In a setback to foreign carrier companies, the Bombay high court has ruled that delayed payment of foreign travel tax (FTT) could attract penalty under the provision of the Finance Act, 1979. Rejecting the plea of petitioners Malaysian Airlines, Saudi Arabian Airlines, North West Airlines and Kenya Airlines
the court on Monday said that the power to impose penalty under section 38(3) of the act could be exercised only in case of “failure to pay the tax” and not where there is only a delay in the payment of tax.
A bench comprising Justice KK Tated and Justice VC Daga said: “ the said concept (failure to pay) has not been defined under the Act (Finance Act, 1979) or Rules (Foreign Travel Tax Rules, 1979). ‘Failure to pay’ means non-payment. The concept of failure to pay can be quoted with non-payment. Non-payment is nothing but failure to pay when due”. It said, “as per the provisions of the act, amount of FTT collected becomes due within fifteen days from the date of collection thereof. Failure to pay within this prescribed time frame would mean non-payment or failure to pay. If any person fails to pay within the statutory period of fifteen days, then such person is well within the sweep of the words ‘failure to pay’”.
The petitioner carriers had said that mere delay in payment of FTT cannot be within the sweep of ‘failure to pay’. Hence delayed payment does not attract penalty, they had said.
In the present case, Malaysian Airlines had collected FTT from passengers going abroad in accordance with the Finance Act and Foreign Travel Tax Rules of 1979. But, the company, for the months of April, August, September and December, 2001 failed to pay the FTT within the stipulated period. The government, in view of such failure, issued four separate show-cause notices to the company. It had also imposed a penalty of Rs. 4,19,700 on the company for late payment.
Aggrieved by such order, the company filed two separate appeals before the Commissioner (Appeals). It, however, dismissed such appeals. The government had also imposed a penalty of Rs. 24,000 on Saudi Arabian Airlines, Rs. 9,62,300 on North West Airline and a fine of Rs. 11,71,100 on Kenya Airlines for delayed deposit of FTT.
