Late Filing of ST-3: Can penalty be greater than that in force at the time of commission of offence

Issue :

 

1. Late filing of Service Tax Return for period prioe to 1.4.2011 - Whether Rs.2,000/- or Rs.20,000/- .

 

2. Whether it is a continuous offence and hence disentilted to lower rate exisiting prior to 1.4.2011 ?

 

3. Is there any difference between penalty for late filing or late-filing-fee ?

Opinions of Mr. VS Datey's and my senior Mr. Rakesh Chitkara, Advocate are given below :

 

Mr. Rakesh Chitkara states :

Whether penal provisions can be retrospective : Hon’ble Supreme Court in a number of cases has unequivocally upheld the provisions of Article 20(1) of the Constitution of India – the mother of all laws – that   penal provisions can neither be retrospective nor can the penalty be greater than that in force at the time of commission of offence imposable.

In P.V. Mohammad Barmay Sons Vs. Director of Enforcement, the Hon’ble Supreme Court while upholding the reduction of penalty by the Tribunal, held :

“7. Article 20(1) of the Constitution of India provides that no person shall be convicted of any offence except for violation of the law in force at the time of commission of the act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of commission of the offence.”

The Hon’ble Supreme Court in Collector of Customs, Bombay Vs. East Punjab Traders had held that amendments resulting in penal consequences are not treatable as retrospective in effect. [1997 (89) ELT 11 (SC)]

Bangalore Tribunal in CCE, Coimbatore Vs. M P Tapes [1998 (103) ELT 128 (Tri.Bang.)] relied upon the judgement of  Hon’ble Supreme Court in Brij Mohan Vs. Commissioner of Income Tax, to quash the plea of the Department for reference to High Court, holding that :

 

“3.The Tribunal relied on the decision of Supreme Court in the case of  Brij Mohan v. Commissioner of Income Tax reported in 120 ITR 1 (S.C.), wherein it was held that penalty could not be imposed under the parallel provision newly introduced in the Income Tax Act in respect of an act or omission prior to the incorporation of the provision. The Tribunal, on the same analogy, held that penal interest could not be imposed in respect of duty short-paid for the period prior to incorporation of Section 11AB of the Act. The penal interest is by way of penalty. Any penal law can only have prospective effect and not retrospective effect. This is the principle upheld by the Supreme Court in case of Brij Mohan. The same principle would apply to penal interest.” (emphasis supplied)

Some similar cases pertaining to Customs & Central Excise are :

·         UOI  Versus Ashok J. Ramsinghani, 2011 (272) E.L.T. 534 (Bom.High Court)

·         CCE, Chennai Versus Chennai Petroleum Corpn. Ltd., 2008 (228) E.L.T. 533 (Tri. - LB)

·         CCE, Chennai Versus Chennai Petroleum Corpn. Ltd., 2008 (228) E.L.T. 366 (Tri. - Chennai)

·         Bireswar Sirkar Versus CCE, Calcutta,  2003 (162) E.L.T. 1170 (Cal. High Court)

·         Jalan Containers Mfg. Corpn. Versus CCE, Chandigrah, 1996 (84) E.L.T. 64 (Tri. Del)

·         Bharat Electronics Ltd. V CCE, Bangalore-II as reported at 2006 (195) ELT 190

·         Merit Organics Ltd. Vs. CCE & Customs, Vapi 2009 (234) ELT 353 (Tri. Ahmd.)

·         Futuristic Concepts Ltd. V CCE, Mumbai-II, 2008 (228) ELT 464 (Tri.Mumbai)

·         Boisur Chemicals Pvt. Ltd. Vs. CCE, Mumbai-II, 2001 (132) ELT 327 (Tri.Mumbai).

 

 Mr. V S Datey, Author of Books On Indirect Taxation (Latest is on Negative List) states :

 

·         Basically penalty can be only after adjudication and appelable order. Mere letter is ot adjudication order.
·         Penalty can be reduced for sufficient reasons (though the actual wrods used are 'late fee' and not 'penalty')
·         Anyway, for previous period, late fee should be max 2,000 - see following

·         What about returns pertaining to period upto September, 2010 filed after 8-4-2011 – It is possible that assessee had not filed returns pertaining to period upto September, 2010 and may file it after 8-4-2011.

·         As per Article 20(1) of Constitution, no person shall be convicted of any offence except for violation of law in force at the time of commission of the act charged as an offence. Thus, penalty can be imposed only on basis of law prevailing on date of offence and not on any subsequent amendment in law.
·         Penalty is imposable on basis of law operating on the date on which the wrongful act is committed. Any subsequent change in law cannot be applied to past offences – P V Mohammad Barmay v. Directorate of Enforcement (1992) 61 ELT 337 (SC) * Brijmohan v. CIT 1979 (120) ITR 1 (SC) - followed in Athivinayagar Wires v. CCE 1999(106) ELT 529 (CEGAT) * Interscape v. CCE 1999(105) ELT 643 (CEGAT) - Same view in Markandy Prasad v. CCE 1998(102) ELT 705 = 35 RLT 919 (CEGAT) – departmental appeal dismissed by SC 107 ELT A121 * Nippon Audiotronix v. CC 2000(120) ELT 736 (CEGAT) * Maruti Udyog Ltd. v. CCE 1998(101) ELT 675 = 25 RLT 246 (CEGAT) * Polar Appliances v. CC 2001(127) ELT 448 (CEGAT) * CCE v. Hi-Tech Steel Industries (2007) 211 ELT 511 (CESTAT).

·         Hence, it can be argued that offense was committed prior to 8-4-2011 and hence penalty applicable that time i.e. when return should have been filed will apply [Counter argument is that non-filing of return is a continuous offense and continues till return is filed. Hence, if return is filed after 8-4-2011, late fee as applicable on that day will apply]

 

Kind regards,

Rebecca Andrews