High Court Of Bombay : Nagpur Bench
Vardhaman Chemcials vs. Commissioner Of Central Excise And Customs & Anr.
Sections 1998FA(No. 2) 90(1)
J.N. Patel & P.S. Brahme, JJ.
Writ Petn. No. 903 of 2002
2nd April, 2002
Counsel Appeared
V.V. Bhangade, for the Petitioners : Govind Mishra, for the Respondents
JUDGMENT
J.N. Patel, J. :
The petitioner-assessee has approached this Court invoking its extraordinary jurisdiction to quash and set aside the communications dt. 10th Aug., 1999, (Annexure No. 4), and 1st Sept., 1999, (Annexure No. 6), and for seeking declaration that the petitioner has made payment in time and is entitled to the benefit of the “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 of 1995 dt. 20th Dec., 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 s. 35B of the Central Excise and Salt Act, 1944, which came to be registered as Appeal No. E/845 of 1996Bom. 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 s. 88 of the Finance (No. 2) Act, 1998, on 17th Dec., 1998, claiming benefit under the said scheme, in respect of the aforesaid order passed by respondent No. 1 on 20th Dec., 1995. In accordance with the scheme, respondent No. 1, in exercise of its powers conferred by sub-s. (1) of s. 90 of the Finance (No. 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 dt. 17th Dec., 1998, in reference to the order-in- original No. 46 of 1995 dt. 20th Dec., 1995. Therefore, the respondents communicated to the assessee, by its letter dt. 7th/8th Jan.,1999, in Form No. 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 13th Jan., 1999, pursuant to which the assessee made payment of the said amount by cheque drawn on Parmatma Ek Sevak Nagarik Sahakari Bank Ltd., Nagpur, dt. 10th Feb., 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 assessee’s bank cleared the payment on 12th Feb., 1999, but the same was credited into the account of the Revenue with the State Bank of India on 13th Feb., 1999. Therefore, the respondents, by their letter dt. 10th Aug., 1999, informed the assessee that as per the provisions of the “Kar Vivad Samadhan Scheme, 1998”, the settlement amount should be paid to the Revenue within 30 days from the date of the order, but as the assessee has paid the amount on 13th Feb., 1999, i.e., on the 31st day from the date of the order and, therefore, the benefit of the “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 dt. 1st Sept., 1999, informed the assessee that their explanation is not accepted and it is in these facts and circumstances, the assessee has approached this Court.
It is the contention of Mr. Bhangade, 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 8th March, 2002. It is submitted that though the assessee made further representation on 8th Sept., 1999, there was no reply from the respondents and even though reminder dt. 11th Feb.,
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 the “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 13th Jan., 1999, the date of receipt of the order dt. 13th Jan., 1999. It is further submitted that even if it is accepted that there is a delay of one day, the 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 an arbitrary manner holding that the petitioner has made the payment on the 31st day and, therefore, they are not entitled for the benefit under the said scheme. 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 No. 2B, therefore, they are not entitled to the benefit of the “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 13th Feb., 1999, i.e., on the 31st day which was beyond the period of 30 days, and, therefore, the benefit of the “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.
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 s. 90(1) of the Finance (No. 2) Act, 1998, in respect of the “Kar Vivad Samadhan Scheme, 1998”. If we examine the communication dt. 10th Aug., 1999, which is annexure No. 4, under which the respondents communicated to the petitioner that the benefit of the “Kar Vivad Samadhan Scheme, 1998” cannot be extended to them because they had paid the amount on 13th Feb., 1999, i.e., on the 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 13th Jan., 1999, pursuant to which the assessee made payment of the amount demanded under the certificate by cheque dated 10th Feb., 1999. The said cheque was cleared on 13th Feb., 1999. 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 10th Feb., 1999, which can be seen from the endorsement of the payee’s bankers, i.e., the 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 Ltd., was debited on 12th Feb., 1999 and it came to be credited in the account of the respondents with the State Bank of India on 13th Feb., 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. 10th Feb., 1999, within the stipulated time limit prescribed under the Kar Vivad Samadhan Scheme, 1998, and is entitled for a certificate of discharge.
7. In the case of Kirloskar Brothers Ltd. vs. CIT AIR 1952 Bom 306, this Court has observed that payment under a cheque relates back to the date of the 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 a 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 CIT vs. Ogale Glass Works Ltd. AIR 1954 SC 429, 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.”
9. 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.
10. A similar question came up for consideration before the Gujarat High Court in the case of Kangold (India) Ltd. vs. CIT (1999) 151 CTR (Guj) 659 : (1999) 239 ITR 842 (Guj). The Gujarat High Court referring to Ogale Glass Works Ltd. (supra), 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 Kangold’s case (supra) also the dispute arose in respect of the assessee who had made disclosure under the scheme known as Voluntary Disclosure of Income Scheme, 1997 and as per the provisions of s. 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 s. 67(1) of the Finance Act that the declarant has to pay the tax within three months from the date of filing the declaration and relying upon the Circular dt. 3rd Sept., 1998, issued by the 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 s. 68(2) of the Finance Act 1997. The High Court held that the petitioner has been wrongly denied the certificate under the provisions of s. 68(2) of the Finance Act, 1997.
11. 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 vs. P. S. S. Somasundaram Chettiar AIR 1989 SC 1553. In the said case also the Supreme Court referred to Ogale Glass Works Ltd.’s case (supra) 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 the 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. 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 s. 90(1) of the Finance (No. 2) Act, 1998, is entitled to the benefit of the “Kar Vivad Samadhan Scheme, 1998” and, therefore, the impugned communications dt. 10th Aug., 1999, and 1st Sept., 1999, issued by the respondents, are quashed and set aside. The respondents are directed to issue necessary certificate to the petitioner in that behalf. The rule is made absolute in the aforesaid terms with no order as to costs.
[Citation : 263 ITR 460]
