1999 (11) TMI 293 - CGOVT - Customs

Interpretation of Payment Date in Tax Penalty Case: Cheque Presentation vs. Clearance

The Revision Application challenged a penalty of Rs. 1 crore imposed for delayed deposit of Inland Air Travel Tax (IATT) collected. The central issue was ... Deemed payment on tender of cheque where cheque is not dishonoured - date of receipt of cheque versus date of clearance as date of payment into Government treasury - acceptance of cheques in payment of Government dues under Treasury Rules - preclusive effect of cheque dishonour on deemed paymentDeemed payment on tender of cheque where cheque is not dishonoured - date of receipt of cheque versus date of clearance as date of payment into Government treasury - acceptance of cheques in payment of Government dues under Treasury Rules - Whether the date on which a cheque is received by the Government's bankers is to be treated as the date of payment into the Government treasury for Inland Air Travel Tax or whether payment is to be reckoned only when the cheque is cleared. - HELD THAT: - A harmonious construction of Rule 7 and Note 1 to Rule 26 of the Central Government Account (Receipts & Payments) Rules, 1983 and Rules 79 and 80 of the Treasury Rules shows that government dues may be tendered by cheque into an accredited bank and, provided the cheque is not subsequently dishonoured, payment is to be deemed to have been made on the date the cheque was handed over to the Government's bankers. Rule 79(1)(a) permits acknowledgement of receipt of a cheque but clarifies that until the cheque is dishonoured payment cannot be admitted to have been received; Rule 80 equates honour of a cheque on presentation with payment. This construction is supported by precedent cited in the judgment, including K. Saraswatty v. P.S.S. Somasundaram Chettiar and the decision of the Madras High Court in CIT v. Kumudam Publications Pvt. Ltd., which treat a cheque as constituting due payment when subsequently encashed or when handed over to Government officials in accordance with the Treasury Rules. Applying these principles to the undisputed facts that the cheques were presented to the accredited bank and not shown to have been dishonoured, the cheques must be treated as payment made on the dates they were handed to the bank, and no delay for the purpose of Section 46(3) arises. [Paras 6, 7, 8]Revision allowed; the dates on which the cheques were handed to the Government's bankers shall be treated as dates of payment into the Government treasury, the penalty and interest confirmed by the lower authorities are set aside and consequential relief granted.Final Conclusion: The Revision Application is allowed: cheques presented to the accredited bank and not dishonoured are to be treated as payment on the date of their tender to the Government's bankers, and the orders imposing penalty and confirming interest are set aside. Issues involved: Penalty imposed for delayed deposit of Inland Air Travel Tax (IATT) collected, interpretation of the date of payment into the Government treasury concerning cheque clearance.Penalty Imposed for Delayed Deposit of IATT:The Revision Application was filed against the penalty of Rs. 1 crore imposed u/s 46(3) of the Finance Act, 1989 for delayed deposit of IATT collected. The penalty was based on the delay in depositing amounts collected within the mandatory 30 days into the Treasury, with interest also confirmed u/s 43A(i) ibid. The Commissioner (Appeals) upheld the penalty, leading to the appeal.Interpretation of Date of Payment into Government Treasury:The central issue revolved around whether the date of receipt of the cheque by the bank should be considered as the date of payment into the Government treasury or the date when the cheque was cleared. The argument presented highlighted that as per various statutes and judicial pronouncements, the date of cheque receipt should be deemed as the date of payment into the treasury.Relevant Legal Provisions and Precedents:The Central Government Account (Receipts & Payments) Rules, 1983, and Treasury Rules of the Central Government were crucial in understanding the issue. The Rules emphasized the process of crediting Government dues directly into accredited banks and the treatment of cheques as payment upon acceptance and clearance. Legal precedents, such as the Supreme Court case of K. Saraswatty v. P.S.S. Somasundaram Chettiar and the Madras High Court case of CIT v. Kumudam Publications Pvt. Ltd., supported the notion that cheque payment should be considered valid once encashed or handed over to Government officials.Decision and Conclusion:After considering the submissions and legal framework, the Government concluded that the date of cheque presentation to the bank for payment of IATT should be recognized as the date of payment into the Government treasury. As there was no dispute regarding the bank's status or the cheque presentation dates, the Revision Application was allowed, overturning the lower authorities' orders. Consequently, the penalty for delayed deposit was set aside, providing consequential relief to the appellant.