# UNION OF INDIA & ORS v. M/S DHARAMENDRA

- **Citation:** [2008] 14 S.C.R. 13
- **Court:** Supreme Court of India
- **Decided:** 2008-09-29
- **Case number:** Civil Appeal Nos. 10289-10303 of 2003
- **Bench:** Dr. Arijit Pasayat, P. Sathasivam, Aftab Alam
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/union-of-india-ors-v-m-s-dharamendra-23599
- **Pages:** 38

## Headnote

CENTRAL Exc1sE Acr, 1944:
c
s.11AC- penalty for short levy or non levy of excise duty
- Nature of - HELD: Penalty under the provision is for breach
of civil obligation .and is mandatory - Mens rea is not an essential element for imposing the penalty - The adjudicatory
authority has no discretion to levy duty less than what is le-' D
gaily and statutorily /eviable - Interpretation of Statutes - Gentral Excise Rules, 1944, rr. 96ZO and 96ZQ.
Interpretation of-Statutes - Principles of casus omissus,
and reading the statute as a whole - Explained.
E
Maxims:
(i) Casus omissus et oblivioni datus dispositioni communis juris relinquitur, and
<
(ii) Quad enim semel ailt bis existit praetereunt . F
legislatores - Applicability of
In the instant appeals, a Division Bench of the Supreme Court noticing the decision in Chairman, SEBl's
case1 , and doubting the correctness of the decision in
Dilip N. Shroff's case2 , referred for consideration of the G
larger Bench the questions (i) whether Section 11AC of
the Central Excise Act, 1944 inserted by Finance Act, 1996
with the intention of imposing mandatory penalty on persons who evaded payment of tax should be read to con13
H
14
SUPREME COURT REPORTS
[2008] 14 S.C.R.
A
tain mens rea as an essential ingredient and (ii) whether
there was a scope for levying a penalty below the prescribed minimum.
..
In some of the cases the assessees had challenged
B
the vires of Rule 96ZQ(5) of the Central Excise Rules, 1944
and the High Court held that the said rule incorporated
)
the requirement of mens rea. The Division Bench of the
Supreme Court referring the matter to the larger Bench
\.-·
clarified that if the larger bench would take a view to say
that the· penalty leviable under the said clause was manc datory, itwas st.ill open to the assessee to challenge the
vires of Rule 96ZQ(5). During the course of hearing, parties agreed that a similar is·sue was involved in respect of
Rule 96ZO.
D
Answering the reference and allowing some of the
appeals, the Cqurt
·~.
j
HELD: 1.1 In Chairman SE.Bi's case, the Court rightly
held that mens rea was not an essential element for imposing pen.alty for breach of civil obligation. In that case,
E reference was made to the statutory scheme. It was noted
that the penalty was mandatory. It was pointed out that
r
there was a scheme attracting imposition of penalty with
\.
reference to a statute relating to breach of civil obligation.
[para 9] [37-B]
!
F
1.2 In Dilip Shroff's case, the c:onceptual and contexti.tal difference between Section 271 (1) (c) and Section
276C of the Income Tax Act, 1961 was lost sight of. The
Explanations appended to Section 272(1)(c) of the IT Act
entirely indicates the element of strict liability on the asG sessee for concealment or for giving inaccurate particu:.
lars while fifing return. The judgment in Dilp N. Shroof's
\..
case has not considered the effect and relevance of Secj
tion 276C of the l.T. Act. The objec.t behind the enactment
of Section 271 (1 )(e) read with the Explanations indicates
H that the said section has been enacted to provide for a
y
UNION OF INDIA & ORS. v. M/S DHARAMENDRA
15
TEXTILE PROCESSORS & ORS.
remedy for loss of revenue. The penalty under that proviA
sion is a civil liability. Wilful concealment is not an essential ingredient for attracting civil liability as is the case in
the matter of prosecution under Section 276C of the l.T.
Act. [para 25] [49-0-E]
2.1 In Union Budget of 1996-97, Section 11AC of the
B
Central Excise Act, 1944 was introduced. It has made the
position clear that there is no scope for any discretion. In
para 136 of the Union Budget reference has been made
. to the provision stating that the levy of penalty is a mandatory penalty. In the Notes on Clauses also the similar C
indication has been given. [para 26] [49-F]
2.2 It cannot be accepted that the use of the expression "assessee shall be liable" proves the existence of
discretion. In fact in the same provision there is an ex0
press ion used,

## Text

_Characters 0–37,424 of 71,168. This is a partial read: ask again with offset=37424 for what follows._

[2008] 14 S.C.R. 13
--\
UNION OF INDIA AND ORS.
A
II.
M/S DHARAMENDRA TEXTILE PROCESSORS AND
ORS.
(Civil Appeal Nos. 10289-10303 of 2003)
1
SEPTEMBER 29, 2008
B'
[DR. ARIJIT PASAYAT, P. SATHASIVAM AND AFTAB
ALAM, JJ]
CENTRAL Exc1sE Acr, 1944:
c
s.11AC- penalty for short levy or non levy of excise duty
- Nature of - HELD: Penalty under the provision is for breach
of civil obligation .and is mandatory - Mens rea is not an essential element for imposing the penalty - The adjudicatory
authority has no discretion to levy duty less than what is le-' D
gaily and statutorily /eviable - Interpretation of Statutes - Gentral Excise Rules, 1944, rr. 96ZO and 96ZQ.
Interpretation of-Statutes - Principles of casus omissus,
and reading the statute as a whole - Explained.
E
Maxims:
(i) Casus omissus et oblivioni datus dispositioni communis juris relinquitur, and
<
(ii) Quad enim semel ailt bis existit praetereunt . F
legislatores - Applicability of
In the instant appeals, a Division Bench of the Supreme Court noticing the decision in Chairman, SEBl's
case1 , and doubting the correctness of the decision in
Dilip N. Shroff's case2 , referred for consideration of the G
larger Bench the questions (i) whether Section 11AC of
the Central Excise Act, 1944 inserted by Finance Act, 1996
with the intention of imposing mandatory penalty on persons who evaded payment of tax should be read to con13
H
14
SUPREME COURT REPORTS
[2008] 14 S.C.R.
A
tain mens rea as an essential ingredient and (ii) whether
there was a scope for levying a penalty below the prescribed minimum.
..
In some of the cases the assessees had challenged
B
the vires of Rule 96ZQ(5) of the Central Excise Rules, 1944
and the High Court held that the said rule incorporated
)
the requirement of mens rea. The Division Bench of the
Supreme Court referring the matter to the larger Bench
\.-·
clarified that if the larger bench would take a view to say
that the· penalty leviable under the said clause was manc datory, itwas st.ill open to the assessee to challenge the
vires of Rule 96ZQ(5). During the course of hearing, parties agreed that a similar is·sue was involved in respect of
Rule 96ZO.
D
Answering the reference and allowing some of the
appeals, the Cqurt
·~.
j
HELD: 1.1 In Chairman SE.Bi's case, the Court rightly
held that mens rea was not an essential element for imposing pen.alty for breach of civil obligation. In that case,
E reference was made to the statutory scheme. It was noted
that the penalty was mandatory. It was pointed out that
r
there was a scheme attracting imposition of penalty with
\.
reference to a statute relating to breach of civil obligation.
[para 9] [37-B]
!
F
1.2 In Dilip Shroff's case, the c:onceptual and contexti.tal difference between Section 271 (1) (c) and Section
276C of the Income Tax Act, 1961 was lost sight of. The
Explanations appended to Section 272(1)(c) of the IT Act
entirely indicates the element of strict liability on the asG sessee for concealment or for giving inaccurate particu:.
lars while fifing return. The judgment in Dilp N. Shroof's
\..
case has not considered the effect and relevance of Secj
tion 276C of the l.T. Act. The objec.t behind the enactment
of Section 271 (1 )(e) read with the Explanations indicates
H that the said section has been enacted to provide for a
y
UNION OF INDIA & ORS. v. M/S DHARAMENDRA
15
TEXTILE PROCESSORS & ORS.
remedy for loss of revenue. The penalty under that proviA
sion is a civil liability. Wilful concealment is not an essential ingredient for attracting civil liability as is the case in
the matter of prosecution under Section 276C of the l.T.
Act. [para 25] [49-0-E]
2.1 In Union Budget of 1996-97, Section 11AC of the
B
Central Excise Act, 1944 was introduced. It has made the
position clear that there is no scope for any discretion. In
para 136 of the Union Budget reference has been made
. to the provision stating that the levy of penalty is a mandatory penalty. In the Notes on Clauses also the similar C
indication has been given. [para 26] [49-F]
2.2 It cannot be accepted that the use of the expression "assessee shall be liable" proves the existence of
discretion. In fact in the same provision there is an ex0
press ion used, "liability to pay duty". It can not be said
that the adjudicating authority has even a discretion to
levy duty less than what is legally and statutorily leviable.
Most of cases relied upon on behalf of the assessee had
their foundation on Bharat Heavy Electrical's case, which
was a case based on concession and in any event did E
not indicate the correct position in law. Even otherwise, it
was not open to the Bench to read into a statute, which
was specific and clear, something which· is not specifically provided for in the statute. [para 11 and 12] [45-8-E]
State of M.P and Ors. v. Bharat Heavy Electricals 1997
(3) Suppl. SCR 435 = 1997 (7) SCC 1 - held inapplic·able.
·F
2.3 The plea that the Rules 96ZQ and 96ZO of Central G
Excise Rules, 1944 have a concept of discretion inbuilt
cannot be sustained. [para 27] [49-G]
3.1 Two principles of construction - one re\ating to
casus omissus and the other in regard to reading the statute as a whole - appear to be well settled. Under the first H
16
SUPREME COURT REPORTS
[2008] 14 S.C.R.
;-·
A principle, a casus omissus cannot be supplied by the
court except in the case of clear necessity and when reason for it is found in the four corners of the statute itself
but at the same time a casus omissus should not be
readily inferred and for that purpose all the parts of a statB ute or section must be construed together and every
clause of a section should be construed with reference
to the context and other clauses thereof so that the con-
't-·
struction to be put on a particular provision makes a con-
,
sistent enactment of the whole statute. [para 18] [47-B-D]
c
Institute of Chartered Accountants of India v. Price
Waterhouse 1977 6 SCC 312; State of Gujarat v. Dilipbhai
Nathjib~ai Patel 1998 (2) SCR 56 = 1998 (3) SCC 234; Union
of India v. Filip Tiago De Gama of Vedem Vasco De Gama
(1990) 1 SCC 277; D.R. Venkatachalam v. Dy. Transport
D Commr. 1977 ( 2) SCR 392 = (1977) 2 SCC 273; and CST
v. Popular Trading Co. 2000 (2) SCR 983 = (2000) 5 SCC
\.
511 - referred to.
Crawford v. Spooner (1846) 6 MOO PC1 ; Stock v. Frank
)
Jones_(Tipton) Ltd 1978 (1) ALL ER 948; Lenigh Valley Coal
E Co. v. Yensavage 218 FR 547; Artemiou v. Procopiou (1965)
3 ALL ER 539 All ER p. 544 I; Luke v. /RC (1963) AC 557 ;
and All ER p.664 I - referred to.
3.2 A casus omissus ought not to be created by interF
pretation, save in some case of strong necessity. Where,
however, a casus omissus does really occur, either through
the inadvertence of the legislature, or on the principle quod
enim semel aut bis existit praetereunt legislatores, the rule is
that the particular case, thus left unprovided for, must be
,G disposed of according to the law as it existed before such
statute' - casus omissus et oblivioni datus dispositioni comr
munis juris relinquitur; "a casus omissus", "can in no case
be supplied by a court of law, for that would be to make
laws." [para 20] [48-8-D]
H
Maulavi Hussein Haji Abraham Umarji v. State of Gujarat
UNION OF INDIA & ORS. v. MIS DHARAMENDRA
17
TEXTILE PROCESSORS & ORS.
2004 (6) SCC 672; Sangeeta Singh v. Union of India and Ors.
A
2005 (2) Suppl. SCR 823 =, 2005 (7) SCC 484 - referred to.
Jones v. Smarl 1785 (1) TR 44:99 ER 963 - referred to.
4. Dilip N. Shroff's case was not correctly decided but
Chairman, SEBl's case has analysed the legal position in B
the correct perspectives. The matter would be placed· be-
~
fore the Division Bench to deal with the matter in the light
of the judgment only so far as the cases where challenge
is made to vires of Rule 967Q (5). In all other cases the
orders of the High Court or the Tribunal, as the case may c
be, are quashed and the matter remitted to it for disposal
in the light of the judgment. [para 27] [49-G, 50-A]
Chairman, SEBI v. Shriram Mutual Fund and Anr. 2006
(2) Suppl. SCR 833 =(2006 (5) sec 361 - upheld.
Dilip N. Shroff v. Jo{nt Commissioner of Income Tax,
D
Mumbai and Anr. 2007(7f SCR 499=2007 (8) SCALE 304 -
overruled.
CASE LAW REFERENCE
2007(7) SCR 499
overruled
para 2
E
2006 (2) Suppl. SCR 833 upheld
para 2
1997 (3) Suppl. SCR 435 held inapplicable para 7
1911 6 sec 312
referred to.
Para 14
(1846) 6 MOO PC1
referred to.
Para 14
F
1998 ( 2 } SCR 56
referred to.
Para 14
1978 (1) ALL ER 948
referred to
para 14
218 FR 547
referred to
para 15
G
i
(1990) 1 sec 211
referred to
para 15
1977 ( 2) SCR 392
refered to
para 16
2000 ( 2 } SCR 983
referred to
para 17
(1965) 3 ALL ER 539
referred to
para 18
H
A
8
c
D
E
18
SUPREME COURT REPORTS
[2008] 14 S.C.R.
All ER p.511 I
referred to
para 18
(1963) AC 557
referred· to
para 18
All ER p.664 I
referred to
para 18
1785 (1) TR 44:99 ER 963 referred to
para 20
2004 (3) Suppl. SCR 202 referred to
para 20
2005 (2) Suppl. SCR 823 referred to
·para 23
1 Chairman, SEBI v. Shriram Mutual Fund and Anr. 2006
Suppl. (2 ) scR 833 = 2006 (5) sec 361
2 Dilip N. Shroff v. Joint Commissioner of Income Tax,
Mumbai and Anr. 2007(7) SCR 499=2007 (8) SCALE 304
CIViL APPELLATE JURISDICTION : Civil Appeal NOs.
10289-10303 of 2003
From the final Judgment and Order dated 7/3/2002 of the
High Court of Gujarat atAhmedabad in S.C.A.Nos. 2602, 2209,
2603,2604,2208,2898,2899,2900,39870f2001,351,352,
693, 742, 1935 and 1936 of 2002
WITH
C.A. Nos. 3398-3399, 3397/2003, 4094, 4096/2004,
3388/2006,4331,4332,4321,4322,4323,432~4311,4316/
2007, 5277/2006, 4320, 4333, 675, 1420, 4317, 2793/2007,
5928,5929,5930,5931,5932,5933,5934,5935,5937,5938,
F 5939, 5940, 5941, 5H42 and 5943/2008, 5272/2006, 5977,
'
5978, 5944, 5945, 5952, 5953, 5955, 5956/2008, 6001/2007,
5957,5958,5959,5960,5961,5962,5963,5964,5965,5966,
5967, 5968, 5969, 5970/2008, 1901, 1643/2008, 5971, 5972,
5973, 5974/2008, 372/2007, 2146, 1823, 5975 and 5976/2008.
G
H
. M. Chandrashekharan, A.S.G., S. Ganesh, S.S. Naganand,
Raghvendra S. Srivastava, P. Parmeswaran, Manish Pushkarna,
S. Sunil, Naveen Prakash, Rashmi Malhotra, Rahul Kaushik,
Shailendra Sahni, Vikas Sharma, Alka Sharma, Asha G. Nair,
B.K. Prasad,Aruna Gupta, B.V. Bairam Dass, MeenakshiArora,
-~
I
UNION OF INDIA & ORS. v. MIS DHARAMENDRA
19
TEXTILE PROCESSORS & ORS.
-\
Amar Dave, Gaurav Goel, Mahesh Agarwal, E.C. Agrawala,
A
\
Manish Kurrar, Ansar Ahmad Chaudhary, Anil Bhansali, Satya
Prakash, Promila Matta, E.M.S. Anam, Shantha Kr. Mahale,
Rajesh Maha le, Harish, P.C. Jain, Abhishek Jaju, Rajesh Kumar,
Atual Mishra, Sonu Bhatnagar, Ajay Aggarwal, Rajan Narain,
Janaranjan Das, Sandeep Narain, M.H. Patil, Shri Narain, (for B
M/s. S. Narain & Co.), K.L. Janjani, Subramonium Prasad, M/s.
I
K.J. John & Co., Tarun Gulati, Praveen Kumar, Jaiveer Shergill,
Thushar Jarwal, Alok Yadav, M.P. Devanath, Ruby Singh Ahuja,
S. Ravi Shankar and Rupesh Kumar for the Appearing Parties.
The Judgment of the Court was delivered by
c
DR. ARIJIT PASAYAT, J. 1. Leave granted in the special
leave petitions.
2. A Division Bench of this Court has referred the contraversy involved in these appeal$ to a larger Bench doubting the D
f
correctness of the view expressed in Dilip N. Shroff v. Joint
Commissioner of Income Tax, Mumbai and Anr. (2007 (8)
SCALE 304). The question which arises for determination in all
these appeals is whether Section 11AC of the Central Excise
Act, 1944 (in short the 'Act') inserted by Finance Act, 1996 with
E
the intention of imposing mandatory penalty on persons who
evaded payment of tax should be read to contain mens rea as
an essential ingredient and whether there is a scope for levying
penalty below the prescribed minimum. Before the Division
Bench, stand of the revenue was that said section should be F
read as penalty for statutory offence and the authority imposing
penalty has no discretion in the matter of imposition of penalty
and the adjudicating authority in such cases was duty bound to
impose penalty equal to the duties so determined. The assessee on the other hand referred to Section 271 (1 )(c) of the InG
come Tax Act, 1961 (in short the 'IT Act') taking the stand that
Section 11AC of the Act is identically worded and in a given
case it was open to the assessing officer not to impose any
penalty. The Division Bench made reference to Rule 96ZQ and
Rule 96ZO of the Central Excise Rules, 1944 (in short the 'Rules')
H
20
SUPREME COURT REPORTS
[2008] 14 S.C.R.
A
and a decision of this Court in Chairman, St=BI v. Shriram Mutual Fund and Anr. (2006 (5) SCC 361) and was of the view
that the basic scheme for imposition of penalty under Section
271 (1)(c) of IT Act, Section 11AC of the Act and Rule 96ZQ(5)
of the Rules is common. According to the Division Bench the
B correct position in law was laid down in Chairman, SEBl's case
(supra) and not in Dilip Shroff's case (supra). Therefore, the
. matter was referred to a larger Bench.
3. It was noted that in some cases the assessee had challenged the vires of Rule 96ZQ(5) and the Gujarat High Court
C held that the said rule incorporated the requirement of mens
rea. The Division Bench clarified that if the larger bench takes a
view to say that the penalty leviable under the said clause is
mandatory, it is still open to the assessee to challenge the vires
D
of Rule 96ZQ(5).
4. During the co.urse of hearing, learned counsel for the
parties agreed that a similar issue is involved in respect of Rule
96ZO.
5. Mr. Chandrashekharan, Additional Solicitor General subE
mitted that in Rules 96ZQ and 96ZO there is no reference to
any mens rea as in Section 11 AC where mens rea is prescribed
statutorily. This is clear from the extended period of limitation
permissible under Section 11 A of the Act. It is in essence submitted that the penalty is for statutory offence. It is pointed out
F
that the proviso to Section 11 A deals with the time for initiation
/
of action. Section 11AC is only a mechanism for computation
and the quantum of penalty. It is stated that the consequences
of fraud etc. relate to the extended period of limitation and the
onus is on the revenue to establish that the extended period of
G limitation is applicable. Once that hurdle is crossed by the revenue, the assessee is exposed to penalty and the quantum of
penalty is fixed. It is pointed out that even if in some. statutes
-r
mens rea is specifically provided for, so is the limit or imposition of penalty, that is the maximum fixed or the quantum has to
H be between two limits fixed. In the cases at hand, there is no
UNION OF INDIA & ORS. v. M/S DHARAMENDRA
21
TEXTILE PROCESSORS & ORS. [DR. ARIJIT PAS/WAT, J.]
variable and, therefore, no discretion. It is pointed out that prior A
to insertion of Section 11AC, Rule 1730 was in vogue in which
no mens rea was provided for. It only stated "which he knows or
has reason to believe". The said clause referred to wilful action.
According to learned counsel what was inferentially provided in
some respects in Rule 1730, now stands explicitly provided in
B
Section 11AC. Where the outer limit of penalty is fixed and the
statute provides that it should not exceed a particular limit, that
itself indicates scope for discretion but that is not the case here.
6. It was pointed out that Rule 96ZO refers to manufacturer of ingots and billets while Rule 96ZO relates to indepenC
dent processor of textile fabrics. They belong to the same category and failure to pay duty attracts penal consequences. In
the other category in cases of fraud etc. penalty is for statutory
offence. It is pointed out that in Dilip Shroff's case (supra) the
question relating to discretion was not the basic issue. In fact,
D
Section 271(1)(c) of the l.T. Act provides for some discretion
and, therefore, that decision has no relevance. So far as the
present dispute is concerned, whether discretion has been properly exercised is a question of fact. It is submitted that Chairman SE Bi's case (supra) has full application to the facts of the
E
eresent case.
7. In reply, learned counsel for the respondent submitted
that the factual scenario in each case has to be examined. In
T
cases relatable to Section 11 AC of the Act, the Appellate Tribunal in some of the cases has come to a finding that there was
F
no wilful disregard involved and the assessee's conduct was
bona fide. It is pointed out that Section 11A relates to the expression "assessee shall be liable" ·and, therefore, there is discretion to reduce the penalty. With reference to Sections 271 C
and 271 B of the l.T.Act, it is pointed out that in the case of former· G
it is "liable" while in the latter it is "shall pay". Reference is also
made to Sections 271 F and 272A of the said l.T. Act. Reliance
is placed on a decision of this Court in State of M.P. and Ors. v.
Bharat Heavy Electricals (1997 (7) sec 1) to contend that even
if this Court held that it appears to give the expression that the
H
22
SUPREME COURT REPORTS
[2008] 14 S.C.R.
A
imposition of penalty is mandatory, yet there was a scope for ;--
exercise of discretion ..
8. It is submitted that various degrees of culpability cannot
be placed on the same pedestal. Section 11AC can be conB
strued in a manner by reading into it the discretion. That would
be the proper way to give effect to the statutory intention. The
relevant provisions i.e. Sec_tion 11AC, Rule 96ZQ and Rule 96ZO
~
read as follows:
"11 AC- Penalty for short levy or non levy of duty in certain
c
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 misstatement or suppression of facts, or contravention of any
of the provisions of this Act or of the rules made thereuhder
D
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 subE
section (2) of section 11 A, and the interest payable thereon
under section 11AB, is paid within 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 be twenty-
~
F
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:
G
Provided also that where the duty determined to be payable
is reduced or increased by the Commissioner (Appeals),
r
the Appellate Tribunal or, as the case may be, the court, then
for the purposes of this section, the duty, as reduced or
H
increased, as the case may be shall be taken into account:
UNION OF INDIA & ORS. v. MIS DHARAMENDRA
23
TEXTILE PROCESSORS & ORS. [DR. ARIJIT PASAYAT, J.]
-\
Provided also that in case where the duty determined to
A
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
B
consequential increase of penalty have also been paid
I
within thirty days of the communication of the order by
I
which such increase in the duty takes effect.
Explanation- For the removal of doubts, it is hereby
declared thatc
(1)
the provisions of this section shall also apply to cases
in which the order determining the duty under subsection (2) of section 11A, relates to notices issued
prior to the date on which the Finance Act, 2000 D
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
E
person.
RULE 96ZO. Procedure to be followed by the
manufacturer of ingots and billets
'\
(1) A manufacturer of non-alloy steel ingots and billets
F
falling under sub- heading Nos. 7206.90 and 7207 .90 of
the Schedule to the Central Excise Tariff Act, 1985 (5 of
1986), shall debit an amount calculated at the rate of Rs.
750 per metric tone at the time of clearance of ingots and
billets of non-alloy steel from his factory in the accountG
current maintained by him under sub-rule (1) of rule 173G
-;
of the Central Excise Rules, 1944; subject to the condition
that the total amount of duty liability shall be calculated
and paid in the following manner :-
I. Total amount of duty liability for the period from the 1st H
24
SUPREME COURT REPORTS
[2008] 14 S.C.R.
A
day of 1 September, 1997 to the 31st day of March, 1998 r
J
(a) a manufacturer shall pay a total amount calculated at
the rate of Rs. 750 per metric tonne on capacity of
production of his factory for the period from 1st day of
B
September, 1997 to the 31 stday of March, 1998, as
determined under the l.nduction Furnace Annual Capacity
Determination Rules, 1997. This amount shall be paid by
31st day of March, 1998;
t--
(b) the amount of duty already paid, together with on-
...
c
account amount paid by the manufacturer, if any, during
the period from 1st day of September,1997 to the 31st
day of March, 1998, shall be adjusted tqwards the total
amount of duty liability payable under clause (a);
(c) if a manufacturer fails to pay the total amount of duty
D
payable under clause (a) by the 31st day of March, 1998,
he shall be liable to pay the outstanding amount (that is
the amount of duty which has not been (paid by the 31st
day of March, 1998) along with interest at the rate of
eighteen percent per annum on such outstanding amount
E
calculated for the period from the 1st day of April, 1998 till
the date of actual payment of the outstanding amount :
Provided that if the manufacturer fails to pay the total
amount of duty payable under clause (a) by the 30tl:l day
F
of April, 1998, he shall also be liable to pay a penalty
equal to the outstanding amount of duty as on 30th day of
f
April, 1998 or five thousand rupees, whichever is greater.
II. Total amount of duty liability for a financial year
subsequent to 1997-98 (a) a manufacturer shall pay a
G
total amount calculated at the rate of Rs. 750/- per metric
tonne on the annual capacity of production of his factory
as determined under the Induction Furnace Annual
-r-
...,
Capacity Determination Rules, 1997. This amount shall
be paid by the 31st day of March of the financial year;
H
(b) the amount of duty already paid, together with on-
UNION OF INDIA & ORS. v. M/S DHARAMENDRA
25
TEXTILE PROCESSORS & ORS. [DR. ARIJIT PASAYAT, J.]
-\
account amount paid by the manufacturer, if any, during A
the financial year shall be adjusted towards the total amount
of duty liability;
(c) if a manufacturer fails to pay the total amount of duty
payable under clause (a) by the 31st day of March, of the
. relevant financial year, he shall be liable to, -
B
(i) pay the outstanding amount of duty (that is the amount
of duty which has not been paid by the 31st day of March
of the relevant financial year) along with interest at the rate
of eighteen per cent. per annum on such outstanding c
amount, calculated for the period from the 1st day of April
of the immediately succeeding financial year till the date
of actual payment of the whole of outstanding amount; and
I
(ii) a penalty equal to such outstanding amount of duty or
five thousand rupees, whichever is greater.
D
·7
(IA) If any manufacturer removes any of the non-alloy steel
ingots and billets specified in sub-rule (I) without complying
with the requirements of the provisions of that sub-rule,
then all such goods shall be liable to confiscation and the
manufacturer shall be liable to a penalty not exceeding
E
three times the value of such goods, or five thousand
rupees, whichever is greater
(2) Where a manufacturer does not produce the ingots
_and billets of non- alloy steel during any continuous period
. of not less than seven days and wishes to claim abatement
F
under sub-section (3) of section 3A of the Central Excise
Act, 1944, the abatement will be allowed by an order
passed by the Commissioner of Central Excise of such
amount as may be specified in such order, subject to the
___,,
fulfillment of the following conditions, namelyG
....
(a) the manufacturer shall inform in writing about the closure
to the 1Assistant Commissioner of Central Excise or
Deputy Commissioner of Central Excise 1, with a copy to
the Superintendent of Central Excise, either prior to the
date of closure or on the date of closure;
H
26
SUPREME COURT REPORTS
[2008] 14 S.C.R.
A
(b) the manufacturer shall intimate the reading of-the
;-~
electricity meter to the Assistant Commissioner of Central
Excise or Deputy Commissioner of Central Excise1, with
,,
a copy to the Superintendent of Central Excise,
.,,.
immediately after the production in his factory is stopped
B
along with the closing balance of stock of the ingots and
billets of non-alloy steel;
(c) the manufacturer, when he starts production again, shall
L
I
inform in writing about the starting of production to the
•
Assistant Commissioner of Central Excise or Deputy .
',
c
Commissioner of Central Excise1, with a copy to -the
.•
~
Superintendent of Central Excise, either prior to the date
of starting production or on the date of starting production;
.,
(d) the manufacturer shall on start of production again
~
D
along with the closing balance of stock on restarting the
~
factory, intimate the reading of the electricity meter to the
'
'
Assistant Commissioner of Central Excise or Deputy
--c
~
l
Commissioner of Central Excise.1, with a copy to the .
Superintendent of Central Excise;
E
(e) the manufacturer shall while sending intimation under
I...
clause (c), .declare that his factory remained closed for a
continuous period starting from -hours on -(date) to -
. hours ori -(date).
' "
'
F
(3) Notwithstanding anything contained elsia\<yhere in these
t
rules, if a manufacturer having a total furnace capacity of
>
3 metric tonnes installed in his factory so desires, he may,
from the first day of September, 1997 to the 31st day of
March, 1998 or any other financial year, as the case may
I--
be, pay a sum of rupees five lakhs per month _in two equal
l
G
installments, the first installment latest by the 15thday of
~.
each month, and the second installment latest by the last
)._
__;
day of each month, and the amounts so paid shall be
deemed to be full and final discharge of his duty liability
for the period from the 1st day of September, 1997 to the
H
31st day of March, 1998, or any other financial year, as
UNION OF INDIA & ORS. v. M/S DHARAMENDRA
27
TEXTILE PROCESSORS & ORS. [DR. ARIJIT PASAYAT, J.]
the case may be, subject to the condition that the
A
manufacturer shall not avail of the benefit, if any, under
sub-section (4) of the section 3A of the Central Excise
Act, 1944 (1 of 1944) :
Provided that for the month of September, 1997 the
B
Commissioner may allow a manufacturer to pay the sum
of rupees five lakhs by the 30th day of September, 1997:
Provided further that if the capacity of the furnaces installed
in a factory is more than or less than 3 metric tonnes, or
there is any change in the total capacity, the manufacturer c
shall pay the amount, calculated pro rata:
provided also that where a manufacturer fails to pay the
whole of the amount payable for any month by the 15th
day or the last day of such month, as the case may be, he
shall be liable to,-
D
(i) pay the 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
E
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 the duty payable for each of the months from
F
September, 1997 to March, 1998 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.
Explanation - For removal of doubts it is hereby clarified G
that sub-rule (3) does not apply to an induction furnace
unit which ordinarily produces castings or stainless steel
products but may also incidentally produce non-alloy steel
ingots and billets.
H
28
A
B
c
D
E
F
G
H
SUPREME COURT REPORTS
[2008] 14 S.C.R.
(4) In case a manufacturer wishes to avail of discharging
his duty liability in terms of sub-rule (3), he shall inform the
Commissioner of Cenfral Excise, with a copy to the
Assistant Commissioner of Central Excise or Deputy
Commissioner of Central Excise, in the following proforma:
"We (name of the factory), located at (address) hereby
wish to avail of the scheme described in sub-rule (3) of
rule 9620, for full and final discharge of our duty liability for
the manufacture of ingots and billets of non-aJloy steel
ur:ider~ection3A of the' Central Excise Act, 1944(Iof1944).
Dated
Sd
Name and Designation
(With stamp)
RULE 96ZQ. Procedure to be followed by an Independent
processor of textile fabrics
(1) An independent processor of textile fabrics falling under
heading
Nos.
52.07,52.08,52.09,54.06,54.07,
55.11,55.12,55.13 or 55.14, or processed textile· fabrics
of cotton or man-made fibers, falling under heading Nos.
or sub-heading Nos. 58.01, 58.02, 5806.10,. 5806.40.
6001.12, 6001.22, 6001.92, 6002.20, 6002.30, 6002.43
or 6002:93, of the First Schedule to Centr'al Excise Tariff
Act, 1'985 (5 of 1986), shall debit an amount of duty of
Rs:2.0 lakhs per chamber per month, Rs.2.51akhs per
chamber per month, Rs.3.0 lakhs per chamber per month
or Rs.3.5 lakhs per chamber per month, as the case may
be, on the annual capacity of production as determined
under the Hot-air Stenter Independent Textile Processors
Annual Capacity Determination Rules, 1998.
·
.
(2) The amount of duty payable under sub-rule (1) shall be
debited by the independent processor in . the account
current maintained by him sub-rule (1) of rule 173G of the
Central Excise Rules, 1944.
UNION OF INDIA & ORS. v. M/S DHARAMENDRA
29
.
TEXTILE PROCESSORS & ORS. [DR. ARIJIT PASAYAT, J.]
-\
(3) Fifty per cent. of the amount of duty payable for a
A
calendar month under sub-rule (1) shall be paid by the
15th of the month and the remaining amount shall be paid
by the end _of that month.
Provided that the amount of duty payable for the period B
from 15th December, 1998 to 31st December, 1998 shall
be deposited on or before the 31st day of December,
1998.
(4) The independent processor shall continue to maintain
records, and file returns, pertaining to production, c
1'
clearance, manufacturing, storage, delivery or disposal of
goods, including the materials received for or consumed
in the manufacture of excisable goods or other goods, the
goods and materials in stock with him and the duty paid
by him, as prescribed under the Central Excise Rules,
D
1944 and the notifications issued there under.
(5) If an independent processor fails to pay the amount 0£
duty or any part thereof by the date specified in sub-rule
(3), he shall be liable to, -
E
""
(i) pay the outstanding amount of duty along with interest
at the rate of twenty-four percent per annum calculated for
the outstanding period on the outstanding amount; and
\
(ii) a penalty equal to an amount of duty outstanding from
F
him at the end of such month or rupees five thousand,
whichever is greater.
(6) If an independent processor, removes the processed
textile fabrics referred to in sub-rule (1) without complying
with any of the requirements contained in sub-rule (4), G
then, all such goods shall be liable to confiscation and the
-'(
independent processor shall be liable to a penalty not
exceeding rupees ten thousand.
(7) Where an independent processor does not produce
or manufacture the processed textile fabrics specified in
H
30
SUPREME COURT REPORTS
[2008) 14 S.C.R.
/-
A
sub-rule (1) during any continuous period of not less than
fifteen days and wishes to claim abatement under subsection (3) of section 3A of the Act, the abatement shall be
,....
allowed by an order passed by the Joint Commissioner of
Central Excise of such amount as may be specified in
B
such order, subject to fulfillment of the following conditions,
namely:.,
t-
(a) abatement shall be applicable only on the complete
closure of the hot air stenter containing the chambers and
not in case of closure of anyone or more chambers
c
contained in such stenter;
(aa) the independent processor shall not clear any non- .
,,
stentered fabrics during t~e period for which abatement is
'
claimed, and any clearance by him of non-stentered fabrics
D
during such period shall be liable to confiscation;
(b) the independent processor shall inform, in writing, about
\'-
such closure to the Deputy Commissioner of Central
~
Excise or the Assistant Com- missioner of Central Exdse,
as the case may be, with a copy to the Superintendent of
E
Central Excise, at least three days prior to the date of
such closure, giving the following details, namely: -
""~
~
(i) the name of the manufacturer of the stenter;
;
(ii) the date of purchase of the stenter;
f
F
(iii) the number of chambers as determined under the
Hot-air Stenter Independent Textile Processors Annual
Capacity Determination Rules, 2000;
(iv) the serial number or identification no. of the stenter; (v)
G
reason for closure of the stenter;
(vi) approximate number of days for which the stenter shall
rremain closed;
(vii) date and time from which the closure is intended; (c)
H
the stenter or stenters shall be sealed in such manner as
'l
<
UNION OF INDIA & ORS. v. MIS DHARAMENDRA
31
~
TEXTILE PROCESSORS & ORS. [DR. ARIJIT PASAYAT, J.]
,,
may be pre- scribed by the Commissioner of Central
A
Excise;
(d) the independent processo.r, when he starts production
again, shall in- form in writing about the date of starting of
production to the Deputy Commissioner of Central Excise . B
+
or the Assistant Commissioner of Central Excise, as the
case may be, with a copy to the Superintendent of Central
Excise, at least three days prior to the date of starting
production, and get the seal opened in such manner as
may be specified by the Commissioner of Central Excise
~
before recommencing the production;
c
---t
(e) When the claim for abatement by the independent
processor is for a period less than one month, he shall be
required to pay the duty, as applicable, for the entire period
of one month and may subsequently seek such claim after D
payment of such duty;
(f) when the claim for abatement by the independent
•
processor is for a period of less than one month or more,
-•,
he shall not be required to pay the duty for that period in
advance;
E
(g) If the claim for abatement by the independent processor
has been disallowed by the Joint Commissioner of Central
\
Excise, by a written order made in this regard, the
independent processor shall pay the duty , and interest if
F
any applicable, prior to getting the stenter or stenters
sealed under condition (c) re-opened for resuming
production:
c
Provided that the Commissioner of Central Excise may
'\
~
condone, for reasons to be recorded in writing, the delay G
,
· in giving prior information under clause (b), if he is satisfied
that such delay in giving information was caused due to
unavoidable circumstances.
Explanation. -For the purposes of these rules, an
"independent processor" means a manufacturer who is H
32
SUPREME COURT REPORTS
[2008] 14 S.C.R.
A
engaged primarily in the processing of fabrics with the aid
of power and who also has the facility in his factory
(including plant and equipment) for carrying out heat-setting
or drying, with the aid of power or steam in a hot-air stenter
and who has no proprietary interest in any factory primarily
B
and substantially engaged in the spinning of yarn or
weaving or knitting of fabrics, on or after the 10th
December, 1998.
c
It would also be necessary to take note of Section 271 (1 )(
c) and Section 271 C of the IT Act:
"Section 271-FAILURE TO FURNISH RETURNS,
COMPLY WITH NOTICES, CONCEALMENT OF
INCOME, ETC.
(1) If the Assessing Officer or the Commissioner (Appeals)
D
in the course of any proceedings under this Act, is satisfied ·· •
that any person -
E
F
G
H
(a) Omitted
~b) Has failed to comply with a notice under sub-section
( : ) of section 142 or sub-section (2) of section 143 or fails
to comply with a direction issued unger sub-section (2A)
of section 142; or
(c) Has concealed the particulars of his income or furnished
inaccurate particulars of such income, he may direct that
such person shall pay by way of penalty, -
(i)
Omitted
(ii) In the cases referred to in clause (b), in addition to any
tax payable by him, a sum which shall not be less than one
thousand rupees but which may extend to twenty-five
thousand rupees for each such failure; ·
(iii) In the cases referred to in clause (c), in addition to any
tax payable by him, a sum which shall not be less than but
which shall not exceed three times the amount of tax sought
I ,
UNION OF INDIA & ORS. v. M/S DHARAMENDRA
33
---\
TEXTILE PROCESSORS & ORS. [DR.