By TIOL News Service

NEW DELHI, FEB 09, 2017: THE petitioner is Spicejet Ltd.

Section 42 of the FA, 1989 imposed a compulsory 'Inland Air Travel Tax' 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% interest 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.

Aircraft was later released and de-registered upon the lessor depositing a sum of Rs.12.5 crores under the order of the High Court 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.25crores was payable.

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.10crores.

The Commissioner (Appeals) was also of the view that the amount of Rs.12.5crore 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 .

Aggrieved by the aforesaid order, the appellant filed a revision application which was disposed of 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 demanded 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.

The present 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 petitioner submitted that M/s. Air U.K. Leasing Ltd deposited the amount of Rs.12.5crores although under the directions of this Court, in two transactions, i.e. Rs.8crores was paid by draft in the name of the Commissioner of Customs, Air Cargo Unit, New Delhi and Rs.4.5crores 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; that this has been deposited under Major Head "0045", which relates to "Other taxes and duties on commodities and services" and 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 CW110/97.

It is, therefore, submitted that the amount of Rs.12.5crores 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 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 again. [PurshottamdasThakurdas v. CIT (1963) 48 ITR 206 refers.]

The High Court noted 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.

After extracting sections46A(1) and 46A(4) of the Act, the High Court further observed -

Merits:

+ 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.

+ 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.

Penalty:

++ The 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 rationale for reducing the penalty amount from Rs.25crores to Rs.10crore is sound and there is no ground to interfere with it.

The Petition was dismissed.

(See 2017-TIOL-274-HC-DEL-CUS)