REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  3481 OF 2022

State of Gujarat and Anr.  …Appellant(s)

Versus

M/s Saw Pipes Ltd.                …Respondent(s)

(known as Jindal Saw Ltd.)   

J U D G M E N T

M.R. SHAH, J.

1. Feeling   aggrieved   and   dissatisfied   with   the

impugned   judgment   and   order   dated

04.08.2016   passed   by   the   High   Court   of

Gujarat   at   Ahmedabad   in   Tax   Appeal   No.

Page 1 of 64

1283/2006, by which, the Division Bench of

the High Court has set aside the penalty and

interest levied under sub­section (6) of Section

45   of   the   Gujarat   Sales   Tax   Act,   1969

(hereinafter referred to as the Act, 1969), the

State   of   Gujarat   has   preferred   the   present

appeal. 

2. The   respondent   company   ­   assessee   is

engaged   in   the   business   of   executing

indivisible works of undertaking contract of

coal tar and enamel coating on pipes. The

respondent ­ assessee had opted for payment

of lump­sum tax as provided under Section

55A of the Gujarat Sales Tax Act, 1969. The

respondent ­ assessee deposited tax at the

rate of 2% on sales involved in the execution

of   works   contract   of   coating   of   pipes   by

treating the same as civil works contract as

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prescribed in Entry­1 of the notification dated

18.10.1993   issued   by   the   Government   of

Gujarat.       The   Assessing   Officer   (AO)  vide

order dated 30.03.2005 for assessment year

(AY) 2002­03 held that the contract of coating

of   pipes   is   not   a   civil   works   contract   and

therefore, the composition amount is payable

not at the rate of 2% as deposited by the

respondent   but   it   falls   under   Residuary

Entry­8 to the notification dated 18.10.1993.

The AO raised the total demand as under: ­

Particulars  Amount 

Tax  2,36,55,529/­ 

Interest   u/s

47(4A) 

1,04,56,181/­ 

Penalty u/s 45(6) 1,41,93,312/­ 

Total  4,83,05,013/­

2.1 The assessee preferred a first appeal before

the First Appellate Authority i.e., Joint Sales

Tax   Commissioner.   By   order   dated

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30.07.2005,   the   First   Appellate   Authority

dismissed   the   said   appeal.   The   assessee

approached   the   Gujarat   Value   Added   Tax

Tribunal   by   filing   Second   Appeal   No.

820/2005. The learned Tribunal  vide  order

dated 29.09.2006 dismissed the appeal and

confirmed the orders passed by the AO as

well   as   the   First   Appellate   Authority   and

thereby confirmed the aforesaid demand of

difference in tax as well as the levy of interest

under   Section   47   (4A)   and   penalty   under

Section 45(6) of the Act, 1969. The assessee

preferred   a   further   appeal   before   the  High

Court   being   Tax   Appeal   No.   1283/2006.

Before   the   High   Court,   the   learned   Senior

Advocate appearing on behalf of the assessee

fairly conceded that looking to the fact that

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the   authority   has   passed   the   assessment

order on the basis of material available with

it, they were required to pay the tax on the

basis of 12% and that has been paid by the

assessee since the opinion of the expert was

turned   out,   however,   the   respondent   –

assessee restricted the appeal to the extent of

challenging the levy of penalty and interest

only   by   submitting   that   the   assessee   was

under   a   bonafide   belief   that   the   works

contract   of   the   assessee   would   fall   under

Entry­1 requiring payment of tax at the rate

of   2%   only.   Reliance   was   placed   on   the

decision   of   the   High   Court   in   the   case   of

Brooke   Bond   India   Limited   Vs.   State   of

Gujarat;   1998   JX   (Guj)   128  and   it   was

prayed   that   the   imposition   of   penalty   and

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interest   not   be   upheld.   By   the   impugned

judgment and order, the High Court has set

aside the penalty and interest on the ground

that   the   assessee   was   under   the   bonafide

opinion and following the advice, paid the tax

at 2% and that thereafter, when the enhanced

tax as imposed has already been paid by the

assessee,   the   penalty   and   interest   is   not

required to be paid by the assessee. The High

Court   allowed   the   appeal   to   the   aforesaid

extent,   deleting   the   penalty   and   interest

levied   under   Section   45(6)   and   Section   47

(4A) of the Act, 1969. 

2.2 Feeling   aggrieved   and   dissatisfied   with   the

impugned judgment and order passed by the

High Court whereby the penalty and interest

has been set aside, the State has preferred

the present appeal.     

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3. Ms.   Aastha   Mehta,   learned   counsel   has

appeared with Ms. Deepanwita Priyanka, on

behalf of the State. 

3.1Ms.   Mehta   learned   counsel   appearing   on

behalf of the State has vehemently submitted

that in the facts and circumstances of the

case, the High Court has committed a serious

error   in   deleting   the   penalty   and   interest

levied under Section 45(6) and Section 47(4A)

of the Act, 1969.

3.2It is further submitted that while deleting the

penalty,   the   High   Court   has   not   at   all

considered sub­section (6) of Section 45 of the

Act, 1969 in its true spirit. 

3.3It is next submitted that the High Court has

not   properly   considered   the   fact   that   the

penalty leviable under Section 45(6) of the

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Act, 1969, is a statutory penalty and hence,

is compulsorily leviable. 

3.4It is contended by Ms. Mehta, learned counsel

appearing   on   behalf   of   the   State   that   the

penalty leviable under Section 45(6) of the

Act, being a statutory penalty, there is no

discretion vested with the Commissioner to

levy or not to levy, as long as the assessee

falls under Section 45(5) of the Act, 1969. 

3.5It   is   further   contended   that   even   the

Commissioner   has   no   discretion   and/or

authority to levy the penalty other than the

penalty provided under Section 45(6) of the

Act, 1969. 

3.6It   is   submitted   by   the   learned   counsel

appearing   on   behalf   of   the   State   that   the

moment it is found that the amount of tax

assessed or reassessed exceeds the amount of

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tax already paid by the dealer under Section

47 in respect of such period by more than

25% of the amount of tax so paid, the dealer

can be deemed to have failed to pay the tax to

the   extent   of   the   difference   between   the

amount so assessed or reassessed and the

amount   paid   and   in   that   eventuality   the

dealer is liable to pay a penalty not exceeding

one and one­half times the difference and/or,

on such dealer, who is deemed to have failed

to pay the tax to the extent mentioned in sub­

section (5) of Section 45, a penalty shall be

levied not exceeding one and one­half times

the   difference.  It  is  further  submitted  that

even the Commissioner has no jurisdiction

and/or authority to levy the penalty lesser

than one and one­half times the difference. 

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3.7It is contended by Ms. Mehta learned counsel

appearing   on   behalf   of   the   State   that   the

phrase used in sub­section (6) of Section 45

of the Act is “shall be levied”. Reliance was

placed on the decision of a three­judge bench

of this Court in the case of  Union of India

and   Ors.   Vs.   Dharamendra   Textile

Processors and Ors.; (2008) 13 SCC 369

wherein it has been held that when the term

is used “shall be leviable” the adjudicating

authority will have no discretion.  

3.8It   is   further   submitted   that   the   penalty

leviable under sub­section (6) of Section 45 of

the Act, is a statutory penalty and legislature

has consciously used the word “shall” and

even   for   interest   the   same   language   is

employed in Section 47(4A) of the Act. That

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the assessee is statutorily liable to pay the

penalty and interest. That therefore, the High

Court   has   committed   a   serious   error   in

deleting the penalty and interest, mainly, on

the   ground   that   the   amount   of   tax   has

already been paid by the assessee and that

the assessee was under the bonafide belief

that it was liable to pay the tax at rate of 2%.

3.9It is further contended by Ms. Mehta, learned

counsel appearing on behalf of the State that

the   non­payment   of   penalty   is   met   with

consequences under Section 45 of the Act,

1969, and is recoverable as an arrear of land

revenue.   That   it   is   well­settled   that   when

non­compliance or violation of a provision is

met with a consequence, then, the language

of the provision is deemed to be mandatory in

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nature.   It   is   therefore   submitted   that   the

statutory penalty cannot be done away with.

3.10It is submitted that in case the penalty is a

statutory penalty, there is no requirement to

prove  mens   rea  or   to   consider   the   aspect

regarding bonafide belief of the assessee while

computing payment of penalty and interest.

In support of the above submissions, learned

counsel appearing on behalf the State has

heavily relied upon the decisions of this Court

in the cases of State of Gujarat Vs. Arcelor

Mittal Nippon Steel India Limited; (2022) 6

SCC 459 and Chairman, SEBI Vs. Shriram

Mutual Fund and Anr.; (2006) 5 SCC 361;

Guljag   Industries   Vs.   Commercial   Taxes

Officer   (2007)   7   SCC   269;   Competition

Commission   of   India   Vs.   Thomas   Cook

Page 12 of 64

(India) Limited and Anr. (2018) 6 SCC 549,

as well as the decisions of the Gujarat High

Court in the cases of  Riddhi Siddhi Gluco

Biols Ltd. Vs. State of Gujarat; (2017) 100

VST 305 (Guj) and State of Gujarat Vs. Oil

and   Natural   Gas   Corporation   Limited;

(2017) 97 VST 506 (Guj).           

3.11It is submitted that  mens rea  can only be

expressly   included   in   the   law   by   the

legislature. The Court cannot fill in the gaps

and purport the requirement of an intention

or guilty mind of the assessee before levying

penalty and interest where the same is not

prescribed by the legislature.

3.12In so far as the decision of this Court in the

case of  Hindustan Steel Ltd. Vs. State of

Orissa; 1969 (2) SCC 627   relied upon on

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behalf   of   the   assessee   is   concerned,   it   is

vehemently submitted by the learned counsel

appearing on behalf of the State that the said

decision   shall   not   be   applicable   while

considering penalty and interest levied under

Section 45(6) and 47(4A) of the Act, 1969. It

is   contended   that   even   otherwise   in   the

present   case,   the   learned   Tribunal   had

specifically   recorded   findings   that   the   said

decision shall not be applicable since there is

nothing on record to prove that there was in

fact   a   bonafide   belief   of   the   respondent   ­

assessee.

3.13In so far as the reliance placed on behalf of

the assessee upon the decision of this Court

in   the   case   of  Dharamendra   Textile

Processors (supra)  is   concerned,   it   is

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submitted   by   Ms.   Mehta,   learned   counsel

appearing on behalf of the State that the said

decision also shall not be applicable to the

facts of the case at hand, more particularly,

considering the statutory provisions, namely,

Section 45(6) and Section 47(4A) of the Act. It

is submitted that in the said case, this Court

was considering Section 11AC of the Central

Excise Act. That the Parliament in its wisdom

has specifically incorporated the element of

mens rea  in Section 11AC by employing the

words,   “fraud,   collusion   or   any   wilful

misrepresentation or any wilful misstatement

or suppression of facts” and “intent to evade

payment of duty”. It is submitted that only

when an intention is built into the provision

and when the assessee’s intention is made

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relevant by the Parliament, can the courts

interpret and go into the issue as to whether

or not the evasion was bonafide or malafide.

No   such   language   is   employed   in   Section

45(6) and Section 47(4A) of the Act, 1969.

That a similar decision of this Court relied

upon on behalf of the assessee in the case of

Commissioner   of   Central   Excise,

Chandigarh Vs. Pepsi Foods Ltd; (2011) 1

SCC 601  is misconceived and shall not be

applicable to the facts of the case at hand

since it interprets Section 11AC of Central

Excise Act and the language of the provision

at hand and that in Section 11AC is starkly

opposite. 

3.14Ms.   Mehta,   learned   counsel   appearing   on

behalf of the State has further contended that

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even the reliance placed by the assessee upon

the decision of the Gujarat High Court in the

case of Jyoti Overseas P. Ltd. Vs. State of

Gujarat; 2017 SCC Online Guj 2511: (2017)

6 GSTL 388, is also misconceived and shall

not be applicable to the facts of the case at

hand. It is submitted that in the said case,

the High Court was dealing with Section 34(7)

of Gujarat VAT Act, in which the language

used is “If the Commissioner is satisfied that

the dealer, in order to evade or avoid payment

of tax…” That under the VAT Act, not only is

the Commissioner vested with discretion but

the   said   penalty   provision   is   applicable

specifically   when   the   assessee   has   an

intention to “evade or avoid payment of tax.”

That in the present case, the legislature in its

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wisdom   imposed   a   liability   of   penalty   and

interest without reference to any requirement

of mens rea on the part of the assessee.

3.15Making the above submissions and relying

upon the above decisions, it is prayed that

the   present   appeal   be   allowed   and   the

impugned judgment and order deleting the

penalty   and   interest   levied   under   Section

45(6) and Section 47(4A) of the Act, 1969 be

quashed and set aside.      

4. The present appeal is vehemently opposed by

Shri   V.   Lakshmikumaran,   learned   counsel

appearing   on   behalf   of   the   respondent   –

assessee   –   dealer.   It   is   submitted   at   the

outset that the penalty and interest is not

payable by the assessee in the facts of the

present case. It is further submitted that with

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reference   to   imposition   of   penalty,   as   per

statutory provision, penalty is leviable only if

differential tax liability (difference between tax

assessed and tax paid) is more than 25%.

That   according   to   the   assessee,   the

differential tax liability on merits is less than

25%, however, for the sake of argument, it is

assumed that the condition of 25% is fulfilled.

4.1Learned counsel appearing on behalf of the

respondent – assessee has made the following

submissions in support of the case on behalf

of the assessee that the assessee is not liable

to pay the penalty and interest: ­

(1)That for the purpose of argument that

penalty is not payable, the respondent is

within   his   legal   rights   to   argue   that

quantum of tax demand is not correct,

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even if the same was not pressed before

the High Court. 

(2)That section 45(5) of Gujarat Sales Tax

Act, 1969 creates a presumption which

is rebuttable in nature. 

(3)That   for  the   purpose  of   imposition  of

penalty   under   Section   45(6)   Gujarat

Sales   Tax   Act,   1969,  mens   rea,

blameworthy   conduct,   deliberate

violation, evil doing, fraud, suppression

(either one or more of them) must be

proved. 

(4)That   section   45(6)   of   the   Act,   1969

provides   for  imposition  of   penalty   not

exceeding   one   and   one­half   times   the

differential tax. The provision provides

for   an   upper   limit   for   imposition   of

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penalty; however, no minimum penalty

is   prescribed.   This   indicates   that   in

appropriate   cases   where   there   is   no

mens   rea,   the   authority   has   the

discretion to impose no penalty. 

(5)That in case the claim of the dealer for

payment of composition amount of 2% is

rejected, the dealer could pay the tax on

actual   value   of   goods   involved   in   the

execution of a works contract. Even in

such   a   scenario,   the   additional   tax

payable  would   be  less   than  25%  and

hence, the provision for penalty will not

be attracted. 

(6)No   interest   is   payable   under   Section

47(4­A) of Gujarat Sales Tax Act, 1969.

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4.2Elaborating   the   above   submissions,   it   is

submitted   that   the   levy   of   penalty   under

Section 45(6) of the Act would depend upon

the liability of the dealer to pay tax. That

accordingly, in case where there is a dispute

regarding imposition of penalty under Section

45(6), it becomes necessary to determine if

the dealer is liable to pay additional tax. It is

submitted   that   this   position   would   remain

unaltered   even   when   the   correctness   of

imposition of tax has not been argued before

the High Court. 

4.3It is next submitted that the respondent can,

in an appeal filed by the opposite party, re­

canvass   for   reversal   of   a   finding   reached

against   him   in   the   judgment.   Reliance   is

placed upon the decisions of this Court in the

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case of J.K. Cotton Spg. and Wvg. Mills Co.

Ltd. Vs. CCE; (1998) 3 SCC 540 and BHEL

Vs. Mahendra Prasad Jakhmola; (2019) 13

SCC 82. Learned counsel appearing on behalf

of   the   assessee   has   also   relied   upon   the

decision of the Gujarat High Court in the case

of Elecon Engineering Vs. State of Gujarat;

(1994) 93 STC 397.

4.4Relying upon the decision of this Court in the

case of  Director of Elementary Education

Vs. Pramod Kumar Sahoo; (2019) 10 SCC

674,   it   is   submitted   that   as   held   by   this

Court any concession in law made by either

counsel would not bind the parties, as it is

legally settled that advocates cannot throw

away legal rights or enter into arrangements

contrary to law. 

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4.5It is contended that in the present case, since

the penalty and interest were proposed to be

waived by following the decision in case of

Brooke   Bond   India   Limited (supra),   the

advocate of the dealer did not press the issue

of   demand   on   merits.   That   in   case   the

judgment of High Court is proposed to be

reversed   and   penalty   is   proposed   to   be

imposed,   it   will   become   necessary   to

adjudicate the dispute on merits as the same

is detrimental to the imposition of penalty.

4.6It is further contended that Section 45(5) of

the Act, 1969, provides that in case difference

between assessed tax and tax paid by the

dealer is more than 25%, the dealer shall be

deemed to have failed to pay the tax to the

extent   of   the   difference.   That   therefore,

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Section 45(5) creates presumption against the

dealer. 

4.7It is submitted that as held by this Court in

the case of  Nandlal Wasudeo Badwaik Vs.

Lata Nandlal Badwaik; (2014) 2 SCC 576 ,

there is a clear distinction in law between a

legal fiction and  presumption. Legal fiction

assumes existence of a fact which may not

really exist. However, a presumption of a fact

depends   on   satisfaction   of   certain

circumstances.   In   support   of   above

submissions,   reliance   is   also   placed   on

another   decision   of   this   Court   in   case   of

Bhuwalka Steel Industries Ltd. Vs. Union

of India; (2017) 5 SCC 598. 

4.8It   is   next   submitted   that   even   otherwise

Section   45(5)   of   the   Act   creates   a

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presumption   against   the   dealer   and   such

presumption is rebuttable in nature. That the

term   “burden   of   proof”   connotes   the

obligation   to   prove   a   fact   or   facts,   by

adducing   the   necessary   evidence.   It   is

submitted   that   any   statutory   provision   by

way   of   which   penalty   is   imposed   by   tax

authorities,   the   burden   of   proof   to   prove

mens   rea  lies   with   revenue,   however,   a

statute can shift the burden on the dealer in

certain circumstances. That therefore, such

presumption would be rebuttable in nature.

4.9It is submitted that Section 45(5) provides a

presumption that in case differential tax is

more than 25%, the dealer shall be deemed to

have   failed   to   pay   the   tax.   That   the

presumption contained in sub­section (5) is

Page 26 of 64

not   irrebuttable   but   rebuttable   in   nature.

That   this   is   specifically   so   because,   sub­

section (6) of Section 45 grants discretionary

power   to   the   assessing   officer   to   impose

penalty.   It   is   submitted   that   in   case   the

presumption is rebutted by the dealer, the

assessing officer will not impose penalty in

exercise of its discretionary power. Reliance is

placed upon the decision of this Court in the

case   of  State   of   M.P.   Vs.   Bharat   Heavy

Electricals; (1997) 7 SCC 1. That therefore,

Section 45(5) of the Act, 1969, merely shifts

the   burden   of   proof,   however,   the

presumption contained in the Section is not

irrebuttable. 

4.10As regards the other preposition that for the

purpose   of   imposition   of   penalty   under

Page 27 of 64

Section 45(6), mens rea, etc., must be proved,

it is vehemently submitted that it is a general

principle   of   law,   based   on   the   maxim   of

“actus non facit reum mens sit rea” that an act

does not make a man guilty, unless it can

also be shown that he was aware that he was

doing wrong. It is submitted that legislative

attitude towards the concept of  mens rea  in

tax   laws   and   the   judicial   practice   in

emphasising   its   importance   therefore,

deserves   careful   consideration.   Learned

counsel   appearing   on   behalf   of   the

respondent ­ assessee has also relied upon

the   decision   of   this   Court   in  the   cases  of

Hindustan   Steel   Ltd. (supra);  Cement

Marketing Co. of India Ltd. Vs. Assistant

Commissioner   of   Sales   Tax,   Indore   and

Page 28 of 64

Ors.;   1980   (6)   ELT   295   (S.C.)  and

Commissioner   of   Central   Excise,

Chandigarh (supra)  in support of his above

submissions to the effect that before levy of

penalty   and   interest  mens   rea  has   to   be

proved by the department. 

4.11It is further submitted by the learned counsel

appearing   on   behalf   of   the   respondent   –

assessee that Section 45(6) of the Act, 1969,

provides   for   imposition   of   penalty   “not

exceeding”   one   and   one­half   times   the

differential tax demand. That employment of

the term “not exceeding” postulates that the

authority   has   been   conferred   with   a

discretionary jurisdiction to levy penalty. By

necessary implication, the authority may not

levy penalty. If it has the discretion not to levy

Page 29 of 64

penalty,   existence   of  mens   rea  becomes

relevant factor. Relance is placed upon the

decision of the Gujarat High Court in the case

of Jyoti Overseas P. Ltd. (supra). 

4.12Learned counsel appearing on behalf of the

assessee has submitted that on the aforesaid

grounds   the   interest   levied   under   Section

47(4A) of the Act, 1969, is also bad in law and

therefore, the High Court has rightly set aside

the same.

4.13Making the above submissions, it is prayed

that the present appeal be dismissed.           

5. We have heard learned counsel appearing on

behalf of the respective parties at length.

6. At the outset, it is required to be noted that

the assessing officer levied the penalty and

interest   against   the   respondent   –   assessee

under   the   provisions   of   Section   45(6)   and

Page 30 of 64

Section 47(4A) of the Act, 1969, which levy

came   to   be   confirmed   by   the   learned

Tribunal.   However,   by   the   impugned

judgment and order, the High Court has set

aside the levy of penalty and interest, mainly

on  the   grounds   that   the   tax  imposed   had

already been paid and that the assessee was

under a bonafide opinion as to its tax liability

and   was   following   expert   advice   and

therefore,   paid   the   tax   at   the   rate   of   2%.

Therefore,   according   to   the   High   Court,

though   not   specifically   mentioned/opined,

there was no  mens rea  on the part of the

respondent – assessee in not paying the tax

at the rate of 2% and in making the payment

of the tax at 2%. Therefore, the short question

which is posed for consideration of this Court

Page 31 of 64

is   whether   while   imposing/levying   penalty

and interest leviable under Section 45(6) and

Section 47(4A) of the Act, 1969, mens rea on

the  part of  the assessee  is required to be

considered.

6.1While appreciating the submissions made on

behalf of the respective parties on the levy of

the penalty and interest under Section 45(6)

and Section 47(4A) of the Act, the relevant

sections i.e., Section 45 and Section 47(4A) of

the Act, 1969 are required to be referred to,

which are as under: ­

“45.   Imposition   of   penalty   in   certain

cases and bar to prosecution. 

(1)Where any dealer or Commission

agent   becomes   liable   to   pay

purchase   tax   under   the

provisions   of   sub­section   (1)   or

(2)   of   section   16,   then,   the

Commissioner   may   impose   on

him,   in   addition   to   any   tax

payable –

Page 32 of 64

(a)if he has included the purchase

price of the goods in his turnover

of purchase as required by sub­

section (1) of section 16, a sum

by way of penalty not exceeding

half the amount of tax, and

(b)if   he   has   not   so   included   the

purchase   price   as   aforesaid,   a

sum   by   way   of   penalty   not

exceeding   twice   the   amount   of

tax.

(2)If it appears to the Commissioner

that such dealer ­

(a)has   failed   to   apply   for

registration   as   required   by

section 29, or

(b)has   without   reasonable   cause,

failed to comply with the notice

under section [41, 44 or 67] or

(c)has concealed the particulars of

any   transaction   or   deliberately

furnished  inaccurate  particulars

of any transaction liable to tax, 

the   Commissioner   may   impose

upon   the   dealer   by   way   of

penalty,   in   addition   to   any   tax

assessed   under   section   41   or

reassessed   under   section   44   or

revised under section 67 a sum

not   exceeding   one   and   one­half

times the amount of the tax.

(3)If   a   dealer   fails   to   present   his

licence,   recognition   or   as   the

Page 33 of 64

case   may   be,   permit   for

cancellation   as   required   by

section   35   or   36,   the

Commissioner may impose upon

the dealer by way of penalty, a

sum not exceeding two thousand

rupees.

(3A) If   a   dealer   fails   to   furnish   any

declaration or any return by the

prescribed   date   as   required

under sub­section (1) of section

40,   the   commissioner   shall

impose upon such dealer by way

of penalty for each declaration or

return,   a   sum   of   two   hundred

rupees for every month or part of

a month comprised in the period

commencing   from   the   day

immediately   after   the   expiry   of

prescribed   date   and   ending   on

the date on which a declaration

or return is furnished.  

(4)If a dealer fails without sufficient

cause to furnish any declaration

or   any   return   [as   required   by

proviso to sub­section (1) or sub­

section   (2)   of   section   40],   the

Commissioner may impose upon

the dealer by way of penalty, a

sum not exceeding two thousand

rupees.

(5)Where in the case of a dealer the

amount of tax ­

(a) assessed for any period under

section 41 or 50; or

Page 34 of 64

(b)   reassessed   for   any   period

under section 44; 

exceeds   the   amount   of   tax

already   paid   under   sub­section

(1), (2) or (3) of section 47 by the

dealer in respect of such period

by more than twenty five per cent

of the amount of tax so paid, the

dealer shall be deemed to have

failed to pay the tax to the extent

of   the   difference   between   the

amount   so   assessed   or

reassessed as aforesaid and the

amount paid.

(6)[Where   under   sub­section   (5)   a

dealer is deemed to have failed to

pay   the   tax   to   the   extent

mentioned   in   the   said   sub­

section, there shall be levied on

such   dealer   a   penalty   not

exceeding one and one­half times

the difference referred to in sub­

section (5).]”

XXX XXX  XXX

“47.   Payment   of   Tax   and   Deferred

Payment of Tax, etc.

(4A)   (a) Where   a   dealer   does   not

pay   the   amount   of   tax

within the time prescribed

for its payment under sub­

section (1), (2) or (3), then

there shall be paid by such

dealer   for   the   period

commencing on the date of

expiry   of   the   aforesaid

Page 35 of 64

prescribed time and ending

on the date of payment of

the amount of tax, simple

interest,   at   the   rate   of

[eighteen   per   cent],   per

annum   on   the  amount   of

tax not so paid or on any

less   amount   thereof

remaining   unpaid   during

such period.

(b) Where   the   amount   of   tax

assessed or reassessed for

any   period,   under   section

41 or section 44, subject to

revision   if   any   under

section   67,   exceeds   the

amount of tax already paid

by a dealer for that period,

there shall be paid by such

dealer,   for   the   period

commencing from the date

of   expiry   of   the   time

prescribed   for   payment   of

tax under  sub­section (1),

(2)   or   (3)   and   ending   on

date   of   order   of

assessment,   reassessment

or,   as   the   case   may   be,

revision, simple interest at

the   rate   of   [eighteen   per

cent]   per   annum   on   the

amount of tax not so paid

or   on   any   less   amount

thereof   remaining   unpaid

during such period.”

6.2On a fair reading of Section 45 of the Act, it

can be seen that as per sub­section (2) of

Page 36 of 64

Section   45   of   the   Act,   1969,   penalty   is

leviable if it appears to the Commissioner that

a dealer has concealed the particulars of any

transaction   or   deliberately   furnished

inaccurate   particulars   of   any   transaction

liable to tax. In the present case, it cannot be

said   that   the   dealer   has   concealed   the

particulars of any transaction or deliberately

furnished   inaccurate   particulars   of   any

transaction liable to tax. However, in so far as

penalty   leviable   under   sub­section   (6)   of

Section 45 of the Act, 1969 is concerned, the

penalty leviable under the said provision is as

such,   a   statutory   penalty   and   there   is   no

discretion vested with the Commissioner as to

whether   to  levy   the   penalty   leviable  under

sub­section (6) of Section 45 of the Act, 1969

or not. Sub­section (5) of Section 45 provides

Page 37 of 64

that in the case of a dealer where the amount

of tax assessed for any period under sections

41 or 50 or re­assessed for any period under

Section 45 exceeds the amount of tax already

paid by the dealer in respect of such period

by more than 25% of the amount of tax so

paid,   the   dealer   shall   be   deemed   to   have

failed to pay the tax to the extent of difference

between amount so assessed or re­assessed

as   aforesaid   and   the   amount   paid.

Considering sub­section (5) of Section 45 of

the Act, 1969, if a dealer is deemed to have

failed to pay the tax to the extent mentioned

in sub­section (5), there  shall  be levied on

such dealer a penalty not exceeding one and

one­half times the difference referred to in

sub­section (5). Under the circumstances, to

Page 38 of 64

the aforesaid extent and on the difference of

tax, as per sub­section (5) of Section 45, the

respondent – assessee – dealer shall be liable

to pay the penalty as mentioned under sub­

section (6) of Section 45.       

6.3Section   45   confers   power   to   levy/impose

penalty   in   certain   cases.   In   certain   cases,

enumerated   in   Section   45   of   the   Act,   the

penalty   imposable   is   distinct   with   the

assessment   such   as   Section   45(1)(a)(b).

However,   in   so   far   as   penalty   imposable

under Section 45(5) and 45(6) of the Act is

concerned,   it   has   a   direct   bearing   or

connection with the order of assessment and

the determination of the tax liability. Sub­

section (5) of Section 45 provides that where

in the case of a dealer the amount of tax

assessed for any period under Section 41 or

Page 39 of 64

50;   or   re­assessed   for   any   period   under

Section 44; exceeds the amount of tax already

paid by the dealer under sub­section (1), (2)

or (3) of Section 47 of the Act, in respect of

such period by more than 25% of the amount

of tax so paid, the dealer shall be deemed to

have failed to pay the tax to the extent of the

difference between the amount so assessed or

re­assessed   as   aforesaid   and   the   amount

paid. Sub­section (6) of Section 45 provides

that where under sub­section (5), a dealer is

deemed to have failed to pay the tax to the

extent   mentioned   in   the   said   sub­section,

there shall be levied on such dealer a penalty

not   exceeding   one   and   one­half   times   the

difference referred to in sub­section (5). Thus,

on a bare reading of sub­sections (5) and (6)

Page 40 of 64

of Section 45, it is evident that it is integral

part of the assessment that the penalty be

levied on the difference of amount of tax paid

and amount of tax payable as per the order of

assessment or re­assessment as the case may

and the same shall be automatic. Therefore,

when the penalty on the difference of amount

of tax paid and tax payable is more than 25%

of the amount of tax so paid, there shall be

automatic levy of penalty under Section 45(6)

of the Act. 

6.4From the language of Section 45(6) of the Act,

it can be seen that the penalty leviable under

the said provision is a statutory penalty. The

phrase used is “shall be levied.” The moment

it is found that a dealer is deemed to have

failed to pay the tax to the extent mentioned

in sub­section (5) of Section 45, there shall be

Page 41 of 64

levied on such dealer a penalty not exceeding

one and one­half times the difference referred

to in sub­section (5). As per sub­section (5),

where in the case of a dealer the amount of

tax   assessed   or   re­assessed   exceeds   the

amount of tax already paid by the dealer in

respect of such period by more than 25% of

the amount of tax so paid, the dealer shall be

deemed to have failed to pay the tax to the

extent of the difference between the amount

so assessed or re­assessed and the amount

paid. Therefore, the moment it is found that a

dealer is to be deemed to have failed to pay

the   tax   to   the   extent   mentioned   in   sub­

section (5), the penalty is automatic. Further,

there   is   no   discretion   with   the   assessing

officer either to levy or not to levy and/or to

levy   any   penalty   lesser   than   what   is

Page 42 of 64

prescribed/mentioned in Section 45(6) of the

Act, 1969. In that view of the matter, there is

no question of considering any  mens rea  on

the part of the assessee/dealer.

6.5At this stage, a few decisions of this Court as

well as decisions of the Gujarat High Court

(on levy of penalty and interest under the

Gujarat   Sales   Tax   Act)   are   required   to   be

referred   to.   In   the   case   of  Dharamendra

Textile Processors (supra) after referring and

considering another decision of this Court in

the case of Shriram Mutual Fund (supra), it

is observed and held that when the term used

“shall be leviable,” the adjudicating authority

will have no discretion. 

6.6In the case of Shriram Mutual Fund (supra)

while   dealing   and/or   considering   similar

Page 43 of 64

provision under the SEBI Act, it is observed

and held that  mens rea  is not an essential

ingredient for contravention of the provisions

of a civil Act. While interpreting the similar

provision of SEBI Act, it is observed that the

penalty is attracted as soon as contravention

of the statutory obligations as contemplated

by the Act is established and, therefore, the

intention   of   the   parties   committing   such

violation   becomes   immaterial.   In   the   case

before this Court, the Tribunal relied on the

judgment in the case of Hindustan Steel Ltd.

(supra).  However, this Court did not agree

with the view taken by the Tribunal relying

upon the decision in the case of  Hindustan

Steel   Ltd.   (supra)  by   observing   that   it

pertained   to   criminal/quasi   criminal

Page 44 of 64

proceedings. This   Court   observed   that   the

decision in the case of Hindustan Steel Ltd.

(supra) shall not have any application as the

same relates to imposition of civil liabilities

under the SEBI Act and the Regulations and

the proceedings under the said Act are not

criminal/quasi­criminal   proceedings. In

paragraphs 34 and 35, it is observed and held

as under: ­     

“34. The   Tribunal   has   erroneously

relied   on   the   judgment   in Hindustan

Steel   Ltd. v. State   of   Orissa [(1969)   2

SCC   627   :   AIR   1970   SC   253]   which

pertained   to   criminal/quasi­criminal

proceedings.   That   Section   25   of   the

Orissa   Sales   Tax   Act   which   was   in

question   in   the   said   case   imposed   a

punishment of imprisonment up to six

months and fine for the offences under

the   Act.   The   said   case   has   no

application in the present case which

relates to imposition of civil liabilities

under   the   SEBI   Act   and   the

Regulations   and   is   not   a

criminal/quasi­criminal proceeding.

35. In our considered opinion, penalty

is   attracted   as   soon   as   the

Page 45 of 64

contravention   of   the   statutory

obligation as contemplated by the Act

and the Regulations is established and

hence   the   intention   of   the   parties

committing   such   violation   becomes

wholly   irrelevant.   A   breach   of   civil

obligation which attracts penalty in the

nature of fine under the provisions of

the   Act   and   the   Regulations   would

immediately attract the levy of penalty

irrespective   of   the   fact   whether

contravention   must   be   made   by   the

defaulter with guilty intention or not.

We   also   further   held   that   unless  the

language   of   the   statute   indicates   the

need to establish the presence of mens

rea,   it   is   wholly   unnecessary   to

ascertain whether such a violation was

intentional or not. On a careful perusal

of Section 15­D(b) and Section 15­E of

the Act, there is nothing which requires

that mens   rea must   be   proved   before

penalty   can   be   imposed   under   these

provisions.   Hence   once   the

contravention   is   established   then   the

penalty is to follow.”

6.7In the case of Guljag Industries (supra) while

considering Sections 78(2) and 78(5) of the

Rajasthan   Sales   Tax   Act,   1994   which

provided for penalty equal to thirty percent of

the   value   of   goods   for   possession   or

movement of goods, whether seized or not, in

Page 46 of 64

violation  of  the  provisions  of  Clause (a)  of

sub­section (2) or for submission of false or

forged documents or declaration, this Court

in paragraph 9 observed as under: ­ 

“9. Existence   of  mens   rea  is   an

essential   ingredient   of   an   offence.

However, it is a rule of construction. If

there is a conflict between the common

law   and   the   statute   law,   one   has   to

construe a statute in conformity with

the common law. However, if it is plain

from the statute that it intends to alter

the   course   of   the   common   law,   then

that plain meaning should be accepted.

Existence of  mens rea  is an essential

ingredient   in   every   offence;   but   that

presumption   is  liable   to  be   displaced

either   by   the   words   of   the   statute

creating the offence or by the subject­

matter with which it deals. A penalty

imposed for a tax delinquency is a civil

obligation, remedial and coercive in its

nature,   and   is   different   from   the

penalty for a crime. “

That   thereafter,   after   following   the

decision in the case of Shriram Mutual Fund

(supra),  this Court observed and held that

mens rea  is not an essential ingredient for

contravention of the provisions of a civil act.

Page 47 of 64

It is further observed that the breach of a civil

obligation which attracts penalty under the

Act   would   immediately   attract   the   levy   of

penalty irrespective of the fact whether the

contravention was made by the defaulter with

any guilty intention. In paragraph 30, it is

observed and held as under: ­

“30. In Chairman,   SEBI  v. Shriram

Mutual Fund [(2006) 5 SCC 361] this

Court   found   on   facts   that   a   mutual

fund   had   violated   the   SEBI   (Mutual

Funds)   Regulations,   1996.   Under   the

said Regulations there was a restriction

placed   on   the   mutual   fund   on

purchasing   or   selling   shares   through

any broker associated with the sponsor

of the mutual fund beyond a specified

limit.   It   is   in   this   context   that   the

Division Bench of this Court held that

mens   rea  was   not   an   essential

ingredient   for   contravention   of   the

provisions of a civil act. The breach of a

civil obligation  which attracts  penalty

under   the   Act   would   immediately

attract the levy of penalty irrespective

of the fact whether the contravention

was   made   by   the   defaulter   with   any

guilty   intention.   It   was   further   held

that   unless   the   language   of   the

provision intends the need to establish

mens rea, it  is generally  sufficient  to

prove   the   default/contravention   in

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complying   with   the   statute.   In   the

present case also the statute provides

for a hearing. However, that hearing is

only to find out whether the assessee

has contravened Section 78(2) and not

to   find   out   evasion   of   tax   which

function is assigned not to the officer at

the   check­post   but   to   the   AO   in

assessment   proceedings.   In   the

circumstances, we are of the view that

mens rea is not an essential element in

the   matter   of   imposition   of   penalty

under Section 78(5).”

6.8In the case of  Competition Commission of

India (supra)  while considering Section 43A

of the Competition Act, 2002 which provides

for a penalty, it is observed in paragraphs 34

to 37 as under: ­

“34. If   the   ultimate   objective   test   is

applied,   it   is   apparent   that   market

purchases   were   within   view   of   the

scheme that was framed. As such the

subsequent change of law also did not

come to the rescue of the respondents

considering   the   substance   of   the

transaction.   The   market   purchases

were  part   of  the  same   transaction  of

the combination.

35. Lastly, the submission raised that

there were no mala fides on the part of

the respondent as such penalty could

not have been imposed. We are unable

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to   accept   the   submission.   The  mens

rea  assumes   importance   in   case   of

criminal   and   quasi­criminal   liability.

For   the   imposition   of   penalty   under

Section   43­A,   the   action   may   not   be

mala fide in case there is a breach of

the statutory provisions of the civil law,

penalty   is   attracted  simpliciter   on   its

violation. The imposition of penalty was

permissible and it was rightly imposed.

There was no requirement of mens rea

under   Section   43­A   or   intentional

breach as an essential element for levy

of penalty. Section 43­A of the Act does

not use the expression “the failure has

to   be   wilful   or   mala   fide”   for   the

purpose of imposition of penalty. The

breach of the provision is punishable

and   considering   the   nature   of   the

breach,   it   is   open   to   impose   the

penalty.

36. In SEBI v. Shriram   Mutual

Fund [SEBI v. Shriram   Mutual   Fund,

(2006)   5   SCC   361]   ,   with   respect   to

imposition   of   penalty   on   failure   to

comply   with   the   civil   obligation   this

Court   has   laid   down   thus:   (SCC   pp.

371 & 376, paras 29 & 35)

“29. … In our opinion, mens rea

is   not   an   essential   ingredient   for

contravention of the provisions of a civil

Act.   In   our   view,   the   penalty   is

attracted as soon as the contravention

of   the   statutory   obligations   as

contemplated by the Act is established

and,   therefore,   the   intention   of   the

parties   committing   such   violation

becomes   immaterial.   In   other   words,

the breach of a civil obligation which

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attracts penalty under the provisions of

an Act would immediately attract the

levy of penalty irrespective of the fact

whether   the   contravention   was   made

by   the   defaulter   with   any   guilty

intention   or   not.   This   apart   [that]

unless   the   language   of   the   statute

indicates   the   need   to   establish   the

element   of  mens   rea,   it   is   generally

sufficient   to   prove   that   a   default   in

complying   with   the   statute   has

occurred. … the penalty has to follow

and   only   the   quantum   of   penalty   is

discretionary.

***

35. In our considered opinion, a

penalty   is   attracted   as   soon   as   the

contravention   of   the   statutory

obligation as contemplated by the Act

and the Regulations is established and

hence   intention   of   the   parties

committing   such   violation   becomes

wholly   irrelevant.   …   We   also   further

hold  that   unless   the   language   of  the

statute indicates the need to establish

the presence of  mens rea, it is wholly

unnecessary to ascertain whether such

a violation was intentional or not. On a

careful perusal of Section 15­D(b) and

Section   15­E   of   the   Act,   there   is

nothing which requires that  mens rea

must be proved before a penalty can be

imposed under these provisions. Hence

once   the   contravention   is   established

then the penalty is to follow.”

37. The   imposition   of   penalty   under

Section 43­A is on account of breach of

a civil obligation, and the proceedings

are neither criminal nor quasi­criminal;

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the   penalty   has   to   follow.   Only

discretion   in   the   provision   under

Section   43­A   is   with   respect   to

quantum of penalty.”

6.9The Gujarat High Court while considering the

very   provision   and   penalty   and   interest

imposed   under   Section   45(6)   and   Section

47(4A)   of   the   Act,   1969,   has   taken   a

consistent view in the cases of Riddhi Siddhi

Gluco Biols Ltd. (supra) and Oil and Natural

Gas Corporation Limited (supra)  that the

penalty leviable under Section 45(6) of the Act

is   a   statutory   and   mandatory   penalty   and

there is no question of any mens rea on the

part of the assessee to be considered. In the

aforesaid decisions, it is observed and held

that   levy   of   penalty   is   automatic   on   the

eventualities occurring under sub­section (5)

of Section 45 of the Act, 1969. 

Page 52 of 64

6.10In the recent decision in the case of Arcelor

Mittal Nippon Steel India Limited (supra),

while   dealing   with   the   very   provision   of

Section 45 of the Act, 1969, it is observed and

held in para 23 and 23.1 as under: ­ 

“23. Now,   so   far   as   the   levy   of

penalty   is   concerned,   it   is   to   be

noted   that   the   penalty   is   leviable

under   Section   45   and   such   a

penalty   is   leviable   under   sub­

sections (5) and (6) of Section 45 of

the   Act,   1969   and   the   penalty   is

leviable on purchase tax assessed. It

provides that if the difference of tax

paid   and   tax   leviable/assessed   is

more   than   twenty­five   percent,   in

that   case,   the   dealer   shall   be

deemed to have failed to pay the tax

to   the   extent   of   the   difference

between the amount so assessed/re­

assessed and the amount paid and,

in that case, there shall be levied on

such dealer a penalty not extending

one   and   one­half   times   the

difference   as   per   sub­section   (5).

Therefore, there being difference of

more   than   twenty   five   percent,

penalty to the aforesaid extent shall

be leviable. This is a clear case of

false and wrong claim of exemption,

as   the   exempted   goods   were

Page 53 of 64

transferred   to   a   third   person   and

used in an ‘ineligible’ industry. This

is a case of deliberate violation and

evil doing.

23.1 In   the   present   case,   as   the

difference   between   total   tax   paid

and the purchase tax is more than

twenty­five percent, the respondent

is deemed to have failed to pay the

tax as per sub­section (5) of Section

45 and, therefore, liable to pay the

penalty not exceeding one and one­

half times. The words used in sub­

section  (6)  of   Section  45  is  “there

shall   be   levied   on   such   dealer   a

penalty not exceeding one and one­

half times the difference”. As noted

above,   in   the   present   case,   the

modus operandi which was adopted

by   the   respondent   ­   Essar   Steel

warrants a penalty. Though, the raw

material was required to be used by

itself   for   the   manufacture   of   their

goods, after availing the exemption

as eligible unit and instead of using

the same for itself/himself, the ESL

sold   the   raw   materials   to   an

‘ineligible’ entity ­ EPL, who used it

for manufacture of its own goods ­

generating   the   electricity,   which

again came to be sold to ESL under

the power purchase agreement.”

6.11Even   otherwise,   the   word   used   in   Section

45(6) is “shall be levied”. The dealer shall be

Page 54 of 64

liable to pay the penalty not exceeding one

and one­half times of the difference of the tax

as mentioned in sub­section (5) of Section 45

of   the   Act,   1969.   The   language   used   in

Section   45   is   precise,   plain   and

unambiguous. The intention of the legislature

is   very   clear   and   unambiguous   that   the

moment   any   eventuality   as   mentioned   in

Section   45(5)   occurs,   the   penalty   shall   be

leviable as mentioned in sub­section (6) of

Section   45.   No   other   word   like  mens   rea

and/or   satisfaction   of   the   assessing   officer

and/or other language is used like in Section

11AC of the Central Excise Act. It is a well

settled principle in law that the Court cannot

read   anything   into   a   statutory   provision

which is plain and unambiguous. A statute is

Page 55 of 64

an   edict   of   the   legislature.   The   language

employed in a statute is the determinative

factor of legislative intent. As per the settled

position of law, the intention of the legislature

is primarily to be gathered from the language

used, which means that attention should be

paid to what has been said as also to what

has not been said. The courts cannot aid the

legislatures' defective phrasing of an Act; they

cannot   add   or   mend,   and   by   construction

make up deficiencies which are left there. 

6.12Under   the   circumstances,   on   strict

interpretation of Section 45 and Section 47 of

the Act, 1969, the only conclusion would be

that the penalty and interest leviable under

Section 45 and 47(4A) of the Act, 1969 are

statutory   and   mandatory   and   there   is   no

discretion   vested   in   the

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Commissioner/Assessing   Officer   to   levy   or

not to levy the penalty and interest other than

as mentioned in Section 45(6) and Section 47

of the Act, 1969. It is needless to observe that

such an interpretation has been made having

regard to the tenor of Sections 45 and 47 of

the Act, 1969 and the language used therein. 

6.13In so far as the decisions relied upon by the

learned counsel appearing on behalf of the

respondent – assessee – dealer, referred to

hereinabove,   are   concerned,   none   of   the

decisions shall be applicable to the facts of

the case at hand, while dealing with Section

45   and   Section   47   of   the   Act,   1969.   The

words/language   of   the   relevant   provisions

that   fell   for   consideration   in   the   decisions

relied upon on behalf of the respondent is

altogether different from the language used in

Page 57 of 64

Section 45 and Section 47 of the Act, 1969. In

the case of Dharamendra Textile Processors

(supra), this Court was considering Section

11AC of the Central Excise Act. In Section

11AC, the words used are “fraud, collusion or

any   wilful   misrepresentation   or   any   wilful

misstatement   or   suppression   of   facts”   and

“intent to evade payment of duty.” In that

view of the matter, the mens rea will play an

important role. Therefore, the said decision

shall   not   be   applicable   while   considering

Section 45 and Section 47 of the Act, 1969. A

similar decision in the case of  Pepsi Foods

Ltd   (supra)  also   shall   not   be   applicable

and/or of any assistance to the respondent –

assessee – dealer. 

Page 58 of 64

6.14In so far as the submissions on behalf of the

respondent – dealer – assessee that as such

the dealer shall not be liable to pay the tax at

the rate of 12% and that it was incompetence

on   the   part   of   the   authority   to   prove   the

difference of  more  than 25% and  that  the

concession was wrongly given by the learned

Senior Advocate appearing on behalf of the

respondent   –   assessee   –   dealer   before   the

High Court are concerned, at the outset, it is

required to be noted that a conscious decision

was   taken   by   the   learned   Senior   Advocate

appearing   on   behalf   of   the   dealer,   who

appeared   before   the   High   Court   and

therefore, he did not press the issue/question

on the liability to pay the tax at the rate of

12% was wrongly given. It is to be noted that

the   respondent   –   dealer   was   represented

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through   a   very   senior   advocate   before   the

High Court. Therefore, it cannot be said that

the   concession   was   wrongly   given.   While

referring   the   submissions   made   by   the

learned Senior Advocate, appearing on behalf

of the respondent – assessee – dealer, the

High Court has recorded as under: ­ 

“4. Learned Senior Counsel Mr. S

N Shel at, appearing with Mr.H A

Dave,   learned   Advocate   for   the

appellant   has   fairly   conceded   that

looking   to   the   fact   that   the

respondent   has   passed   the

assessment   order   on   the   basis   of

material available with it, they were

required to pay the tax on the basis

of 12% and that has been paid by

the   appellant   since   the   opinion  of

the expert was turned out.”

It   is   not   true   that   the   learned   Senior

Advocate,   appearing   on   behalf   of   the

respondent   –   assessee   –   dealer,   was

considering the decision of the in the case of

Brooke Bond India Limited (supra). It was a

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conscious decision taken not to press into

service the issue No. 1 and 2, that is with

respect to the liability to pay the tax at the

rate   of   12%.   Therefore,   the   decision   relied

upon by the learned counsel appearing on

behalf of the respondent – assessee on the

concession   given   by   the   learned   Senior

Advocate,   appearing   on   behalf   of   the

respondent – assessee before the High Court,

would not be applicable to the facts of the

case on hand. 

6.15In so far as the reliance placed by the learned

counsel on behalf of the respondent – dealer

on the decision of this Court in the case of

Hindustan Steel Ltd. (supra)  is concerned,

at the outset, it is required to be noted that

the learned Tribunal specifically found that

there was nothing on record to prove that

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there   was   in   fact   a   bonafide   belief   of   the

respondent herein, that it would be required

to   pay   tax   at   2%   only.   As   observed

hereinabove and on plain reading of Section

45 and Section 47 of the Act, 1969 and as

observed   hereinabove,   on   the   eventualities

occurring under sub­section (5) of Section 45,

there   shall   be   levied   penalty   mentioned   in

sub­section (6) of Section 45 and the liability

to pay the interest is incurred as mentioned

in Section 47(4A). The impugned judgment

and order passed by the High Court on the

grounds that the amount of tax has already

been paid by the assessee – dealer; that the

assessee   –   dealer   was   under   the   bonafide

belief that it was liable to pay the tax at the

rate   of   2%,   is   unsustainable.   None   of   the

aforesaid   grounds   would   justify   deletion   of

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the   penalty   and   interest   leviable/payable

under Section 45(6) and Section 47(4A) of the

Act, 1969. As observed hereinabove, in the

case of  Shriram Mutual Fund (supra),  this

Court distinguished the decision in the case

of Hindustan Steel Ltd. (supra) and even set

aside the order passed by the Tribunal which

was   relying   upon   the   decision   in   case   of

Hindustan Steel Ltd. (supra).      

7. In   view   of   the   above   and   for   the   reasons

stated above, the present appeal succeeds.

The impugned judgment and order passed by

the High court is hereby quashed and set

aside. The order(s) passed by the Assessing

Officer confirmed up to the Tribunal to levy

penalty and interest under Section 45(6) and

Section 47(4A) of the Act, 1969, are hereby

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restored.   Present   appeal   is   accordingly

allowed. In the facts of the case, there shall

be no order as to costs.   

………………………………….J.

[M.R. SHAH]

………………………………….J.

[B.V. NAGARATHNA]

NEW DELHI;

APRIL 17, 2023

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