Upon Repeal, Old Provision Ends; Substituted One Activates Upon Replacement

Pernod Ricard India (P) Ltd. Vs State of Madhya Pradesh & Ors. (Supreme Court of India)

Repealed provision ceases to operate from the date of repeal, and the substituted provision starts operating as and when it is substituted

Conclusion: Supreme Court held that subject to statutory stipulation, a repealed provision ceased to operate from the date of repeal, and the substituted provision started operating as and when it is substituted.

Held: Assessee-company was the sub-licensee under the M.P. Excise Act, 1915 for manufacture, import and sale of Foreign Liquor. The same was regulated under the Madhya Pradesh Foreign Liquor Rules, 1996. While Rule 16 prescribed the permissible limits of loss of liquor in transit, Rule 19 provided penalty for the breach of this rule. The breach, in this case, took place during the license period of 2009-10. The penalty for the same was around four times the maximum duty payable on foreign liquor. However, no action against assessee-company was taken during this period. Subsequently, in March 2011, Rule 19 was substituted by an amendment. As a result, the penalty was reduced from four times the maximum duty payable to an amount not exceeding the duty payable on foreign liquor. Following this development, a notice was issued to assessee for payment of the penalty as per the old Rule 19. So, the question arose for the adjudication was whether the penalty was to be levied as per the old rule or the substituted one. It was held that it was wrong to assume that the substituted Rule was given retrospective effect if its benefits were made available to pending proceedings or to those that have commenced after the substitution. Rule 19 which was substituted on 29.03.2011 was made applicable to proceedings that have commenced with the issuance of the demand notice in November, 2011. The Rule operated retroactively and thus saves it from arbitrarily classifying the offenders into two categories with no purpose to subserve.  The single Judge as well as the Division Bench had adopted two different approaches and the Court had not agreed with either of them. The single Judge was of the view that the amendment by way of substitution had the effect of repealing the law which existed as on the date of repeal. The Division Bench on the other hand, held that levy of penalty was substantive law, and as such, it could not operate retrospectively. This again was a wrong approach. The substituted penalty only mollified the rigour of the law by reducing the penalty from four times the duty to value of the duty. Therefore, the bar of Article 20(1) of imposing a penalty greater than the one in force at the time of the commission of the offence had no application. While rejecting the reasoning of the single Judge as well as the Division Bench, the importance of a simple and plain understanding of laws and its processes, was underscored keeping in mind the purpose and object for which they seek to govern and regulate us. Thus, penalty to be imposed on assessee would be on the basis of Rule 19 as substituted on 29.03.2011.

FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER

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