M/s Saudi Arabian Airlines vs Union of India and Ors.

11 days in 5 cases and 63 days in the last case – In respect of 5 instances, the demand drafts were purchased from the concerned bank before the due dates, however could not be submitted into the treasury because of security restrictions, whereas in respect of the last instance, the demand draft could not be deposited since the concerned employee was on emergency leave – Issuance of show cause notices to the appellant – In the initial order in-original, the adjudicating authority imposed the penalty of Rs.12,000/- u/s.38(3), on the appellant in respect of the 6 cases of late payment of FTT – In appeal by the appellant, the appellate authority remanded the matter, whereby the adjudicating authority passed de novo order-in-original, as per which penalty of Rs.71,29,140.00 was imposed on the appellant in respect of the 6 cases of late payment of FTT – Upheld by the appellate authority, revisional authority and the High Court – Sustainability: Held: Not sustainable – In the context of sub-section (3) of s.38, failure to pay the FTT or non-payment of FTT is not to be equated with delayed payment of FTT into the Government treasury – Sub-section (4) of s.38 read with rr.4 and 9 of the 1979 Rules deal with a situation of delayed payment of FTT into the Government treasury – Timeline for deposit of FTT into the Government treasury or the timeline for filing of monthly return by the carrier is not inflexible – It is flexible but on the exercise of the discretion conferred upon the Collector of Customs – Thus, the view taken by the lower authorities and by the High Court that the moment the timeline for deposit of FTT or filing of return is breached, imposition of penalty is automatic not the correct view – Appellate authority, revisional authority as well as High Court erred in upholding the penalty imposed upon the appellant since it is not a case u/s.38(3), rather it comes within the ambit of s.38(4); there is a provision in r.4 for condoning the delay in deposit of FTT, which the authorities below had overlooked; and for breach of s.38, be it sub-sections (2), (3) and (4), imposition of penalty is not automatic the moment there is a breach of the said provisions – Discretion is vested on the officer of customs to adjudicate whether penalty is imposable or not – Only if he arrives at the finding that penalty is imposable, then the quantum of penalty that may be imposed would be guided by the range provided for in sub-sections (2), (3) and (4) of s.38, as the case may be – Thus, the penalty is not imposable insofar the appellant is concerned – Furthermore, plea of appellant before all the authorities that such abnormal enhancement of penalty from Rs.12,000.00 to Rs.71,29,140 has put the appellant in a worse off condition because he chose to file an appeal, and had he not filed the appeal, all that he would have had to pay as penalty was Rs.12,000.00 and not Rs.71,29,140 – This plea was turned down by the appellate authority, revisional authority and the High Court on the ground that the initial penalty imposed was not in accordance with law, and on de novo adjudication, correct penalty came to be imposed – On this aspect also the appellate authority, revisional authority as well as High Court fell in grave error – No appellant by filing an appeal can be worse off than what he was prior to filing the appeal – Impugned order of the High Court, the revisional order, order-in-appeal and the de novo order qua imposition of the penalty on the appellant for late deposit of FTT on 6 occasions is set aside and quashed. [Paras 35, 37.3, 37.4, 46-55]

Fiscal statutes – Imposition of penalty – Proof of mens rea – Requirement:

Held: Automatic imposition of penalty and exclusion of mens rea are two different things – It cannot be said as a general proposition that in all instances of violation of statutory provisions for which penalty is prescribed, imposition of penalty is automatic – It will all depend on the scheme of the statute and the adjudicatory process provided for imposition of penalty – Where the adjudicatory process prior to imposition of penalty provides for show cause notice, filing of reply or representation against each of the grounds cited for imposition of penalty and hearing, to hold that imposition of penalty is mandatory or automatic or a foregone conclusion would be to render such a provision or adjudicatory process nugatory – Power to impose penalty includes power not to impose penalty – Merely because the statute provides a minimum penalty, it would not mean that penalty is automatic – Question of imposition of minimum penalty would arise only when the authority comes to the conclusion that penalty should be imposed. [Para 46]

Finance Act, 1979 – s.38(3), (4) – Foreign Travel Tax Rules, 1979 – Imposition of penalty – Delay in payment of Foreign Travel Tax-FTT and non-payment of FTT, if can be equated: Held: Delay in payment of FTT cannot be equated with nonpayment of FTT which stands on a different footing altogether – For non-payment of FTT, sub-section (3) of s.38 is attracted and for delay in deposit of payment of FTT, sub-section (4) of s.38 would come into play – Insofar imposition of penalty is concerned, be it under any of the sub-sections of s.38 i.e. subsections (2), (3) and (4), it is not automatic, notwithstanding the word ‘shall’ appearing therein – It is trite law of interpretation that merely because the word ‘shall’ appears in a particular provision, the same would not be rendered mandatory – It cannot be said as a thumb rule that the moment there is a breach of the timeline, imposition of penalty is automatic – This is so because of the very nature of the provisions of rr.4 and 9 and, because of the adjudicatory process contemplated u/r.12 – In an appropriate case, the officer of customs may decide not to impose a penalty, be it under sub-sections (2), (3) or (4), if he is satisfied that imposition of penalty is unwarranted – But if he decides to impose penalty, the quantum of penalty that may be imposed would be guided by the range provided for in each of the sub-sections. [Para 40]