TMI Blog2024 (5) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... ERS [ 2001 (3) TMI 4 - SUPREME COURT ] while considering on the power to impose interest on the delayed payment of penalty amount, has observed ' once the demand ceased to exist and the fact was brought to the notice of the Tax Recovery Officer by the assessee, the former should have cancelled the recovery certificate and, therefore, with effect from that date till the date of refund, the interest should be paid by revenue.' The interest can be levied only in a manner provided by the statute. Further, the Hon ble Apex Court in a number of Judgments has held that when there is a power, coupled with duties, to do a thing in a particular way it should be done in that way only and other modes are forbidden. The Impugned Order is set aside inasmuch as it levies interest on the delayed payment of penalty amount from 10.12.2018 till the date of payment - Petition allowed. - HON'BLE MR. JUSTICE SUBRAMONIUM PRASAD For the Petitioners Through: Mr. Tarun Gulati, Senior Advocate with Mr. Ravisekhar Nair, Ms. Parthsarathi Jha, Ms. Ayushi Sharma, Ms. Raagini Agarwal, Ms. Shruti, Advocates For the Respondent Through: Ms. Aakanksha Kaul and Mr. Aman Sahani, Advocates. JUDGMENT 1. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent/CCI issued demand notices directing the Petitioners to deposit the penalty amount with simple interest @ 1.5% for every month or part of a month comprised in the period commencing from 10.12.2018 till the date on which the demand is paid. It is pertinent to mention here that the Petitioner No. 1 continuously renewed the FDR of Rs. 10 lakhs, that had been deposited as a condition precedent for grant of stay by the Ld. NCLAT. The Petitioners requested the Respondent/CCI to withdraw the demand notices in so far as it related to the demand of payment of simple interest @ 1.5% for every month or part of a month comprised in the period commencing from 10.12.2018 till the date on which the demand is paid. The Petitioners also requested for payment of penalty amount by way of instalments. The said request had been turned down by the Respondent/CCI vide the Impugned Order dated 18.07.2023. iii. The Petitioners have, therefore, approached this Court by filing the instant writ petition under Article 226 of the Constitution of India challenging the power of the Respondent/CCI to levy interest on the payment of penalty. 3. The principal contention of the learned Senior Counsel appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of penalty. 7. Per contra, learned Counsel appearing for the Respondent/CCI contends that the liability to pay the amount of penalty arose from the date of the Final Order which is 30.08.2018. She states that the Ld. NCLAT did not come to the conclusion that penalty was not to be levied on the Petitioners. She states that there was a reduction only as far as Petitioner No. 1 is concerned regarding the quantum of penalty. She, therefore, states that the demand notice was only Consequential wherein the Petitioners have been directed to pay interest on the penalty amount from the date of which the penalty was to be paid. 8. Learned Counsel for the Respondent/CCI further states that on the date when the appeals were dismissed by the Ld. NCLAT, the original demand made vide Order dated 30.08.2018 got revived and the stay granted by the Ld. NCLAT gets automatically vacated. She, therefore, states that the amount which was due and payable within 60 days from the date of Order dated 30.08.2018 would attract interest on its own. She states that it cannot be said that the liability to pay interest on the delayed payment of penalty can only arise after the demand notice is served on the Pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the interest imposed under the Competition Act is akin to the interest imposed under Section 234A of Income Tax Act, which is also a statutory levy and automatically becomes leviable as soon as a default occurs on the part of the assessee defaulting to file his income tax return. 11. In nutshell, the contention of the learned Counsel for the Respondent/CCI is, as night follows the day, that the moment a penalty is imposed, it has to be complied with and if the penalty is not paid in terms of the Order imposing penalty, interest automatically becomes payable under Regulation 5 of the 2011 Regulations. 12. Heard learned Counsel appearing for the Parties and perused the material on record. 13. To understand the scheme of Regulations and the power to levy penalty, it is necessary to extract the few provisions of the 2011 Regulations. Regulations 2(c), 2(e), 2(g), 3, 4, 5 and Form-I of 2011 Regulations read as under: 2(c) demand notice means a notice issued by the Commission to an enterprise from whom any penalty is recoverable under the Act; 2(e) enterprise in default means an enterprise which has not paid the penalty imposed on it within the stipulated time despite the demand no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned fails to make the payment within the time so extended, the enterprise concerned shall be deemed to be an enterprise in default. (3) In a case where payment by instalments has been allowed and the enterprise concerned commits default in paying any one of the instalments within the time fixed, the enterprise concerned shall be deemed to be enterprise in default as to the whole of the penalty then outstanding, and the other instalment or instalments shall also be deemed to have been due on the same date as the instalment actually in default. 5. Interest on penalty.- If the amount specified in any demand notice is not paid within the period specified by the Commission, the enterprise concerned shall be liable to pay simple interest at one and one half per cent, for every month or part of a month comprised in the period commencing from the day immediately after the expiry of the period mentioned in demand notice and ending with the day on which the penalty is paid: Provided that the Commission may reduce or waive the amount of interest payable by the enterprise concerned if it is satisfied that default in the payment of such amount was due to circumstances beyond the control ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons. A perusal of Regulation 3 read with Form-I postulates that a person against whom penalty has been imposed has to be first informed regarding levy of penalty. This Form-I is to be issued regardless the person against whom a penalty has been imposed was present during the hearing or at the time of final order was passed. Form-I specifies the correct amount of penalty that is due and payable by the person against whom the penalty has been imposed and the amount which has become due and payable. Form-I also specifies that in case a person fails to deposit the amount of penalty within the time stipulated, he shall be liable to pay simple interest @ 1.5% for every month or part of a month comprised in the period commencing from the date immediately after the expiry of the period mentioned in the demand notice and ending with the date on which the amount is paid. The said stipulation was introduced in Form-I on 25.06.2014. The specific insertion of the said clause intimating that the interest is due and payable on failure to pay the amount of penalty read with the mandatory provision of Regulation 3(1) of the 2011 Regulations makes it clear that unless and until a person, against who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore initiating recovery proceedings and constitutes foundation of subsequent recovery proceedings. 15. We have already stated that the finding of fact recorded by CIT (Appeals) and the Tribunal was that notice of demand was not served on the assessee. The very foundation for initiating the recovery proceedings, therefore, was non-existent and the assessee could neither have been deemed to be in default nor any proceedings for recovery of tax could have been initiated against him. xxx 17. In Homely Industries v. STO [(1976) 3 SCC 705 : 1976 SCC (Tax) 383 : (1976) 37 STC 483] also the significance of service of demand notice came up for the consideration of this Court and it was held that there can be no recovery without service of a demand notice; if such notice was not served, the recovery proceedings are not maintainable in law and are invalid and the same along with the recovery certificates are liable to be quashed. 18. In Ram Swarup Gupta v. Behari Lal Baldeo Prasad [(1974) 95 ITR 339 (All) (DB)] a Division Bench of the Allahabad High Court referred to the effect of the Taxation Laws (CVRP) Act, 1964 on the law laid down by this Court in Seghu Buchiah Setty case [(1964) 52 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay has the imperative meaning of shall and no proceedings for recovery can be initiated without service of notice of demand failing which the proceedings would suffer from jurisdictional defect. For a long period of time the High Court of Madhya Pradesh has been taking this view consistently. 18. Similarly, the Apex Court in State of Kerala v. Joy Varghese, Kerala Rubber Products, (1999) 9 SCC 124 has observed as under: 2. Having regard to the phraseology of Section 23(3) of the Kerala General Sales Tax Act, the liability of the dealer to pay penal interest on the tax assessed or any other amount due under that Act arises only if such tax or amount is not paid within the time specified therefor in the notice of demand . There being no notice of demand, it was held that the liability to pay penal interest did not arise. It is necessary to emphasise that this is not a case of payment of interest at the ordinary statutory rate but a case of penal interest and it is, therefore, that the Act provides that the liability to pay the same arises only after there has been a failure to comply with the provisions of a notice in that behalf. 19. The Apex Court in Mumbai Agricultural Produce Mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract or usage interest can be levied under law and it cannot be recovered by way of damages for wrongful detention of the amount. (See Bengal Nagpur Railway Co. Ltd. v. Ruttanji Ramji [AIR 1938 PC 67 : 65 IA 66 : 67 CLJ 153] and Union of India v. A.L. Rallia Ram [(1964) 3 SCR 164, 185-90 : AIR 1963 SC 1685]) . Our attention was, however, drawn by Mr Sen to two cases. Even in those cases, CIT v. M. Chandra Sekhar [(1985) 1 SCC 283 : 1985 SCC (Tax) 85 : (1985) 151 ITR 433] and Central Provinces Manganese Ore Co. Ltd. v. CIT [(1986) 3 SCC 461 : 1986 SCC (Tax) 601 : (1986) 160 ITR 961], all that the Court pointed out was that provision for charging interest was, it seems, introduced in order to compensate for the loss occasioned to the Revenue due to delay. But then interest was charged on the strength of a statutory provision, may be its objective was to compensate the Revenue for delay in payment of tax. But regardless of the reason which impelled the Legislature to provide for charging interest, the Court must give that meaning to it as is conveyed by the language used and the purpose to be achieved. Therefore, any provision made in a statute for charging or levying interest on d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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