1969 (3) TMI 4 - SC - Income Tax

Garnishee Order - Whether the payment made by the Collector of Customs can be certified under Order 21, r. 2 of the Code of Civil Procedure - Held, Yes - if the payment has been legally made out of court in full and final discharge of the liability under a decree, there is no reason why the judgment debtor cannot move the court for getting the adjustment or payment certified - appeal allowed

Summary

Issues:
1. Refusal to enter satisfaction of two decrees under Order 21, rule 2 of the Code of Civil Procedure by the High Court of Calcutta.
2. Interpretation of the notice issued under section 46(5A) of the Indian Income-tax Act, 1922.
3. Contention regarding the nature of the payment made by the Collector of Customs on behalf of the Union of India.
4. Analysis of the legal technicalities involved in the adjustment of decrees under Order 21, rule 2 of the Code of Civil Procedure.

Detailed Analysis:
1. The Supreme Court heard an appeal against the High Court of Calcutta's decision to refuse the entry of satisfaction of two decrees under Order 21, rule 2 of the Code of Civil Procedure. The decrees were obtained by the respondents against the Union of India for refund of excess customs duty. The High Court held that the decrees were against the Union of India and not the Collector of Customs, leading to the refusal of satisfaction entry. The Supreme Court disagreed with this technical interpretation and emphasized that the Collector of Customs paid the amount on behalf of the Union of India, making it a valid payment towards the decrees.

2. The notice issued under section 46(5A) of the Indian Income-tax Act, 1922, required the Collector of Customs to pay the decreed amount to the Income-tax Officer. The High Court found the notice defective as it mentioned income-tax and penalty, while the payment was for super-tax. However, the Supreme Court clarified that super-tax is a form of income-tax, making the notice valid. The Court highlighted that the notice was akin to a garnishee order, directing the payment to the Income-tax Officer for the benefit of the firm.

3. The contention regarding the nature of the payment made by the Collector of Customs on behalf of the Union of India was addressed by the Supreme Court. The Court rejected the argument that the payment was merely a transfer between government departments, emphasizing that the Collector of Customs acted as a custodian of the funds for the Union of India. The Court held that the payment by the Collector of Customs was a proper discharge of the Union's liability towards the decrees, dismissing the technical objections raised by the respondents.

4. The analysis of legal technicalities involved in the adjustment of decrees under Order 21, rule 2 of the Code of Civil Procedure was crucial in this case. The Supreme Court clarified that the rule contemplates payments out of court to decree-holders, allowing for certification of such payments for satisfaction of decrees. The Court emphasized that the nature of the payment, whether voluntary or under a garnishee order, does not affect the applicability of the rule. The Court held that a garnishee payment or a payment under section 46(5A) of the Income-tax Act stands on a different footing, enabling the judgment debtor to seek certification of the payment for decree satisfaction.

In conclusion, the Supreme Court allowed the appeals, overturning the High Court's decision, and ordered the certification of the payments made by the Collector of Customs towards the decrees, emphasizing the technical correctness and validity of the payments.