Directors were guilty of committing the two contraventions alleged against them mentioned in the Article of charges and so far as the first count of charge, a penalty of ₹ 40,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, unless `criminality' is established the penalty provided under Section 23(1)(a) of the Act cannot be imposed on any person. The High Court thus held the existence of `mens rea' as a necessary ingredient for the commission of an `offence' under Section 10 of the Act and in the absence of a finding about the presence of `mens rea' on the part of the offenders, no punishment under Section 23(1)(a) of FERA, 1947 could be imposed. For what follows, we cannot agree ₹ 7.Mens rea' is a state of mind. Under the criminal law, mens rea is considered as the `guilty intention' and unless it is found that the `accused' had the guilty intention to commit the `crime', he cannot be held `guilty' of committing the `crime'. An `offence' under Criminal Procedure Code and the General Clauses Act, 1897 is defined as any act or omission `made punishable by any law for the time being in force'. The proceedings u/s 23(1)(a), FERA, 1947 are `adjudicatory' in nature and character and are not `criminal proceedings'. The Officers of the Enforcement Directorate and other administrative authorities are expressly empowered by the Act to `adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the provisions of Section 10 of FERA would be discharged, where it is shown that the `blameworthy conduct' of the delinquent had been established by wilful contravention by him of the provisions of Section 10, FERA, 1947. It is the delinquency of the defaulter itself which establishes his `blameworthy' conduct, attracting the provisions of Section 23(1)(a) of FERA, 1947, without any further proof of the existence of `mens rea'. Even after an adjudication by the authorities and levy of penalty under Section 23(1)(a) of FERA, 1947, the defaulter can still be tried and punished for the commission of an offence under the penal law, where the act of the defaulter also amounts to an offence, the penal law and the bar under Article 20(2) of the Constitution of India in such a case would not be attracted. The failure to pay the penalty by itself attracts `prosecution' under Section 23F and on conviction by the `Court' for the said offence imprisonment may follow. In9. Maqbool Hussain v. State of Bombay [1983 (13) E.L.T. 1284 (S.C.) = AIR 1953 SC 325 : 1953 SCR 730] a Constitution Bench of this Court while considering the nature of proceedings under the Sea Customs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determine whether the appellant could be said to have been prosecuted when proceedings for confiscation were taken by the Sea Customs Authorities for if it was found that the appellant had been prosecuted when proceedings were taken by the Sea Customs Authorities to confiscated gold, there was no scope left for the argument that he had not been punished by the confiscation of gold and the option given to him to pay fine in lieu of such confiscation. The Court examined in detail the ambit, scope and applicability of the principle of `double jeopardy' in the light of the fundamental right guaranteed under Article 20(2) of the Constitution. The Court opined (para 12 of AIR) :- `It is clear that in order that the protection of Article 20(2) be invoked by a citizen there must have been a prosecution and punishment in respect of the same offence before a Court of law or a Tribunal required by law to decide the matters in controversy judicially on evidence on oath which it must be authorised by law to administrator and not before a Tribunal which entertains a departmental or an administrative enquiry even though set up by a statute, but not required to proceed on legal evidence g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Sea Customs Act had the jurisdiction to confiscate gold, illegally brought into the country, and levy penalty on the defaulter, none the less the authorities were not trying a criminal case, but deciding only the effect of a breach of the obligations by the defaulter under the Act. On a parity of reasoning, what holds true for the adjudicatory machinery under the Sea Customs Act holds equally true for the administrative or adjudicatory machinery, designed to adjudge the breach of a civil statutory obligation and provide penalty for the said breach, under the FERA, 1947, whether the breach was occasioned by any guilt intention or not is irrelevant. In ₹ 12.Corpus Juris Secundum' Volume 85, at page 580, paragraph 1023, it is stated thus : `A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal laws.' 13. We are in agreement with the aforesaid view and in our opinion, what applies to `tax delinquency' equally holds good for the `blameworthy' conduct for contravention of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istic of early common law usage, when one breaks the law even with the best of motives, still he commits an offence sufficient in law to render him liable to be dealt with by the Adjudicatory Authorities departmentally, and in such cases, the delinquency of the defaulter itself would establish the blameworthy conduct sufficient in law to impose a penalty to make amends for the violation - by payment of penalty. We are of the view that the final word has been said in the statement of law declared by the Apex Court in Director of Enforcement v. M/s. M.CT.M. Corporation Private Ltd. (AIR 1996 SC 1100) (supra) which has invariable application dealing with pari materia provisions or similar and allied Laws. 10.In the light of the above, it becomes necessary to notice the nature of the powers conferred under the Act, which has come to be exercised in dealing with a violation under the Act. The penalty in question came to be imposed in this case by the Collector of Customs as a sequel to the following findings : `In view of the foregoing, clearance of the goods, viz., 256 drums of RED palmolein valued at ₹ 2,95,402/- under OGL (Sl. No. 8 Appendix 10) ITC Policy April-March 197 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law usage, as having been inbuilt as an ingredient to be established as a condition precedent before indicating any violator under any of those provisions with personal penalty. The establishment of blameworthy conduct, which stands proved from the very proof of contravention of the civil obligation, would in our view, suffice to justify the imposition of personal penalty in adjudicatory proceedings before the statutory departmental Authorities. The need for insisting upon further proof of the mental attitude of the violator concerned, may assume some significance in any prosecution initiated before the Criminal Court for the very contravention or violation concerned. But, in our view, as held by the Apex Court in M/s. M.CT.M. Corporation Private Ltd. case (AIR 1996 SC 1100) (supra); Gujarat Travancore Agency's case [1989 (42) E.L.T. 350 (S.C.) = AIR 1989 SC 1671] (supra) and the two Division Bench judgments of this Court in Vijaya Electricals's case (82 STC 268) (supra) and Lakshmi Co.'s case (87 STC 345) (supra), the penalty contemplated under Section 112(a) of the Act for the violation in question is of a civil obligation, remedial and corrective in its nature and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the relevant date of bill of lading in view of the sudden clamping down of licensing on the import of edible oils from 2-12-1978 and they stood to gain far more by fraudulent manipulation of the date of bill of lading, than the supplier. The very import depends upon the entitlement of the applicants only and the exporter in the Country outside could not by himself bring those goods into this Country without the involvement of the Importer. Even that apart, we find that but for the clearance of the goods, which the applicant was able to secure in this case, they could not have escaped an order of confiscation and imposition of consequent redemption fine and it is only on account of the fact that the clearance has been made even before the Department came to know of the fraudulent act of ante-dating the bill of lading by which it was able to get the goods imported and cleared, the Department had no other go, but to impose only a personal penalty. Viewing this case and the facts in this context also, we are of the view that no exception could be taken to the imposition of personal penalty in question or the quantum thereof upon the applicant. 13.For all the reasons stated above ..... X X X X Extracts X X X X X X X X Extracts X X X X
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