TMI Blog2010 (8) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... ted:- 9-8-2010 - V.C. Daga and K.K. Tated, JJ. Shri D.P. Merchant, Sr. Counsel, i/b. Shah Sanghi, Vikram Nankani with Madhur Baya, i/b. N.S. Thacker, V. Sridharan with Prakash Shah, i/b. PPS Legal, Manoj Sanklecha with Sandeep Goyal and Ms. Khushanama Gazdar, i/b. Mulla Mulla Craigie Blunt Caroe, for the Petitioner. Shri Vijay Kantharia with J.B. Mishra and Rutuja Ambekar, Suresh Kumar and A.S. Rao, for the Respondent. JUDGMENT All these petitions filed by the petitioners under Article 226 of the Constitution of India are challenging imposition of penalty under Section 38(3) of the Finance Act, 1979 ( Finance Act or Act for short) for delay in payment of Foreign Travel Tax ( FTT for short) to the Government. The facts involved in all these petitions are more or less common and issues involved are identical. Hence all these petitions were heard together and are being 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 passenger ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/-, out of which Rs. 12,000/- was held to be barred by limitation as such only Rs. 2,000/- was payable by the petitioner. Fourteen separate show-cause-notices were issued on different dates to the petitioner after receipt of monthly returns and they were called upon to show cause why the FTT short/late paid by them should not be recovered from them and why penalty should not be imposed on them under Section 38 of the Finance Act. The petitioner by their reply dated 22nd July, 1998, replied said show-cause-notices, inter alia; submitting that on account inordinate delay in issuing the notices, the petitioner is handicapped in not being able to defend their case for want of records and documents. 7. The adjudicating authority, vide its order dated 31st August, 1999 confirmed the demand of FTT of Rs. 87,700/- and further ordered the petitioner to pay interest @ 20% on the amount late 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 Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 71,29,140/-. The said order is a subject matter of challenge in this petition. Facts of W.P. No. 3918/2005 : 13. The petitioner is carrier engaged in the business of carrying passengers on international routes by air from India and into India. In terms of the Finance Act, the petitioner was required to collect and pay into the treasury within the specified period of 15 days, the amount of FTT collected by the petitioner from the passengers flying outside India in their flights pursuant to the provisions of the FTT Rules. The petitioner was regularly collecting the FTT from the passengers and paying the same to the treasury. In respect of FTT collected during the month of July, 2002 amounting to Rs. 48,11,500/-, the petitioner was required to pay the same to the treasury by 15th August, 2002. The last date being the Independence Day of India was a national holiday. The 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation for dispensing with pre-deposit of penalty. Respondent No. 3 vide its order dated 20th April, 2003 directed pre-deposit of entire amount of penalty. The petitioner did not make payment of the pre-deposit. According, respondent No. 3, vide its order dated 2nd July, 2003 dismissed the appeal for non-compliance of order dated 20th April, 2003. 18. Aggrieved by the aforesaid order, petitioner invoked revisional jurisdiction before respondent No. 4. The respondent No. 4 set aside the order dated 2nd July, 2003 passed by respondent No. 3 and directed the petitioner to deposit Rs . 5,50,000/- towards the penalty and remanded the matter to respondent No. 3 for decision on merits. The petitioner deposited Rs. 5,50,000/- as directed by respondent No. 4. 19. On remand, vide its order dated 14th June, 2005, the respondent No. 2 set aside the order-in-original passed by 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 uphel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in the appeal filed by the petitioner, the order in original dated 14th June, 1999 was set aside and the order under which the case was remanded to the adjudicating authority was not an open remand or a full remand . As a corollary, the order of the respondent No. 4, dated 14th June, 1999 imposing penalty of Rs. 24,000/- on the petitioners (in W.P. No. 3269/2004) , for want of challenge at the instance of Revenue has become final and binding. Therefore, higher penalty of Rs. 71,29,140/- could not have been imposed by the respondent No. 4, as such it is liable to be set aside. 27. Mr. Nankani submits that in 5 cases, the demand drafts in favour of the Respondents had been ready prior to the due date for the payment of tax but the same could not be deposited within prescribed time on account of reasons beyond the control of the petitioner. That there 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 del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (3) can be much higher than Section 38(1) and Section 38(2). Old sub-section (3) is practically repeated in new sub-section (5). However, simultaneously, with the insertion of new sub-section (3) of Section 38, proviso to Rule 11 was not amended. Proviso to Rule 11 continued as it is. It provided that no customs officers shall be competent to impose penalty exceeding Rs. 5,000/-. He, thus, submits that this is a clear case of legislative casus omissus. 30. Mr. Sridharan pressed into service Apex Court judgment in the case of Smt. Hiradevi Others v. District Board Shajahanpur District Collector, AIR 1952 SC 362. (page 69 to 74 of Volume I at page 73 before para 12) to urge that it is, no doubt, the duty of the court to try to harmonize various provisions of the Act passed by the legislature, but it is certainly not the duty of the court to stretch 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Parliament/Legislature can certainly provide for penalty for non-payment of tax by due date by employing appropriate language in the concerned stature. That in many taxing Statues penalty for non-payment of tax on due date is expressly provided. However, language of Section 38(3) does not cover the contingency of a delay in payment of tax. It is submitted that Section 38(3) is a charging section by which penalty is imposed. Section 38(3) is not a machinery provision. He submits that it is a settled position in law that provisions of taxing statue are to be construed strictly. Charging provision providing for imposition of penalty is to be construed even more strictly. Therefore, Section 38(3) is to be strictly constructed. This is more so when Act provides for payment of interest @ 20 per cent, which rate itself has inbuilt with element of penalty in it. 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 retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the maximum penalty which could be imposed on the petitioners was only Rs. 5,000/- each in case of delayed payment. In alternative, without prejudice to this contention, he further submits that in view of Section 38(4) of the Act, penalty in excess of Rs. 50,000/- cannot be imposed. While, in case in hand, the penalty imposed by the respondents is in excess of Rs. 50,000/- as such the same is liable to be quashed and set aside. 37. Mr. Merchant adopted the submissions advanced by Mr. Nankani; Mr. Sridharan and Mr. Sanklecha and prayed that the impugned order be quashed and set aside and the rule be made absolute. Per Contra : 38. Mr. Rao and Mr. Kantharia, learned advocates appearing for the Revenue pressed into service the scheme of the Finance Act, 1979 in particular engrafted in Sections 33 to 41. In their submission, sub-section (1) of Section 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 Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch of this Court upheld the minimum penalty imposed upon the carrier/airlines under Section 38(3) of the Finance Act. That in these cases, admittedly, the carrier/airlines had failed to make payment of FTT collected within the specified period, as such imposition of minimum penalty was in accordance with law. Reliance is also placed on the judgment of the Delhi High Court in the case of Combatta Aviation Ltd. v. Union of India, 2000 (115) E.L.T. 622 (Del.). 41. Learned counsel for the Revenue, lastly, submitted that this Court under Article 226 of the Constitution of India is having wide powers and is empowered to uphold the rule of law and cannot allow any illegality or any inconsistency in law to operate. He, therefore, submits that the revisional authority was perfectly justified in upholding the penalty imposed by the adjudicating authority 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve hundred rupees for every day after the first during which such breach Continues. (5) Any penalty under this section may be adjudged, collected and paid to the credit of the Central Government by such authority and in such manner as may be specified in the rules made under this Chapter. Provided that no order for imposing a penalty shall be passed by such authority unless the carrier or other person on whom the penalty is proposed to be imposed is given an opportunity of being heard in the matter by such authority. Foreign Travel Tax Rules, 1979 : 11. Adjudication of penalties.- In every case in which any person is liable to penalty under Sec. 38 of the Act, such penalty 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed by the respondents is the unequivocal submission advanced by the advocates appearing for the petitioners. In addition to this, it is further submitted that Rule 11 of the FTT Rules existed on the statute right from 11th June, 1979, whereas sub-sections (3), (4) and (5) of Section 38 were substituted for the original sub-section (3) by the Finance Act (32 of 1994). At that time it was expected on the part of the legislature to amend Rule 11 of the FTT Rules. Since there is omission to amend Rule 11, a legislative casus omissus cannot be supplied by process of judicial interpretation. It is, thus, urged that sub-section (3) of Section 38 cannot be used against the petitioners 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 petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, it is not difficult to notice that the said rule runs contrary to the provision of the Act. There is a clear conflict between the proviso to Rule 11 and Section 38(3), the substantive provision of the Act. Reconciliation thereof is not possible. Sub-section (3) of Section 38 of the Act is a leading provision which by no stretch of imagination can be said to be or treated as subordinate provision. The sub-ordinate provision must give way to the leading provision of the Act. Rule being sub-ordinate legislation cannot override the provision of primary legislation. In this view of the matter, the submission advanced on behalf of the petitioners that the penalty must be 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, there is no need to establish proof of criminal motive or any mens rea on the part of the defaulter. It is not an essential element for imposing penalty under the Act and rules framed thereunder. 55. In Chairman, S.E.B.I. v. Shriram Mutual Fund, AIR 2006 SC 2287, the Hon ble Supreme Court had an occasion to consider more or less similar provision; Wherein the Apex Court referred to the case of Director of Enforcement v. MCTM Corporation Pvt. Ltd., (1996) 2 SCC 471 and extracted observations made therein reading as under : it is thus the preach of a civil obligation which attracts penalty under Section 23(1)(a) FERA, 1947 and a finding that the 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 convicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not a part of general penal law but arise from the breach of a duty provided in a special beneficial social defence legislation, which creates absolute or strict liability without proof of any mens rea. The offences are strict statutory offences for which establishment of mens rea is not an essential ingredient. The omission or commission of the statutory breach is itself the offence. Similar type of offences based on the principle of strict liability, which means liability without fault or mens rea, exist in many statutes relating to economic crimes as well as in laws concerning the industry, food adulteration, prevention of pollution etc. in India and abroad, 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 classi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our opinion, there is nothing in Section 271(1)(a) which requires that mens rea must be proved before penalty can be levied under that provision. The Hon ble Supreme Court in another judgment in Swedish Match AB v. S.E.B.I., (2004) 11 SCC 641 observed as Under : ......The provisions of Section 15-H of the Act mandate that 3 penalty of rupees twenty five crores may be imposed. The Board does not have any discretion in the matter and, thus the adjudication proceeding is a mere formality. Imposition of penalty upon the appellant would, thus, be a forgone conclusion. Only in the criminal proceedings initiated against the appellants, existence of mens 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art from the lapses committed by the carriers in filing returns. It is, thus, clear that the delayed payment or rather nonpayment of the part of the FTT within the prescribed period is an admitted fact in all these petitions. 60. One more submission advanced by the advocates appearing for the petitioners is that power to impose penalty under Section 38(3) of the Act is exercisable only in case of failure to pay the tax and not where there is only a delay in the payment of tax. According to them, failure to pay arises only where no payment has at all been made prior to the issuance of the demand notice and does not arise where a payment has 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oners, one more submission specific to the case of Saudi Arabia Airlines advanced by Mr. Nankani needs consideration. 65. Mr. Nankani, in his submission, has urged that it was not open for the adjudicating authority to enhance the quantum of penalty while considering the show cause notice after its remand by the appellate authority to the adjudicating authority. The submission made is without any merit. If one goes through the order of remand, one would find that it was not a limited remand. The remand was to enable the adjudicating authority to consider all the issues after affording opportunity of personal hearing to the petitioner. The first order-in-original dated 14th June, 1999 was in breach of principles of natural justice. Consequently, it was set aside, that too, at the request of the petitioner. The show cause notices were restored to the file of the adjudicating authority for consideration afresh. It was not a limited remand. In that view of the matter, it was open for the adjudicating authority to enhance the amount of penalty in consonance with the provision of sub-section (3) of Section 38 of the Act. Thus, submission made in this behalf holds no water. 66. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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