Law:

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Section 11AC of the Central Excise Act, 1944 - Penalty - For short-levy or non-levy of duty in certain cases - Whether section 11AC, inserted by the Finance Act, 1996 with intention of imposing mandatory penalty on persons who evade payment of tax, can be read to contain mens rea as an essential ingredient and there is scope for levying penalty below prescribed minimum limit - Held, no Interpretation of statutes - Rule of legislative intention FACTS The questions which arise for determination in the instant case are : whether section 11AC inserted by the Finance Act, 1996 with the intention of imposing mandatory penalty on persons who evade payment of tax should be read to contain mens rea as an essential ingredient; and whether there is a scope for levying penalty below the prescribed minimum limits. Before the Division Bench, stand of the revenue was that said section should be read as penalty for statutory offence and the authority imposing penalty has no discretion in the matter of imposition of penalty and the adjudicating authority is duty bound to impose penalty equal to the duties so determined in such cases. The assessee, on the other hand, referred to section 271(1)(c) of the Income-tax Act, 1961 taking the stand that section 11AC is identically worded and in a given case it is open to the Assessing Officer not to impose any penalty. The Division Bench made reference to rule 96ZQ and rule 96ZO of the Central Excise Rules, 1944 and to a decision in Chairman, SEBI v. Shriram Mutual Fund [2006] 5 SCC 361 and was of the view that the basic scheme for imposition of penalty under section 271(1)(c) and section 11AC and rule 96ZQ(5) is common. According to the Division Bench, the correct position, in law, has been laid down in Chairman, SEBI's case (supra). Therefore the Division Bench referred the controversy involved to a Larger Bench, doubting the correctness of the view expressed in Dilip N. Shroff v. Joint CIT [2007] 161 Taxman 218 (SC). HELD The stand of the assessee was that the absence of specific reference to mens rea is a case ofcasus omisus. If the contention of the assessee was to be accepted that the use of the expression 'assessee shall be…

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