TaxTMI 
TaxTMI 
2010 (8) TMI 786
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....eing disposed of by this common judgment. Facts of W.P. No. 17/2004 : 2. The petitioner in this petition is a Airline Company engaged in the business of carrying passengers between various locations in India and abroad. The petitioner in the course of its business collected FTT from passengers going abroad in accordance with the Finance Act and Foreign Travel Tax Rules, 1979 framed thereunder ("FTT Rules" for short). The petitioner for the months of April, August, September and December, 2001 failed to pay the FTT within the stipulated period. In view of its failure, four separate show-cause notices were issued to the petitioner. The adjudicating authority vide its order dated 29th May, 2002 imposed penalty of Rs. 4,19,700/- on the petitioner for late payment of FTT for the months of April, August and September, 2001, whereas vide order dated 18th July, 2002 imposed penalty for the month of December, 2001. 3. Aggrieved by the aforesaid order, petitioner filed two separate appeals before the Commissioner (Appeals). Pursuant to the interim order dated 16th September, 2002, passed by the Commissioner (Appeals), the petitioner furnished bank guarantees for the amounts involved....
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....ate paid, which worked out to Rs. 2,58,630 and Rs. 45,632/- on the amount which was short paid. The adjudicating authority also imposed penalty of Rs. 24,000/- on the petitioner for late and short payment under Section 38(3) of the Finance Act and separate penalty of Rs. 6,000/- under Rule 10A of the Rule of 1979 for late submission of the monthly return. 8. Aggrieved by the said order, petitioner filed appeal before the Commissioners (Appeal), who, vide his order dated 24th November, 1999 set aside the said order dated 31st August, 1999 and remanded case for de-novo consideration. 9. On remand, the adjudicating authority vide its order dated 8th August, 2001 reduced the demand of Rs. 14,000/- and confirmed the amount of interest as held payable earlier and imposed penalty of Rs. 71,29,140/- in respect of six case of late payment of FTT and Rs. 2,800/- in respect of seventh case of short payment of FTT. 10. Aggrieved by the said order, petitioner filed appeal before the Commissioner (Appeals); wherein the Commissioner (Appeals), vide his order dated 17th January, 2001 directed the petitioner to deposit the entire amount of interest/short payment and penalty which was reduc....
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.... petitioner's office at Mumbai received the cheque from its Delhi office in the evening of 16th August, 2002 and, thereafter, petitioner duly paid the tax collected, to the treasury in the early hours on the next day i.e. 17th August, 2002. In the circumstances, there was a delay of about two days in payment of FTT. On 2nd September, 2002, a show-cause-notice was issued to the petitioner proposing to levy interest of Rs. 5,273/- under Section 35A and penalty under Section 38(3) of the Finance Act. They replied the same vide their reply dated 16th September, 2002 and explained the reasons for delayed payment. The Deputy Commissioner of Customs, the adjudicating authority, after offering opportunity of hearing to the petitioner, vide its order-in-original dated 12th November 2002 confirmed interest of Rs. 5,273/- under Section 35A and imposed penalty of Rs. 9,62,300/- on the petitioner under Section 38(3) read with Notification No. 2/94 of the Finance Act. 14. Not satisfied with the aforesaid order, petitioner filed appeal before the Commissioner of Customs (Appeals) on 27th January, 2003 and paid an amount of Rs. 4,81,150/- towards interest and penalty on 4th September, 2003. The....
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....respondent dated 18th July, 2002 and remanded the matter for re-adjudication of show cause notices in terms of the amendment made to Rule 11 of the FTT Rules. 20. Aggrieved by the said order petitioner filed revision application before respondent No. 4. The respondent No. 4 vide his order dated 31st July, 2006 upheld the imposition of penalty of Rs. 11,71,100/- as imposed by respondent No. 2 on the basis of retrospective effect given to the amendment made to Rule 11 of the FTT Rules. 21. Aggrieved by the said order, the petitioner has invoked writ jurisdiction of this Court. 22. All these petitions as stated hereinbefore were heard together involving common issues. Rival Submissions : 23. Mr. Nankani, learned counsel for the petitioners through his oral and reiterated in the written submissions dated 7th July, 2010 would submit that the impugned orders are liable to be set aside being ex facie illegal and arbitrary. That the Power to impose the penalty under Section 38(3) of the Finance Act is exercisable only in case of "failure to pay the tax" and not where there is only a delay in the payment of the tax. That a "failure to pay" arises only where no payment has at ....
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....was no intention on the part of the petitioner to cause delay in depositing the amount of tax which is apparent from the very fact that the demand drafts were got prepared well before the due date. Thus, having already parted with the amounts towards the value of the demand drafts, the petitioner did not stand to gain by a delayed deposit of the demand drafts with the respondents, unlike cases where a cheque may be issued but not paid. According to him, the said 5 cases cover a tax liability of Rs. 2,94,83,400. In the 6th case, the notice had been issued after almost 2 years, much beyond the prescribed limitation, as such, no penalty under Section 38(3) was warranted in respect of the said show cause notice. 28. According to Mr. Nankani, seven other notices covered a short payment of FTT foreign amounting to Rs. 14,000/-. Of the said short paid tax, the demand in respect of a sum of Rs. 12,000/- was barred by limitation and that the amount short paid was only Rs. 2,000/-. He, thus, submits that the impugned order suffers from non-application of mind and perverse approach. 29. Mr. Sridharan, learned counsel for the petitioners submits that failure to delete proviso to Rule 11 ....
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....tretch the words used by the legislature to fill-in-the gaps or omissions in the provisions of the Act. According to Mr. Sridharan, the case of Smt. Hiradevi & Others (supra) applies to the present case. The failure to amend proviso to Rule 11 is a clear case of casus omissus by legislature which cannot be filled up or supplied by court through a process of interpretation or otherwise. 31. Mr. Sridharan further submits that the respondents cannot challenge proviso to Rule 11. Proviso to Rule 11, as it stood on the date of default by the Petitioners, did not allow the customs officer to impose penalty in excess of Rs. 5,000/-. That the Respondents are bound by the Rule. It is not open for them to challenge the validity of Rule either on the ground of being inconsistent with Section 38(3) or otherwise. That privilege is available to the assessee and not to the State itself. Admittedly, the custom officer exercised the power of imposition of penalty under Rule 11. It is not open to the officer to challenge the validity of Rule under which he exercised the jurisdiction. In support of his submissions he relied upon (i) Indian Leaf Tobacco Development Co. Ltd. v. UOI, 1984 (16) E.L.T.....
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..... He placed reliance on the judgment of the Supreme Court in the case of Maruti Wire Industries (P) Ltd. v. Sales Tax Officer, 2001 (3) SCC 735; wherein the assessee did not even file a return as provided in the Rules and did not therefore pay any tax at all. Rule 27(7A) of Kerala General Sales Tax Rules, 1963 mandates filing of return along with proof of payment of tax within 20 days of the close of the quarter. Section 23(3) provided for penalty if tax assessed is not paid within time prescribed. The Supreme Court, thus held that a legislative casus omissus cannot be supplied by judicial interpretative process. He submits that the ratio of this decision applies to the present case. 34. Mr. Sanklecha while adopting the submissions advanced by Mr. Nankani and Mr. Sridharan went on to submit that Section 38(3) of the Act is not applicable to the facts of the cases in hand, which, according to him, appears to be more particularly governed by Section 38(4) of the Act. lie while relying on the proviso to Rule 11 of the Rules Urged that the court should hot declare the said rule ultra vires the parent Act and should try to reconcile the rule with the parent Act adopting rule of harmo....
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....ection 35 is a charging section and, inter alia; provides for levy of FTT on all passengers embarking all international journey. Sub-section (2) of Section 35 provides that in accordance with the FTT Rules, FTT shall be collected by the officers of the Customs appointed under the Customs Act or such officers of the Central or State Government tar the Airport Authority of India or such carriers, as may be authorised in this behalf by the Central Government by notification in the official gazette and credit the same to the Central Government. Rule 4 of the FTT Rules, inter alia provides that the FTT collected in any month by any carrier shall be paid before the expiry of 15 days from the end of that month into the treasury. Therefore, according to them, combined reading of Section 35(2) with Rule 4 makes it amply clear that the FTT has to be collected as per the rates prescribed under Section 35(1) and the same has to be paid into the credit of the Central Government within 15 days from the end of the month, during which the tax has been collected. It is, thus, submitted that the charging section also lays down the time limit for payment of FTT into the credit of the Central Governme....
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....ty and it was rightly confirmed by the appellate authority. Statutory Provisions : 42. Before we deal with the rival contentions and the case-laws on the point, it would be proper if we notice relevant statutory provisions of the Finance Act, 1979 and Foreign Travel Tax Rules, 1979. Finance Act, 1979 : 1. Short title and commencement.- (1) This Act may be called the Finance Act, 1979. (2) Save as otherwise provided in this Act, sections 2 to 27 and sections 44, 45 and 46 shall be deemed to have come into force on the 1st day of April, 1979. 34. Definitions.- In this Chapter, unless the context otherwise requires. - (a) .... .... .... (b) "carrier" means the person or authority undertaking the carriage of a passenger on an international journey and includes any agent, representative or other person acting on behalf of such person or authority; .... .... .... 35. Foreign travel tax. - (1) With effect from the date of commencement of this Chapter, there shall be levied on all passengers embarking on international journeys a tax (hereafter in thi....
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....may be adjudged by an officer of customs mentioned in Sec. 3(c) or Sec. 3(d) of the Customs Act : Provided that no officer of customs mentioned in Sec. 3 of the Customs Act shall be competent to impose a penalty exceeding five thousand rupees in any such case. 43. The Finance Act, 1979, which received assent of the President on 10th May, 1979 contains Chapter V which provides for provisions of levy of FTT under Section 35 of the Act on all passengers embarking on the international journey and created liability on the carriers to collect and pay it to the Central Government. 44. Section 35A thereof created liability on the carrier to pay interest for default in payment of FTT, whereas Section 38 in general provides for penalty and sub-section (3) thereof, in particular, provides for penalty on the carrier or other person who fails to pay FTT to the Central Government under sub-section (2) of Section 35. In addition to the payment of such tax and the interest leviable thereon, the carrier is also held liable to pay minimum penalty not less than one-fifth, which may extend to three times of the amount of tax not so paid to the credit of the Central Government. Sub-section (4)....
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....oners to impose penalty for late payment of FTT. 48. The proper construction of legislative provisions as regards rules and regulations made under the Act fell for consideration in several English and Indian decisions. One of the leading judgment delivered by the Constitution Bench of the Hon'ble Supreme Court in case of Chief Inspector of Minkes v. Karam Chand Thapar, AIR 1961 SC 838 can conveniently be referred to repel the construction put on the statutory provision by the advocates appearing for the petitioners. In the said judgment, the Hon'ble Supreme Court has referred to an earlier decision in the case of Institute of Patent Agents v. Lockwood, 1894 AC 347; wherein similar question was considered. Hon'ble Supreme Court relied upon the observations of the Lord Chancellor while considering the question as to how far, if at all, the courts could consider the question of validity of the rules running contrary to the provisions of the Act. The observations made are :- "No doubt", said he, "there might be some conflict between a rule and a provision of the Act. Well, there is a conflict sometimes between two sections to be found in the same Act. You have to try and reconcil....
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.... in consonance with proviso to Rule 11 of the FTT Rules and not in line with Section 38(3) of the Act is without any substance. The submission advanced by Mr. Sridharan that legislative casus omissus cannot be supplied by the Court is misplaced since this court is only giving primacy to primary provision of the primary legislation while upholding minimum penalty imposed. 52. The provision of Chapter-V of the Act in general and Section 38(3) in particular provides that every carrier or other person, who fails to pay the FTT to the credit of the Central Government under sub-section (2) of Section 35, in addition to payment of such tax and the interest leviable thereon, is made liable to pay penalty. The said provision shows the mandatory nature of payment of liability. The use of the word "shall" in the statute, ordinarily speaking, means the statutory provision is mandatory. It is Construed as such, unless there is something in the context in which the Word is used, which would justify departure from that meaning. There is nothing in the language of the provision of Section 38(3) which would justify any departure. On the other hand, Section 38(3) makes it abundantly clear that if....
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.... delinquent has contravened the provisions of Section 10 FERA, 1947 that would immediately attract the levy of "penalty" under Section 23, irrespective of the fact whether the contravention was made by the defaulter with any "guilty intention" or not. Therefore, unlike in a criminal case, where it is essential for the 'prosecution' to establish that the 'accused' had the necessary guilty-intention or in other words the requisite 'mens rea' to commit the alleged offence with which he is charged before recording his conviction, the obligation on the part of the Directorate" of Enforcement, in cases of contravention of the provisions of Section 10 of FERA, Would be discharged where it is shown that the "blameworthy conduct" of the delinquent had been established by wilful contravention by him of the provisions of Section 10, FERA 1947. It is the delinquency of the defaulter itself which establishes his 'blameworthy' conduct, attracting the provisions of Section 23(1)(a) of FERA, 1947, without any further proof of the existence of "mens rea" . Even after an adjudication by the authorities and levy of penalty under Section 23(1)(a) of FERA, 1947, the defaulter can still be tried and pun....
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....broad, "Absolute offences" are not criminal offences in any real sense but acts which are prohibited in the interest of welfare of the public and the prohibition is backed by sanction of penalty......." In R.S. Joshi Sales Tax Officer, Gujarat & Ors. v. Ajit Mills Ltd. & Anr. Etc. , (1977) 4 SCC 98, the Hon'ble Supreme Court observed as under : ".......Even here we may reject the notion that a penalty or a punishment cannot be cast in the form of an absolute or no-fault liability but must be preceded by mens rea. The classical View that 'no mens rea, no crime' has long ago been eroded and several laws in India and abroad, especially regarding economic crimes and departmental penalties, have created severe punishments even where the offences have been defined to exclude mens rea. Therefore, the contention that Section 37(1) fastens a heavy liability regardless of fault has no force in depriving the forfeiture of the character of penalty." In M/s. Gujarat Travancore Agency, Cochin v. C.I.T., (1989) 3 SCC 52 = 1989 (42) E.L.T. 350 (S.C.), the Hon'ble Supreme Court observed as under : "..........It is sufficient for us to refer to Section 271(1)(a), which provides that a pe....
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....ns rea on the part of the appellants Will come up for consideration." 56. The case of Hindustan Steel Ltd. v. State of Orissa, AIR 1970 SC 253 = 1978 (2) E.L.T. J159 (S.C.) relied upon was a case under the Orissa Sales Tax Act, 1947 which dealt with the imposition of a minimum penalty for failure to carry out statutory obligation. The Court held that such an order imposing penalty is the result of quasi-criminal proceeding and penalty will not ordinarily be imposed unless party obliged either acted deliberately in defiance of law or acted in conscious disregard of its obligation. Because of its quasi-criminal character, the Court held that the element of mens rea or bona fiders was to be imported which would justify the authority which was competent to impose or refuse to impose penalty even when the statute provided for a fixed minimum penalty on proof of default. This case has no application to the facts of the cases in hand. Section 38(3) merely provides consequences of the failure to comply with the provisions of Section 35(2) of the Act. 57. As already noticed, each petitioner was served with the show cause notice. They were given opportunity of hearing. The adverse circ....
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....been made, albeit belatedly. In other words, mere delay in payment cannot be within the sweep of "failure to pay". Hence delayed payment does not attract penalty. The said submission is also devoid of any substance. 61. Let us find out the meaning of the concept "failure to pay". The said concept has not been defined under the Act or Rules. "Failure to pay" means non-payment. The meaning of non-payment, as given in the Black's Law Dictionary, is : "Failure to deliver money or other valuables, esp. when due in discharge of an obligation. The concept of failure to pay can be quoted with non-payment. Non-payment is nothing but failure to pay when due. As per the provisions of the Act, amount of FTT collected becomes due within fifteen days from the date of collection thereof. Failure to pay within this prescribed time frame would mean non-payment or failure to pay. If any person fails to pay within the statutory period of fifteen days, then such person is well within the sweep of the words "failure to pay". Once the period of fifteen days is over and breach in payment of tax is committed, then it is immaterial when the defaulter in future is making the payment. Had there been....