1. M/s Jay Engineering Works Ltd., Roynager, Bansdhani, 24-Parganas, has filed an appeal being aggrieved from Order No. 38 (33)-83 dated 31st May, '83 passed by the Addl Collector of Central Excise, Calcutta against the imposition of penalty of Rs. 500/- under rule I73Q of Central Excise Rules, 1944, 2. Briefly, the facts of the case are that the appellant company had deposited a sum of Rs. 95,000/- basic excise duty and Rs. 4.750/- special excise duty by TR-6 No. Nil dated 17th Nov. '82 on the State Bank of India, Naktala Branch and the same was entered in their P.L.A.vide entry at Sl. No. 1245 and 1246 twice. Consequently, there were clearances of 3228 pcs. electric fans between 22nd Jan. '82 and 25th Nov.'82 without payment of Central Excise duty to the tune of Rs. 89,340,10 p. However, the said Company deposited the amount of Rs. 95,900/- on 8th December, '82 when the mistake was detected. A show cause notice dated 9th Feb. '83 was issued to the appellant and in reply the appellant denied the charges framed against them and a penalty of Rs. 500/-was imposed upon them by the Addl. Collector. Being aggrieved from the aforesaid order, the appellant has come in appeal before this Court.
3 Shri A.K.. Bhowmik, the learned counsel appeared on behalf of the appellant and has stated that the appellant is paying about Rs. 2.5 crores C.E. duty in a year and has reiterated the facts. He has pleaded that there was a bona fide mistake and due to that bona fide mistake instead of one entry two entries of Rs. 95,000/- were made at Sl. Nos.
1245 and 1246 in the P.L.A. Register. The mment this error came to the notice of the appellant, the appellant had voluntarily deposited a sum of Rs. 95,020/- plus Rs. 4.750/- on 8th December '82. He has referred to page 1 of the Paper Book which is the copy of the letter dated 8th Dec. '82 written by the appellant to the Supdt. of Central Excise, Range XV/2, Calcutta XV Division. The same is reproduced as under: Double credit against single deposit in TR-6 no. nil dt. 17.11.82 of Rs. 95.000/- basic and Rs, 4.750/- special in P.L.A. No 2/EF/56 of Electric Fans.
We are every sorry to intimate to you that there was double entry against entry serial no. 1245 dt. 17.11.82 and serial no. 1246 dt.
17.11.82 in our above mentioned PLA of Rs. 95.000/- basic and Rs. 4.750/- special against a single TR-6 no. nil dt. 17.11.82 due to mistake by the dealing clerk.
2. As soon as the mistake was detected, we have deposited a sum of Rs. 95.000/- basic and Rs. 4.750/- special under TR-6 no. nil dt.
3. In this connection, we would like to mention that such type of mistake had never occurred in our PLA before. We have taken suitable action against the clerk concerned and the checking system has been made more stringent so that this type of mistake may not happen in future.
4. In view of the above, we have placed before you the fact of our bona fide mistake for your kind perusal and would be grateful if you could kindly condone the lapse.
He has also cited page 2 of the Paper Book which is a photo copy of the Challan dated 8th Dec. '82. A show cause notice was issued to the appellant by the learned Asstt. Collector dated 9th Feb. '83 wherein there was alleged contravention of rule 173F and 173G (1) of Central Excise Rules, 1944 and the penalty of Rs. 500/- was imposed under Section 173Q ibid. He was pleaded that there is complete absence of the element of mem rea and there was no malafide intention on the part of the appellant in any way. He has referred to the judgment of Hon'ble Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa reported in 1978 Excise Law Times 158. He has also referred to the judgment of Nathulal v. State of M.P. reported in A.I.R. 1976 S.C 93.
He has also referred to the Supreme Court judgment in the case of Cement Marketing Co. of India Ltd. v. Asstt. Commissioner of Sales Tax and Ors. reported in 1980 E.L.T. 295. In this judgment, the Hon'ble Supreme Court has held that if the assessee entertained belief that he was not liable to include the amount of freight in the taxable turnover, it would not be said to be malafide or unreasonable nor it can be dubbed as frivolous contention taken up merely for the purpose of avoiding liability to pay tax. What the law requires is that the assessee should not have filed a false return. A return cannot be said to be 'false' unless there is an element of deliberation in it. It is true that where the incorrectness of the return is claimed to be due to want of care on the part of assessee and there is no reasonable explanation forthcoming from him for such want of care, the court may in a given case infer deliberateness and the return may be treated as a false return. But, where the assessee does not include a particular item in the taxable turnover under a bona fide belief that he is not liable so to include it, it would not be right to brand the return as 'false return' inviting penalty. In the said judgment, it was also held that it is elementary that Section 43 of the General Sales Tax Act, 1958 providing for imposition of penalty is penal in character and unless the filing of inaccurate return is accompanied by a guilty mind, the section cannot be invoked for imposing penalty. Otherwise the result would be that even if the assessee raises a bona fide contention that a particular item is no includible in the taxable turnover, he will have to pay tax upon it under the apprehension of being held liable for penalty in case his contention was ultimately found by the court to be not acceptable which could hardly have been the intention of the Legislature. He has also cited the judgment of Indo-China Steam Navigation Co. v. Jasjit Singh reported in 1983 E.L.T. 1392 and two Govt. of India decisions in the case of Western Indian Straw Products reported in 1982 E.L.T. 566. In that case, it was held by the Govt. of India that if the ingredients of mens rea were missing in debiting the small excess amount in the P.L.A. imposition of penalty was not admissible. He has also referred to the judgment in the case of Dabur (Dr. S.K. Barman) Pvt. Ltd. reported in 1982 E.L.T. 480. In that case, it was held that if the lapse of non-debiting of auxiliary duty to P.L.A. was brought to the notice of the authorities by the petitioners themselves, no mens rea can be alleged against them and no penalty was imposable. He has pleaded that the appellant had paid the amount on 8th Dec. '82 voluntarily prior to the detection by the department and had written a letter to the Revenue Authorities voluntarily before detection. As such there is complete absence of the element of mens rea. In view of the Supreme Court judgment and other judgments cited above, the penalty of Rs. 500/- so imposed should be quashed.
4. In reply, Shri A.K. Saha, the learned Sr. D.R. has referred to Rule )73A(a) of Central Excise Rules, 1944 and has pleaded that the intention is not necessary. He has also referred to the judgment of Indoglass Pvt- Ltd. and Ors. v. U.O.I. of the Bombay High Court reported in 1982 E.L.T. 135 (Bom.). He has referred to para 15 of the said judgment wherein it was held that the petitioners have undoubtedly contravened the provisions of the Act and the Rules and the imposition of penalty and fine cannot be set aside. The imposition of fine and penalty does not involve any moral turpitude and it is not open for the Limited Company to claim that they were not aware of the provisions of the law. In the said case, the Hon'ble High Court had dismissed the appeal and had held that the penalty imposed was in order. The learned Sr. D.R. has also pleaded that the appellant should have taken due care and the goods should have been only removed after the payment of duty.
He has also filed a copy of the judgment of this Bench in the case of Burn Standard Co. Ltd., Howrah v. Collector of Central Excise, Calcutta in Appeal No. E.D. (T) CAL-18/83 dated 22nd April '83. Lastly, he has pleaded that clearances were made without payment of duty and as such the penalty order imposing a penalty of Rs. 500/-only needs to be confirmed and the appeal filed by the appellant should be dismissed.
5. In reply, Shri Bhowmik has referred to the judgment of Shriram Pistons and Rings v. Collector of Central Excise reported in 1983 E.C.R. 1227.
6. After hearing both the sides and keeping in view the facts and circumstances of the case and the judgments cited by both the sides, 1 hold that the appellant's case is fully covered by the Supreme Court judgment in the case of H.S.L. v. State of Orissa reported in 1978 E.L.T. 158. In the instant case, the appellant had undoubtedly made an error but it was a bona fide mistake. As soon as he discovered the error he made the payment voluntarily prior to the detection by the department and also had written a letter to the Revenue Authorities on 8th Dec. '83, which has been reproduced above. It is a settled law that penalty proceedings are quasi-criminal proceedings and no penalty is leviable unless the element of mens rea is established. In this case, I am satisfied that there is complete absence of element of mens rea and no penalty is leviable. I very respectfully follow the observation of the Hon'ble Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa. I quash the order as to the imposition of penalty of Rs. 500/-. The Revenue is directed to refund the amount of penalty within two months from the date of this order, after necessary verification as to the payment.