Judgment:
V.C. Daga, J.
1. This petition is directed against the order dated 1st October, 2002 passed by the second respondent (Exhibit-C) forfeiting the facility of payment of duty allowed on fortnightly basis under Rule 8(4) of the Central Excise Rules, 2001 (the 'Rule' for short) framed in exercise of the powers conferred under Section 37 of the claimed under the provisions of the Central Excise Act, 1944 (the 'Act' for short),
FACTS
2. The petitioner is a private limited Company engaged in the business of manufacturing steel wire, having its factory at Anandnagar, M.I.D.C., Ambernath (Maharashtra). The product manufactured by the petitioners attracts payment of excise duty under the provisions of the Act. The petitioners were enjoying facility of payment of duty on fortnightly basis under Rule 8(4) of the Rules. The relevant Rule 8 reads as under :--
'(1) The duty on the goods removed from the factory or the warehouse during the first fortnight of the month shall be paid by the 20th of that month and the duty on the goods removed from the factory or the warehouse during the second fortnight of the month shall be paid by the 5th of the following months :
Provided that in the case of goods removed during the second fortnight of the month of March, the duty shall be paid by the 31st March:
Provided further that where an assessee is availing of the exemption under a notification based on the value of clearances in a financial year, the duty on goods cleared during a calender month shall be paid by the 15th day of the following month. Explanation :--For removal of doubts, it is hereby clarified that the duty liability shall be deemed to have been discharged only if the amount payable is credited to the account of the Central Government by the specified date.
(2) The duty of excise shall be deemed to have been paid for the purposes of these rules on the excisable goods removed in the manner provided under sub-rule (1) and the credit such duty allowed, as provided by or under any rule.
(3) If the assessee fails to pay the amount of duty by due date, he shall be liable to pay the outstanding amount along with interest at the rate specified by the Central Government vide notification under Section 11AB of the Act on the outstanding amount, for the period starting with the first day after due date till the date of actual payment of the outstanding amount.
(4) If the assessee defaults :--
(i) in payment of any one instalment and the same is dischargedbeyond a period of thirty days from the date on which theinstalment was due in a financial year, or
(ii) in payment of instalment by the due date for the third time in afinancial year, whether in succession or otherwise, then, the assessee shall forfeit the facility to pay the dues in instalments under this rule for a period of two months, starting from the date of communication of the order passed by the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, in this regard or till such date on which all dues are paid, whichever is later, and during this period the assessee shall be required to pay excise duty for each consignment by debit to the account current and in the event of any failure, it shall be deemed that such goods have been cleared without payment of duty and the consequences and penalties as provided in these rules shall follow.'
3. The above provisions lays down that if the assessee commits three defaults in succession or otherwise within a period of one financial year in the matter of payment of duty, then only the assessee shall forfeit the facility to pay dues in instalments under this Rule for a period of 2 months starting from the date of communication of the order passed by the Assistant Commissioner of Central Excise or the Deputy Commissioner of the Central Excise, as the case may be in this regard or till such date on which all dues are paid, whichever is . later, and during this period, the assessee shall be required to pay excise duty for each consignment by debit to the account and in the event of any failure, it shall be deemed that such goods have been cleared without payment of duty and the consequences and penalties as provided in these Rules shall follow.
4. What should be seen at the threshold is whether the above condition precedent to invoke the power under Rule 8(4) of the Rules 2001 existed in this case on the date when the impugned order was passed. In the impugned order dated 1-10-2002 passed by the Dy. Commissioner of Central Excise, Kalyan II Division, Kalyan, the alleged three defaults committed by the petitioners set out are as under:--
S. No.Duty payable for the Amount of Duty Rs. of ChequeBankers AcknowledgementDue DateRelease of TR-6 Challan
i)16 May 2002 to 31 May 200280,811/-4-6-20025-6-20026-6-2002ii)16 July 2002 to 31 July 20021,10,000/-3-8-20025-8-20026-8-2002iii)1 August 2002 to 15 August 20021.23,330/-19-8-200220-8-200221-8-2002
5. The perusal of the impugned order based on the above tabular data would show that the petitioner made payments by depositing cheques with the bankers of the Revenue on 4-6-2002, 3-8-2002 and 20-8-2002 towards the duty for the period ending on 31-5-2002, 31-7-2002 and 15-8-2002 respectively. In respect of these three periods, the due dates were 5-6-2002, 5-8-2002 and 20-8-2002. The narration of these facts would show that the petitioners deposited cheques on or before due dates but the said cheques were said to have been realised subsequent to the due dates with the result the account of the Revenue in case of each payment was credited subsequent to the due dates. The 2nd respondent taking the date of credit in the account of the Revenue as date of payment, prima facie came to the conclusion that the petitioner committed defaults in payment of excise duty as such not entitled to take the benefit of Rule 8(1) so as to enjoy the facility of payment of duty on fortnightly basis which the petitioners was enjoying.
6. The 2nd respondent, on the above premise issued a show cause notice dated 25-9-2002. The petitioner was called upon to show cause as to why the facility provided to the petitioner to make payment of duty in instalment on fortnightly basis under provisions of Rule 8(1) should not be forfeited.
7. The petitioner replied to the aforesaid show cause notice vide its letter dated 30th September, 2002 and tried to canvass that the date of deposit of the cheque should be treated as the date of payment or at any rate upon encashment of cheque, it will relate back to the date of receipt of the cheque. Thus, it was contended that the date of receipt of the cheque should be treated as the date of payment of the duly. It was urged that the amount of duty was paid by depositing cheque with the authorised bank on 4-6-2002, 3-8-2002 and 19-8-2002, as such it should be held that it made the payment of duty prior to the due dates and, therefore, there are no defaults on the part of the petitioner in payment of excise duty. The said contention raised by the petitioner did not find favour with the 2nd respondent, with the result by the impugned order dated 1st October, 2002, the 2nd respondent, the Deputy Commissioner, Central Excise, Kalyan-II Division forfeited the facility to pay duty in instalments on fortnightly basis, in exercise of powers under Rule 8(4) of the Rules, 2001.
8. Being aggrieved by the aforesaid order, petitioner invoked the Writ jurisdiction of this Court under Article 226 of the Constitution of India to assail the validity of the order dated 1-10-2002 passed by the 2nd respondent herein.
THE SUBMISSIONS
9. The learned Counsel appearing for the petitioner reiterated the submissions which did not find favour with the 2nd respondent and urged that the date of receipt of the cheque by the authorised bankers of the Revenue should be treated as date of payment of duty. It is further contended that if payments are made by cheques and ultimately, if the cheques are realised, then upon such realisation, the payments made should be treated as having been made on the date when the cheques were delivered or deposited. In the submission of the learned Counsel for the petitioner, the realisation of the cheque will relate back to the date of delivery or deposit, payment, as such petitioner could not be as defaulter in payment of duty under Rule 8(1) of the Rules of 2001. He relied on the case of K. Saraswathi Alias K. Kalpana (Dead) by LRS. v. P. S. S. Somasundaram Chettiar reported in : [1989]2SCR819 and relied on the observation to say that payment by cheque is an ordinary incident of present day life, whether commercial or private, and if the payment is made by cheque, it should be taken to be due payment if the cheque is subsequently encashed in the ordinary course. He also placed reliance on another Judgment C.I.T. v. Ogale Glass Works Ltd. reported in 1954 I.T.R. 529 to contend that if the cheques were accepted by the bankers of the Revenue unconditionally as payment and the cheques not having been dishonoured but having been cashed, the payment must be treated as having been made on the date of the receipts of the cheques and in law the dates of payments are the dates of the delivery of the cheques. He also sought to place reliance on some of the Judgments of the CEGAT reiterating the same principles, reference to which, in our opinion, is not necessary for the purpose of deciding the present petition.
10. Per contra, the learned Counsel appearing for the Revenue would point out that the petitioner has committed 3 defaults and seriously disputed legality of the legal submissions canvassed on behalf of the petitioner, considering the peculiar rule which is holding the field. He relied upon the explanation to rule 8(1) and contended that in view of the specific clarification, the duty liability shall be deemed to have been discharged only on the date the amount payable is credited to the account of the Central Government. The learned Counsel appearing for the Revenue contended that in view of the specific provision made under the Rules of 2001, the general principles laid down by the various Courts dealing with the cases arising out of the Negotiable Instruments Act or other general legislations dealing with commercial transactions would be of no assistance to the petitioner in the particular facts of the present case on the face of Rule 8 of the Rules of 2001.
11. The learned Counsel for the Revenue brought to our notice that the Apex Court in K. Saraswathy (supra), has made caveat that the 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. The Apex Court was alive to the fact that there could be any other specific provision prescribing mode, manner and method of making payment. In that event, such specific provision will hold the field. Turning to the case at hand, he submitted that explanation to sub-rule (1) of Rule 8 makes a specific provisions as to how the duty liability is to be paid. He thus tried to support the impugned order passed by the 2nd respondent on the touchstone of the specific rule 8(1) read with rule 8(4) of the Rules of 2001 and undisputed facts emerging on record.
12. The learned Counsel for the petitioner, in rejoinder, tried to contend that the rule 8 cannot be said to be a mandatory rule. In his submission, the rule sought to be relied by the Revenue is directory. The petitioner has substantially complied with the provisions thereof, as such the impugned order of forfeiture is bad and illegal and the same is liable to be quashed and set aside.
CONSIDERATION AND FINDINGS
13. The main argument advanced before us, as before the respondent No. 2, by the learned Counsel for the petitioner, is that the Revenue received the payment of duty when the cheque was deposited with their bankers. In other words, the Revenue accepted the cheques in full satisfaction of the duty liability through their bankers, who acted as agents of the revenue. Rule 8 of the Rules of 2001 sought to be pressed in service must be considered to be directory having regard to its objects. As already discussed hereinabove, the Rule contemplates if the assessee commits 3 defaults in succession or otherwise within a period of one financial year in the matter of payment of duty, then only the assessee shall forfeit the facility to pay duty in instalments under the said rules for a period of 2 months starting from the date of communication of the order passed by the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be in this regard or till such date on which all the dues are paid, whichever is later. The explanation to Rule 8(1) specifically clarifies for removal of doubts, that duty liability shall be deemed to have been discharged only if the amount payable is credited to the account of the Central Government by the specified date. At this juncture, it will not be out of place to mention that an explanation is sometimes added to a Section or Rule or enactment. An explanation should be read with a view to harmonise and clear up the ambiguity to the provisions of the Section or Rule. The explanation should be interpreted according to its own terms having regard to its context and not to enlarge or widen the ambit of the Section or Rule. The proper function of an explanation to a section or rule in the Act or Rules is to explain and not to add or even alter. An explanation only explains. There can be more than one reason for a statutory explanation e.g. to make clear what seems to be obscure; to make explicit that which is implicit, to render patent and obvious that which is latent, as observed by this Court in Kamruddin Masjid Trust v. Abdul Rahiman Fakiruddin, : 1986(2)BomCR121 .
14. It is well settled that explanation added to a statutory provisions is not a substantive provision in any sense of the term but as the plain meaning of the word itself show it is merely meant to explain or clarify certain ambiguities which may have crept in the statutory provisions, as held in the case of Sundaram Pillai v. Pattabiraman, : [1985]2SCR643 . The object of the explanation to the statutory provision is :--
(a) To explain the meaning and intendment of the Act;
(b) Where there is any obscurity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to subserve;
(c) To provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful;
(d) an explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment.
15. Having seen the purpose and role of the explanation in the light of the well recognised principles of interpretations, it is also well settled that where the statute provides the time at or within which some act has to be done by the executive it is supposed to be permissive with regard to the issue of time only. Of course, the provision regarding time may be considered mandatory if the intention of the legislature appears to be to impose literal compliance with the requirement of time. Where the rights of private person depend upon his compliance with the provisions of an enactment, those provisions are deemed to be mandatory. The difference between a mandatory rule and a directory rule is that while the former must be strictly observed, in the case of the latter, substantial compliance may be sufficient to achieve the object regarding which the rule is enacted. Certain broad propositions which can be deduced from several decisions of Courts regarding the rules of construction that should be followed in determining whether a provision of law is directory or mandatory may be summarised thus :
The fact that the statute used the word 'shall' while laying down a duty is not conclusive on the question whether it is mandatory or directory provision. In order to find out the true character of the legislation, the Court has to ascertain the object which the provision of law in question is to subserve and its design and the context in which it is enacted. If the object of a law is to be defeated by non-compliance with it, it has to be regarded as mandatory. But when a provision of law relates to the performance of any public duty and the invalidation of any act done in disregard of that provision causes serious prejudice to those for whose benefit it is enacted and that at the time who have no control over the performance of the duty, such provision should be treated as a directory one. Where however, a provision of law prescribes that a certain act has to be done in a particular manner by a person in order to acquire a right and it is coupled with another provision which confers an immunity on another when such act is not done in that manner, the former has to be regarded as a mandatory one. A procedural rule ordinarily should not be construed as mandatory if the defect in the act done in pursuance of it can be cured by permitting appropriate rectification to be carried out at a subsequent stage unless by according such permission to rectify the error later on, another rule would be contravened. Whenever a statute prescribes that a particular act is to be done in a particular manner and also lays down that a failure to comply with the said requirement leads to a specific consequence, it would be difficult to hold that the requirement is not mandatory and specified consequence should not follow. (see Sharif-ud-Din v. Abdul Gani Lone, : [1980]1SCR1177 ).
16. The practical bearing of the distinction between a provision which is mandatory and one which is directory is that while the former must be strictly observed, in the case of the latter it is sufficient that it is substantially complied with, as held in the case of Hari Vishnu Kamath v. Ahmad Ishaque reported in 7955 SCC 1104. It is one of the rules of construction that a provision is not mandatory unless non-compliance with it is made penal. A mandatory provision must be obeyed and any act done in breach thereof will be invalid but if it is directory the act will be valid.
17. Thus, keeping in view the aforesaid judicially recognised principles in mind, if one turns to Rule 8 of the Rules of 2001 in general and Rule 8(1) followed by sub-rule (4) of Rule 8, it would be clear that the non-compliance of the rule in question is made penal. It, therefore, has to be treated as mandatory. As such, the payment of duty ought to have been made by the petitioner either before the due date or on the date specified. In other words, payment ought to have been credited to the account of the Revenue at least by the due date. In this case, none of the payments have been made on or before the due dates and, therefore, no fault can be found with the impugned order. None of the cases cited by the learned Counsel appearing for the petitioner deal with the specific mandatory provision directing payment on a particular specific date prescribed by the statute. As a matter of fact in the case of K. Saraswathy (supra) the Court ruled that the 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. While laying down this proposition, the Apex Court made a caveat that this general proposition that payment by cheque realised subsequently on the cheque being honoured and encashed relates back to the date of receipt of the cheque would not be applicable if statute make a different provision in that behalf, and in law the date of payment is the date of delivery of the cheque. Where there is a rule providing for payment which must result in credit entry in the account of the Revenue by specified date or by a specific due date, the payment must be made by that particular date provided under the statute.
18. It is well recognised rule of interpretation that where there is a general rule and special rule relating to a specific class or object, the general rule should be so applied as not to effect the special provisions unless an intention to abrogate the special rule can be spelt out from the provisions of the general rule. It is well settled that in interpreting an enactment, the Court should have regard not merely to the literal meaning of the words used, but also take into consideration the antecedent history of the legislation, its purpose and the mischief it seeks to suppress. The very purpose of the enactment of Rule 8(1) is to provide facility of paying duty in instalments but at the same time, the object of Rule 8(4) is to prevent misuse of such facility and to deprive the person from making delayed payments of excise duty from enjoying such facility and to make him liable to pay the excise duty with penalty as printed in the rule. Thus, keeping in view the legislative intent and object behind framing these rules, one has to reach to the conclusion that the compliance of Rule 8(1) was mandatory and non compliance thereof rightly resulted in penal consequences as laid down under the Rules. No fault can be found with the impugned order. The petition is liable to be dismissed.
19. Accordingly, petition is dismissed. Rule stands discharged with no order as to costs.