JUDGMENT M. Katju, J.
1. This writ petition has been filed for a mandamus restraining the respondents from levying or collecting any cess under the Research and evelopment Cess Act, 1986 (hereinafter referred as 'the Cess Act') in respect of payments made and to be made by the petitioner No. 1, Wig Brothers (Builders and Engineers) (P) Ltd. to Heit-Camp and/or Balcke Durr (German Companies) under the collaboration agreement dated 28.11.1989 between Heit-Kampt and the Petitioner No. 1. Petitioners also prayed for declaring the levy and collection of cess under the Cess Act on payments made by the petitioner No. 1 to Heit Kampt and/or Balcke Durr as ultra vires the Cess Act and the rules made thereunder. Petitioners have also prayed for quashing the demand notice dated 22.7.1991 under Rule 6 of the rules to the petitioner by respondent No. 3. They have also prayed for declaring Section 2(h) of the Act as ultra vires Articles 14 and 19(1)(g) of the Constitution and Rule 3 of the rules as ultra vires the Act.
2. We have heard learned counsel for the parties. The Petitioner No. 1 is a company incorporated under the provisions of the Companies Act having its registered office at Mathura Road, New Delhi. It is executing the works in respect of which cess under the Act is sought to be levied and collected from the Petitioner No. 1 at Vidyut Nagar, Dadri, in the State of Uttar Pradesh. It is alleged in para 2 of the petition that 70 per cent of the contract work has already been executed at Dadri in respect of which the cess is being levied.
3. The Cess Act was brought into force with effect from 1.12.1987. Section 2(d) of the Act defines 'import' as follows :
(d) 'import' in relation to any technology, means the bringing into India of such technology from a place outside India.
3.1 Section 2(e) defines 'industrial concern' as follows :
(e) 'Industrial concern' has the meaning assigned to it in Clause (e) of Section 2 of the Industrial Development Bank of India Act, 1964 and includes any other person in whose favour a foreign collaboration involving the import of technology is approved by the Central Government.
3.2 Section 2(h) defines 'technology' as follows :
(h) 'Technology' means any special or technical knowledge or any special service required for any purpose whatsoever by an industrial concern under any foreign collaboration, and includes designs, drawings, publications and technical personnel.
3.3 Section 3 of the Act states :
(1) There shall be levied and collected for the purposes of this Act, a cess at such rate not exceeding five percent on all payments made towards the import of technology, as the Central Government may, from time to time, specify, by notification, in die Official Gazette.
(2) The cess shall be payable to the Central Government by an industrial concern which imports technology on or before making, any payments towards such import and shall be paid by the industrial concern to any specified agency.
4. Under Section 9(2) of the Act, penalty can be imposed for non-payment of cess, not exceeding ten times the amount in arrears.
5. It is alleged in para 6 of the petition that the petitioner company is not an industrial concern within the meaning of Section 2(e) of the Act read with Section 2(e) of the Industrial Development Bank of India Act (IDBI Act).
6. It is alleged in para, 8 of the petition that the National Thermal Power Corporation of India floated a global tender dated 21.3.1988 inviting bids on turnkey basis for design and engineering supply of equipment, construction and commissioning of 4 natural draught cooling towers of 25,000 cub. meter for the National Thermal Power Corporation project at Dadri, District Ghaziabad. Annexure 1 to the petition is a copy of the tender invitation (minus the technical specifications and drawings). The tender invitation mentioned that the Government of India had received a credit from the International Bank of Reconstruction and Development (IBRD) towards the cost of the project and that the NTPC intended to apply a portion of the proceeds of the credit to finance portion of the design and engineering charges equipment cost, supervision of erection and commissioning charges of foreign collaborations etc. for the project. The qualifying requirements as stipulated in the said tender invitation, inter alia, included the requirements that the 'bidder furnishes along with a bid an undertaking jointly executed by the bidder and his collaborator for successful performance of the cooling towers as per performa attached'.
7. In para 9 of the petition, it is alleged that the petitioner company together with E. Heit-Kampt of Germany and Balcke-Durr, Germany, in response to the said tender invitation submitted a bid dated 16.6.1988 to the NTPC for the said project. In para 10, it is stated that the NTPC after evaluation accepted the petitioners' bid and awarded the contract for the project, namely, supply of equipment, construction and commissioning of 4 cooling towers on turn-key basis for the Thermal Power Project at Dadri to the petitioner with Heit-Kampt and Balcke-Durr as collaborators for the said purpose, and the NTPC issued a letter of intent dated 8.11.1988 to the petitioner company, Annexure 2. Pursuant to the same, the NTPC entered into an agreement dated 11.1.1990 with the petitioner vide Annexure-3. In para 11 of the petition, it is alleged that cooling towers are essentially civil works as they are tailor-made, designed and engineered according to the needs of the specific power plant, and the same design or technology cannot be used for another cooling tower. The petitioners entered into an agreement with Heit Kampt dated 28.11.1988 for providing the required design and engineering, documentation, expertise and supervision services as required by NTPC. The collaboration agreement is only for the said project and does not stipulate transfer of any on-going technical know-how to the petitioner company which would enable it to acquire the ability to design and engineer cooling towers. Under the collaboration agreement, there was no provision of the related services which are usually the subject matter of technical know-how agreements. True copy of the collaboration agreement is Annexure 4.
8. The NTPC vide its letter dated 19.11.1988 sent to the petitioner a pro forma of a joint undertaking required by it to be executed jointly by the petitioner company. along with Heit-Kampt and Balcke-Durr, German collaborators, for the said project. Accordingly, the petitioner submitted the said joint undertaking dated 29.11.1988 vide Annexure 5. It is alleged in para 17 that the NTPC has been directly in contact with Heit-Kampt on the technical aspect of the project and has been seeking clarification from Heit-Kampt from time to time. A true copy of the letter dated 5.3.1991 written by NTPC to Heit-Kampt to illustrate this fact is Annexure 6 to the petition. It is alleged in para 18 of the petition that Heit-Kampt and Balcke-Durr were providing services really to NTPC as is evident from the minutes of the meeting held on 3.11.1988 between the NTPC and the representatives of the petitioner company. It is alleged that this clearly shows that for the deputation of Heit-Kampt and Balcke-Durr Engineers to Dadri during the construction period for supervision the construction of the cooling towers, the extent of deployment shall be in line, inter alia, with NTPC technical specifications and the petitioners bid, and the decision taken by NTPC in this regard after discussions would be binding on the petitioner and Heit-Kampt including Balcke-Durr without any commercial implication to NTPC. A true copy of the said minutes is Annexure 7.
9. It is alleged in para 19 of the petition that there was no import of technology within the meaning of the Cess Act. The contract was essentially, a civil contract. It is alleged in para 20 that the petitioner company executed the project as leader with Heit-Kampt and Balcke-Durr as its associates. Hence it made an application to the Reserve Bank of India by a letter dated 27.2.1989 for grant of permission for opening a letter of credit in favour of Heit-Kamp towards payment of design and consultancy charges for the project vide Annexure 8. In response to this letter, the Reserve Bank of India allowed the petitioner to open a letter of credit vide Annexure 9. The NTPC also certified to the Reserve Bank of India about the amount against IBRD Loan paid to the petitioner vide Annexure 10.
10. Subsequently, the petitioner by letter dated 18.4.1989 -- requested the Reserve Bank pf India for grant of permission to open a letter of credit for DM 11,56,000 less the amount for which sanction had already been granted by the RBI. A true copy of the said letter is Annexure 11. In response to the said letter, the RBI, by letter dated 21.6.1989 informed the petitioner that it should first take approval from the Union of India, Ministry of Industry, for the collaboration agreement with Heit-Kampt. A true copy of the said letter is Annexure 12. It is alleged in para 24 of the petition that pursuant to the earlier approval, the petitioner company had made payment to Heit-Kamp on or about May-June, 1989, and the respondent No. 1 to the collaboration agreement. Copy of the letter in this connection is Annexure 12A.
11. It is alleged in para 25 of the petition that the petitioner was all along stressing before the Reserve Bank of India that they were not required to take foreign collaboration approval from the Central Government, as there is no transfer of technology from Heit-Kampt or Balcke Durr to the petitioner. The German collaborations [collaborators] are only sub-consultants for the project for the supply of design and drawing to the petitioner, and they are also responsible for the construction and testing the cooling towers. However, respondent No. 2 insisted that the petitioner should obtain approval from respondent No. 1. In view of this, the petitioner was forced to apply for grant of foreign collaboration approval before the respondent No. 1. Only thereafter ; the Reserve Bank of India gave its approval dated 30.3.1990 to the collaboration agreement with Heit-Kampt on condition of levy of cess under the Research and Development Cess Act, 1986. A true copy of the approval dated 30.3.1990 is Annexure 14.
12. It is alleged in para 27 that no cess is payable under the Cess Act, because the contract is a deemed export contract and does not fall within the purview of the Cess Act. However, the petitioner received notice dated 22.7.1991 under Rule 6 of the rules for payment of cess vide Annexure 16. Hence this petition.
13. Counter affidavit has been filed and we have perused the same. In para 6, it is stated that the petitioner company is an industrial concern within the meaning of Section 2(e) of the Cess Act read with Section 2(c) of the IDBI Act. It is alleged that the petitioner company entered into a collaboration agreement dated 22.11.1988 with Heit-Kampt--a foreign company of Germany for import of technology from outside India, and the said agreement has been approved by the Central Government. It is alleged that the petitioner company has imported technology under the said collaboration agreement, and hence is liable to pay the cess.
14. In para 7 of the counter affidavit, the respondents have denied that the petitioner is doing essentially civil work. It is alleged that cooling towers are essentially plant and equipments and not civil work.
15. In para 8 of the counter affidavit, it is denied that the bid was submitted by the petitioners jointly with Heit Kampt and Balcke Durr. It is alleged that the bid was submitted by the petitioner company alone and not as a joint bidder with Heit-Kampt and Balcke Durr. It is alleged that at the time of invitation of tenders it was understood that the technology for setting up of the national draught cooling towers was not available in India ; and hence, the bidder was required to tie up with foreign collaborators for the import of technology. As per terms of the tender, the successful bidder was required to furnish a joint performance guarantee. From the contract documents, it is evident that the contract was given to the petitioner company alone and not jointly with Heit-Kampt and/or Balcke Durr, the German collaborators. An agreement dated 11.1.1990, Annexure 3 to the writ petition, was executed by the petitioner alone as contractor. This agreement clearly provides that the contract was awarded to the petitioner company alone, and the petitioner company alone was responsible for execution of the contract.
16. In para 11 of the counter affidavit, it is stated that the petitioner company alone imported the technology. The recital in the collaboration agreement dated 22.11.1988 makes it clear that the petitioner company desired to make use of the special know-how and the technical services and assistance of Heit-Kampt.
17. In para 13 of the counter affidavit, it is alleged that the collaborators came into contract with NTPC at the instance of the petitioners in discharge of their obligations towards the petitioner company under the collaboration agreement dated 22.11.1988. There was no transfer of technology by the collaborators directly to the NTPC. The technology in question was imported by the petitioner from the collaborator as per terms of the collaboration agreement, and not by the NTPC. It was the petitioner company, and not the NTPC, which required the necessary technology for executing the contract awarded by NTPC to the petitioner company, and not to Heit-Kampt or Bal-cke Durr.
18. In para 22, it is alleged that the petitioner is an industrial concern and having imported technology, is liable to pay the cess.
19. We have also perused the rejoinder affidavit of this case.
20. We have carefully considered the submissions of learned counsel for the parties. For imposition of the cess, it has to be demonstrated that the petitioner is an industrial concern which imported technology.
21. The petitioner has alleged that it is not an industrial concern vide para 7 of the writ petition. This allegation has been denied in para 6 of the counter affidavit, where it is stated that the petitioner is an industrial concern, which has entered into a foreign collaboration by agreement dated 22.1.1988 with Heit Kampt, a German company, for import of technology from outside India, and the said agreement has been approved by the Central Government. In para 7 of the counter affidavit, it is stated that cooling towers are essentially plant and equipments and not civil work.
22. We are of the clear opinion that petitioner is an industrial concern as defined in Section 2(e) of the Act since a foreign collaboration agreement involving import of technology has been approved in its favour by the Central Government, as is evident from para 6 of the counter affidavit. We are further of the opinion that the petitioner has imported technology.
23. No doubt, the stand of the petitioner is that it was the NTPC which imported the technology ; but we cannot accept this submission. A perusal of the contract dated 11.1.1990, Annexure 3 to the petition, shows that it was executed by the petitioner alone, and not jointly with Heit Kampt. A perusal of the said agreement shows that the contract was awarded by NTPC in favour of the petitioner and not jointly in favour of the petitioner along with its German collaborators. We, therefore, fully agree with what is stated in paras 8 and 11 of the counter affidavit. The collaboration agreement dated 22.11.1988, Annexure 4 to the petition, shows that the petitioner has imported technology from the German collaborators. It was the petitioner company and not the NTPC which required the necessary technology for executing the contract. The technology was not available in India and hence, was imported from Germany by the petitioner.
24. We do not agree with the submission made by the petitioner that Heit-Kampt and Balcke Durr were really providing services to NTPC. We are of the opinion that there was no transfer of technology by the collaborators directly to the NTPC. The technology was imported by the petitioner from the collaborators as per terms of the collaboration agreement and not by the NTPC. The technology was required by the petitioner and not by NTPC. Hence, in our opinion, the cess was certainly payable by the petitioner under Section 3(2) of the Act. Thus, there is no force in the writ petition, and it is dismissed.
25. It appears that, in this case, this Court had passed an interim order on 5.11.1992 staying the demand against the petitioner in pursuance of the demand notice dated 20.7.1991. Thus, due to the interim order of this Court, the demand remained stayed for a period of 12 years.
26. It may be mentioned that money doubles in six years (because of interest). In this case, the petitioner has avoided payment of cess for about 12 years, counting from the date of the demand notice dated 20.7.1991. Thus, even though we are dismissing this petition, the petitioner has really won the case, because he did not have to pay interest from 20.7.1991 till today.
27. It may be mentioned that there is a misconception about interest. Interest is not a penalty or punishment at all, but is the normal accretion on capital. Had the petitioner paid the amount in question in July, 1991, when it was due, the respondents would have invested the same somewhere, and earned interest thereon. Instead, the petitioner has kept the money with himself for about 12 years and has earned interest thereon. Hence for every Rs. 100 which the petitioner has to pay in July, 1991, he has in fact, earned an additional Rs. 300. This is because Rs. 100 becomes Rs. 200 after six years, and in another six years this Rs. 200 doubles and becomes Rs. 400. Thus, even though we have dismissed this writ petition today, the petitioner has got three time, more amount than what he has to pay now. All this happened because of the interim order of this Court staying the demand.
28. In Assistant Collector of Central Excise v. Dunlop India Ltd. (1985) 1 SCC 260, the Supreme Court strongly criticised the tendency of various High Courts to grant stay of recovery of tax. The Supreme Court held that normally, the High Courts should not under Article 226 grant stay of recovery of tax save under very exceptional circumstances. By interim orders, such as the one passed in the case, the Government or concerned authority/Department often suffers heavy loss.
29. The whole misconception about interest is that, often it is regarded as a penalty or punishment. That is not so. Interest is the normal accretion on capital, as already stated above, and does not amount to a penalty. Hence, in our opinion, interest should ordinarily be ordered to be paid whenever there is delay in payment of the tax or other money liability, otherwise, the petitioner who succeeds in getting an interim order from this Court really wins the case even while technically losing it (and often wins it several rimes over, as has happened in this case).
30. However, the Supreme Court in Indian Carbon Ltd. v State of Assam (1998) 1 UPTC 1 has held that interest can be charged on delayed payment of tax only if the statute has made a substantive provision in that regard. This Supreme Court decision is binding on us under Article 141 of the Constitution ; and, hence, as long as it stands we have to follow it. There is no provision in the Cess Act for payment of interest on delayed payment of the cess, and, hence, in view of the aforesaid decision of the Supreme Court, we cannot direct realisation of interest. However, in view of Section 9(2) of the Act, we direct the respondent bank to consider imposition of penalty not exceeding 10 times of the arrears, if it so deems fit.
31. In view of the above observations regarding interest made in this judgment we recommend to the Central Government and State Governments to consider amending all taxing statutes (by a suitable Ordinance or Amending Act) to provide for payment of interest whenever there is delay in payment of taxes (for whatever reason).
32. Let the Registrar General of this Court send copies of this judgment to the Union Law and Finance Secretaries, New Delhi, as well as the Chief Secretary, Law and Finance Secretaries, U.P., forthwith. Copy of the judgment shall be given to the parties on payment of usual charges by 14.7.2003.