Holding

Penalty and interest under Sections 45(6) and 47(4A) of the Gujarat Sales Tax Act, 1969 are statutory, mandatory and levied automatically; no mens rea is required.

Summary

The State of Gujarat appealed against the Gujarat High Court's order that set aside the penalty and interest imposed on M/s. SAW PIPES Ltd. under Sections 45(6) and 47(4A) of the Gujarat Sales Tax Act, 1969. The assessee had paid tax at a 2% rate on the basis of a civil works classification, but the Assessing Officer later re‑characterised the work as a non‑civil contract, raising the tax rate and invoking the penalty provision. The High Court quashed the penalty on the ground that the assessee acted in good faith and had already paid the higher tax. The Supreme Court examined whether mens rea (guilty mind) is a prerequisite for levying the statutory penalty and interest. It held that the language of Sections 45(6) and 47(4A) is clear, mandatory and leaves no discretion or requirement of mens rea; the penalty is automatic once the conditions of Section 45(5) are met. Consequently, the appeal was allowed, the High Court order was set aside and the penalty and interest were restored.

Issues considered

Whether mens rea on the part of the assessee is required to be considered while levying penalty and interest under Section 45(6) and Section 47(4A) of the Gujarat Sales Tax Act, 1969.

Legislation cited

Central Excise Acts. 11AC
Gujarat Sales Tax Act, 1969s. 45, s. 45(5), s. 45(6), s. 47, s. 47(4A), s. 55A
SEBI Act

Subjects

Gujarat Sales Tax Actpenaltystatutory penaltymens reatax assessmentinterestSection 45Section 47civil liabilitystatutory interpretation

Judgment

[2023] 6 S.C.R. 479 479

STATE OF GUJARAT AND ANR. A
v.
M/s. SAW PIPES LTD.
(Civil Appeal No. 3481 of 2022)
APRIL 17, 2023 B
[M. R. SHAH AND B. V. NAGARATHNA, JJ.]
Gujarat Sales Tax Act, 1969 – s. 55A, 45, and 47 –
Respondent-assessee was engaged in business of executing
indivisible works of undertaking contract of coal tar and enamel
C
coating on pipes – Respondent deposited tax at rate of 2%, however,
the Assessing Officer (AO) held that the composition amount was
not payable at the rate of 2% as deposited but it fell under residuary
entry-8 to the notification dated 18.10.1993 – Demand of difference
in tax as well as the levy of interest u/s.47(4A) and penalty u/s.
45(6) of the Act, 1969 was made – By the impugned judgment and D
order, the High Court has set aside the penalty and interest levied
u/s.45(6) and s.47(4A) of the Act, 1969 on the ground that the
respondent-assessee was under the bonafide opinion and paid tax
at 2% and that thereafter, when the enhanced tax as imposed was
paid by the assessee, the penalty and interest was not required to be
E
paid by the assessee – Issue before the Supreme Court: Whether
while levying penalty and interest leviable u/s 45(6) and s. 47(4A)
mens rea on the part of the assessee is required to be considered –
Held: The language used in s.45 is precise, plain and unambiguous
that the moment any eventuality as mentioned in s. 45(5) occurs,
the penalty shall be leviable as mentioned in s. 45(6) – There is no F
question of considering any mens rea on the part of the assessee –
The language employed in a statute is the determinative factor of
legislative intent – The Court cannot read anything into a statutory
provision which is plain and unambiguous – On strict interpretation
of s. 45 and s. 47, the only conclusion would be that the penalty
G
and interest leviable u/ss. 45 and 47(4A) are statutory and mandatory
and there is no discretion vested in the Assessing Officer to levy or
not to levy the penalty and interest other than as mentioned in s.
45(6) and s. 47 – Judgment of High Court set aside.

H
479
480 SUPREME COURT REPORTS [2023] 6 S.C.R.

A Allowing the appeal, the Court
HELD:1. 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
B the tax to the extent mentioned in sub-section (5) of Section 45,
there shall be levied on such dealer a penalty not exceeding one
and one-half times the difference referred to in sub-section (5).
As per sub-section (5), where in the case of a dealer the amount
of tax assessed or re-assessed exceeds the amount of tax already
paid by the dealer in respect of such period by more than 25% of
C 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 re-assessed 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
D (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 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. [Para 6.4][495-G-H; 496-A-C]
E
2. The word used in Section 45(6) is “shall be levied”. The
dealer shall be liable to pay the penalty not exceeding one and
one-half times of the difference of the tax as mentioned in sub-
section (5) of Section 45 of the Act, 1969. The language used in
Section 45 is precise, plain and unambiguous. The intention of
F 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 sub-section (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
G 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 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
H
STATE OF GUJARAT AND ANR. v. M/s. SAW PIPES LTD. 481

used, which means that attention should be paid to what has been A
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.
[Para 6.11][501-E-H; 502-A]
3. On strict interpretation of Section 45 and Section 47 of B
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 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 C
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. [Para 6.12][502-B-C]
Chairman, SEBI v. Shriram Mutual Fund and Anr.
(2006) 5 SCC 361; Competition Commission of India v. D
Thomas Cook (India) Limited and Anr. (2018) 6 SCC
549 – relied on.
Union of India and Ors. v. Dharamendra Textile
Processors and Ors. (2008) 13 SCC 369 : [2008] 14
SCR 13; Commissioner of Central Excise, Chandigarh E
v. Pepsi Foods Ltd. (2011) 1 SCC 601 : [2010] 14 SCR
836; Brooke Bond India Limited v. State of Gujarat;
1998 JX (Guj) 128 – held inapplicable.
Hindustan Steel Ltd. v. State of Orissa; (1969) 2 SCC
627 : [1970] 1 SCR 753; State of Gujarat v. Arcelor F
Mittal Nippon Steel India Limited; (2022) 6 SCC 459;
Guljag Industries v. Commercial Taxes Officer (2007)
7 SCC 269; J. K. Cotton Spg. and Wvg. Mills Co. Ltd.
v. CCE; (1998) 3 SCC 540 : [1998] 2 SCR 102; BHEL
v. Mahendra Prasad Jakhmola; (2019) 13 SCC 82 : G
[2019] 4 SCR 504; Elecon Engineering Vs. State of
Gujarat (1994) 93 STC 397; Director of Elementary
Education v. Pramod Kumar Sahoo (2019) 10 SCC 674;
Nandlal Wasudeo Badwaik v. Lata Nandlal Badwaik;
(2014) 2 SCC 576 : [2014] 1 SCR 120; Bhuwalka Steel
H
482 SUPREME COURT REPORTS [2023] 6 S.C.R.

A Industries Ltd. v. Union of India; (2017) 5 SCC 598 :
[2017] 2 SCR 993; State of M.P. v. Bharat Heavy
Electricals (1997) 7 SCC 1 : [1997] 3 Suppl. SCR 435;
Cement Marketing Co. of India Ltd. v. Assistant
Commissioner of Sales Tax, Indore and Ors. 1980 (6)
ELT 295 (S.C.) – referred to.
B
Riddhi Siddhi Gluco Biols Ltd. v. State of Gujarat (2017)
100 VST 305 (Guj); State of Gujarat v. Oil and Natural
Gas Corporation Limited (2017) 97 VST 506 (Guj); Jyoti
Overseas P. Ltd. v. State of Gujarat; 2017 SCC Online
Guj 2511 – referred to.
C
Case Law Reference
[2008] 14 SCR 13 held inapplicable Para 3.7
(2022) 6 SCC 459 referred to Para 3.10

D [1970] 1 SCR 753 referred to Para 3.12
[2010] 14 SCR 836 held inapplicable Para 3.13
[1998] 2 SCR 102 referred to Para 4.3
[2019] 4 SCR 504 referred to Para 4.3
E (2019) 10 SCC 674 referred to Para 4.4
[2014] 1 SCR 120 referred to Para 4.7
[2017] 2 SCR 993 referred to Para 4.7
[1997] 3 Suppl. SCR 435 referred to Para 4.9
F CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3481
of 2022.
From the Judgment and Order dated 04.08.2016 of the High Court
of Gujarat at Ahmedabad in TA No. 1283 of 2006.
Ms. Aastha Mehta, Ms. Deepanwita Priyanka, Ms. Prerana
G Mohapatra, Advs. for the Appellants.
V. Lakshmikumaran, Aditya Bhattacharya, Ms. Apeksha Mehta,
Sahil Parghi, Ms. Avisha Khatri, Ms. Mounica Kasturi, Ms. Charanya
Lakshmikumaran, Advs. for the Respondent.

H
STATE OF GUJARAT AND ANR. v. M/s. SAW PIPES LTD. 483
[M. R. SHAH, J.]

The Judgment of the Court was delivered by A
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 Gujarat at
Ahmedabad in Tax Appeal No. 1283/2006, by which, the Division Bench
of the High Court has set aside the penalty and interest levied under B
sub-section (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 C
enamel coating on pipes. The respondent - assessee had opted for
payment of lump-sum 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 prescribed in D
Entry-1 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) 2002-03 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 Entry-8 to the notification dated 18.10.1993. The E
AO raised the total demand as under: -

F

2.1 The assessee preferred a first appeal before the First Appellate
Authority i.e., Joint Sales Tax Commissioner. By order dated 30.07.2005,
the First Appellate Authority dismissed the said appeal. The assessee
approached the Gujarat Value Added Tax Tribunal by filing Second Appeal G
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. Theassessee preferred
H
484 SUPREME COURT REPORTS [2023] 6 S.C.R.

A 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 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
B
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 Entry-1 requiring payment of
tax at the rate of 2% only. Reliance was placed on the decision of the
C High Court in the case of Brooke Bond India Limited Vs. State of
Gujarat; 1998 JX (Guj) 128and it was prayed that the imposition of
penalty and 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
D
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
E and order passed by the High Court whereby the penalty and interest
has been set aside, the State has preferred the present appeal.
3. Ms. Aastha Mehta, learned counsel has appeared with
Ms. Deepanwita Priyanka, on behalf of the State.

F 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.

G 3.2 It is further submitted that while deleting the penalty, the High
Court has not at all considered sub-section (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
Act, 1969, is a statutory penalty and hence, is compulsorily leviable.
H
STATE OF GUJARAT AND ANR. v. M/s. SAW PIPES LTD. 485
[M. R. SHAH, J.]

3.4 It is contended by Ms. Mehta, learned counsel appearing on A
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 B
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 tax already paid by the dealer under C
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 one-half times the difference and/or, on
such dealer, who is deemed to have failed to pay the tax to the extent D
mentioned in sub-section (5) of Section 45, a penalty shall be leviednot
exceeding one and one-half 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 one-half times the difference.
3.7 It is contended by Ms. Mehta learned counsel appearing on E
behalf of the State that the phrase used in sub-section (6) of Section 45
of the Act is “shall be levied”. Reliance was placed on the decision of a
three-judge 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” F
the adjudicating authority will have no discretion.
3.8 It is further submitted that the penalty leviable under sub-
section (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 the assessee is G
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%.
H
486 SUPREME COURT REPORTS [2023] 6 S.C.R.

A 3.9 It is further contended by Ms. Mehta, learned counsel
appearing on behalf of the State that the non-payment 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 well-settled that when non-
compliance or violation of a provision is met with a consequence, then,
the language of the provision is deemed to be mandatory in nature. It is
B
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
regardingbonafide belief of the assessee while computing payment of
penalty and interest. In support of the above submissions, learned counsel
C 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 SCC 459andChairman, SEBI Vs.
Shriram Mutual Fund and Anr.; (2006) 5 SCC 361; Guljag
Industries Vs. Commercial Taxes Officer (2007) 7 SCC 269;
D Competition Commission of India Vs. Thomas Cook (India)
Limited and Anr. (2018) 6 SCC 549,as well asthe decisions of the
Gujarat High Court in the cases ofRiddhi Siddhi GlucoBiols 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).
E
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.
F
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
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
G 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.
H
STATE OF GUJARAT AND ANR. v. M/s. SAW PIPES LTD. 487
[M. R. SHAH, J.]

3.13 In so far as the reliance placed on behalf of the assessee A
upon the decision of this Court in the case of Dharamendra Textile
Processors(supra)is concerned, it is 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
B
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 mens rea in
Section 11AC by employing the 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 C
intention is built into the provision and when the assessee’s intention is
made 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
D
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 E
has further contended that 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 F
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 G
case, the legislature in its 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 H
488 SUPREME COURT REPORTS [2023] 6 S.C.R.

A 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
B interest is not payable by the assessee in the facts of the present case. It
is further submitted that with 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
C 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: -
D
(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, even if the same was not
pressed before the High Court.

E (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
F (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 one-half times the
differential tax. The provision provides for an upper limit
for imposition of penalty; however, no minimumpenalty is
prescribed. This indicates that in appropriate cases where
G
there is no mens rea, the authority has the 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
H
STATE OF GUJARAT AND ANR. v. M/s. SAW PIPES LTD. 489
[M. R. SHAH, J.]

of a works contract. Even in such a scenario, the additional A
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(4-A) of Gujarat
Sales Tax Act, 1969.
4.2 Elaborating the above submissions, it is submitted that the B
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 C
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 D
in the case of J.K. Cotton Spg. and Wvg. Mills Co. Ltd. Vs. CCE;
(1998) 3 SCC 540and 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.
E
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. F
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 G
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 H
490 SUPREME COURT REPORTS [2023] 6 S.C.R.

A pay the tax to the extent of the difference. That therefore, Section 45(5)
creates presumption against the dealer.
4.7 It is submitted that as held by this Court in the case of Nandlal
WasudeoBadwaik Vs. Lata Nandlal Badwaik; (2014) 2 SCC 576,
there is a clear distinction in law between a legal fiction and presumption.
B 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.
C 4.8 It is next submitted that even otherwise Section 45(5) of the
Act creates a 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
D 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
E have failed to pay the tax. That the presumption contained in sub-section
(5) is 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
F 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.

G 4.10 As regards the other preposition that for the purpose of
imposition of penalty under 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 facitreummens 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
H concept of mens rea in tax laws and the judicial practice in emphasising
STATE OF GUJARAT AND ANR. v. M/s. SAW PIPES LTD. 491
[M. R. SHAH, J.]

its importance therefore, deserves careful consideration.Learned counsel A
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 Ors.; 1980 (6) ELT 295 (S.C.) and
Commissioner of Central Excise, Chandigarh (supra) in support
B
of his abovesubmissions to the effect thatbefore 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 one-half times
the differential tax demand. That employment of the term “not exceeding” C
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 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). D
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 E
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 F
levied the penalty and interest against the respondent – assessee under
the provisions of Section 45(6) and 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 G
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
H
492 SUPREME COURT REPORTS [2023] 6 S.C.R.

A which is posed for consideration of this Court 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
B 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.
C (1) Where any dealer or Commission agent becomes liable to
pay purchase tax under the provisions of sub-section (1) or
(2) of section 16, then, the Commissioner may impose on
him, in addition to any tax payable –
(a) if he has included the purchase price of the goods in his
D 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
E tax.
(2) If it appears to the Commissioner that such dealer -
(a) has failed to apply for registration as required by section
29, or
F (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
G 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 one-half
times the amount of the tax.
(3) If a dealer fails to present his licence, recognition or as the
H case may be, permit for cancellation as required by section
STATE OF GUJARAT AND ANR. v. M/s. SAW PIPES LTD. 493
[M. R. SHAH, J.]

35 or 36, the Commissioner may impose upon the dealer by A
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 sub-section (1) of
section 40, the commissioner shall impose upon such dealer
by way of penalty for each declaration or return, a sum of B
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 C
declaration or any return [as required by proviso to sub-
section (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 - D
(a) assessed for any period under section 41 or 50; or
(b) reassessed for any period under section 44;
exceeds the amount of tax already paid under sub-section
(1), (2) or (3) of section 47 by the dealer in respect of such
E
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 sub-section (5) a dealer is deemed to have
F
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 oneand one-half times the difference referred
to in sub-section (5).]”
XXX XXX XXX
G
“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 H
494 SUPREME COURT REPORTS [2023] 6 S.C.R.

A aforesaid 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 (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
C tax under sub-section (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
D period.”
6.2 On a fair reading of Section 45 of the Act, it can be seen that
as per sub-section (2) of 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
E 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 sub-section (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
F vested with the Commissioner as to whether to levy the penalty leviable
under sub-section (6) of Section 45 of the Act, 1969 or not. Sub-section
(5) of Section 45 provides that in the case of a dealer where the amount
of tax assessed for any period under sections 41 or 50 or re-assessed
for any period under Section 45 exceeds the amount of tax already paid
G 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 re-assessed as
aforesaid and the amount paid. Considering sub-section (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 sub-section (5), there shall be levied on such
H
STATE OF GUJARAT AND ANR. v. M/s. SAW PIPES LTD. 495
[M. R. SHAH, J.]

dealer a penalty not exceeding one and one-half times the difference A
referred to in sub-section (5). Under the circumstances, to the aforesaid
extent and on the difference of tax, as per sub-section (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 B
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 C
of tax assessed for any period under Section 41 or 50; or re-assessed
for any period under Section 44; exceeds the amount of tax already paid
by the dealer under sub-section (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 D
the difference between the amount so assessed or re-assessed as
aforesaid and the amount paid. Sub-section (6) of Section 45 provides
that where under sub-section (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 one-half times
the difference referred to in sub-section (5). Thus, on a bare reading of E
sub-sections (5) and (6) 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
re-assessment as the case may and the same shall be automatic.
Therefore, when the penalty on the difference of amount of tax paid and F
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 G
dealer is deemed to have failed to pay the tax to the extent mentioned in
sub-section (5) of Section 45, there shall be levied on such dealer a
penalty not exceeding one and one-half times the difference referred to
in sub-section (5). As per sub-section (5), where in the case of a dealer
the amount of tax assessed or re-assessed exceeds the amount of tax
H
496 SUPREME COURT REPORTS [2023] 6 S.C.R.

A 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 re-assessed 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
B
no discretion with the assessing officer either to levy or not to levy and/
or to levy any penalty lesser than what is 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
C 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
ofDharamendra Textile Processors(supra) after referring and
considering another decision of this Court in the case of Shriram Mutual
Fund(supra), it is observed and held that when the term used “shall be
D leviable,” the adjudicating authority will have no discretion.
6.6 In the case of Shriram Mutual Fund(supra) while dealing
and/or considering similar 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
E 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
F relying upon the decision in the case of Hindustan Steel Ltd. (supra)by
observing that it pertained to criminal/quasi criminal 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
G proceedings under the said Act are not criminal/quasi-criminal
proceedings.In paragraphs 34 and 35, it is observed and held as under: -
“34. The Tribunal has erroneously relied on the judgment
in Hindustan Steel Ltd. v. State of Orissa [(1969) 2 SCC 627 :
AIR 1970 SC 253] which pertained to criminal/quasi-criminal
H proceedings. That Section 25 of the Orissa Sales Tax Act which
STATE OF GUJARAT AND ANR. v. M/s. SAW PIPES LTD. 497
[M. R. SHAH, J.]

was in question in the said case imposed a punishment of A
imprisonment up to six months and fine for the offences under the
Act. The said case has no application in the present case which
relates to imposition of civil liabilities under the SEBI Act and the
Regulations and is not a criminal/quasi-criminal proceeding.
35. In our considered opinion, penalty is attracted as soon as the B
contravention of the statutory obligation as contemplated by the
Act and the Regulations is established and hence the intention of
the parties committing such violation becomes wholly irrelevant.
A breach of civil obligation which attracts penalty in the nature of
fine under the provisions of the Act and the Regulations would
immediately attract the levy of penalty irrespective of the fact C
whether contravention must be made by the defaulter with guilty
intention or not. We also further held that unless the language of
the statute indicates the need to establish the presence of mens
rea, it is wholly unnecessary to ascertain whether such a violation
was intentional or not. On a careful perusal of Section 15-D(b) D
and Section 15-E of the Act, there is nothing which requires
that mens rea must be proved before penalty can be imposed under
these provisions. Hence once the contravention is established then
the penalty is to follow.”
6.7 In the case of Guljag Industries (supra)while considering E
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 violation of
the provisions of Clause (a) of sub-section (2) or for submission of false
or forged documents or declaration, this Court in paragraph 9 observed
as under: - F

“9. Existence of mens rea is an essential ingredient of an offence.
However, it is a rule of construction. If there is a conflict between
the common law and the statute law, one has to construe a statute
in conformity with the common law. However, if it is plain from
the statute that it intends to alter the course of the common law, G
then that plain meaning should be accepted. Existence of mens
rea is an essential ingredient in every offence; but that presumption
is liable to be displaced either by the words of the statute creating
the offence or by the subject-matter with which it deals. A penalty
imposed for a tax delinquency is a civil obligation, remedial and H
coercive in its nature, and is different from the penalty for a crime.’’
498 SUPREME COURT REPORTS [2023] 6 S.C.R.

A That thereafter, after following the 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. 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
B
the defaulter with any guilty intention. In paragraph 30, it is observed
and held as under: -
“30. In Chairman, SEBI v. Shriram Mutual Fund [(2006) 5 SCC
361] this Court found on facts that a mutual fund had violated the
SEBI (Mutual Funds) Regulations, 1996. Under the said
C Regulations there was a restriction placed on the mutual fund on
purchasing or selling shares through any broker associated with
the sponsor of the mutual fund beyond a specified limit. It is in this
context that the Division Bench of this Court held that mens rea
was not an essential ingredient for contravention of the provisions
D of a civil act. 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. It was further held that
unless the language of the provision intends the need to establish
mens rea, it is generally sufficient to prove the default/
E contravention in complying with the statute. In the present case
also the statute provides for a hearing. However, that hearing is
only to find out whether the assessee has contravened Section
78(2) and not to find out evasion of tax which function is assigned
not to the officer at the check-post but to the AO in assessment
F proceedings. In the circumstances, we are of the view that mens
rea is not an essential element in the matter of imposition of penalty
under Section 78(5).”
6.8 In the case of Competition Commission of India (supra)
while considering Section 43A of the Competition Act, 2002 which
G provides for a penalty, it is observed in paragraphs 34 to 37 as under: -
“34. If the ultimate objective test is applied, it is apparent that
market purchases were within view of the scheme that was
framed. As such the subsequent change of law also did not come
to the rescue of the respondents considering the substance of the
H transaction. The market purchases were part of the same
transaction of the combination.
STATE OF GUJARAT AND ANR. v. M/s. SAW PIPES LTD. 499
[M. R. SHAH, J.]

35. Lastly, the submission raised that there were no mala fides on A
the part of the respondent as such penalty could not have been
imposed. We are unable to accept the submission. The mens rea
assumes importance in case of criminal and quasi-criminal liability.
For the imposition of penalty under Section 43-A, the action may
not be mala fide in case there is a breach of the statutory provisions
B
of the civil law, penalty is attracted simpliciter on its violation. The
imposition of penalty was permissible and it was rightly imposed.
There was no requirement of mens rea under Section 43-A or
intentional breach as an essential element for levy of penalty.
Section 43-A of the Act does not use the expression “the failure
has to be wilful or mala fide” for the purpose of imposition of C
penalty. The breach of the provision is punishable and considering
the nature of the breach, it is open to impose the penalty.
36. In SEBI v. Shriram Mutual Fund [SEBI v. Shriram Mutual
Fund, (2006) 5 SCC 361] , with respect to imposition of penalty
on failure to comply with the civil obligation this Court has laid D
down thus: (SCC pp. 371 & 376, paras 29 & 35)
“29. … In our opinion, mens rea is not an essential ingredient
for contravention of the provisions of a civil Act. In our view, the
penalty is attracted as soon as the contravention of the statutory
obligations as contemplated by the Act is established and, therefore, E
the intention of the parties committing such violation becomes
immaterial. In other words, the breach of a civil obligation which
attracts penalty under the provisions of an Act would immediately
attract the levy of penalty irrespective of the fact whether the
contravention was made by the defaulter with any guilty intention
or not. This apart [that] unless the language of the statute indicates F
the need to establish the element of mens rea, it is generally
sufficient to prove that a default in complying with the statute has
occurred. … the penalty has to follow and only the quantum of
penalty is discretionary.
*** G
35. In our considered opinion, a penalty is attracted as soon
as the contravention of the statutory obligation as contemplated
by the Act and the Regulations is established and hence intention
of the parties committing such violation becomes wholly irrelevant.
H
500 SUPREME COURT REPORTS [2023] 6 S.C.R.

A … We also further hold that unless the language of the statute
indicates the need to establish the presence of mens rea, it is
wholly unnecessary to ascertain whether such a violation was
intentional or not. On a careful perusal of Section 15-D(b) and
Section 15-E of the Act, there is nothing which requires that mens
rea must be proved before a penalty can be imposed under these
B
provisions. Hence once the contravention is established then the
penalty is to follow.”
37. The imposition of penalty under Section 43-A is on
account of breach of a civil obligation, and the proceedings are
neither criminal nor quasi-criminal; the penalty has to follow. Only
C discretion in the provision under Section 43-A is with respect to
quantum of penalty.”
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
D Siddhi GlucoBiols Ltd. (supra) and Oil and Natural Gas
Corporation Limited(supra)that the 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
E automatic on the eventualities occurring under sub-section (5) of Section
45 of the Act, 1969.
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
F 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.
G It provides that if the difference of tax paid and tax leviable/
assessed is more than twenty-five 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 one-half times the difference as
H
STATE OF GUJARAT AND ANR. v. M/s. SAW PIPES LTD. 501
[M. R. SHAH, J.]

per sub-section (5). Therefore, there being difference of more A
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 transferred to a third person and
used in an ‘ineligible’ industry. This is a case of deliberate violation
and evil doing.
B
23.1 In the present case, as the difference between total tax paid
and the purchase tax is more than twenty-five percent, the
respondent is deemed to have failed to pay the tax as per sub-
section (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 C
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 D
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.”
E
6.11 Even otherwise, the word used in Section 45(6) is “shall be
levied”. The dealer shall be liable to pay the penalty not exceeding one
and one-half times of the difference of the tax as mentioned in sub-
section (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 F
in Section 45(5) occurs, the penalty shall be leviable as mentioned in
sub-section (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 G
is plain and unambiguous. A statute is 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
H
502 SUPREME COURT REPORTS [2023] 6 S.C.R.

A 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
B 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 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,
C 1969 and the language used therein.
6.13 Inso 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
D 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 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
E 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. Asimilar decision in the case of Pepsi Foods Ltd
F (supra) also shall not be applicable and/or of any assistance to the
respondent – assessee – dealer.
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
G 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
H dealer, who appeared before the High Court and therefore, he did not
STATE OF GUJARAT AND ANR. v. M/s. SAW PIPES LTD. 503
[M. R. SHAH, J.]

press the issue/question on the liability to pay the tax at the rate of 12% A
was wrongly given. It is to be noted that the respondent – dealer was
represented 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
B
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 C
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 D
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 – E
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 F
required to be noted that the learned Tribunal specifically found that
there was nothing on record to prove that there was in fact a bonafide
belief of the respondent herein, that itwould 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 sub-section (5) of Section 45, there shall G
be levied penalty mentioned in sub-section (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 H
504 SUPREME COURT REPORTS [2023] 6 S.C.R.

A was liable to pay the tax at the rate of 2%, is unsustainable. None of the
aforesaid grounds would justify deletion of 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 Hindustan Steel
Ltd. (supra) and even set aside the order passed by the Tribunal which
B
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
C interest under Section 45(6) and Section 47(4A) of the Act, 1969, are
hereby restored. Present appeal is accordingly allowed. In the facts of
the case, there shall be no order as to costs.

Ankit Gyan Appeal allowed.
D (Assisted by : Abhishek Pratap Singh and Aarsh Choudhary, LCRAs)

E

F

G

H