THE STATE OF GUJARAT AND ANR. vs. M/S. SAW PIPES LTD. (KNOWN AS JINDAL SAW LTD.)

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 Signature Not Verified Digitally signed by R Natarajan Date: 2023.04.17 17:02:04 IST Reason: 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 Page 2 of 64 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: ­

the First Appellate Authority i.e., Joint Sales Tax   Commissioner.   By   order   dated Page 3 of 64 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 Page 4 of 64 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 Page 5 of 64 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.      Page 6 of 64 3. Ms.   Aastha   Mehta,   learned   counsel   has appeared with Ms. Deepanwita Priyanka, on behalf of the State.  3.1 Ms.   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. 3.2 It 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.  3.3 It is next submitted that the High Court has not   properly   considered   the   fact   that   the penalty   leviable   under   Section   45(6)   of   the Page 7 of 64 Act, 1969, is a statutory penalty and hence, is compulsorily leviable.  3.4 It 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.  3.5 It   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.  3.6 It   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 Page 8 of 64 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.  Page 9 of 64 3.7 It 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.   3.8 It   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 Page 10 of 64 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%. 3.9 It 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 Page 11 of 64 nature.   It   is   therefore   submitted   that   the statutory penalty cannot be done away with. 3.10 It 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 and   SCC 459  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) .            3.11 It  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. 3.12 In 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 Page 13 of 64 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. 3.13 In 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 Page 14 of 64 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   in Section 11AC by employing the mens rea 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 Page 15 of 64 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.  3.14 Ms.   Mehta,   learned   counsel   appearing   on behalf of the State has further contended that Page 16 of 64 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 Page 17 of 64 wisdom   imposed   a   liability   of   penalty   and interest without reference to any requirement of  mens rea  on the part of the assessee. 3.15 Making   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 Page 18 of 64 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. 4.1 Learned 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, Page 19 of 64 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 Page 20 of 64 penalty; however, no minimum penalty is   prescribed.   This   indicates   that   in appropriate   cases   where   there   is   no ,   the   authority   has   the mens   rea 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. Page 21 of 64 4.2 Elaborating   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.  4.3 It 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 Page 22 of 64 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. 4.4 Relying 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.  Page 23 of 64 4.5 It 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. 4.6 It 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, Page 24 of 64 Section 45(5) creates presumption against the dealer.  4.7 It 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 .  4.8 It   is   next   submitted   that   even   otherwise Section   45(5)   of   the   Act   creates   a Page 25 of 64 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. 4.9 It 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.  4.10 As 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,   in support of his above Chandigarh (supra) submissions to the effect that before levy of penalty   and   interest   mens   rea   has   to   be proved by the department.  4.11 It 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) 4.12 Learned 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. 4.13 Making 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. 6.1 While 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.” 6.2 On 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.        6.3 Section   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.  6.4 From 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. 6.5 At 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    after referring and Textile Processors (supra) considering another decision of this Court in the case of    , it Shriram Mutual Fund (supra) is observed and held that when the term used “shall be leviable,” the adjudicating authority will have no discretion.  6.6 In 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 by   observing   that   it Steel   Ltd.   (supra)   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: ­       

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6.7 In 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: ­ 

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: ­

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6.8 In 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

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6.9 The 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 that   the Gas   Corporation   Limited   (supra)   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 6.10 In 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.” 6.11 Even   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.  6.12 Under   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 Page 56 of 64 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.  6.13 In 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 6.14 In 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 Page 59 of 64 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 Page 60 of 64 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.  6.15 In 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 Page 61 of 64 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 Page 62 of 64 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   and even set Hindustan Steel Ltd. (supra) 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 Page 63 of 64 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 Page 64 of 64