2026-VIL-95-SC-CU
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CUSTOMS Supreme Court Cases

Customs – Delay in payment of Foreign Travel Tax – Penalty for Delayed Payment – Distinction between Failure to Pay and Delay in Payment – Appellant airline company was charged with penalty under Section 38(3) of Finance Act 1979 for delayed deposit of Foreign Travel Tax collected from passengers. Delay in payment ranged from 1 day to 63 days in six instances. Appellant had prepared demand drafts before due dates but there were delays in depositing same into Government treasury. Appellant contended that delay should not attract penalty as distinct from non-payment and that provisions of Section 38(4) read with Rule 4 and 9 would apply instead of Section 38(3) – Whether delayed payment of Foreign Travel Tax can be equated with non-payment and whether penalty under Section 38(3) is automatic once timeline is breached – HELD – Expression ‘fails to pay’ occurring in Section 38(3) means non-payment not delay in payment. Legislature has carefully used phrase fails to pay implying non-payment. If legislative intent was to cover delayed payment different expression would have been used. Failure to pay cannot be equated with delay in making payment. Delayed payment of Foreign Travel Tax into Government treasury cannot be equated with non-payment. Section 38(4) read with Rules 4 and 9 deals with delayed payment situation - Timeline for deposit of Foreign Travel Tax and filing of returns is not inflexible. Discretion is vested on Collector of Customs to condon delay on sufficient cause shown. Imposition of penalty is not automatic moment timeline is breached. Officer of customs may exercise discretion to decide whether penalty is imposable - Mere delay in depositing tax or filing returns cannot trigger mandatory penalty. Penalty is not imposable insofar Appellant concerned – The penalty imposed on appellant for late deposit of Foreign Travel Tax is set aside and quashed. Any amount paid as penalty shall be refunded with interest at nine percent per annum. Bank guarantee furnished by Appellant stands discharged – The appeal is allowed
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