Air France vs Union Of India And Anr.
1995 Latest Caselaw 628 Del

JUDGMENT

Vijender Jain, J.

(1) This is a petition filed by the petitioner against levy of foreign travel tax on the petitioner whereas as per the Notification the tax was to be levied on the passengers. As per the Notification, it is the admitted case of the parties that the petitioner as well as other Air Lines were depositing the tax collected by them from the passengers in the treasury of the respondent. The Assistant Collector of customs,

(2) Foreign Travel Tax, issued show cause notice to the petitioner asking for deposit further amount on account of shortfall in collection of tax, which according to the parties is from 1971 onwards amounting to Rs.77 lakhs approximately. Similarly, notices were sent to the other Air Lines like British Airways, Klm etc. However, the British Airways and Klm challenged the notices before the appropriate authorities in the Ministry of Finance, Government of India. The basic contention of Mr.Goburdhun, learned counsel for the petitioner, is that Rule-9 of the Foreign Travel Tax Rules, 1971 only envisages the issuance of show cause notices in cases where tax is collected under Rule-4 and not paid in whole or in part into the treasury within the prescribed time. The procedure prescribed under the Rules cannot be used to demand from the petitioner the alleged shortfall in collection of tax payable by a passenger in terms of sub-section (1) of Section 45 of the Finance Act. He has also taken me on the similar plea, which was raised before the Government on an application filed by the British Airways against the show cause notice issued on the similar demand raised by the Assistant Collector of Customs. Government of India, Minsitry of Finance, Department of Revenue vide Order No.383/85 dated 12.3.1985 upheld the contention of British Airways and passed the following orders:- "THE Government find that the contention of the petitioners that the procedure prescribed under Rule 9 cannot be used to demand from them an alleged shortfall in collection of tax payable by a passanger in terms of Section 45(1) of the Act, is correct. Since the petitioner has paid into Treasury whatever has been collected by him under rule 4, no cause of action lies under rule 9. The orders-in-appeal and the orders-in-original pertaining to these revision applications are, therefore, set aside to the extent of demand issued, concerning YE-120."

(3) Against the show cause notices issued to the British Airways and Klm, appeals were preferred but no appeal was preferred by the petitioner against the show cause notices issued to it. Mr.Goburdhun has contended that once State has itself come to a conclusion that the demand could not be raised under Rule-9, even if no appeal was preferred by the petitioner, the respondent ought to have withdrawn the show cause notices on their own in view of the aforesaid order passed by the respondents themselves.

(4) The petitioner represented to the Assistant Collector of Customs on 29.10.1985 inter alia impressing upon the respondents that in view of the decision of the Government of India in the case of British Airways and Klm, the show cause notices be withdrawn. This contention, however, did not find favor with the respondents on the plea that the decision pertains to British Airways and Klm and the said decision cannot be made applicable to the other Air Lines, who did not file appeal or revision against the said show cause notices. A representation was also made to the Chairman of the Central Board of Excise and Customs requesting that the same principle be applied to the case of the petitioner as applied to the case of British Airways and KLM. However, that representation was also rejected.

(5) It has also been contended before me that under the Finance Act, the foreign travel tax is levied on the passengers and not on the Air Lines, which were only authorised to collect tax from the passengers on the fare payable and, therefore, the pleas of the Government for shortfall in tax is mis-conceived and without the authority of law.

(6) Mr. Goburdhun has further contended that no tax could be levied without the authority of law as has been enshrined under Article 265 of the Constitution of India. Learned counsel for the petitioner has further contended that what is sought to be recovered from the petitioner is the tax not on the excursion fare but on the total value of the fare. Mr.Goburdhun has also contended that if the Air Line has not issued the full fare ticket, there were no occasion to collect the foreign travel tax from the passengers as fare pertains to the YE-120 Excursion Fare Scheme and the passanger was to pay the excursion fare and the travel tax was recovered to the extent of excursion fare. Therefore, Mr.Goburdhun has contended that the show cause notice in dispute is in relation to tax, which was never intended or imposed by the legislature, and, therefore, the impugned notices suffer from inherent illegality and the same may be quashed.

(7) On the other hand, Mr.Datar, learned counsel for respondent No.1-Union of India, has contended that the impugned demand does not only contain the amount due under YE-120 Excursion Fare Scheme but it contains other demands also.

(8) MR. AGGARWAL, learned counsel for respondent No.2, has contended that the petitioner has not chosen to file appeal or review against the impugned notices issued by the Assistant Collector of Customs, therefore, the decision of the Government of India in relation to British Airways and Klm cannot be of much help to the petitioner. He has also contended that the orders against the petitioner are final in the absence of any appeal or revision.

(9) I have heard the submissions made by the learned counsel appearing for both the parties at length. There are three questions involved in this petition, i.e. (i) whether the Act envisaged collection of tax on full fare or on excursion fare; (ii) who was to pay the tax; and (iii) whether any shortfall in payment of collected tax was made by the petitioner justifying the issuance of show cause notices. Admittedly the tax was to be paid by the passanger.

(10) There is no allegation that the petitioner has not collected tax from the passengers, the demand is on account of shortfall of foreign travel tax, which, according to the respondent, ought to have been calculated on full fare. Under the Act fare has been defined under Section 44(d) :- "FARE means the total amount of all charges of whatever nature (including charges, if any, for provision of food or accommodation) payable to the carrier by or on behalf of a passanger in respect of his international journey."

(11) After coming into effect the Finance (II) Act 32 of 1971, respondent No.1-Union of India formulated a Scheme dated 17.3.1972 inter alia laying down the conditions and excursion fare to certain destinations. It was the obligation of the carrier like petitioner to collect the foreign travel tax from the passengers and deposit with the treasury of Central Government. There is no dispute that the petitioner did deposit the foreign travel tax collected on excursion fare. In view of this matter, it cannot be said that there was any shortfall as far as the recovery of foreign travel tax qua YE-120 Excursion Fare Scheme was concerned.

(12) Secondly, the Government of India itself, as I observed above, took the decision in the appeals/revisions filed by the British Airways and Klm that the Air Lines could not be made to pay shortfall in foreign travel tax calculated on the basis of the full fare as Rule-9 of the Foreign Travel Tax Rules could not be made applicable to such kind of cases. Even otherwise, in view of the specific provisions as contained in Sections 45 and 47 of the Act, the demand made under Rule-9 of the Foreign Travel Tax Rules cannot be sustained in the eyes of law. The Government of India rightly decided in the case of British Airways and Klm that Rule-9 of the Rules will have no applicability as Rule-9 contemplates issue of show cause notices in cases where foreign travel tax collected under Rule-4 is not paid in whole or in part in the treasury within the prescribed period. This rule cannot be made applicable for raising the demand of alleged shortfall in collection of tax payable by the passengers in terms of Section 45(1) of the Act. On this ground also, the impugned demand is without authority of law.

(13) Lastly, on the basis of aforesaid discussions, I hold that issuance of impugned show cause notices to the petitioner was not justified. The same was without the authority of law.

(14) Now dealing with the contention of the learned counsel for respondent No.2, Mr.Aggarwal, that as the appeal/revision has not been preferred by the petitioner, therefore, the demand has become final against the petitioner. There is an obvious fallacy in the arguments of the learned counsel for respondent No.2. Once a decision has been taken by the Government of India itself scrapping the demand, which was raised by the Assistant Collector of Customs and holding that Rule-9 would not give any cause of action to the respondent, the respondent on their own ought to have withdrawn the demand. Be as it may, once I have held that the impugned show cause notices have been issued without the authority of law, I quash the impugned show cause notices. Another point, which has been raised before me by the learned counsel for the respondent in relation to impugned show cause notices is that certain amounts are not in relation to YE-120 Excursion Fare Scheme. If that is so, the respondents will be entitled to issue fresh notice in relation to demands, which are not covered under the said Scheme.

(15) With these observations, the petition is allowed and the rule is made absolute.