When Two Interpretations Of Fiscal/Penal Statute Are Possible, One Which Exempts Subject From Penalty Must Be Adopted: Allahabad High Court

The Allahabad High Court has held that where two interpretations of a fiscal or penal statute are possible, the interpretation which exempts the subject from penalty must be adopted rather than the one which imposes penalty.

The bench comprising Justice Manoj Kumar Gupta and Justice Kshitij Shailendra held

“As regards interpretation of a penal or fiscal statute, it is well settled that if two views or constructions are possible, the Court must lean towards that view/construction which exempts the subject from penalty rather than the one which imposes penalty. It is also well settled that if there is a reasonable doubt or ambiguity, the principle to be applied in construing a penal provision is that such doubt or ambiguity should be resolved in favour of the person who would be subjected to penalty.”

Factual Background

Petitioner's land was subjected to inquiry wherein it was found that he had indulged in soil mining, measuring 2340 cubic meters. A notice was sent to the petitioner which remained unserved. However, a penalty of Rs. 1,46,360/- was imposed on him which was set aside by the High Court in a different writ petition on grounds of violation of principles of natural justice.

Subsequently, fresh proceedings were carried out and eventually, the same penalty was levied on the petitioner. Petitioner relied on the Government Order dated 24.12.2012 which provides that where the depth of mining is not more than 2 mts, it will not fall under 'mining operations'. Reliance was placed on Ramvir Singh vs State of U.P. and 2 others wherein the Allahabad High Court in a similar fact situation had quashed the penalty order.

Per contra, respondents contended that even though the depth of mining was less than 2 mts, it was being done for commercial purposes and thus, attracted royalty under the Government Order dated 24.12.2012.

High Court Verdict

The Court observed that under the Government Order dated 24.12.2012 only if the depth of mine was more than 2 mts, any fiscal liability would arise, otherwise there no penal action could be initiated.

Since the digging done by the petitioner was less than 2 mts as prescribed in the Government Order dated 24.12.2012, the Court held that penalty could not be imposed upon the petitioner in the absence of material available to the contrary.

“It is well settled that the penal and fiscal provisions must be strictly construed and since the order impugned is fiscal in nature, the burden to establish the guilt or wrong of the petitioner, if any, lay upon the respondents and it cannot be shifted to or fastened upon the petitioner to prove negatively.”

The Court held that it was upon the State respondents to prove beyond doubt that the activity carried out by the petitioner prior to the issuance of the Government Order dated 24.12.2012 will fall within 'illegal mining operations'.

“In a catena of decisions, the Supreme Court has held that in the fiscal matters, the burden to establish levy or any financial charge lay upon the revenue and it is not for the assesee to lead negative evidence to evade the liability.”

The Court held that there was no material on record to show that the digging done by the petitioner “in his own agricultural field below two meters depth would fall under 'illegal mining operation' or that it would be in teeth of any statutory provision.”

Holding that the case of the petitioner was squarely covered by the earlier decision of the Allahabad High Court in Ramvir Singh vs State of U.P. and 2 others, the writ petition was allowed.

Case Title: Om Prakash vs. State Of UP And 2 Others 2024 LiveLaw (AB) 179 [WRIT - C No. - 39901 of 2018]

Case citation: 2024 LiveLaw (AB) 179

Click Here To Read/Download Order