Bombay High Court
Vardhaman Chemicals, Near Sharda ... vs The Commissioner, Central Excise And ... on 2 April, 2002
Equivalent citations: 2002(4)BOMCR537, (2002)2BOMLR826, (2003)185CTR(BOM)163, 2003(160)ELT132(BOM), [2003]263ITR460(BOM), 2002(2)MHLJ187
Author: J.N. Patel
Bench: J.N. Patel
JUDGMENT J.N. Patel, J.
1. The petitioner-Assessee has approached this Court invoking its extra ordinary jurisdiction to quash and set aside the communications dated 10/8/1999 (Annexure No.4) and 1/9/1999 (Annexure No.6), and for seeking declaration that the petitioner has made payment in time and is entitled to the benefit of "Kar Vivad Samadhan Scheme, 1998", and for directions to the respondents to issue necessary certificate in that behalf.
2. The petitioner is engaged in manufacturing and trading of Synthetic Organic Dye falling under heading No. 3204.29 in the Central Excise Tariff. By order-in-original No. 46/95 dated 20/12/1995, the respondents held that the assessee is liable to pay Rs. 4,22,043/- towards the Central Excise Duty and Rs. 20,000/- towards penalty, on the ground that the assessee had taken excess MODVAT credit. The said order was challenged before the CEGAT by filing an appeal under Section 35-B of the Central Excise & Salt Act, 1944, which came to be registered as Appeal No. E/845/96-Bom. While the aforesaid appeal was pending before the CEGAT, in the year 1998, the Central Government came up with a scheme known as "Kar Vivad Samadhan Scheme, 1998". Therefore, as required, the assessee filed a declaration under Section 88 of the Finance (2) Act, 1998 on 17/12/1998, claiming benefit under the said scheme, in respect of the aforesaid order passed by the respondent no.1 on 20/12/1995. In accordance with the scheme, the respondent no.1, in exercise of its powers conferred by Subsection 1 of Section 90 of the Finance (2) Act, 1998, determined an amount of Rs. 2,11,021/- as payable by the Assessee towards the full and final settlement of its tax arrears covered by the declaration dated 17/12/1998 in reference to the order-in-original No. 46/1995 dated 20/12/1995. Therefore, the respondents communicated to the Assessee, by its letter dated 7th/8th January, 1999, in Form 2B of the "Kar Vivad Samadhan Scheme 1998" and the Assessee who was the declarant seeking benefit under the Scheme, was directed to make payment of the same within 30 days from the date of the said certificate. The said certificate was received by the Assessee on 13/1/1999, pursuant to which the Assessee made payment of the said amount by cheque drawn on Parmatma Ek Sevak Nagarik Sahakari Bank Ltd., Nagpur, dated 10/2/1999 in the sum of Rs. 2,11,021/- in favour of the Revenue through the State Bank of India, Chhaoni Branch. Against the said payment, the account of the Assessee came to be debited as the Assessees Bank cleared the payment on 12/2/1999, but the same was credited into the account of the Revenue with the State Bank of India on 13/2/1999. Therefore, the respondents, by their letter dated 10th August, 1999, informed the Assessee that as per the provisions of "Kar Vivad Samadhan Scheme 1998", the settlement amount should be paid to the Revenue within 30 days from the date of order, but as the Assessee has paid the amount on 13/2/1999 i.e. on 31st day from the date of order and, therefore, the benefit of "Kar Vivad Samadhan Scheme 1998" cannot be given to the Assessee. The Assessee thereafter tried to explain the correct position to the respondents who, by their letter dated 1st September, 1999, informed the Assessee that their explanation is not accepted and it is in these facts and circumstances, the Assessee has approached this Court.
3. It is the contention of Mr. Bhangade, the learned counsel appearing for the petitioner-Assessee that in spite of accepting the payment tendered by the Assessee under the "Kar Vivad Samadhan Scheme, 1998, the respondents have proceeded further in the matter and the Assessee received a notice from the CEGAT in respect of the appeal filed by him that the matter was fixed on 8/3/2002. It is submitted that though the Assessee made further representation on 8/9/1999, there was no reply from the respondents and even though reminder dated 11/2/2002 was sent to them, it was not considered and though the Assessee is entitled to the benefit of the "Kar Vivad Samadhan Scheme 1998" , the respondents are proceeding further in the matter, therefore, the impugned communication deserves to be quashed and set aside and the Assessee be declared as entitled to the benefit of "Kar Vivad Samadhan Scheme 1998". It is the contention of Mr. Bhangade, that it is a settled law that if the cheque is honoured the payment under the said cheque relates back to the date of deposit of the said cheque. Thus, it is clear that the petitioner has made the payment on the 30th day to be reckoned from 13/1/1999, the date of receipt of the order dated 13/1/1999. It is further submitted that even if it is accepted that there is a delay of one day, same can be condoned as the said delay is due to the circumstances beyond the control of the Assessee and, therefore, the respondents cannot be expected to act unreasonably and in arbitrary manner holding that the petitioner has made the payment on 31st day and, therefore, they are not entitled for the benefit under the said scheme.
4. Mr. Govind Mishra, Senior Standing Counsel, appearing for the respondents, submits that the defendants do not wish to file any return in the matter and the record speaks for itself. It is submitted that the respondents are justified in informing the petitioner that as they have failed to pay the settlement amount within 30 days from the date of the receipt of the order in Form 2-B, therefore, they are not entitled to the benefit of "Kar Vivad Samadhan Scheme 1998. According to Mr. Mishra, admittedly, the actual tender of the amount in the credit of the respondents was made on 13/2/1999 i.e. on 31st day which was beyond the period of 30 days, and, therefore, the benefit of "Kar Vivad Samadhan Scheme 1998" was rightly denied to the petitioner and it does not call for any interference. Mr. Mishra submitted that the Assessee will now have to prosecute his appeal before the CEGAT at Mumbai.
5. The only question which requires our consideration is whether the Assessee has made payment within 30 days from the date of receipt of the certificate of intimation under Section 90(1) of the Finance (2) Act, 1998, in respect of "Kar Vivad Samadhan Scheme 1998". If we examine the communication dated 10th August, 1999 which is Annexure No.4, under which the respondents communicated to the petitioner that the benefit of "Kar Vivad Samadhan Scheme 1998" cannot be extended to them because they had paid the amount on 13/2/1996 i.e. on 31st day which is beyond 30 days time limit. Therefore, the facts are not much in dispute. The Certificate of Intimation was received by the Assessee on 13/10/1999, pursuant to which the Assessee made payment of the amount demanded under the Certificate by cheque dated 10/2/1999. The said cheque was cleared on 13/2/1999.
6. A cheque is a bill of exchange drawn on a banker and payable on demand and a common way of paying a debt. It is not in dispute that the payment under the "Kar Vivad Samadhan Scheme 1998" could be made by cheque and if this is so, the cheque was delivered to the payee by way of demand on 10/2/1999 which can be seen from the endorsement on the Payees Bankers i.e. State Bank of India, Chhaoni Branch on TR6 Challan, which shows that it was received as such by the Bankers of the respondents and, therefore, it operates as payment and will have to be construed as an extinguishment to that extent of the debt, though this is, no doubt, subject to a condition subsequent that if upon due presentation, the cheque is not paid, the original debt would revive. It is also not disputed that the account of the petitioner with his bankers Parmatma Ek Sevak Nagarik Sahakari Bank Limited, was debited on12/2/1999 and it came to be credited in the account of the respondents with S.B.I. on 13/2/1999. Therefore, there could be no hesitation to hold that a cheque bearing to have been paid by the bank on which it is drawn has an effect of receipt. We, therefore, find that the Assessee did make payment by cheque dt/- 10/2/1999 within the stipulated time limit prescribed under the Kar Vivad Samadhan Scheme 1998 and are entitled for a certificate of discharge.
7. In the case of Kirloskar Brothers Ltd. v/s The Commissioner of Income Tax , this Court has observed that payment under a cheque relates back to the date of cheque so immediately when a cheque is cashed, what is material is when the cheque was given and the payment is made when the cheque was given and not when the cheque was cashed at the instance of the creditor. Consequently, even when a cheque is accepted by the creditor as conditional payment, the preference by the creditor of accepting cheque rather than cash, operates as a payment to the creditor when the cheque is given although the liability of the debtor may revive in the event of the cheque not being ultimately cashed.
8. In another case i.e. in Commissioner of Income Tax -vsOgale Glass Works Ltd. the Supreme Court said, "The position, therefore, is that in one view of the matter there was, in the circumstances of this case, an implied agreement under which the cheques were accepted unconditionally as payment and on another view, even if the cheques were taken conditionally, the cheques not having been dishonoured but having been cashed, the payment related back to the dates of the receipt of the cheques and in the law the dates of payments were the dates of the delivery of the cheques. "
Therefore, it is a settled position that a cheque unless dishonoured, is payment. The payment takes effect from the delivery of the cheque, but is defeated by happening of the condition i.e. non payment at maturity.
9. A similar question came up for consideration before Gujarat High Court in the case of Kangold (India) Ltd. -vs- Commissioner of Income-Tax (842 ITR 239), the Gujarat High Court referring to the Ogale Glass Works Ltd.s case held that it is a settled legal position that in case of payment by cheque, the payment is deemed to have been made on the date of delivery of the cheque and not on the date of encashment when the cheque was honoured. In Kangolds case also the dispute arose in respect of the Assessee who had made disclosure under the scheme known as Voluntary Disclosure of Income Scheme 1997 (VDIS) and as per the provisions of Section 67 of the Finance Act, 1997, the Assessee had to make payment of tax payable on the amount of income disclosed within a period of three months from the date of filing of the declaration and it was canvassed that it is very clear from the language of Section 67 (1) of the Finance Act that the declarant has to pay the tax within three months from the date of filing declaration and relying upon the circular dated September 3, 1998, issued by CBDT and more particularly clauses II and IV of the said circular, it was submitted that the assessee ought to have deposited the amount of tax within 90 days and the cheque deposited by the assessee ought to have encashed within 90 days from the date of said declaration and the cheque was encashed beyond the prescribed period, the assessee was held not to be entitled for a certificate under Section 68(2) of the Finance act 1997. The High Court held that the petitioner has been wrongly denied the certificate under the provisions of Section 68(2) of the Finance Act 1997.
10. This doctrine that the payment takes effect from the date of the delivery of the negotiable instrument, has been reaffirmed by the apex Court in the Case of K. Saraswathy alias K. Kalpana (dead by L.Rs.
-vs- P.S.S. Somasundaram Chettiar . In the said case also the Supreme Court referred to Ogale Glass Works Ltd.s case and reiterated the doctrine that payment by cheque realised subsequently on the cheque being honoured and encashed relates back to the date of the receipt of cheque, and in law, the date of payment is the date of delivery of the cheque. It was further held that payment by cheque is an ordinary incident of present day life, whether commercial or private, and unless it is specifically mentioned that payment must be in cash there is no reason why payment by cheque should not be taken to be due payment if the cheque is subsequently encashed in the ordinary course.
11. We having come to the conclusion that the petitioner discharged their liability by making the payment of the sum of Rs. 2,11,021/- in terms of the Certificate of Intimation under Section 90(1) of the Finance (2) Act 1998, is entitled to the benefit of the "Kar Vivad Samadhan Scheme 1998" and, therefore, the impugned communications dated 10/8/1999 and 1/9/1999 issued by the respondents, are quashed and set aside. The respondents are directed to issue necessary certificate to the petitioner in that behalf.
12. Rule is made absolute in the aforesaid terms with no order as to costs.