TELECOM DISPUTES SETTLEMENT
& APPELLATE TRIBUNAL
NEW DELHI
Dated 11th February,
2010
Petition No.111 of 2007
Tata Teleservices Limited
…Petitioner
Vs
Bharat Sanchar Nigam Limited …Respondent
BEFORE:
HON’BLE
MR. JUSTICE S.B.SINHA, CHAIRPERSON
HON’BLE
MR.G. D. GAIHA, MEMBER
|
For Petitioner |
: |
Mr.Ramji
Srinivasan,Senior Advocate with Ms.Simran Brar, Mr.Vedant Verma,Advocate |
|
For Respondent |
: |
Mr.Maninder Singh,Senior Advocate with Mrs.Prathiba M. Singh, Mr.Yoginder Handoo, Mr.Tejveer Singh Bhatia, Ms.Nitya Thakur, Mr.Arjun Natarajan,
Advocates |
JUDGMENT
S.B. Sinha
Introduction
The parties hereto are holders of
licenses granted in terms of the provisions of Indian Telegraph Act, 1885 (1885
Act). The petitioners are aggrieved by
and dissatisfied with demands made by the respondents herein contained in the
demand notes dated 03.09.2006, 23.03.2007 and 09.04.2007 whereby and whereunder
it was called upon to pay a sum of Rs.10,63,88,772/- purported to be in terms
of clause 6.4.6 of the Interconnect Agreement entered into by and between the
parties as amended on 01.12.2005.
Fact
The factual matrix involved herein is
not much in dispute.
The parties
hereto entered into a basic licence agreement for
The
respondent purported to be in terms of a prevailing practice issued an
implementation circular on or about 20.01.2004, the relevant portions whereof
read as under:
“(b) In para 9 of the letter it is provided that
calls without CLI if any may be rejected by the termination access provider at
all POIs other than the POIs meant for termination of International calls. At the same time Para 11 of the letter says
that calls received by BSNL without CLI shall be charged at the highest level
as for ISD calls. TRAI has already
issued a Directive on 24.11.2003 to all service providers as to not to tamper
with the CLI and not to offer any call without CLI unless it involves CLIR and in
case any call is received without CLI, the same may be rejected. As regards ILD calls the Direct calls on the
ILDOs to insert their code and the code of the country from which the call is
coming, in case call is received without CLI.
BSNL decision to accept calls without CLI and charging at the higest
slab rate is against TRAI direction.
We are separately checking with the operators the implementation of TRAI
directions.” (Emphasis supplied).
TRAI issued
implementation Directive regarding IUC Regulation 2003 to all Service Providers
including BSNL regarding billing mechanism and dispute:
(i)
Not to tamper with CLI and not to offer any calls
without CLI unless it involves CLIR
(ii)
If any calls received without CLI, the same be
rejected.
(iii)
Where ILD calls are received without CLI, ILDOs have
to insert their code and the code of the country from which the call is coming.
(iv)
BSNL to take urgent action for implementation of CDR
based billing in their network.
(v)
Till CDR based billing is introduced, BSNL would
implement reciprocal arrangements.
The respondent started raising huge
demands, in protest whereto the petitioner in respect its Hubli area (with
which we are not concerned) made a representation to settle the issues
amicably.
Respondent
issued a circular on or about 13.06.2005 wherein inter alia it was laid down:
“2. Various reasons for handover to such non-CLI or
invalid/incomplete CLI calls have been reported. These reasons may be due to calls originating
from mobile without SIM card, transcient faults in the switch, software
version/ signaling problem, non-recognition of CLI by exchanges, lack of
capability to analyse all digits by some exchanges, operator associated trunk
call booking non-CLI calls originated by BSNL network and meant for private
operators’ network which is in turn forwarded back to BSNL network due to
activation of call forwarding feature by private operators’ subscribers,
roaming call forwarded cases wherein non-CLI or invalid/incomplete CLI calls
meant for cellular subscribers roaming in other service areas/networks were
routed via BSNL TAXs etc. In all such
cases where it is sufficiently established by concerned BSNL field units that
the reasons for handover of non-CLI, invalid/incomplete CLI calls to BSNL
network was not of deliberate misuse or routing/tampering of CLI of incoming
ISD calls at PoI, and where the private operators give an undertaking that call
forwarding to BSNL network has been barred from their network, in all such
cases which have come to notice as well as cases which come to notice
henceforth shall be settled as prescribed below.
3. It has been decided for all access providers that in case for
a billing cycle the number of non-CLI calls received at PoI are less than 0.5%
of the total number of calls received at their PoI, then in such cases the
access provider shall be charged for double the number of such non-CLI calls
handed over, at the highest slab of IUC applicable i.e. incoming ISD calls as
detailed below for each of the three IUC regimes.
|
S.No. |
Carriage
involved |
IUC-I
regime (Rs. Per minute) |
IUC-2
regime (Rs. per minute) |
IUC-3
regime (Rs. Per minute) |
|
1 |
Termination
SDCA |
5.50 |
4.55 |
3.55 |
|
2 |
0-50
km |
5.70 |
4.75 |
3.75 |
|
3 |
50-200
km |
5.95 |
5.20 |
4.20 |
|
4 |
200-500
km |
6.25 |
5.45 |
4.45 |
|
5 |
>500
km |
6.60 |
5.65 |
4.65 |
Furthermore a clarificatory circular
was issued on 05.07.2005 whereby it was directed that in the event any call having
invalid/incomplete CLI is received in the POI with private service provider the
same are to be treated as at par with non-CLI calls and to be included while
calculating 0.5% of calls with no/invalid/incomplete CLI as well as while
calculating the amount to be recovered from private service provider at whose
POI the said calls have been received.
In terms of IUC Regulations the
service providers were to raise bills on the basis of CDR based platform. In that context the respondent by a circular
dated 06.08.2005 intimated all private service providers that as it had begun
implementation of CDR based system, supplementary bills may be required to be
raised by it to the private operators if:
(i)
Any difficulty is felt in obtaining the CDR from the
POI to CDR based system in time;
(ii)
If errors in CDRs are not rectified on time; and
(iii)
Corrupted CDRs are received or if it is unable to
recover the CDRs. However it was stated
that if CDRs of BSNL are lost irretrievably, the bills shall be raised on
average calling patterns.
Indisputably,
on the question as to whether respondent should mandatorily raise bills on the basis
of CDRs, a petition was filed before this Tribunal by the Cellular Operators
Association of India being Petition No.48 of 2004. By a judgment and order dated 11.11.2005,
this Tribunal allowed the said petition inter alia directing as under:
“(i) BSNL to
implement CDR based billing system at Level II TAX within 90 days.
(ii)
BSNL to refund excess ADC on monthly basis within 3
months of collection
(iii)
Parties to enter into Agreement with applicable rate
of interest on reciprocal basis”
In the
light of the aforementioned judgment, TRAI issued a circular letter on or about
16th November, 2005, directing:
“Now therefore,
in exercise of the powers vested in it under section 13 read with section
11(1)(b)(ii), (iii) and (iv) of the Telecom Regulatory Authority of India Act
1997 and in compliance of Hon’ble TDSAT’s direction to TRAI as contained in
Para 47 of the order dated 11.11.2005, the Authority hereby directs BSNL, MTNL
and other service provider to maintain reciprocity in the billing by way of
adopting the same method for making and receiving the payments i.e. if CDR
based billing is used for making payments then the same should be used for
receiving payments and if MCU based billing is used for making payments then
the same should be used for receiving payments.
BSNL, MTNL and
other service providers are also directed to furnish compliance report latest
by 22.11.2005.”
It is at
that stage the respondent insisted on an Addenda to be inserted in the original
Interconnect Agreement dated 31.08.2001.
The said Addenda was inserted in the original agreement on or about
01.12.2005. It was given effect to on
and from 14.11.2003. Clause 1 of the
said addenda, however, made an exception with regard to giving retrospective
effect thereto in respect of interconnect usage charge including ADC,
interconnection arrangements and associated bills arrangements as prescribed by
BSNL corporate office during the intervening period till date of signing of the
Addenda.
See sub-clauses of clause
6.4.6 which are relevant for our purpose read as under:
“(a) Unauthorised calls i.e. calls other than
specified for that trunk group if detected, for which the applicable IUC
(including ADC) is higher than the IUC (including ADC) applicable for calls
prescribed in that trunk group, then BSNL shall charge the UASL the highest
applicable IUC (including ADC), as applicable for such unauthorized calls, for
all the calls recorded on this trunk group from the date of provisioning of
that POI or for the preceding two months whichever is less.
(b) The CLI based barring facility shall be
activated at the POIs wherever technically feasible to ensure that the traffic
handed over to BSNL is in the appropriate trunk groups only. Wherever it is technically not feasible to
activate CLI based barring, periodic monitoring of the incoming trunk groups
shall be done by BSNL to ensure this objective.
The calls received by BSNL without CLI or modified/tampered CLI from
UASL shall be charged at the highest slab i.e. as for ISD Calls. In case such calls are received by BSNL on
any trunk group, then all the calls recorded on this trunk group shall be
charged at the rates applicable for IUC of incoming ISD Calls from the date of
provisioning of that POI or for the preceding two months, whichever is less.”
For the
period May 2003 to September 2004, the respondent raised a supplementary demand
for a sum of Rs.10,63,88,772/- being the charges for non-CLI calls, the details
whereof are as under:
|
MONTH |
WMS OCB TAX |
|
May’03 |
21166628.23 |
|
Jun’03 |
23958165.03 |
|
July’03 |
29422638.94 |
|
Aug’03 |
36756238.66 |
|
Sep’03 |
40267399.89 |
|
Oct’03 |
81028.48 |
|
Nov’03 |
84372.64 |
|
Dec’03 |
128770.07 |
|
Jan’04 |
76045.85 |
|
Feb’04 |
77055.46 |
|
Mar’04 |
56966.26 |
|
Apr’04 |
63999.41 |
|
May’04 |
95074.40 |
|
TOTAL |
152234383.31 |
Indisputably
the petitioner protested thereagainst. A
joint meeting for reconciliation was held, pursuant whereto a report was
submitted, stating:
“1. BSNL & TTSL CDRs are matching with
reference to Date, Time, Calling No. Called No. & Duration with one second
variation.
2. Majority of NO CLI calls, are pertaining
to Bangalore Rural in May, Jun, Jul and Aug’2003.
3. For July, Aug & Sep’2003 many calls
to CellOne are also observed where ‘Calling No.is not available in BSNL data,
whereas for the same calls TTSL is having Calling Numbers.
The non recording of CLI at BSNL switch may be due to switch
incompatibility of different technologies between BSNL & TTSL.
Sample data compared is enclosed in Annexures.
Annexure-1 - Calls to BG Rural comparison
Annexure-2 - Calls
to CellOne comparison
In view of the above, very few calls for which NO CLI is
recorded both at BSNL and TTSL needs to be dealt as per the IUC agreement.”
In the said
meeting some datas were randomly selected and not in a chronological manner.
We say so
as from Annexure-I annexed to the said report, it would appear that except two
numbers, CLI was not recorded in BSNL’s network although the same was available
in the CDRs of the petitioner. The
contention of the petitioner is that the time and date mentioned in two CDRs tallied save and except the duration of 1
second and the petitioner’s CDR shows all the calling IDs. According to the respondent even the details
of the called IDs would show that the CDR contained 11 digits or 10 digits
which demonstrated grave inaccuracy in the details supplied by the
petitioner. Discrepancies according to
the respondent also exist with regard to time, duration of call etc. We must however, point out that the
respondents had not made any grievance in relation thereto either in their
correspondences or in their pleadings.
Moreover, even the minutes of the joint reconciliation meeting do not
point out the same.
The
petitioner however, contends that it was reported in the joint reconciliation
report at para 3 that for July, Aug & Sep’2003 many calls to CellOne are
also observed where ‘Calling No.is not available in BSNL data, whereas for the
same calls, TTSL is having the Calling Numbers’.
The said
report was also accompanied by detailed analysis of data by the petitioner
which showed that the total numbers of CLI calls are merely 0.04%. Such analysis was purportedly carried out by
using an appropriate software.
On the
basis of said report the petitioner made a representation on or about
24.10.2006 wherein the respondent was asked:
(i)
to raise demand only for the genuine non-CLI calls;
(ii)
to charge the petitioner as per revised circular for
treating non-CLI calls which were below 0.4% of the total traffic routed in
that POI.
The
respondent however, without adverting to the contentions raised in the said
letter dated 24.10.2006 of the petitioner raised a supplementary bill for a sum
of Rs.6,53,119/-. A reminder was also
sent on 22.01.2007. The petitioner
without prejudice to its rights and contentions paid the amount of
Rs.6,53,116/- for the period October 2003 to June 2005 by way of full and final settlement of all the dues
arising out of the said bill. It was
specifically stated:
“Please note that we are
making this payment in view of your threat to withdraw the interconnect
facility as per clause 7.3.2. of the Interconnect Agreement.”
However,
for the said period the respondent raised a revised bill for a sum of
Rs.10,58,494/-. The parties thereafter
held a coordination meeting for amicable solution pursuant whereto the
following minutes of the meeting were recorded on 24.03.2007:
“GM(NC) informed about with
the technical nature of NO CLI observed at the BS WMS OCB TAX POI of M/s TATA
(Basic Service).
The technical capability of
the switches was discussed in detail and it was agreed upon that the calls
pertaining to the particular definition (i.e. for Bangalore rural area) NO CLI
were recorded in BSNL CDRs perhaps due to the translation taken place at M/s
TTSL Switch.
In was also pointed out that
such violated calls were charged by considering technical in nature. Accordingly bills were raised as per the interconnect
agreement terms and conditions vide bill No.BSO/TATA/NOCLI dated 23.03.2007 fee
an amount of Rs.105833494/-.
Mr.Venugopal, GM of TTSL
explained that the change of CLI is not intentional. Its further stated that the bills were for
the period May 2003 to September 2003 and the period is too old. It is difficult to stimulate and decide the cases
of NOCLI calls reported in BSNL Switch.
He requested BSNL to
consider the CDRs without CLI recorded in BSNL as well as in TTSL as violation
and accordingly requested to issue revised bills for the period.
However, GM BG reiterated
that during the settlement of disputes the records made by the measurement
devices located at BSNL interface point shall have precedence over the records
of the UASL, as per 7.6.4 of interconnect agreement & requested M/s TTSL to
pay the amount of Rs.10,58,33,494/-.
M/s TATA has agreed to look
into the matter.”
The
petitioner by its letter dated 28.03.2007 requested the respondent not to
penalize it for the technical inability of the respondent’s switches. It also made a request for an appointment
with the Chief General Manager of the respondent. However, the respondent by its letter dated
09.02.2007 asked the petitioner to make the payment of the demand note dated
23.02.20027 and issued a notice of disconnection by 10.05.2007 if payment is
not made by 09.05.2007.
Submissions
Mr.Ramji
Srinivasan, learned senior counsel appearing on behalf of the petitioner in
support of this petition would urge:
(i) The impugned
bill having been raised beyond the period of six months from the date of the
issue of the relevant bill the same is barred by limitation in terms of clause
7.3.1(iv) of the agreement.
(ii) No material
having been placed on record by the respondent to show that the petitioner has
an intention to breach the conditions of the contract, the impugned demand is
not substantial.
(iii)
The respondent must be held to have acted illegally in
comparing the case of the petitioner with that of another operator, namely,
Reliance Infocomm Ltd. particularly in view of the fact that the present case
does not involve any incoming ISD calls nor it is a case of tampering of CLI to
pass ISD calls as local calls.
(iv) In view of the
findings arrived at the joint reconciliation meeting as also the circular
letter of the respondent dated 13.06.2005, the impugned bill is wholly
unsustainable as the respondent itself has recognized that non-recording of CLI
could occur genuinely due to various technical reasons and the operators should
not be penalized unless the amount of such non-CLI calls exceeded 0.5% of the
total traffic on that POI.
(v) As the error has
occurred due to the technical incompatibility at the BSNL’s end in view of the
fact that its CDR did not capture the CLI calling numbers, the impugned bill is
liable to be set aside. Similar
violations having been observed at BSNL’s exchanges towards petitioner and the
percentage of the same being 0.71% i.e. above 0.5% whereas petitioner’s non-CLI
be merely 0.07%, the impugned bills are liable to be set aside.
Mr.Maninder
Singh, learned senior counsel appearing on behalf of the respondent, on the
other hand, would contend:
(i)
That the agreement having been given a retrospective
effect from 14.11.2003 the impugned bills are within the prescribed period of
limitation. The period of limitation
provided for in clause 7.3.1 (iv) would apply only in case of an inadvertent
omission and not in a case of fraud.
(ii)
It is incorrect to say that CDRs of both the service
providers had tallied and the only difference was found only in duration of
call to the extent of 1 second as a perusal of the annexures appended to the
said minutes of meetings would show that there were various other
discrepancies.
(iii)
In view of the clear and explicit provisions contained
in clause 6.4.6, even a reconciliation was not necessary as in the event a
non-CLI is recorded in the exchange of the BSNL and even if the subsequent
circulars, namely, the circular letters dated 13.06.2005 and 05.07.2005 are
given effect to, the petitioner would be bound to make payment in terms
thereof.
(iv)
The circular letter issued by the TRAI dated
20.01.2004 being binding on all cellular
operators and as the circular letter dated 29.01.2005 having formed part of the
agreement, the impugned demand is unassailable.
(v)
In view of the letter of the petitioner dated
10.11.2004, an admission having been made that there existed a fault in the
petitioner’s equipment, no further inquiry was needed.
(vi)
The petitioner having been given the benefit of the
circular of 2005 by the respondent in its bill, no grievance in relation
thereto can be raised.
Agreement – Effect of
The
relationship of the parties is governed by the agreement. The said agreement however, would be subject
to the provisions of the said ‘Act’ and the Regulations framed thereunder.
It is
beyond any controversy that clause 6.4.2 was inserted by way of an addenda in
the agreement dated 01.12.2005. The said
agreement, however, has been given a retrospective effect and retroactive
operation w.e.f. 14.11.2003. Ex facie
therefore, the bills raised prior to the said period must be held to be wholly
illegal as in respect thereof no agreement was in force.
Before
adverting to the other contentions raised by the learned counsel for the
parties, we may furthermore notice that the purported admission on the part of
the respondent in terms of its letter dated 10.11.2004 was in relation to the
Hubli area and not in relation to other area.
It is difficult, therefore, to accept the contention of Mr.Singh that in
view of the admission made by the petitioner that its equipments were faulty in
nature, no further inquiry or reconciliation was required to be made. It is not the case of respondent that the
equipments of the petitioner in respect of the circle in question were
defective.
We may at
this juncture also deal with another contention of Mr. Singh that the annexures
appended to the joint reconciliation report would show that the numbers
recorded in the CDRs of the petitioner were invalid containing 11 digits or were
less than 10 digits. We do not agree for
more than one reason. No such contention
has been raised by the respondent either in its letters to the petitioner or in
the pleadings. No such observation has
also been made in the minutes of the meeting.
It is now a
well settled principle of law that no contention necessitating determination of
factual dispute between the parties to a lis, should be permitted to be raised
unless specifically pleaded.
Although
this Tribunal is not bound by the procedure laid down in the Code of Civil
Procedure but as it is called upon to undertake a scrutiny of various datas referred
to in the annexures to the joint reconciliation meetings held on 09.10.2006 and
10.10.2006, the principles of natural justice in our opinion would be violated the
petitioner is deprived of an opportunity to explain the purported discrepancies.
The joint
reconciliation report dated 16.10.2006 clearly show that only sample datas have
been compared. Annexure-I appended
thereto refers to the comparison made in respect of calls to Bangalore Rural Area;
whereas Annexure-II refers to the calls made in Cell One which is the mobile
network of the respondent. It is clearly
stated that in respect of some calls for which NO CLI was not recorded both at BSNL
and TTSL, the same was required to be dealt with as per the IUC/agreement. The authorities of the respondents,
therefore, clearly held that the CDRs of the parties were matching with
reference to date, time, calling number and called number with duration with 1
second variation and the majority of non-CLI calls pertain to Bangalore rural for
the months of May, June, July and August, 2003.
Even for July, August and September, 2003 many calls to Cell One were
also found where calling number was not available in the BSNL data but found to
be available in the CDR of the petitioner.
It has not been denied or disputed that the ordinarily CDRs of both the
parties should match. If calling line
identification of the caller is available on the CDR of the petitioner on the
basis whereof the petitioner might have raised bills in terms of IUC
Regulations but not shown in the CDR of the respondent, the fault lay in the
system of the respondent itself for which the petitioner cannot be penalised.
The
respondent in a case of this nature cannot be permitted to contend that its
equipments would prevail over those of the petitioner.
If
reconciliation of the datas was found to be necessary, having regard to the
respondent’s own circular letter dated 13.06.2005, it was, in our view, also necessary
to ascertain as to whose equipment did not record the CLI calls.
The
respondent in law while seeking to impose penalty on the petitioner cannot
refuse to look into its contention in regard to the defect in the equipments of
the parties, stating that even reconciliation was not necessary.
The
respondent itself in its circular dated 20.06.2004 named as Implementation Circular
of the IUC Regulations 2003 of the BSNL’s network categorically mentioned that
in the event any call is received without CLI the same should be rejected.
In fact the
respondent itself in its circular letter dated 13.06.2005 stated that huge IUC
bills have been raised which were disputed by the private service providers;
the reasons wherefor might have been; due to calls originating from mobiles
without sim cards, transit fault in the switch software version, signaling
problems, non-recognition of CLI by exchanges, lack of compatibility to analyse
all digits by some exchanges, operators’ assigned trunk call booking non-CLI
calls originated by BSNL network and meant for private operators’ network which
is in turn forwarded back to BSNL’s network etc.
Interpretation of Clause 6.4.2
Clause
6.4.2 provides for imposition of penalty.
The respondent itself having made a distinction between an
invalid/non-CLI calls on the one hand and tampered/modified CLI on the other,
it is difficult to accept the contention of the learned senior counsel that the
provisions of the penal clause would stand attracted even when a non-CLI call
is received in BSNL’s exchange. We are
of the opinion that the said provision deserves closure scrutiny.
No penalty
(unless the text of the penal clause is clear or unambiguous attracting
imposition of penalty immediately on default) can be imposed without giving an
opportunity of hearing.
The
Regulations made by TRAI and/or the circular letters issued by DoT do not
provide for generation of revenue far less providing an undue advantage to BSNL
over others because of its own lapses.
If the CDR of the respondent did not match with the petitioner evidently
equipments were defective. Possibility
of the equipments of the petitioner or other service providers being defective
thus cannot be ruled out. In such a
case, we have no other option but to hold that the respondent cannot seek to
take advantage of its own wrong.
We have
referred to hereinbefore that the percentage of violation on the part of the
respondent is 0.71% compared to the percentage of the petitioner’s non-CLI
calls during the period May 2003 to September 2003 which is only 0.07% i.e.
within the permissible limit.
CLI means
Caller Line Identification and is meant to record “A” number. Mr.Maninder Singh however submitted that it
was a case of CLI tampering by pointing out to discrepancies on called number
(“B” number). It has never been a case
of the petitioner that the respondent has indulged in tampering of CLI. It is in fact a case of “B” number transmission
which might have arisen because of the wrong practice of numbering scheme being
followed by BSNL. In any event the same
having not been pleaded, the submission raised before us for the first time by
the respondent in course of the arguments cannot be accepted. Furthermore, it is not a case which involved
any incoming calls at the wrong POIs.
Had the calls been international ones the matter might have been
different.
Law in a
situation of this nature comprehends complete and total fairness and
reasonableness on the part of the respondent in its action. We have no doubt in our mind that in a
situation of this nature penalty clause deserves to be construed strictly.
Preconditions for levy of penalty
The principle of mens rea per se may
not be applicable in respect of a a civil wrong. But imposition of any contractual penalty at
the hands of a ‘State’ must be on a rational and reasonable basis.
It now stands accepted that non-CLI or
invalid CLI calls may pass through the network of the another BSO for a large
number of reasons some of which have been mentioned by BSNL itself in its
circular dated 13.06.2005.
It is also of some significance to
notice that such invalid or non-CLI calls have passed through the network of
BSNL also, as a result whereof the petitioner suffered loss.
Would a default or breach immediately attract
penalty may be another aspect of the matter which should receive due consideration.
If it does involve an enquiry,
verification of records, exchange of datas and other information, like the
present case, imposition of penalty cannot be said to wholly automatic.
The respondent being a ‘State’ would
be bound by its own circular letter dated 13.06.2009 and, thus, obligated to
ask itself the right question.
Circulars issued by DoT or TRAI were
not for the purpose of generation of revenue far less by BSNL.
We are not
oblivious of some decisions of the Supreme Court of India as for example in
Union of India Vs. Dharmendra Textiles reported in MANU/SCC/4448/2008. It is of some significance to notice that in
Union of India Vs. Rajasthan Spinning and Weaving Mills – JT 2009(7) 314 the
Supreme Court of India observed that the contention that mere non-payment or
short payment of duty (without there being anything else) would inevitably lead
to imposition of a penalty equal to the amount for which duty was short paid is
as misconceived as interpretation of Dharmendra Textiles (supra) is
misconstrued by the revenue, stating, “we completely fail to see how payment of
the differential duty, whether before or after the show cause notice is issued,
can alter the liability for penalty, the conditions for which are clearly spelt
out in Section 11AC of the Act(Central Excise Act)”. Stating that in a case of non-payment, short
payment or error refund of duty issues are likely to arise relating to (i)
recovery; (ii) interest; and (iii) penalty, it was held:
“From Sub-section 1 read with its proviso it is
clear that in case the short payment, non payment, erroneous refund of duty is unintended
and not attributable to fraud, collusion or any wilful mis-statement or suppression
of facts, or contravention of any of the provisions of the Act or of the rules
made under it with intent to evade payment of duty then the Revenue can give
notice for recovery of the duty to the person in default within one year from
the relevant date (defined in sub Section 3). In other words, in the absence of
any element of deception or malpractice the recovery of duty can only be for a
period not exceeding one year. But in case the non-payment etc. of duty is intentional
and by adopting any means as indicated in the proviso then the period of
notice and a priory the period for which duty can be demanded gets extended to
five years.”
It was
observed:
“21. From
the above, we fail to see how the decision in Dharamendra Textile can be
said to hold that Section 11AC
would apply to every case of non-payment or short payment of duty regardless of
the conditions expressly mentioned in the section for its application.
22.
There is another very strong reason
for holding that Dharamendra Textile could not have interpreted Section 11AC
in the manner as suggested because in that case that was not even the stand of
the revenue. In paragraph 5 of the decision the court noted the submission made
on behalf of the revenue as follows:
5. Mr. Chandrashekharan, Additional Solicitor General
submitted that in Rules 96ZQ and 96ZO there is no reference to any mens rea as
in Section 11AC
where mens rea is prescribed statutorily. This is clear from the
extended period of limitation permissible under Section 11A
of the Act. It is in essence submitted that the penalty is for statutory
offence. It is pointed out that the proviso to Section 11A
deals with the time for initiation of action. Section 11AC
is only a mechanism for computation and the quantum of penalty. It is stated
that the consequences of fraud etc. relate to the extended period of limitation
and the onus is on the revenue to establish that the extended period of
limitation is applicable. Once that hurdle is crossed by the revenue, the
assessee is exposed to penalty and the quantum of penalty is fixed. It is
pointed out that even if in some statues mens rea is specifically provided for,
so is the limit or imposition of penalty, that is the maximum fixed or the
quantum has to be between two limits fixed. In the cases at hand, there is no
variable and, therefore, no discretion. It is pointed out that prior to
insertion of Section 11AC,
Rule 173Q was in vogue in which no mens rea was provided for. It only stated
"which he knows or has reason to believe". The said clause referred
to wilful action. According to learned Counsel what was inferentially provided
in some respects in Rule 173Q, now stands explicitly provided in Section 11AC.
Where the outer limit of penalty is fixed and the statute provides that it
should not exceed a particular limit, that itself indicates scope for
discretion but that is not the case here.
23.
The decision in Dharamendra Textile
must, therefore, be understood to mean that though the application of Section 11AC
would depend upon the existence or otherwise of the conditions expressly stated
in the section, once the section is applicable in a case the concerned
authority would have no discretion in quantifying the amount and penalty must
be imposed equal to the duty determined under Sub-section (2) of Section 11A.
That is what Dharamendra Textile decides.
24.
It must, however, be made clear that
what is stated above in regard to the decision in Dharamendra Textile is
only in so far as Section 11AC
is concerned. We make no observations (as a matter of fact there is no occasion
for it!) with regard to the several other statutory provisions that came up for
consideration in that decision.”
A
distinction has been made by the Apex Court between cases where breach of a
civil obligation attracts penalty immediately, irrespective of the fact whether
contravention was made by the defaulter with a guilty intention or not and a
case where the penalty has to be imposed on the basis of a findings of fact as
to whether the violation has been made unintentionally or because of a
situation which is either beyond its control or because of technical lapses.
A term in
the contract, whereby a huge monetary obligation can be imposed by way of
penalty; like fiscal statutes must be strictly construed.
It is also
of some relevance to notice that in Guljag Industries Vs. Commercial Taxes
Officer – 2007(7) SCC 269, the Supreme court distinguished its earlier decision
in State of Rajasthan & Anr. Vs. D.P. Metals – AIR(2001) SC 3076: 2002(1)
SCC 279, stating:
24. That, once the ingredient of Section
78(5) stood established after giving a hearing, there was no discretion with
the officer to reduce the amount of penalty or to waive the penalty. If by
mistake some of the documents were not readily available at the time of
checking, principles of natural justice might require opportunity being given
to produce the same. It was further held that under Section 78(5) the
legislature has fixed the rate of penalty and, therefore, the quantum of
penalty could not be waived or reduced.
25.
In our view, the aforestated judgment
in the case of D.P. Metals (supra) has no application to the present
case. We are not concerned in the present case with false or forged
documents/declaration. In the present case the goods in movement were carried
with the blank declaration Form 18A/18C which was duly signed by the assessee.
Therefore, as stated above, we hold that the goods in movement were carried
without the declaration Form 18A/18C. Therefore, Section 78(2)(a) stood
attracted. Moreover, in the present case, there were no special circumstances
indicated by the assessee as to why the forms which were duly signed were not
filled in. Therefore, in our view the above judgment in the case of D.P.
Metals (supra) has no application to the facts of the present case.
The
decision of Aftab Alam J in Rajasthan Spinning and Weaving Mills (supra) has
also been considered by the Apex Court in C.I.T. Delhi vs. Atul Mohan Bindal – 2009(11)
SCALE 592.
In a case
of this nature penalty is not immediately attracted. The circular letters issued by the respondent
itself in 2005 provides for application of mind. Cases even on the basis thereof must be
divided in two categories. Even percentage
of non-CLI calls received in the network of the BSNL is less than 0.5% only
twice the charges are to be levied whereas in the case, where it exceeds 0.5%,
charges on all calls received for the last two months at the maximum slab may
have to be levied.
It,
therefore, involves inquiry, verification of records, exchange of datas and
other informations and thus, in the instant case it cannot be said that levy of
penalty is automatic and immediate.
Failure to ask
a right question would amount to ‘misdirection in law’. If the respondent has laid down a procedure
it was bound to follow the same. It is
now well accepted in the Indian jurisprudence the dicta of Frankfurter J that ‘he
who carries a procedural sword, shall perish with it’. See Ramana Dayaram Shetty Vs. International
Airport Authority of India and Ors.– AIR1979SC1628: (1979)3SCC489.
In this
case not only the respondent but also Government of India accepts that there
exists a ‘grey market’ which is operated by some miscreants or unscrupulous
persons as a result whereof not only the security of the State is at threat,
but loss of revenue is also suffered by all private operators including the
respondent. The DoT was thus, grappling
with a problem of both security of State as also loss of revenue. If a private operator looses revenue, the
Government of India also suffers loss.
Furthermore, as noticed hereinbefore in the event of non-CLI calls,
having regard to the statutory requirements made by TRAI, all parties were to reject
the same, there was absolutely no reason as to why the respondent shall stand
alone in the matter of implementation thereof.
Its request for exemption has met with an order of rejection by TRAI as
noticed in the respondent’s circular letter dated 20.01.2004.
Moreover
the amount of penalty is not commensurate with the actual damages suffered by
the respondent. For the said purpose, we
would assume that clause 6.4.6 provides for the machinery to arrive at a
pre-estimated damage but it is well known that even damages in terms of Section
74 of the Indian Contract Act must be a reasonable one. It is not necessary to further dilate in this
matter as this aspect has been considered by us in the connected matters at
some details.
Limitation
We are, however, unable to accept the
contention of Mr.Srinivasan that the period of limitation would only be six
months in terms of clause 7.3.1(iv) of the agreement.
It is now well settled that period of
limitation provided for in the Limitation Act, 1963 cannot be curtailed by
agreement in view of Section 28 of the Indian Contract Act.
Furthermore, the said clause would
apply only in case of a mistake and not in case of this nature.
For the
reasons aforementioned this petition is allowed. However, the respondent may give an
opportunity of hearing to the petitioner to demonstrate as to what would be the
reasonable quantum of the loss, if any, only in respect of the period which will
be covered by the agreement i.e. from 14.11.2003 to May 2004. In the facts and circumstances of the case,
the parties shall pay and bear their own costs.
……......... J
(S.B.
Sinha)
Chairperson
.………….....
(G.
D. Gaiha)
Member