Special tax-default penalty governs dishonoured cheque payments, with penalty reduced on facts and delay.

Where a cheque tendered for tax payment is dishonoured and the tax is remitted later with interest, the special penalty provision for default in payment of tax governs, not the general penalty provision. The Court held that a specific statutory default must be dealt with under the special clause even if the same facts may also amount to a general violation. On quantum, the Court considered the delayed departmental action and the assessee's financial difficulty and reduced the penalty, fixing it at Rs. 25,000 per month for the two months in issue.

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Issues: (i) Whether penalty for dishonour of cheques tendered towards tax payment and consequent delay in remittance was exigible under the general penalty provision or the special provision relating to default in payment of tax; (ii) what would be the proper quantum of penalty in the facts of the case.

Issue (i): Whether penalty for dishonour of cheques tendered towards tax payment and consequent delay in remittance was exigible under the general penalty provision or the special provision relating to default in payment of tax.

Analysis: The Act contained a general penalty provision for violations and a special provision specifically dealing with default in payment of tax. The default here was non-payment of tax along with the monthly return, even though the cheques tendered towards tax payment were dishonoured. Where a special provision squarely covers the default, penalty has to be considered under that provision and not under the general provision. The dishonour of cheques and delay in remittance therefore attracted the special penalty provision applicable to tax default.

Conclusion: Penalty was required to be considered under the special provision for default in payment of tax and not under the general penalty provision.

Issue (ii): What would be the proper quantum of penalty in the facts of the case.

Analysis: The tax was ultimately paid with interest after notice, and the departmental officer had delayed action for several months after dishonour of the cheques. The Court also took note of the assessee's stated financial difficulty. In these circumstances, instead of remanding the matter for fresh quantification, the Court exercised its own discretion to fix the penalty at a lesser amount than that imposed by the Tribunal.

Conclusion: The penalty was reduced to Rs. 25,000 per month, aggregating Rs. 50,000 for the two months in question.

Final Conclusion: The revisions succeeded only to the extent of reducing the penalty, while affirming that the case fell within the special default-in-payment framework under the Act.

Ratio Decidendi: Where a statute provides a special penalty provision for a specific default, that provision governs the case even if the same facts may also amount to a general violation.

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