Delhi High Court
M/S Spicejet Ltd. vs Uoi & Ors. on 3 February, 2017
Author: Najmi Waziri
Bench: S. Ravindra Bhat, Najmi Waziri
$~30
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgement delivered on:03.02.2017
+ WP(C) 6611/2001
M/S. SPICEJET LTD. ..... Petitioner
Through: Mr. Atul Sharma, Adv.
Versus
UOI & ORS. ..... Respondents
Through: Mr. Sanjeev Narula and Sh.
Abhishek Ghai, Advocates.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE NAJMI WAZIRI
NAJMI WAZIRI, J (OPEN COURT):-
1. This petition impugns the order of the Government of India dated
30.04.2001 which upheld the Order-in-Appeal dated 25.08.2000 passed by
the Commissioner of Customs (Appeals), New Delhi. The Order-in-
Original dated 30.04.2001 passed by the Commissioner of Customs, New
Delhi had imposed a demand of Rs.8,65,06,850/- being Inland Air Travel
Tax (IATT) for the period from March, 1996 to August, 1996 along with
interest @ 20% in terms of Section 43A(1) of the Finance Act, 1989 ('the
Act') read with Notification No. 4/94-IATT dated 12.08.1994. A penalty
amount of Rs 25 crores too was imposed on the petitioner under Section
46(3) of the Act. However, this was reduced to Rs 10 crores by the Order-
in-Appeal.
2. Section 42 of the Act imposed a compulsory 'Inland Air Travel Tax'
WP(C) 6611/2001 Page 1 of 9
upon every carrier obliging it to collect tax on every inland journey from
the passenger @ 10% of the fare. The carrier has to credit the amount to
the Central Government failing which an interest on the amount of tax not
paid for the delayed period is payable at the rate not below 20% and not
exceeding 30%. Admittedly, the petitioner/carrier under the Act, did not
pay the amount although it had collected it from its passengers. Therefore,
the minimum rate of 20% was imposed on the unpaid amount. In default of
payment of the demanded amount the aircraft which was then leased to the
petitioner from M/s Air U.K. Leasing Limited (Lessor) had been distrained.
It was later released and de-registered upon the lessor depositing a sum of
Rs.12.5 crores under the order of this Court in WP(C) 110/1997 which had
been filed by the Lessor. Subsequently, by Writ Petition (C) No.
1908/1997, the Lessor sought refund of the said amounts of Rs.12.5 crores
contending that it was not liable to pay the said amount towards the IATT
dues. That writ petition was disposed off on 18.01.1999 in view of the
order passed by the Assistant Commissioner of Customs on 13.01.1999
holding that the aforesaid amount of Rs. 8,65,06,850/- along with interest
@ 20% and penalty amount of Rs.25 crores was payable.
3. Aggrieved by the aforesaid Order-in-Original dated 13.01.1999, the
petitioner preferred an appeal wherein the Commissioner of Customs
(Appeals) confirmed the aforesaid demand. However, the penalty amount
was reduced to Rs.10 crores. It reasoned as under:
"On the basis of observations and findings recorded
hereinabove, I have to infer that the pleadings of the
appellants, that the amount of Rs.12.5 crore, deposited by
the lessor for the release of the distrained aircraft, has
been appropriated by the department against the
determined dues payable by the appellants, or that it has
WP(C) 6611/2001 Page 2 of 9
been already adjusted against the determined liability of
the appellants, have no basis. Inspite of a clear
observation made by the Assistant Commissioner in the
impugned order that the appellants had not produced any
letter from the lessor or any TR6 Challan to prove that the
amount of Rs.12.5 crore was deposited against the liability
of the appellants, no such requisite evidence has been
produced even before me. With a view to the foregoing, I
hold that the dues, determined in the impugned order on
account of IATT and interest thereon, are still unpaid and
the appellants have been withholding that payment in
gross violation of and utter disregard to the law; and
therefore, the order of the Assistant Commissioner in
question, directing the appellants to deposit the same
immediately, suffers from no infirmity. I fail to find any
substance in all other pleas relating to this aspect for the
findings recorded above.
One of their contentions mentioned in the appeal
memorandum is that rule 8A of IATT Rules, 1989 does not
provide for any penalty for the breach of rule 6 ibid. As
the penalty in the impugned order has been adjudged in
terms of provisions of Section 46 of the Act, I fail to find
any relevance of this pleading.
After examining the provisions of Section 46 of the Act, I
find that in such cases of non-payment of IATT within the
stipulated time, a penalty, which is not to be less than one
fifth and which can extend upto three times of the unpaid
amount of the IATT, can be imposed. Such cases, where
the concerned persons act in utter disregard to the law,
call for the imposition of a higher penalty. But in this case
the penalty imposed is very close to the upper limit; and
therefore has acquired a dimension which wounds
unrealistic when seen in the light of persisting practice. I,
therefore, hold that to meet the ends of justice, a
modification in the impugned order to reduce the amount
of penalty is necessary. I accordingly reduce the amount
of penalty from Rs.25 crore to Rs.10 crore (Rupees Ten
Crore only) and modify the impugned order to this extent."
WP(C) 6611/2001 Page 3 of 9
4. The Commissioner (Appeals) was also of the view that the amount of
Rs.12.5 crore lying deposited against the distrained aircraft in terms of
Section 46A of the Act could not be deemed to have been recovered against
the amounts payable by the carrier because it was the carrier's specific
liability which had to be discharged by it. The Commissioner (Appeals)
reasoned as under:
"Thus, the facts, placed before me, clearly evince that the
amount of Rs.12.5 crore is lying deposited and represents
the distrained aircraft in term of Section 46A ibid. The
appellants have however, contended that the amount stands
appropriated and in support of this, have referred to the
department's letter dated 15.4.97. Citing the contents of
that letter, the appellants have themselves mentioned, in
their write-up submitted on 11.8.2000, that the Addl.
Commissioner, vide the letter dated 15.04.1997, addressed
to the DGCA, wrote that the amount is merely a deposit for
the release of the aircraft which can be appropriated
towards the outstanding dues if the petition is ultimately
dismissed. I thus find that the letter in question, as it uses
the words "can be" expresses only a probability about the
appropriation of the amount. It no where says that the
amount deposited by the lessor "has been" or "shall
definitely be" appropriated towards dues adjudged against
the appellants. The plea, thus, I hold, is devoid of
substance. In any case, the order of the Hon'ble High
Court passed on 18.01.99 in CW 1908/97, whereby the
U.O.I. and the Commissioner have been directed to
proceed for the recovery of the dues from the appellants,
has to prevail. Order dated 18.01.99 read as following:
"It is not disputed now that during
pendency of the writ petition and pursuant to
the order passed by this Court, Assistant
Commissioner of Customs (IATT) has on
10.1.1999 passed an order determining the tax
liability of respondent No.5 for payment of
WP(C) 6611/2001 Page 4 of 9
inland air travel tax. In view of the fact that
now liability has been determined, no other or
further order deserves to be issued in this
petition except that respondents Nos. 1 to 3
will act in accordance with law to recover the
amount subject to course of rights of
respondent No.5 to challenges the said order
in appeal or otherwise in accordance with law.
Ordered accordingly. The petition sands
disposed of.""
5. Aggrieved by the aforesaid order, the appellant filed a revision
application which was disposed off by the impugned order holding
untenable the petitioner's plea that since the IATT dues were paid by
M/s.Air U.K. Leasing Ltd., the Lessor, the same could not be demand
twice. The order further held that the amount deposited was only for the
release of the distrained aircraft upon the directions of this Court for deposit
of the said amount which were dues from the carrier (present petitioner), till
the matter attains finality in the Letters Patent Appeal (LPA) pending
before this Court. And before the adjudication in the LPA it could not be
conclusively said that the said amounts stood adjusted against the IATT
dues from the carrier. It was further held as under:
"The respondent having failed to honour their
commitments, cannot hide their inefficiency or
incompetence (as revealed from their letter dt 21.12.98
(vis-a-vis Lufthansa) in reply to the 6 SCNs) and claim the
deposits made by another as their own payments. The
lessor are not a party to the instant proceedings. What
they have paid was in accordance to the Court orders and
cannot be appropriated towards the dues of the
respondents, even though on the date of deposit the sums
more or less equalled the dues. The deposits made by the
lessor are different from the dues payable by the
WP(C) 6611/2001 Page 5 of 9
respondents. Had it not been so, the lessor, namely, M/s
Air U.K. Leasing Ltd would not have sought orders from
the Court for return of those sums. Therefore the
respondents plea enumerated vide para 10.3 to 10.6 supra
are not sustainable and are rejected."
6. The learned counsel for the petitioner has reiterated arguments
similar to what was advanced by it all along in the authorities below. In
addition, the learned counsel for the petitioner has stressed that M/s. Air
U.K. Leasing Ltd deposited the amount of Rs.12.5 crores although under
the directions of this Court, in two transactions, i.e. Rs.8 crores was paid by
draft in the name of the Commissioner of Customs, Air Cargo Unit, New
Delhi and Rs.4.5 crores was in the form of a Fixed Deposit made on 10.4.96
which matured on 11.4.98, and has since been credited to the Central
Government as duty payment, by TR 6 Challan dated 23.8.98. This has
been deposited under Major Head "0045", which relates to "Other taxes and
duties on commodities and services". The Challan also mentions that the
deposit is against the outstanding dues of the appellant towards IATT in
terms of the orders dated 10.4.98 and 10.2.98 of this Court in CW 110/97.
7. The learned counsel contended that: (a) requisite amounts towards
dues as outstanding were already been paid to the Government and the
same stood appropriated under the proper account; hence there was no
further requirement of payment to be made by the petitioner; (b) the amount
of Rs.12.5 crore although deposited by the Lessor, was a permissible mode
of recovery of IATT dues as contemplated under Section 46A(4) of the Act
read with Rule 14(4) of the eponymous Rules and (c) having recovered the
said amount by the aforesaid permissible method, it was not open to the
Revenue to initiate recovery of the said amount from the petitioner all over
WP(C) 6611/2001 Page 6 of 9
again. Reliance was made upon the judgment of the Supreme Court in
Purshottamdas Thakurdas v. CIT (1963) 48 ITR 206 to contend that once
tax has been deducted by a mode of deduction under the statute, no other
mode of collection of the tax can be legally resorted to. The petitioner has
also cited several financial constraints which has led to the non deposit of
the IATT dues.
8. Having considered the facts and circumstances of the case, the Court
is of the view that Section 42 of the Act fixes the tax liability on the carrier
and while Section 43A imposes the interest between 20% and 30% for the
delay in payment of the amount, the modes of recovery of unpaid amount is
prescribed under Section 46A(4) of the Act. Section 46A (1) and 46A(4)
read as under:
"46-A(1) - Where the inland air travel tax or interest or
penalty is not paid by a carrier or other person, as
required under the provisions of sub-section (2) of section
42, Section 43-A or Section 46, the authority specified in
the rules (hereinafter referred to as the authority) may,
after the tax, interest or penalty has been determined under
the rules, proceed to recover the amount of such tax,
interest of penalty by one or more of the modes specified in
sub-section (2), sub-section (3) or sub-section (4).
46-A(4) - The authority may distrain or arrest any
aircraft and any other property belonging to, or under the
control of, the carrier of other person, as the case may be,
and detain the same until the tax, interest or penalty so
determined is paid; and in case any part of the tax, interest
or penalty or of the cost of the distress or arrest or of the
keeping of the aircraft or other property distrained or
arrested, remains unpaid for the space of thirty days next
after any such distress or arrest, may cause the said
aircraft or other property to be sold and with the proceeds
of such sale may satisfy the tax, interest or penalty and the
costs including the cost of sale remaining unpaid, and
WP(C) 6611/2001 Page 7 of 9
shall render the surplus, if any, to the carrier or other
person."
9. Under the statutory scheme, therefore, the aircraft which was in
possession of the carrier was first distrained and then released to the Lessor
upon the deposit of an amount near equivalent of the dues then outstanding.
Therefore, the deposit would represent only the aircraft and not such
amounts as were to be recovered from the carrier. The Lessor was,
obviously interested in release of the aircraft which had far greater value
than the amount required to be paid for its release and de-registration from
the authorities. Subsequently, the lessor had also sought refund of the said
amount from the Government. However, the responsibility of the carrier to
pay the IATT dues subsisted. The recovery is to be made from the carrier
until tax, interest, penalty so determined is paid. The distrainment was only
for the purpose of ensuring recovery of the monies then due. The monies
deposited by a third party could not be deemed to have been adjusted
against the aforesaid dues of the tax as well as the penalty. Financial
constraints of the carrier do not constitute a valid reason for either waiver of
any dues under Section 42 and 43-A of the Act or under Section 46 of the
Act.
10. Furthermore, there is no letter or due communication from the Lessor
agreeing to adjustment of the amounts paid by it against the carrier's tax
dues. Indeed, the position is to the contrary as refund of the said amounts
had been sought by the carrier. Hence, the contentions of the petitioner are
untenable.
11. The rationale for reducing the penalty amount from Rs.25 crores to
Rs.10 crore is sound and there is no ground to interfere with it. The
WP(C) 6611/2001 Page 8 of 9
deliberate withholding of monies (taxes) by the petitioner from such
statutorily sanctioned collections and diversion of it by the carrier for its
own private use, instead of crediting it into Government's account was in
blatant disregard to statutory provisions. This omission - in depositing the
collections was illegal and dishonest. Accordingly, the non-imposition of
penalty in such case would dilute and indeed render ineffective the
deterrence envisaged under Section 46 of the Act. The reduction of the
penalty amount from the maximum to a third was justified. The Court is
satisfied that the discretion exercised by the appellate authority was sound
and judicious and has not, in turn inflicted a disproportionate burden, in the
overall circumstances of the case.
12. In view of the preceding discussion the petition is without merit and
is accordingly dismissed.
NAJMI WAZIRI, J.
S. RAVINDRA BHAT, J.
FEBRUARY 03, 2017/acm WP(C) 6611/2001 Page 9 of 9