IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL JURISDICTION

 

 

 

WRIT PETITION NO. 17 OF 2004

 

 

 

(ORIGINAL SIDE MATTER)

 

M/s.Malaysian Airlines............................................................................. Petitioner.

 

V/s.

 

 

 

1. The Union of India.
2. The Joint Secretary (Camp Mumbai) Government of India.

 

 

 

3. The Commissioner of Customs (Appeals).
4. Deputy Commissioner of Customs.

ig...................................................................... Respondents.

 

WITH

WRIT PETITION NO. 3269 OF 2004 (ORIGINAL SIDE MATTER)

M/s.Saudi Arabian Airlines....................................................................... Petitioner.

 

V/s.

 

 

1. The Union of India.

 

 

 

2. The Joint Secretary (Camp Mumbai) Government of India.

 

3. The Commissioner of Customs (Appeals).
4. Deputy Commissioner of Customs............................................ Respondents.

 

 

 

WITH

WRIT PETITION NO. 3918 OF 2005 (APPELLATE SIDE)

 

 

 

M/s.North West Airlines.......................................................................... Petitioner.

 

V/s.

 

1. The Union of India.
2. The Joint Secretary (Camp Mumbai) Government of India.

 

3. The Commissioner of Customs.
4. Deputy Commissioner of Customs................................................... Respondents.

 

 

 

::: Downloaded on - 09/06/2013 16:15:24 ::: 2      wp-17.04--

 

WITH

WRIT PETITION NO. 2552 OF 2006

 

 

 

(ORIGINAL SIDE MATTER)

 

Kenya Airways Ltd......................................................................................... Petitioner.

V/s.

 

1. Union of India.
2. Mr.K.P.P.Nair,

 

 

 

Deputy Commissioner of Customs.

3. Mr.D.S.Negi,

The Commissioner of Customs (Appeals)

4. Dinesh Thakkar, Joint Secretary,

 

 

 

Government of India................................................................. Respondents.

 

D.P.Merchant, senior counsel i/b. Shah & Sanghi for the petitioner (in W.P.No.17/04)

 

Vikram Nankani with Madhur Baya i/b. N.S.Thacker for the petitioner (in W.P.No.3269/04)

 

 

V.Sridharan with Prakash Shah i/b. PDS Legal

 

 

 

for the petitioner (in W.P.No.3918/05).

 

Manoj Sanklecha with Sandeep Goyal and Ms.Khushanama Gazdar i/b. Mulla & Mulla & Craigie Blunt & Caroe  for the petitioner (in W.P.No.2552/06).

 

 

 

Vijay Kantharia with J.B.Mishra and Rutuja Ambekar for the respondents (in W.P.No.2552/06).

 

Vijay Kantharia with Suresh Kumar for the

 

respondents (in W.P.Nos.17/04).

 

A.S.Rao with Rutuja Ambekar for the respondents (in W.P.Nos.3269/04 and AS-W.P.No.3918/05).

 

 

CORAM :       V.C.DAGA AND K.K.TATED, JJ.

 

DATED : 9th August 2010. 3 wp-17.04--

JUDGMENT : (Per V.C.Daga, J.) 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 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.

 

4 wp-17.04--

 

3. Aggrieved by the aforesaid order, petitioner filed two separate appeals before the Commissioner (Appeals). Pursuant to the interim order dated 16 th September, 2002, passed by the Commissioner (Appeals), the petitioner furnished bank guarantees for the amounts involved. The Commissioner (Appeals), vide his order dated 15th January, 2003, dismissed these appeals of the petitioner and upheld the order-in-original.

 

4.Aggrieved by the order-in-appeal, the petitioner invoked revisional jurisdiction; wherein the revisional authority dismissed the revision applications and upheld the order-in-appeal.

 

Facts of W.P.No.3269/2004 :

 

6. The petitioner in this petition is also carrying on business as Carriers through Airlines under the name and style M/s.Audi Arabian Airlines. They have a licence to operate flights to and from India. As required under the Finance Act, the petitioner has paid FTT in the Government treasury. For the months of July, 1995; December, 1996; and November, 1997, there was delay in payment of FTT of only one day. The total tax involved for these three months was approximately Rs. 1,95,00,000/-. There was a delay of eleven days in case of April, 199 Also, there was a delay of two months and three days in making payment of FTT for the month of 5 wp-17.04--

 

December, 1995. However, in five out of these six instances of delay in delivering the payment by demand drafts purchased by the petitioner through the concerned bank well before the due date for making the payment, but there was a delay in depositing the subject demand drafts as mentioned above. The total short payment of tax in these seven cases was an aggregate amount of Rs.

 

14,000/-, 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 Rule of 1979 for late submission of the monthly return.

 

6 wp-17.04--

 

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.

11. Aggrieved by the said order, petitioner invoked revisional jurisdiction by preferring revision application before the Joint Secretary, Government of India, Ministry of Finance. During the pendency of the revision application, a show-cause-notice was served on 7 wp-17.04--

 

the petitioner calling upon them to show cause as to why penalty should not be enhanced under sub-rule (4) of rule 15 of the FTT Rules.

 

12. The petitioner replied to the above show cause notice vide its reply dated 2nd December, 2003. The revisional authority vide its order dated 29th October, 2004 held that the demand for FTT in five out of seven cases was barred by limitation and that only an amount of Rs.2,000/- was payable by the petitioner. It was also held that the issue regarding limitation for demand of interest on the late payment of FTT needed reconsideration. Accordingly matter was remitted back to the original authority for the limited purpose of ascertaining whether the show-cause-notice demanding interest on the delayed payment of FTT amount to Rs. 3,56,45,700/- was issued within the prescribed time limit under rule 7 of the said FTT Rules. The revisional authority, however, upheld the penalty of 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 8 wp-17.04--

 

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 15 th 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 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 Commissioner (Appeals) vide his order dated 28th October, 2003 dismissed appeal of the 9 wp-17.04--

 

petitioner and upheld the order-in-original. Aggrieved by the aforesaid order dated 28th October, 2003, petitioner invoked revision jurisdiction under section 129DD of the Customs Act, 1962 ("Customs Act" for short) before the Joint Secretary to the Government of India, Department of Revenue, New Delhi on 31st December, 2003, which came to be dismissed vide order dated 30th November, 2004.

 

15. Being aggrieved by the aforesaid, petitioner has invoked writ jurisdiction of this Court.

 

Facts of W.P.No.2552/2006 :

 

16. The petitioner in this petition is engaged in the business of transporting people by air on international routs, inter alia; from and to Mumbai.

 

The petitioner was required to collect FTT from every passengers and deposit the same with Government treasury. For the months of January, April and May, 2002, the petitioner though collected FTT from the passengers, however, committed delay in making deposit in the Government treasury. Three different show-cause notices were issued to the petitioner to which the petitioner filed their three separate replies. The adjudicating authority vide its order dated 18th July, 2002 confirmed the show cause notices and imposed an aggregate penalty of Rs.11,71,100/- as also interest of Rs.14,809/- on delayed deposit of FTT.

 

17. Aggrieved by the aforesaid order, petitioner filed appeal before the respondent No.3- Commissioner 10 wp-04--

 

(Appeals) along with application 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 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.

 

11 wp-17.04--

 

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 all been made prior to the issuance of the demand notice and not where a payment has been made, albeit belatedly. He submits that the Act provides for the consequences of a belated payment separately in the form of a liability to pay interest under section 35A of the Act. According to him, a mere delay does not attract penalty.

 

24. Without prejudice to the above, he would, alternatively, submit that even assuming that a penalty is attracted for delayed payment, the same could only be adjudicated and imposed under proviso to rule 11 of the FTT Rules, wherein the maximum prescribed amount of penalty is Rs.5,000/-. No penalty in excess of the said amount could be imposed by the Respondents. That the provisions of section 38(3) will have to be read down to 12 wp-17.04--

 

cover only those cases where there is an absolute failure to pay, otherwise it would amount to conferring arbitrary, uncontrolled, unguided and unchecked powers in favour of the respondents in violation of Article 14 of the Constitution of India.

 

25. Mr.Nankani would, alternatively, submit that, in any event, the provision of section 38(3) was never invoked in the show-cause notices. No penalty under section 38(3) could, therefore, be imposed in relation to the subject show cause notices. He further submits that the scope of adjudication by the adjudicating authority was limited only to the aspect of determining the true and correct liability, after considering the legality of the notices issued to the petitioners.

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 13 wp-17.04--

 

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 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 after amendment of section 38(3) is an instance of legislative casus omissus which cannot be filled by the Court. That sub-section (1) of section 38 as originally introduced by Finance Act provided for imposition of penalty on the passenger who embarks or 14 wp-17.04--

 

attempts to embark on an international journey without paying the tax payable by him a penalty not exceeding Rs.200.00. Sub-section (2) of section 38 provided for penalty on every carrier or other person in charge of ship or aircraft, who in contravention of section 37, allows any passenger to board a ship or aircraft not exceeding three times the amount or aggregate of the amount of the tax payable by passenger(s) so allowed to board the ship or aircraft. Sub-section (3) of section 38 provided that any penalty under this section may be adjudged by such authority and in such manner as may be specified. Proviso to Rule 11 provided for ceiling of Rs. 5,000/-. It is, thus, obvious that having regard to language of section 38(1) and 38(2), penalty was unlikely to be substantial amount and because of this perhaps, proviso to Rule 11 put a ceiling of Rs.5,000/-. Sub-section (3) of section 38, in effect, provided for penalty on the Carrier who fails to pay the foreign travel tax to the credit of Central Government under section 35(2) not less than one-fifth, which may extend to three times the amount of tax not paid to Central Government. This penalty under new sub-section (3) is apart from sub-section (1) and (2). Also, quantum of penalty now proposed by new 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.

 

15 wp-17.04--

 

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 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 v. UIO, 1984 (16) 16 wp-17.04--

 

ELT 234; (ii) Asstt. Commr. v. Dharmendra Trading, (1988) 3 SCC 570; (iii) JK Synthetics v. Commercial Tax Officer, (1997) 3 SCC 161.

 

32. Mr.Sridharan further submitted that subsequent deletion of proviso to rule 11 is of no consequence for the past period. That the revisional authority erroneously sustained the penalty on the ground that inconsistency between rule 11 and section 38(3) is removed later on 13th October, 2003 by deleting proviso and amended rule 11 will apply. He submits that it is settled position in law that the provision, as in force on the date of alleged contravention, can only be applied. In Varkey Chacko v. C.I.T., 1994 supp (1) SCC 264, Supreme Court held as under:-

 

"11.         A penalty proceeding, therefore, can be initiated only after an assessment order has been made which finds such concealment or furnishing of inaccurate particulars. Who at this point of time has the authority to impose the penalty is what is relevant. Whoever this authority may be, he is obliged to impose such penalty as was permissible under the law in that behalf on the date on which the offence of concealment of income was committed, that is to say, on the date of offending return. The two aspects must firmly be borne in mind, namely, who may impose the penalty and in what measure."

 

33. Mr.Sridharan while adopting submission made by Mr.Nankani submits that section 38(3) is not applicable for delay in payment of tax by due date and went on to develop the very same contention and urged that the 17 wp-17.04--

 

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 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 18 wp-17.04--

 

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. He while relying on the proviso to rule 11 of the Rules urged that the court should not declare the said rule ultra vires the parent Act and should try to reconcile the rule with the parent Act adopting rule of harmonious construction which, according to him, applies to the cases in hand. Reliance is placed on the Supreme Court judgment in the case of J.K.Cotton Spng. & Wvg. Mills v. State of U.P., AIR 1961 SC 1170 and UCO Bank v. Rajinder Lal Capoor, (2008) 5 SCC 257 (para-28).

 

35. Mr.Sanklecha further submits that if two or more provisions of the statue appear to carry different meaning, a construction which would give effect to all of them should be preferred. In support of this submission, he placed reliance on the judgment of the Supreme Court in the case of Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd., (2008) 4 SCC 755; wherein the Apex Court relied upon Mimansa principles of interpretation and advocated that wherever the harmonious construction is possible and reconciliation is obtainable, the same must be obtained. He, therefore, submits that if the said principles of reconciliation are applied, there will be no conflict between section 38(3) of the Act and proviso to rule 11 of the said Rules as existed at the relevant time.

 

36. Mr.Sanklecha further submits that when the executive by way of subordinate legislation chose to 19 wp-17.04--

 

limit or cap the maximum penalty imposable under the proviso to rule 11 of the FTT Rules, it is not for the writ Court to decide whether or not the same is appropriate, particularly, when the same is reconcilable with the parent Act. He submits that if reconciliation is not possible, then the provision which is more beneficial to the subject should be adopted. He, thus, submits that 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 20 wp-17.04--

 

shall be collected by the officers of the Customs appointed under the Customs Act or such officers of the Central or State Government or 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 Government.

 

39. The learned counsel for the Revenue while relying upon the provisions of the Finance Act, 1979 submit that the sub-section (3) of section 38 of the Act would be applicable immediately upon failure to pay tax as envisaged under section 35(2) of the said Act read with rule 4 of the FTT Rules. They, thus, submit that the contention of the petitioners that section 38(3) would be applicable only in case of total failure to pay FTT to the credit of the Central Government is misconceived and legally not tenable. 21 wp-17.04--

40. Mr.Rao relying upon section 38(3) submits that the said section makes it clear that minimum penalty that can be imposed is 1/5 of the amount of tax unpaid tax and that can extend to three times of the amount of tax not paid to the credit of the Central Government. According to him, the adjudicating authority has no discretion in the matter of levy of minimum penalty. It is mandatory for it to levy minimum penalty which cannot be less than 1/5 of the amount of tax not paid. He submits that proviso to rule 11 of the FTT Rules is inconsistent with the substantive statutory provision and hence the substantive statutory provisions shall prevail. He relied on ITW Signode India Ltd. v. Collector of Central Excise, 2003 (158) ELT 403 (SC) in support of his submission. He further relied upon the judgment of this Court in the case of Iran National Airlines v. Union of India, 2006 (202) ELT 588 (Bom.) followed in North West Airlines v. Union of India, 2007 (214) ELT 278 (Bom); wherein Division Bench 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) ELT 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 22 wp-17.04--

 

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.-

 

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 23 wp-17.04--

 

Chapter, there shall be levied on all passengers embarking on international journeys a tax (hereafter in this Chapter referred to as the foreign travel tax)--

 

1. 1. at the rate of one hundred rupees for every such journey to any place outside India other than a place in a neighbouring country;

 

1. 2. at the rate of fifty rupees for every such journey, where such journey is to any place in a neighbouring country.

 

Explanation.-                .....                                     .....                                     .....

 

1. 2. In         accordance              with          the         rules            made

 

under this Chapter, the foreign travel tax shall be collected by the officers of customs appointed under the Customs Act, 1962, or such officers of the Central Government or the State Government or the International Airports Authority of India constituted under the International Airports Authority Act, 1971, or such carriers, as may be, considered in this behalf by the Central Government by notificati8on in the Official Gazette and paid to the credit of the Central Government.

 

38. Penalties.-

 

(1)                 .....                      .....

(2)                 .....                      .....

 

 

 

1. 3. Every           carrier              or         other           person           who

 

fails to pay the foreign travel tax to the credit of the Central Government under sub- section (2) of section 35 shall, in addition to the payment of such tax and the interest leviable thereon, be liable to pay penalty which shall not be less than one- fifth but which may extend to three times of the

amount of the tax not so paid to the credit of the Central Government.

 

24                                                                                     wp-17.04--

 

1. 4. Any         rule           made        under          this           Chapter            may

 

provide that in case of breach thereof by the carrier or other person, he shall be liable to penalty which shall not be less than five hundred rupees but which may extend to fifty thousand rupees, and where the breach is continuing one, with further penalty which may extend to five hundred rupees for every day after the first during which such breach continues.

 

1. 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 25 wp-17.04--

 

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) of section 38 provides that in case of breach of any rules by the carrier or other person, he shall be liable to pay penalty which shall not be less than five hundred rupees, which may extend to fifty thousand rupees, and where the breach is a continuing one, with further penalty which may extend to five hundred rupees for every day after the first during which such breach continues.

 

Proviso to section 38 provides 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.

 

45. With the above understanding of the provisions of the Act, if one turns to the provisions of Rules in general and rule 11 thereof in particular, one may find 26 wp-17.04--

 

that proviso to rule 11 provides 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.

 

46. With the above preface of statutory provisions, we propose to consider the rival contentions.

 

Consideration :

 

47. All the advocates appearing for the petitioners in one voice urged that under proviso to rule 11 of the FTT Rules, no officer of Customs mentioned in section 3 of the Customs Act is competent to impose penalty under section 38(3) of the Act more than Rs.5,000/-. According to them, rule 11 is a part of the statute and it provides for lesser penalty than provided in section 38(3) of the Act. Proviso to rule 11 of the FTT Rules being beneficial to the assessees, it should be given effect to rather than section 38(3) of the Act. In other words, no penalty in excess of Rs. 5,000/- could be imposed 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 27 wp-17.04--

 

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 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 reconcile them as best as you may. If you cannot, you have to determine which is the leading provision and which is the subordinate provision, and which must give way to the other. That would be so with regard to enactments  and  with  regard  to  rules  which  are  to  be  treated  as  if  within  28 wp-17.04--

 

the enactment. In that case probably the enactment itself would be treated as the governing consideration and the rule as subordinate to it."

 

(emphasis supplied)

 

49. From the above observations, it is clear that a delegated legislation would have to be read in the context of the primary statute under which it is made and, in case of any conflict, it is primary legislation that will prevail. The Hon'ble Supreme Court in the case of ITW Signode India Ltd. v. Collector of Central Excise (supra) held as under:

 

"it is well settled principle of law that in case of a conflict between a substantive act and delegated legislation, the former shall prevail in as much as delegated legislation must be read in the context of the primary/legislative act and not the vice-

 

versa."

 

50. Apart from the above judgment, the aforesaid principle is also recognised by the Hon'ble Supreme Court in Union of India v. Somasundram Viswanath, 1989 (1) SCC 175; wherein the Court ruled that the Act will prevail over the Rules. The rule which travels beyond the scope of Act cannot be given effect to. [also see Bimal Chandra Banerjee v. State of Madhya Pradesh, 81 ITR 105 (SC); Lohia Machines Ltd. v. Union of India, 152 ITR 308 (SC); Chowgule & Co. v. C.I.T., 195 ITR 810 (Bom)] 29 wp-17.04--

 

51. Keeping in mind the aforesaid well settled principles of rule of interpretation, if one turns to section 38(3) of the Act, in contrast to rule 11 of the FTT Rules, 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 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 30 wp-17.04--

 

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 the carrier or any other person fails to pay the FTT to the credit of the Central Government within fifteen days as specified, the penalty must follow, which shall not be less than one-

 

fifth of the amount of FTT. It is well settled that when the consequences of the failure to comply with the prescribed requirement is provided by the statute itself, there can be no manner of doubt that such statutory requirement must be interpreted as mandatory.

 

53. If we turn to the statutory provisions and the scheme of the foreign travel tax and collection thereof, section 35 of the Act creates liability to collect tax and payment thereof to the credit of the Central Government. Section 35A provides for payment of interest for default in payment of FTT, whereas section 38 provides for penalty in case of non-payment of FTT within a prescribed time frame, subject to compliance of the principles of natural justice. Both sections operate in different contingencies.

 

54. Further more, the question as to whether mens rea is essential ingredient or not depends upon the nature of the right of the parties and the purpose of penalty for which penalty is sought to be imposed.

 

31 wp-17.04--

 

Section 38 of the Act nowhere fastens criminal liability. The default or failure to pay is nothing, but failure or default to comply with the statutory civil obligations provided under the Act and the rules made thereunder. The penalty leviable under Chapter-V or under section 38 is penalty in case of default or failure of statutory obligation or in other words for breach of civil obligation. In the provisions engrafted under Chapter-V of the Act, there is no element of any criminal aspect as is generally contemplated under criminal proceedings. 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 breach 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 32 wp-17.04--

 

'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 punished for the commission of an offence under the penal law ............................................................................................................... "

 

In Corpus Juris Secundrum. Vol.85 at page 580, para 1023, it is stated thus:

 

"A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws."

 

"We are in agreement with the aforesaid view and in our opinion what applies to "tax delinquency" equally holds good for the 'blameworthy' conduct for contravention of the provisions of FERA, 1947. We, therefore, hold that mens area (as is understood in criminal law) is not an essential ingredient for holding a delinquent liable to pay penalty under Section 23(1)(a) of FERA, 1947 for contravention of the provisions of Section 10 of FERA, 1947 and that penalty is 33 wp-17.04--

 

attracted under Section 23(1)(a) as soon as contravention of the statutory obligation contemplated by Section 10(1)(a) is established. The High Court apparently fell in error in treating the "blameworthy conduct" under the Act as equivalent to the commission of a "criminal offence", overlooking the position that the "blameworthy conduct" in the adjudicatory proceedings is established by proof only of the breach of a civil obligation under the Act, for which the defaulter is obliged to make amends by payment of the penalty imposed under Section 23(1)(a) of the Act irrespective of the fact whether he committed the breach, with or without any guilty intention."

In J.K. Industries Ltd. & Ors. v. Chief Inspector of Factories and Boilers & Ors., (1996) 6 SCC 665 the Hon'ble Supreme Court made following observations:

 

"The offences under the Act 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. "

 

34 wp-17.04--

 

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, the Hon'ble Supreme Court observed as under:

 

".          It is sufficient for us to refer to Section 271(1)(a), which provides that a penalty

may be imposed if the Income Tax Officer is satisfied that any person has without reasonable cause failed to furnish the return of total income, and to Section 276-C which provides that if a person wilfully fails to furnish in due time the return of income  required  under  Section  139(1), he  shall  be  punishable  with  rigorous imprisonment for a term which may extend to one year or with fine. It is clear that in the former case what is intended is a civil obligation while in the latter what is imposed is a criminal sentence. There can be no dispute that 35 wp-17.04--

 

having regard to the provisions of Section 276-C, which speaks of wilful failure on the part of the defaulter and taking into consideration the nature of the penalty, which is punitive, no sentence can be imposed under that provision unless the element of mens rea is established. In most cases of criminal liability, the intention of the legislature is that the penalty should serve as a deterrent. The creation of an offence by statute proceeds on the assumption that society suffers injury by the act or omission of the defaulter and that a deterrent must be imposed to discourage the repetition of the offence. In the case of a proceeding under Section 271(1)(a), however, it seems that the intention of the legislature is to emphasise the fact of loss of revenue and to provide a remedy for such loss, although no doubt an element of coercion is present in the penalty. In this connection, the terms in which the penalty falls to be measured is significant. Unless there is something in the language of the statute indicating the need to establish the element of mens rea it is generally sufficient to prove that a default in complying with the statute has occurred. In 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 a 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 36 wp-17.04--

 

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 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 bonafiders 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 circumstances were brought to their notice. They were heard and thereafter, by reasoned order imposing penalty is passed against on each of the petitioners. The petitioners have availed 37 wp-17.04--

 

opportunity of appeal and revision before the competent authorities provided under the Act. All the three different authorities have passed reasoned orders in consonance with the provisions of the Act following principles of natural justice.

 

58. The sole question that arises for consideration in the present petitions, is: whether the authorities below were justified in imposing and sustaining penalty in consonance with sub-section

(3) of section 38 of the Act ignoring proviso to rule 11 of the FTT Rules. The breach of civil obligation against each petitioner has been established, which was sufficient to attract penalty in the nature of fine under the provisions of the Act irrespective of the fact whether or not the contravention made by the defaulter was with any guilty intention.

 

59. Learned counsel appearing for the parties took us through the order passed by the adjudicating authority. It is seen that the respondents, in all cases, have admitted violation of the provisions of the Act by making late deposits. Sub-section (3) of section 38 of the Act provides that every carrier or other persons who fails to pay FTT to the Central Government under section 35(2) shall be in addition to payment of such tax and interest leviable thereon be liable to pay penalty which shall not be less than one-fifth but which may extend to three times of the amount of the tax not so paid to the credit of the Central Government. The factual matrix in the cases in hand demonstrate several instances of delayed payment, short or nonpayment of the 38 wp-17.04--

 

FTT apart 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.

 

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 39 wp-17.04--

 

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 no minimum penalty prescribed under sub-section (3) of section 38 of the Act, it would have been open for the adjudicating authority to consider the conduct of the defaulter and the extent of delay taking into account the extenuating circumstances while imposing penalty. But once the statute prescribes the minimum penalty without giving any discretion in favour of the adjudicating authority, then one has to go by the provisions of the Act.

 

62. This Court while exercising writ jurisdiction has only to consider whether or not power to impose penalty has been exercised in accordance with the provisions of the Act and that the decision making process is in accordance with law. Once the Court comes to the conclusion that there is no fault on the part of the adjudicating authority either in complying with the provisions of the Act or in the decision making process, then this Court would be justified in refusing to interfere with the impugned orders.

 

63. The view which we have taken herein is in consonance with the view taken by this Court in the case 40 wp-17.04--

 

of Iran National Airlines v. Union of India (supra) and Delhi High Court judgment in Combatta Aviation Ltd. v. Union of India (supra); wherein while upholding the penalty imposed upon the carrier under sub-section (3) of section 38 of the Finance Act, the Court held as under:

 

"The language of Section 38(3) shows that the provision is in absolute terms and in the matter of imposition of penalty the discretion of the authorities is limited to it being not less than one fifth of the amount of tax not so paid and the upper limit extends upto three times of the amount of tax involved."

 

64. Having disposed of common arguments advanced by the advocates appearing for the petitioners, 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 41 wp-17.04--

 

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.