Mgn IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION CENTRAL EXCISE APPEAL NO.199 of 2006 The Commissioner of Central Excise & Customs ..Appellant Vs. M/s.Shri Ram Aluminium P. Ltd....Respondent Mr. R.V. Desai, Senior Advocate with Mr. K.R. Chaudhari i/b. T.C. Kaushik, for the Appellant. Mr. V.Sreedharan, Amicus Curiae for the Respondent CORAM : F.I. REBELLO & J.H. BHATIA, JJ. DATED : 30TH JUNE, 2009 JUDGMENT (PER FERDINO I. REBELLO, J.). 1. Admit on the following questions:- “Whether the Hon’ble CESTAT was justified in setting aside the penalty imposed under Section 11AC which is required to be equal to the duty confirmed by the Tribunal? Whether in case of clandestine removal of goods the payment of part of duty subsequently made on notice by the department prior to issue of show cause can discharge the Respondent from the rigour of provisions of Sec. 11AC of Central Excise Act, 1944?” 2. The facts are not disputed. A show cause notice was issued on 9th January, 2001. A reply was filed to the said show cause notice. The A.O., by his order dated 26th August, 2002 demanded duty and also imposed penalty. It may be mentioned that the respondents before issuance of the show cause notice had paid an amount of Rs.66,096/- towards the differential duty amount. The A.O., found that that there was a a balance amount of Rs.3,888/-. The Respondents aggrieved preferred an Appeal before the Commissioner (Appeals), who upheld the order in Original and dismissed the Appeal preferred. 3. The Respondents aggrieved preferred an Appeal before the CESTAT. The learned Tribunal was of the view that the offence is clearly established as the act of clandestine removal of goods has come to the public gaze and referred to the observations in the case of M/s.Saheli Synthetics Pvt. Ltd. Vs. C.C. Kandla (Appeal Nos. C/414 to 416/03) dated 19th July, 2005. The learned Tribunal, however, observed that considering the findings of the larger Bench in the case of Machino Montell (I) Ltd., 2006 (202) ELT 398 (P. & H.) which had held that if the duty is payable by the assessee before issuance of show cause notice no penalty can be impugned under Section 11AC and no interest can be demanded under Section 11AB and accordingly set aside the order of penalty and interest. They however, upheld the demand of duty and penalty and interest demanded under the Rules. It is this order which is the subject matter of the present appeal. 4. At the hearing of this appeal on behalf of the Revenue learned Counsel has drawn our attention to the judgment of the Supreme Court in Union of India vs. Dharamendra Textile Processors, 2008 (231) E.L.T 3 (S.C.). and the judgment in Union of India vs. M/s.Rajasthan Spinning & Weaving Mills, 2009 (239) E.L.T. 3 (S.C.) and submitted that the Tribunal has no jurisdiction to impose lesser penalty than the duty adjudicated to be payable. It is further submitted that mere payment of duty before issuance of show cause notice is also of no consequence. 5. At the bar it was mentioned that the issue is of vital importance in large number of matters. Considering that Shri Sreedharan, Advocate of this Court was appointed as Amicus Curiae to assist this Court. 6. The learned Amicus Curiae considering Section 11A and 11AC has submitted that in order to impose penalty two predicates are to be satisfied, firstly the duty has to be determined under Sub-Section (2) of Section 11A and secondly, that the duty was not paid with an intent to evade payment. It is only on satisfaction of these to predicates can penalty be imposed under Section 11AC. Referring to the judgment in Rajasthan Spinning & Weaving Mills (supra) it is submitted that the judgment can be said to have been passed sub-silentio in so far as the first requirement is concerned and consequently the judgment of the Supreme Court cannot be held to have concluded the issue on there being a need for determination of duty under Section 11A(2). 7. We have heard learned Counsel. In so far as mandatory penalty is concerned, the law stands now concluded in Dharamendra Textile Processors (supra). The law as now settled is that there is no jurisdiction in the authority to impose penalty lesser than the mandatory penalty which has to be co-extensive with the duty which is payable. The Supreme Court has further held that there is no requirement of existence of mens rea. Mens rea as understood in criminal law is not an essential ingredient for holding a delinquent liable to pay penalty for a tax delinquency which is a Civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws. 8. Having so said we may now consider the first limb of argument as raised by the learned Amicus Curiae. The relevant portion of Section 11A of Central Excise Act, 1944 reads as under:- “11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded.-- (1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Central Excise Officer may, within six months from the relevant date, ser4ve notice on the person chargeable with the duty which has not been levied or paid or which has been short- levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause whey he should not pay the amount specified in the notice: Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub-section shall have effect, (as if) for the words “six months”, the words “five years” were substituted. Explanation:- Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of six months or five years, as the case may be. (2) The Central Excise Officer shall, after considering the representation, if any, made by the person or whom notice is served under sub-section (1), determine the amount of duty of excise due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.” (3)...........” 9. The controversy requires consideration of Section 11AC also, which reads as under:- “11AC. Penalty for short-levy or non-levy of duty in certain cases.- Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reaqsons or fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) of Section 11A shall also be liable to pay a penalty equal to the duty so determined: Provided that where the duty determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, for the purposes of this section, the duty has reduced or increased, as the case may be, shall be taken into account.” 10. The Judgment in Dharamendra Textile Processors (supra) came up for consideration before the Supreme Court in Rajasthan Spinning & Weaving Mills Ltd (supra). . It is necessary to reproduce paragraphs 2 and 15, which read as under:- “2. What are the conditions and the circumstances that would attract the imposition of penalty under Section 11AC of the Central Excise Act (“The Act” hereinafter)? In the two cases before us the Tribunal has taken the view that there was no warrant for levy of penalty since the assessees had deposited the balance amount of excise duty (that was short paid at the first instance) even before the show cause notice was issued. On the other hand, on behalf of the Revenue, the appellants in the two appeals, it was contended, relying uponh a recent decision of this Court in Union of India vs. Dharamendra Textile Processors, 2008 (231) E.L.T 3 that mere non payment or short payment of duty (without anything else) would inevitably lead to imposition of penalty equal to the amount by which duty was short paid. In our view the reason assigned by the Tribunal to strike down the levy of penalty against the assessees is as misconceived as the interpretation of Dharamendra Textiles is misconstrued by the Revenue. We completely fail to see how payment of the differential duty, whether before or after the show cause notice is issued, can after the liability for penalty, the conditions for which are clearly spelled out in Section 11AC of the Act. 11. Sub-section 2B of Section 11A provides that in case the person in default makes payment of the escaped amount of duty before the service of notice then the Revenue will not give him the notice under sub-section 1. This, perhaps, is the basis of the common though erroneous view that no penalty would be leviable if the escaped amount of duty is paid before the service of notice. It, however, overlooks the two explanations qualifying the main provision. Explanation 1 makes it clear that the payment would, nevertheless, be subject to imposition of interest under Section 11AB. Explanation 2 makes it further clear that in case the escape of duty is intentional and by reason of deception the main provision of sub-section 2B will have to application.” The learned Counsel points out that therefore, the issue that before imposing penalty under Section 11AC there must be an adjudication process was neither raised nor was it decided by the learned Supreme Court and, therefore, it is sub silento. As to what would constitute sub silento we would gainfully refer from Solmond on Jurisprudence, Twelfth Edition, by P.J. Fitzgerald, M.A., Indian Economy Reprint, 2002, which reads as follows:- “A decision passes sub silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind. The court may consciously decide in favour of one party because of point A, which it considers and pronounces upon. It may be shown, however, that logically the court should not have decided in favour of the particular party unless it also decided point B in his favor; but point B was not argued or considered by the court. In such circumstances, although point B was logically involved in the facts and although the the case had a specific outcome, the decision is not an authority on point B. Point B is said to pass sub silentio.” 12. Can it be said that this issue was sub-silentio and not under consideration in Rajastthan Spinning & Weaving Mills. In our opinion it is not possible to accept the said submission considering the last sentence of para.2 of the judgment which we again reproduce and which reads as under:- “We completely fail to see how payment of the differential duty, whether before or after the show cause notice is issued, can after the liability for penalty, the conditions for which are clearly spelled out in Section 11AC of the Act.” 13. It is, therefore, clear that though the Supreme Court has not expressly referred to the argument now advanced by the learned Amicus Curiae, nevertheless the Supreme Court was clear that to impose penalty the conditions in Section 11AC of the Act must be complied with. Under Section 11AC as already set out the requirements are firstly, that there must be intent to evade payment of duty and secondly the duty ought to be as determined under sub-section (2) of Section 11A. It is, therefore, clear that it is only on these two requirements being followed that penalty is imposable. The determination of duty admittedly is under Section 11A. The other limb of argument is that once the duty is paid even before the show cause notice, the question of the A.O. in a case where duty demanded has been paid there will be no determination of liability. In our opinion, the argument is fallacious. Under Section 11A there must be a determination of duty irrespective of as to whether duty demanded is paid before issuance of show cause notice or before order is passed. Any amounts paid as aforesaid are to be adjusted against the final order of adjudication. In order words the monies paid will be adjusted against the duty ascertained and consequently if the full amount has been paid there will be no requirement of further deposit and/or invocation of the provisions for recovery. All that Section 11AC requires is the duty as determined. Once the A.O., passes the order under Section 11A. the duty is determined. The question, therefore, of having paid the amount before issuance of the show cause notice or after issuing the show cause notice cannot result in holding that there is no requirement of determination. That argument, therefore, must be rejected. 14. Our attention was also invited on behalf of the Revenue to the Judgement of the Division Bench of this Court in C.C.E. & C. Aurangabad vs. Sterlite Optical Technologies Ltd., 2008 (225) E.L.T. 430 (Bom.) where also the learned Bench has taken the view that as far as Section 11AC is concerned the party did not have the facility or liberty to pay or not to pay duty, on the basis of self ascertainment. In our view in view of the ratio of the judgment in Rajasthan Spinning & Weaving Mills (supra) the argument advanced by the learned Amicus curiae has to be rejected. Consequently the following order;- 15. The Appeal filed on behalf of the Revenue is allowed. The question (a) is answered in the negative against the assessee and in favour of the revenue. Question (b) is also answered in the negative against the assessee and in favour of the Revenue. Appeal disposed off according. The Court would like to place on record its appreciation of the valuable assistance rendered by the learned Amicus curiae. (J.H. BHATIA,J.) (F.I. REBELLO,J.)