The debate as to whether “mens rea” is an essential ingredient for levy of penalty has been never ending. It is a common issue as to whether absence of ill motive or in other words bonafide belief would save the offender from penalty.
Over the last many years the law has changed and Courts have been trying to provide clarity in this issue.
Findings of the Apex Court:
The Hon’ble Supreme Court in the case of Commissioner of Sales Tax, Uttar Pradesh vs. Sanjiv Fabrics, Civil Appeal Nos. 2344-2347 of 2004, by a judgment dated 10.9. 2010, while examining whether mens rea is an essential factor for levy of penalty for an offence under a taxing statute, has held that the following factors should be considered while dealing with levy of penalty:
(i) The object of the statute;
(ii) the language and meaning of the section; and
(iii) the nature of penalty.
It was held that although the Court on various occasions has examined the essence of mens rea but it has not been possible to frame a principle of law which could determine the issue. The answer to the question depends upon the object of the statute and the language of the provision dealing with the offence.
Meaning of the term “Penalty”:
In general, penalty refers to a result of a wrong committed by the offender. It can be both in the form of pecuniary punishment or prosecution. The measurement of penalty is related with the nature of offence which has been committed.
Penalty has been defined at different places. The Oxford Dictionary defines penalty as a loss or disability of a kind that has been fixed by law for some offence.
The Hon’ble Apex Court in M/s Gujarat Travancore Agency, Cochin vs. C.I.T. (1989) 3 SCC 52, has stated that the creation of an offence by statute implies that society suffers a loss by such act and that a deterrent step must be taken to discourage the offender.
The Hon’ble Supreme Court in Karnataka Rare Earth & Another vs. The Sr. Gelt., Department of Mines, by a judgment dated 23.1. 2004, has expressed that penalty is a liability in the form of a punishment on the offender.
The use of the term “penal” may also include any kind of liability to which the law subjects an offender in favour of the person against whom such wrong has been committed and the same is not limited to the damages suffered.
Thus “penalty” includes a kind of punishment which is imposed for an act or omission which –
i. inflicts damage or injury to the society; or
ii. Involves breach of contract; or
iii. Involves breach of a statutory obligation.
In the taxing statutes, the levy of penalty is intended to compensate for the loss caused to revenue.
Nature of Liability involved:
The common question which comes in the mind is the nature of liability involved while a person commits an offence in a statute. The very rule states that proceedings should be initiated against the person committing the act against a statute.
There are three types of liability which can be classified as:
1. Civil liability;
2. Criminal liability; and
3. Quasi Criminal Liability.
Differences between Civil and Criminal Liability:
The Hon’ble Apex Court in the case of M/s Gujarat Travancore Agency, Cochin vs. C.I.T., (1989) 3 SCC 52, expressed its view regarding the differences between a Civil Liability and Criminal Liability. The Hon’ble Court stated that Section 271(1) (a) of the Act provides that a penalty may be imposed if the department is satisfied that any person has without sufficient cause failed and / or neglected to furnish his return of income. On the other hand, Section 276C provides that if a person willfully fails to furnish his return of income which is required under Section 139(1) within due time, he shall be punishable with rigorous imprisonment up to one year or with fine. The former case is a civil obligation but the latter one is a criminal sentence.
Meaning of “Mens Rea”:
Mens Rea has been dealt widely in issues relating to levy of penalty. It has been a matter of debate that whether mens rea is an essence for levy of penalty for civil, criminal offences and quasi criminal offences. However it has not been possible to provide a clear guideline on this issue.
Mens Rea refers to a “guilty mind or intention to commit an act prohibited in law”. The Hon’ble Rajasthan High Court in Parasnath Granite India Ltd. vs. State of Rajasthan and Another, 144 STC 271, on 2 .6. 2004 observed that mens rea means knowledge of the wrongfulness of the act or omission.
In the context of punishment for a criminal act, mens rea is ordinary considered as an essence of an offence. Absence of mens rea implies a reasonable belief of the accused relating to the existence of facts which would prove him innocent.