Jagson Airlines Limited And ... vs Union Of India And Others
1998 Latest Caselaw 1033 Del

ORDER

K.S. Gupta, J.

1. This order will govern the disposal of CWP Nos. 2665/96 & 1087/96.

2. Jagson Airlines Ltd., a public limited company carrying business as scheduled private airlines in India, filed CW No. 2665/96, inter alia, alleging that on 19th October, 1994, Assistant Commissioner of Customs, respondent No. 3 issued notice stating that as per the IATT return, the petitioner had collected a sum of Rs. 1,72,166/- as Inland air travel tax during the month of November 1993 but had made only part payment leaving a balance of Rs. 90,000/-. Petitioner was called upon to show cause why the said outstanding amount together with Inland air travel tax collected during the period December, 1993 to July, 1994 computed on the basis of highest paid sector operated by the petitioner be not recovered and interest charged and penalty imposed. Respondent No. 3 further issued corrigendum to the said notice calling upon the petitioner to show cause why interest amounting to Rs. 3,40,236/- be not demanded under Section 43A(1) and penalty imposed under Section 46(3) of the Finance Act, 1989 as amended by Section 98 of the Finance Act, 1994. The impugned demand of interest and proposed imposition of penalty was contested by filing objections on a number of grounds by the petitioner before respondent No. 3. However, respondent No. 3 arbitrarily dismissed the objections by the order dated 22nd/23rd August, 1995 confirming the demand of Rs. 3,40,236/- towards interest and imposed penalty amounting to Rs. 8,00,000/- upon the petitioner. Feeling aggrieved, the petitioner filed an appeal before the Commissioner of Customs (Appeals). New Delhi, respondent No. 2. By the order dated 31st January, 1996 respondent No. 2 declined to interfere in the order dated 22nd/23rd August, 1995. Petitioner thereafter filed a revision petition before the Joint Secretary, Government of India, Ministry of Finance, Department of Revenue, New Delhi on 21st March, 1996 which too was dismissed by the order dated 31st May, 1996. Petitioner-company seeks to challenge the aforesaid three orders by filing the present petition on the grounds set out in para No. 13 of the petition.

3. In CW No.1087/96 Skyline NEPC Limited (petitioner No.1) is also a public limited company carrying business as scheduled private airlines within India. It is, inter alia, alleged in the petition that pursuant to the notice dated 2nd February, 1996 issued by the Assistant Commissioner of Customs, respondent No. 3, petitioner No.1 handed over cheque No. 420530 dated 10th February, 1996 for Rs. 1,96,89,951,/- drawn on Canara Bank, Saidapet, Madras in favour of respondent No. 2 with the request to respondents 2 & 3 to present the same in the last week of February, 1996 for encashment to which they agreed. However, contrary to the agreement respondents 2 & 3 presented the said cheque on 10th February, 1996 for the reasons best known to them and the cheque was returned dishonoured. On receiving information about the dishonour of the cheque the petitioners contacted the said respondents and requested for extension of time till 29th February, 1996 to deposit the amount due under the cheque which was allowed. Suddenly on 22nd February, 1996 petitioner No.1 received a legal notice dated 15th February, 1996 from Sh. Madan Lokur, Advocate on behalf of respondent No. 2 wherein it was stated that if the amount of Rs. 1,91,89,991/- was not received by respondent No. 2 within a period of 15 days from the date of the receipt of the notice, respondent No. 2 shall be constrained to take suitable action against the petitioners. After receiving the said notice petitioner No. 1 made arrangements to pay the amount due on or before 29th February, 1996. However, on 23rd February, 1996 at 11.00 PM when the aircraft of petitioner No. 1 viz. Boeing 200-VT-PDB with Sl. No. 22416 landed at Delhi Airport, respondents 2 & 3 detained the same without giving any prior intimation to petitioner No.1 by issuing an order dated 23rd February, 1996 bearing Ref. C.No. VIII (PLM) IATT/DAM/39/96 enclosing therewith detention memo dated 23rd February, 1996. Said order revealed that the non-payment of the amount due towards Inland air travel tax was the basis for detaining the aircraft. Petitioner No.1 on 24th February, 1996 deposited a sum of Rs. 1,90,81,991/- by a bank draft in the account of respondent No. 3 whereupon the aircraft was released by respondent No. 3 on 24th February, 1996 itself. It is further alleged that on 27th February, 1996 petitioner No.1 received notice dated 23rd February, 1996 calling upon it to show cause why interest @ 20% per annum and penalty be not imposed on it. The total amount of interest sought to be levied on petitioner No.1 as shown in the notice was Rs. 48,90,000/- for the period January 1995 to november 1995. Petitioners have impugned the said notice by filling this petition on the grounds noted in para No. 26 of the petition.

4. Since the other points raised in these petitions stand decided by the decision in Sahara India Airlines Vs. Union of India, 1998 I AD (Delhi) 8765. Sh. Rajiv Nayar, Sr. Advocate appearing for both the petitioners, has assailed the vires of sub-sections 43A(1) and 46(3) of the Finance Act, 1989 as amended. Sections 43A and 46 are reproduced below :

"43A. Interest for default in payment of Inland air travel tax.

(1) Where any carrier or other person fails to pay the inland air travel tax to the credit of the Central Government under sub-section (2) of section 42, in accordance with the rules made under this Chapter, he shall pay an interest on the amount of tax not so paid for the entire period for which payment or such tax has been delayed, at such rate, now below twenty per cent and not exceeding thirty per cent per annum, as the Central Government may, by notification in the official Gazette, specify in this behalf.

(2) Where, on or before the date of commencement of section 98 of the Finance Act, 1994, the inland air travel tax had not been paid by any carrier or other person to the credit of the Central Government, in accordance with the rules made under this Chapter, the carrier or other person shall pay the amount of such tax within a period of thirty days of such commencement, failing which he shall be liable to pay the interest in accordance with the provisions of sub-section (1).

46. Penalties:-

(1) Every passenger who embarks or attempts to embark on an inland journey without paying the inland air travel tax shall, in addition to his liability to pay the inland air travel tax, be liable to a penalty not exceeding twice the amount of the inland air travel tax.

(2) Every carrier or other person in charge of an aircraft, who, in contravention of the provisions of Section 45, allows any passenger or passengers to board the aircraft, shall be liable to a penalty not exceeding three times the amount or the aggregate amount of the inland air travel tax payable by the passenger or passengers so allowed to board the aircraft.

(3) Every carrier or other person who fails to pay the inland air travel tax to the credit of the Central Government under sub-section (2) of section 42 shall, in addition to the 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.

(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 a penalty which shall not be less than five hundred rupees but 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.

(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."

5. It is not in dispute that under amended Rule 6 of Inland Air Travel Rules, 1989 the tax collected in any month by any carrier is to be paid by such carrier before the expiry of 30 days from the end of that month into the treasury.

6. One of the submissions made by Sh. Nayar was that although both the aforesaid sub-sections 43A(1) and 46(3) provide for minimum and maximum percentage of the interest/penalty which can be levied on a carrier in default of making payment as per amended Rule 6 but no guidelines have been given as to how discretion in the matter is to be exercised by the concerned authority and, therefore, aforesaid sub-sections are ultra vires the Articles 14 & 19 of the Constitution of India. Reliance was placed on the decisions in Associated Cement Co. Ltd. Vs. Commercial Tax Officer, Kota and others, , Bhag Mal Vs. Ch. Parbhu Ram and Others, , and M/s. Hindustan Steel Ltd. Vs. The State of Orissa, . Provisions similar to that of the said sub-sections providing for minimum and maximum penalty can also be found in various other statutes including the Indian Penal Code. The award of sentence under those provisions depend upon the facts of each case. On the same analogy under the aforesaid sub-sections discretion in the matter of levying interest/penalty can be exercised on the facts and circumstances of each case by the concerned authority. The case of M/s. Hindustan Steel Ltd. (supra) under the Orissa Sales Tax Act was considered and distinguished in Sahara India Airlines' case (supra). Remaining two decisions, referred to above, have no applicability to the point in issue. Said submission is thus without any merit.

7. Next submission advanced on behalf of the petitioners was that even a single day delay beyond the stipulated period in depositing the amount of Inland air travel tax makes the carrier liable to pay the interest and the penalty under the aforesaid sub-sections and, therefore, they being confiscatory are bad in the eyes of law. Submission has no force. As noticed above, under amended Rule 6, 15% tax collected from the passengers by a carrier is to be deposited before the expiry of 30 days from the end of that month. In the absence of time limit carriers like petitioners who collect the tax on behalf of Union of India can evade the payment thereof for any number of years they like. Thus, the time limit for deposit of tax has to be there.

8. It was lastly contended by Sh. Nayar that the word "shall" used in said sub-section 46(3) has to be read as "may" and the provision of sub-section instead of being mandatory is directory in nature. Reliance was placed on the decisions in Raza Buland Sugar Co. Ltd. Vs. Municipal Board, Rampur, and Superintendent and Remembrancer of Legal Affairs to Government of West Bengal Vs. Abani Maity, . In Raza Buland Sugar Co.'s case (supra) the questions for consideration before the Apex Court were whether whole of Section 131(3) of U.P. Municipalities Act, 1916 was mandatory or the part of it requiring publication in the manner laid down under Section 94(3), i.e. in Hindi Newspaper was merely directory. While dealing with that aspect of the matter in th majority judgment on page 975 of the report it was observed thus:

"The question whether a particular provision of a statute which on the face of it appears mandatory, inasmuch as it uses the word "shall" as in the present case is merely directory cannot be resolved by laying down any general rule and depends upon the facts of each case and for that purpose the object of the statute in making the provision is the determining factor. The purpose for which the provision has been made and its nature, the intention of the legislature in making the provision, the serious general inconvenience or injustice to persons resulting from whether the provision is read one way or the other, the relation of the particular provision to other provisions dealing with the same subject and other considerations which may arise on the facts of a particular case including the language or the provision, have all to be taken into account in arriving at the conclusion whether a particular provision is mandatory or directory."

9. Applying the above ratio to the facts of the present case, we are of the opinion that the provision of aforesaid sub-section 46(3) is mandatory instead of directory and the word "shall" as used in the sub-section cannot be read as "may". Decision in Abani Maity's case (supra) was rendered entirely in a different context. Submission referred to above thus deserves to be repelled being devoid of merit.

10. For the foregoing discussion, both the writ petitions are dismissed.

11. By the order dated 17th October, 1996 on CM No. 4678/96 in CW 2665/96 the recovery of a sum of Rs. 4 Lacs out of the sum of interest and penalty levied on the petitioner was stayed subject to its depositing the balance amount within four weeks. Time for making the payment was extended by another two weeks in terms of the order dated 15th November, 1996. In case the balance amount had been deposited as per the said orders, the petitioner shall now deposit the amount of Rs. 4 Lacs within one week from today.