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TMI Blog1987 (11) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... after called " the Act "), but what is payable under that provision is damages. It is useful to extract section 14B of the Act: " 14B. Power to recover damages.-Where an employer makes default in the payment of any contribution to the Fund, the Family Fund or the Insurance Fund or in the transfer of accumulations required to be transferred by him tinder sub-section (2) of section 15 or sub-section (5) of section 17 or in the payment of any charges payable under any other provision of this Act or of any Scheme or Insurance Scheme or under any of the conditions specified tinder section 17, the Central Provident Fund Commissioner or such other officer as may be authorised by the Central Government, by notification in the Official Gazette, in this behalf may recover from the employer such damages, not exceeding the amount of arrears, as it may think fit to impose: Provided that before levying and recovering such damages, the employer shall be given a reasonable opportunity of being heard. " The question is, therefore, reframed to read as " damages" in the place of " interest ". The Income-tax Officer had disallowed the claim of the assessee for deduction of the amount paid by it as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g four annas per maund on the entry of the cane into the premises of a factory for use, consumption or sale therein ... (2) The cess imposed under sub-section (1) shall be payable by the owner of the factory and shall be paid on such date and at such place 'as may be prescribed. (3) Any arrear of cess not paid on the date prescribed under subsection (2) shall carry interest at 6 per cent. per annum from such date to date of payment. (4) The State Government may, for the purpose of assessment and collection of the cess, appoint officers and authorities and may also prescribe the manner in which the cess shall be assessed and collected. (5) Where any person is in default in making the payment of the cess, the officer or authority empowered to collect the cess may direct that in addition to the amount of the arrears and interest, a sum not exceeding 10 per cent. thereof shall by way of penalty be recovered from the person liable to pay the cess. (6) The officer or authority empowered to collect the cess may forward to the Collector a certificate under his signature specifying the amount of arrears including interest due from any person, and on receipt of such certificate, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing month and, therefore, the word 'default' in section 14B must mean 'failure in performance ' or ' failure to act'. At the same time, the imposition of damages under section 14B is to provide reparation for the amount of loss suffered by the employees. " Earlier, in the same judgment, the learned judge has noticed the conflict of views in the various High Courts on the question whether the damages awarded under this section was penal in character of compensatory. In view of this decision of the Supreme Court, it cannot be said that the amount payable under section 14B is wholly compensatory and, therefore, it cannot be equated to the interest payable under section 3(3) of the U.P. Sugarcane cess Act. It is not disputed that any penal levy (i.e., other than compensatory levy) cannot be claimed as a -deduction for ascertaining the income from business under the Income-tax Act. The aforesaid decision of the Supreme Court does not appear to have been considered in the decisions cited by the Revenue or the assessee. In fact, the conflict of decisions in the various High Courts is referred to by the Supreme Court. The Tribunal, therefore, was not right in treating the payment- as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he' ground that the payment was in the nature of a penalty. The Tribunal has, however, held, following its earlier decision, that the payment was only compensatory and not penal. For determining the controversy whether the payment is penal or compensatory, it is necessary to examine the provisions of the Bombay Sales Tax Act, 1959. The aforesaid payment is said to have been made under section 36(3) of the said Act. Section 38 of that Act provides for the payment of, and deferred payment of, tax, etc. According to subsection (2) of the said section, the tax has to be paid by the registered dealer into the Government Treasury along with the return to be filed by him under section 32 of the said Act. Section 33 provides for the assessment of tax. Sub-section (7) of section 33 reads as follows: " 33. (7) Any assessment made under this section shall be without prejudice to any penalty, or prosecution for an offence, under this Act." Sections 36 and 37 provide for imposition of penalties by the authorities in certain cases and for contravening certain provisions of the Act. Section 36 contains several subsections providing for penalties in various situations. Similarly, section 37 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment of interest due to delay in payment. The levy under sub-section (3) of section 36 is to be made after giving notice to the dealer and after recording reasons for it where the tax has not been paid within the time contemplated for payment by the Act. The Commissioner has also the power to remit the whole or any part of the interest calculated in the manner mentioned in it which can be only on relevant grounds. Sub-section (5) of section 36, which is extracted above, indicates that after the levy of this amount under subsection (3), immunity is granted from prosecution on the same facts. These indicate that the imposition, though called a penalty, is a composite one comprising both a penalty and a compensation for delayed payment. The Tribunal, therefore, was not right in treating the entire payment as merely interest for delayed payment. As already indicated while discussing question No. (1), the nomenclature of the levy as interest, damages or penalty may not be conclusive. In view of the provisions of the Act mentioned above, we are of the opinion that this levy is also of a composite nature. The order of the Commissioner imposing the levy is not available on record. There ..... X X X X Extracts X X X X X X X X Extracts X X X X
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