From our Legal Corner - Monday's casesLegal Corner Icon — the image was hosted by the publisher and was not captured.

By Vijay Kumar

Income Tax

Failure to deduct TDS - No mens rea required for penalty - what is reasonable cause? - Payment of tax ultimately does not absolve the deductor : ITAT

The Supreme Court in the case of Gujarat Travancore Agencies, had held that "unless there is something in the language of the statute indicating the need to establish, the element of mens rea it is generally sufficient to prove that a default in complying with the statute has accrued; in our opinion there is nothing in section 271(1)(a) which requires that mens rea must be proved before penalty can be levied under that provision".

The payment of taxes by the payees will not absolve the assessee from the responsibility of deducting tax at source. Acceptance of this argument would make the provisions relating to collection of taxes by way of TDS redundant.

FERA

FERA violations - ED imposes penalty of Rs 64 Cr - Tribunal orders pre-deposit of 25% - Tribunal order is perfectly in order - SCN issued at Chennai, first order passed at Mumbai, appellate order passed in Delhi, Madras HC has jurisdiction : HC

"Cause of action" consists of a bundle of facts, which give cause to enforce the legal inquiry for redress in a court of law. It must include some act done by the parties within the appropriate court of jurisdiction.

For waiving pre deposit two significant expressions in the statute have to be considered - "undue hardship to such person" and "safeguard the interests of revenue"

Central Excise

Clandestinely removed goods were exempted! Tribunal sets aside Rs 8.91 Crores - the adjudicating authority had decided to impose penalties till the ink in his pen drained out!

WE reported this case on the 18^th June of this year when the Stay application had come up for hearing before the Tribunal, West Zonal Bench [2007-TIOL-800-CESTAT-MUM]. Suffice to say that the Tribunal had while granting an unconditional Stay held thus - "Even if the fact remains that the goods have been removed clandestinely, the question of confirmation of demand will not arise as the goods are entitled for full exemption".

The matter came up for final hearing recently and the result is obvious. The order of the Commissioner, Central Excise, Nashik was set aside and all the appeals allowed. Nothing exceptional about these appeals except that they were against an order confirming duty liability of Rs.8.91 crores, an equivalent penalty on the manufacturer & liberal imposition of penalties on the various company officials right from the authorized signatories to the Despatch & Stores In-charge, the Marketing Manager, Marketing Co-ordinator & last but not the least the Executive Director & the Director of the company. It was as if the adjudicating authority had decided to impose penalties of amounts till the ink in his pen drained out!

See our columns Monday for the judgments