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1969 (6) TMI 44
Issues Involved:
1. Whether the offence of adulteration under Section 2(i)(j) of the Prevention of Food Adulteration Act was proved.
2. Whether the offence falls under Section 2(i)(1) of the Prevention of Food Adulteration Act.
3. Whether the case is fit for action under Section 4 of the Probation of Offenders Act.
Issue-wise Detailed Analysis:
Issue 1: Offence of Adulteration under Section 2(i)(j) of the Prevention of Food Adulteration Act
The Food Inspector filed a complaint alleging that the accused sold Mysorepak containing metanil yellow coaltar-dye, which is prohibited under the Prevention of Food Adulteration Act and Rules. The trial court found the Mysorepak adulterated and convicted the accused under Section 16(1)(a)(i) read with Sections 7 and 2(i)(j) of the Act. The Sessions Judge confirmed this conviction and sentence.
The relevant portion of Section 2(i)(j) states that an article of food is deemed adulterated if it contains any non-prescribed coloring matter or if the quantity of its constituents exceeds prescribed limits. The rules under the Act specifically prohibit the addition of unauthorized coloring matter, including inorganic pigments and non-permitted coaltar dyes. Metanil yellow is not listed as a permitted coaltar dye under Rule 28, thus its use is prohibited.
The court interpreted the word "and" in Section 2(i)(j) as "or" to avoid absurdity, as a literal conjunctive reading would imply that a totally prohibited coloring matter could be used within prescribed limits, which is illogical. The court relied on precedents where "and" was interpreted as "or" to give effect to the legislative intent and avoid absurd results. Therefore, the court upheld the finding that the accused's use of metanil yellow constituted an offence under Section 2(i)(j).
Issue 2: Applicability of Section 2(i)(1) of the Prevention of Food Adulteration Act
The accused contended that the case should fall under Section 2(i)(1), which deals with the quality or purity of the article falling below the prescribed standard. However, the court found that since the Mysorepak contained a prohibited coloring matter, it was specifically covered under Section 2(i)(j) rather than Section 2(i)(1). The court concluded that Section 2(i)(j) was the more appropriate provision and upheld the conviction under this section.
Issue 3: Action under Section 4 of the Probation of Offenders Act
The accused, an elderly man and a petty shopkeeper, argued for leniency under Section 4 of the Probation of Offenders Act. The minimum sentence prescribed under the Act was six months' imprisonment and a fine, which the Sessions Judge felt compelled to impose despite acknowledging the harshness of the sentence given the accused's circumstances.
Considering the special circumstances, including the accused's age and the nature of the offence, the court deemed it fit to apply Section 4(1) of the Probation of Offenders Act. The court set aside the conviction and sentence, directing the accused to be released on probation for one year, during which he must maintain good behavior. The court also ordered the refund of any fine paid.
Conclusion
The court upheld the conviction under Section 2(i)(j) of the Prevention of Food Adulteration Act, rejected the applicability of Section 2(i)(1), and granted probation under Section 4 of the Probation of Offenders Act, considering the accused's age and circumstances.
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1969 (6) TMI 43
Issues Involved:
1. Non-compliance with Order 5, Rule 19, Civil Procedure Code (CPC) regarding the service of summons.
2. Validity of execution sale conducted without proper notice.
3. Application of Article 166 of the Limitation Act, 1908.
4. Requirement of an express declaration by the court regarding due service of summons.
Detailed Analysis:
1. Non-compliance with Order 5, Rule 19, Civil Procedure Code (CPC) regarding the service of summons:
The Full Bench was constituted to resolve conflicting observations in previous decisions regarding the effect of non-compliance with Order 5, Rule 19 CPC, which mandates the procedure for service of summons. Specifically, the judgment-debtor contended that the service of summons was not properly executed as required by Order 5, Rule 19. The court noted that the process server did not verify the return by an affidavit, and the court did not examine the process server on oath or declare that the summons had been duly served. The absence of these steps rendered the service invalid.
2. Validity of execution sale conducted without proper notice:
The judgment-debtor argued that he had no notice of the sale, rendering it void. He claimed that the property was undervalued and sold fraudulently, causing substantial injury. The court found that the sale was conducted without proper notice, as the service of summons was not compliant with Order 5, Rule 19 CPC. The court emphasized that strict compliance with the provisions of Order 5, Rule 19 is essential to ensure that the judgment-debtor has actual or constructive notice of the sale.
3. Application of Article 166 of the Limitation Act, 1908:
The judgment-debtor contended that the limitation period under Article 166 should start from the date of his knowledge of the sale, not the date of the sale itself. The court rejected this argument, holding that Article 166 prescribes a period of thirty days from the date of the sale, assuming the judgment-debtor had notice of the sale. If the judgment-debtor did not have notice, Article 166 would not apply, and the residuary Article 181 would provide a three-year limitation period. The court concluded that strict compliance with Order 5, Rule 19 is necessary before applying the shorter limitation period under Article 166.
4. Requirement of an express declaration by the court regarding due service of summons:
The court held that an express declaration by the court that the summons had been duly served is mandatory under Order 5, Rule 19 CPC. This declaration can be in any convenient form, such as "defendant duly served" or "service sufficient." The court's endorsement must indicate that the presiding officer has applied his mind and considers the summons duly served. The absence of such a declaration would render the service ineffective and invalidate subsequent proceedings, including the execution sale.
Conclusion:
The Full Bench concluded that non-compliance with Order 5, Rule 19 CPC regarding the service of summons renders the service ineffective. Consequently, the execution sale conducted without proper notice was declared void. The court emphasized the necessity of strict compliance with the provisions of Order 5, Rule 19, including the requirement of an express declaration by the court that the summons had been duly served. The judgment-debtor's appeal was allowed, and the execution sale was set aside.
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1969 (6) TMI 42
Issues Involved:
1. Jurisdiction of the Trial Court.
2. Validity of the Certificate issued under Section 3(2) of the Revenue Recovery Act.
3. Validity of the Proclamation issued by the Mamlatdar.
4. Whether the plaintiff was a defaulter under the Revenue Recovery Act.
5. Requirement of an inquiry before issuing the certificate.
6. Applicability of Section 4 of the Revenue Recovery Act regarding deposit of the amount claimed.
Detailed Analysis:
1. Jurisdiction of the Trial Court:
The primary argument raised by Mr. Tambe for the appellant was that the learned Joint Judge erred in holding that the Trial Court had no jurisdiction to try the suit and returning the plaint for presentation to the proper Court. It was pointed out that the District Court had previously reversed the Trial Court's finding, holding that the Court of the Civil Judge, Senior Division, Ahmednagar, had jurisdiction. This finding was conclusive and could not be reopened. The appellate court cannot entertain jurisdictional issues unless prejudice is shown to have been caused by the suit being instituted in an inappropriate forum. The subject matter of the suit involved actions taken by the Mamlatdar in the district, thus conferring jurisdiction on the Trial Court.
2. Validity of the Certificate issued under Section 3(2) of the Revenue Recovery Act:
Mr. Tambe contended that the certificate (Ex. 31) was invalid as it was issued by an authority not entitled under Section 3(1) of the Revenue Recovery Act. However, the plaintiff did not amend his pleadings to challenge the certificate on this ground. The Union of India may have had several answers if this point had been raised at trial. The certificate, issued by the Collector of Osmanabad, was presumed valid, and the plaintiff was not allowed to traverse beyond his original pleadings to challenge its legality at this stage.
3. Validity of the Proclamation issued by the Mamlatdar:
The proclamation issued by the Mamlatdar was challenged on the grounds that it was illegal and void under Section 6 of the Revenue Recovery Act. However, Section 6 pertains to attachment, while the proclamation in question was for the sale of property. The procedure under the Land Revenue Code for attachment and sale of property applied, and the Mamlatdar had the authority to issue the proclamation under administrative orders. The appellate court found the proclamation valid, and the trial court's decision was based on the incorrect assumption that the certificate was invalid due to lack of inquiry.
4. Whether the plaintiff was a defaulter under the Revenue Recovery Act:
The appellant argued that he was not a "defaulter" as defined by Section 2(3) of the Revenue Recovery Act. However, the Union of India produced a bond executed by the appellant, which referred to Rule 103 of the Posts and Telegraphs Manual and the Public Accountants' Default Act, 1850. The bond obligated the appellant to pay for any loss caused to the Union due to his conduct. Thus, the appellant was considered a defaulter, as the loss was recoverable as an arrear of land revenue.
5. Requirement of an inquiry before issuing the certificate:
The appellant argued that the certificate was invalid as no inquiry was held before its issuance, violating natural justice. However, Section 5 of the Revenue Recovery Act does not mandate an inquiry before issuing a certificate. The defaulting officer can challenge the amount through a suit, provided the amount is deposited. The appellant had opportunities to contest the claim but failed to utilize them, leading to the conclusion that the certificate was valid.
6. Applicability of Section 4 of the Revenue Recovery Act regarding deposit of the amount claimed:
The appellate court held that the suit could not be maintained without depositing the amount claimed. Although Section 4 of the Revenue Recovery Act might not apply if the challenge is solely to the proclamation's legality, the merits of the case were decided against the plaintiff, rendering this point moot.
Conclusion:
The appeal was dismissed, and the plaintiff's suit was rejected with costs throughout. The interim injunction was vacated, and the appellant was ordered to pay the costs of the application to the Union.
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1969 (6) TMI 41
Issues:
1. Validity of the "test-check-cum-muster roll method" for best judgment assessment.
2. Applicability of government instructions on assessment methods.
3. Justifiability of best judgment assessment without finding fault with the return.
Analysis:
1. The judgment addressed the validity of the "test-check-cum-muster roll method" used by the assessing authority for best judgment assessment. The assessee contested the method, arguing that it was not reliable due to various factors affecting the mill's capacity and worker efficiency. The appellate authority and the Appellate Tribunal upheld the method, stating it was permissible by law and essential for determining turnover accurately. However, the High Court found the method to be flawed as it could lead to undue hardship for the assessee. The court emphasized that the assessing authority should adopt a method minimizing errors to a negligible extent. Consequently, the court set aside the assessment and directed a fresh assessment with a more reliable method to reduce errors significantly.
2. The judgment also discussed the applicability of government instructions on assessment methods, particularly the instructions issued by the Board of Revenue to curb tax evasion in paddy and rice trade. The government had decided to waive excess tax levied based on certain methods for specific years to avoid hardship for millers. The court noted that the assessing authority followed these instructions, which were later revised for more effective measures. The court highlighted that the method used in the present case was not consistent with the revised approach, indicating a lack of reliability and potential hardship for the assessee.
3. Additionally, the judgment examined the justifiability of resorting to best judgment assessment without finding fault with the return filed by the assessee. The assessing authority justified the best judgment assessment based on the suppression of certain bags of paddy, which raised doubts about the accuracy of the return. The court agreed that such circumstances warranted a best judgment assessment. However, it emphasized that the method chosen should not cause undue harm or hardship to the assessee. Given the flaws in the method used and the potential for prejudice, the court set aside the assessment and instructed a fresh assessment with a more reliable approach, leaving the method selection to the assessing authority's discretion.
In conclusion, the High Court's judgment focused on the inadequacies of the "test-check-cum-muster roll method" for best judgment assessment, the importance of using reliable assessment methods to minimize errors and avoid undue hardship for the assessee, and the need for assessing authorities to follow updated and effective government instructions to ensure fair and accurate assessments.
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1969 (6) TMI 40
Issues Involved:
1. Competence of the Deputy Commercial Tax Officer to levy penalty.
2. Timing of the initiation of penalty proceedings.
3. Authority of the successor-assessing authority to initiate penalty proceedings.
Issue-wise Detailed Analysis:
1. Competence of the Deputy Commercial Tax Officer to levy penalty:
The primary issue was whether the Deputy Commercial Tax Officer was competent to levy a penalty when the original assessment was made by the Commercial Tax Officer. The court noted that the Deputy Commercial Tax Officer, as defined in the Act, was an "assessing authority" authorized and empowered to make assessments by the State Government. The court concluded that the Deputy Commercial Tax Officer was competent to levy the penalty since the matter was within his jurisdiction both on pecuniary and territorial bases. The court emphasized that the legality of the levy could not be assailed on the ground that the Deputy Commercial Tax Officer was not the same authority that made the original assessment.
2. Timing of the initiation of penalty proceedings:
The court addressed whether the penalty proceedings must be initiated simultaneously with or in continuation of the original assessment order. The court referred to Section 14(2) of the Act, which provides the assessing authority the power to levy a penalty in addition to the tax assessed. The court held that Section 14(2) is an enabling provision that does not specify a time limit for initiating penalty proceedings. It was observed that the initiation of penalty proceedings need not be simultaneous with the original assessment. The court cited previous judgments to support the view that the levy of penalty does not automatically follow upon assessment and that a reasonable opportunity must be given to the dealer to explain the omission. The court concluded that the initiation of penalty proceedings after the appellate order was valid.
3. Authority of the successor-assessing authority to initiate penalty proceedings:
The court examined whether the successor-assessing authority, in this case, the Deputy Commercial Tax Officer, was authorized to initiate penalty proceedings. It was noted that the term "assessing authority" in Section 14(2) does not imply the same person who made the original assessment. The court held that if the jurisdiction is conferred on another authority due to transfer or other reasons, such authority is competent to take up the case from that stage to its final stage. The court rejected the argument that the person who imposes the penalty should be the same as the person who made the assessment order. The court concluded that the Deputy Commercial Tax Officer, who revised the assessment order, was competent to initiate penalty proceedings.
Conclusion:
The court set aside the order of the Tribunal, holding that the Deputy Commercial Tax Officer was competent to initiate penalty proceedings even though he was not the original assessing authority. The petition was allowed with no order as to costs, and an advocate's fee of Rs. 100 was awarded.
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1969 (6) TMI 39
The court held that the sale of jaggery attracts tax under the Madras Agricultural Produce Markets Act, and the tax under the Madras General Sales Tax Act can also be levied. Jaggery is not considered an agricultural produce under the Madras General Sales Tax Act. The petition was dismissed.
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1969 (6) TMI 38
Issues:
Interpretation of the term "sugar" under the Andhra Pradesh General Sales Tax Act in relation to sugar candy for tax liability determination.
Detailed Analysis:
The judgment of the Andhra Pradesh High Court involved a dispute regarding the interpretation of the term "sugar" under the Andhra Pradesh General Sales Tax Act in relation to sugar candy for tax liability determination. The Sales Tax Appellate Tribunal initially found that sugar candy and bura sugar sold by the assessees were subject to a levy under the Additional Duties of Excise Act and could not be taxed under the Andhra Pradesh General Sales Tax Act. However, the Tribunal remanded the case for further determination on whether the commodities were actually subjected to a levy of additional duties of excise. This decision was challenged by the assessee in T.R.C. No. 14 of 1965, arguing that once the commodities were considered to be included in the term "sugar" exempt from tax under the Act, the order of remand was unwarranted.
In two other appeals before the Tribunal, it was held that "sugar candy" was not included in the term "sugar" for tax exemption purposes, leading to a direction for a 1% tax levy. This decision was challenged in T.R.Cs. Nos. 2 and 3 of 1966. The main issue for determination was whether the term "sugar" under the Act included "sugar candy," which is a purer form of sugar. The historical background and legislative context of the Act were considered to understand the legislative intent behind the term "sugar."
The Court analyzed the legislative history, including the Second Finance Commission's recommendations and subsequent amendments to the Act exempting certain goods from tax under the Andhra Pradesh General Sales Tax Act. The Court observed that the term "sugar" was removed from taxable items and added to the exempted list, indicating that sugar, on which additional excise duty could be levied, was exempt from sales tax. The Court also referred to decisions from other High Courts, such as the Mysore High Court and the Madras High Court, which supported the interpretation that "sugar candy" should be considered exempt under the Act.
The Court further reasoned that "sugar candy" should be regarded as purified sugar itself, as it contains no other ingredient but sugar. The argument that the Legislature should have used clearer terms if all forms of sugar were intended to be included was dismissed, considering the historical context and the legislative framework. Ultimately, the Court held that the expression "sugar" in Schedule V included "sugar candy," exempting it from tax liability. Consequently, the orders of the Appellate Tribunal were set aside, and the assessee was deemed not liable for any tax related to sugar candy. The Court allowed the appeals and awarded costs to the petitioner-company.
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1969 (6) TMI 37
Issues Involved
1. Whether the sales tax provision of Rs. 22,642 is deductible in the computation of the total income of the assessee for the assessment year 1961-62.
Detailed Analysis
Issue 1: Deductibility of Sales Tax Provision
Facts and Background:
- The assessee followed the mercantile system of accounting.
- For the assessment year 1961-62, the assessee made a provision of Rs. 22,642 for sales tax payable.
- The Income-tax Officer disallowed the deduction, considering it a mere provision for taxes that were neither paid nor ascertained by the sales tax authorities.
- The Appellate Assistant Commissioner upheld this disallowance.
- The Income-tax Appellate Tribunal allowed the deduction, stating that the sales tax liability accrued as soon as the sales were effected.
Arguments by Revenue:
- Sales tax is not deductible for income-tax purposes.
- The liability for sales tax arises only upon assessment or demand by sales tax authorities.
- Reliance was placed on various cases, including *Recols (India) Ltd.*, *Kedarnath Jute Manufacturing Co.*, and others, arguing that mere legal liability is insufficient for claiming deduction.
Arguments by Assessee:
- Sales tax is deductible under sections 10(1) and 10(2)(xv) of the Indian Income-tax Act, 1922.
- Payment of sales tax is necessary for carrying on the business.
- The liability for sales tax arises on sales effected, not on assessment or demand.
- Cited cases including *Kesoram Industries and Cotton Mills Ltd.* and *Textile Machinery Corporation Ltd.* to support the claim.
Court's Analysis:
- Reviewed the relevant provisions of the Bengal Finance (Sales Tax) Act, 1941.
- Noted that the liability to pay sales tax arises on sales effected, not dependent on assessment or demand.
- The obligation to pay sales tax is directly related to the business and is necessary for its operation.
- Sales tax is a compulsory levy and its payment is necessary for carrying on the business.
- In the context of the mercantile system of accounting, expenditures are entered when a legal liability arises, not when the actual payment is made.
Precedents Considered:
- *Keshav Mills Ltd.* and *Calcutta Company Ltd.*: Mercantile system of accounting recognizes liabilities when they arise.
- *Kesoram Industries and Cotton Mills Ltd.*: Liability to pay tax is a present liability.
- *Textile Machinery Corporation Ltd.*: Provision for sales tax stands on the same footing as provision for income-tax liability.
Conclusion:
- The assessee is entitled to deduction of the sales tax provision under section 10(2)(xv) of the Indian Income-tax Act, 1922.
- The liability for sales tax is incurred in the capacity of a trader and is directly connected with the business.
- The facts of the case differ from *Kedarnath Jute Manufacturing Co.*, where the liability was disputed and no provision was made.
- The court answered the reference in the affirmative, in favor of the assessee, allowing the deduction of the sales tax provision.
Judgment:
- The reference was answered in the affirmative, and the Commissioner of Income-tax was directed to pay the costs of the reference.
Separate Judgment:
- SANKAR PRASAD MITRA, J. concurred with the judgment.
Final Reference:
- Reference answered in the affirmative.
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1969 (6) TMI 36
Issues:
Interpretation of section 18-A of the Mysore Sales Tax Act, 1957; Levying penalties under section 18-A; Constitutional validity of section 18-A.
Analysis:
The judgment by the High Court of Mysore dealt with writ petitions challenging penalties imposed under section 18-A of the Mysore Sales Tax Act, 1957. The main contention of the petitioners was that they did not contravene the provisions of section 18 and, therefore, penalties should not be levied. The Commercial Tax Officer had imposed penalties based on the excess amounts collected by the petitioners compared to the total tax assessed on their turnovers. The petitioners argued that they collected tax at specified rates and explained the possibility of variations in tax collection due to high turnovers.
The Court noted that the Commercial Tax Officer did not satisfactorily address the petitioners' main contention that they collected tax only at specified rates. The Officer imposed penalties based on the excess amounts collected, without proving that the petitioners collected tax at rates exceeding those specified under the Act. The Court clarified that a dealer can collect small amounts in excess of the total tax assessed without contravening section 18(1) of the Act. The judgment emphasized that penalties under section 18-A are attracted only when a dealer collects amounts not in accordance with prescribed conditions or at rates exceeding those specified.
The Court found a clear error of law in the impugned orders and quashed them. It directed the Commercial Tax Officer to reconsider the case, giving the petitioners a fair opportunity to present their explanations. The judgment highlighted that penalties under section 18-A are not applicable if section 18(1) is not contravened, even if the aggregate amounts collected exceed the tax chargeable on the total turnover. The Court did not address other grounds raised in the writ petitions, and the petitions were allowed without costs.
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1969 (6) TMI 35
Issues:
1. Whether ginger is considered a vegetable for the purpose of taxation under the Orissa Sales Tax Act.
Analysis:
The High Court of Orissa was presented with the issue of determining whether ginger should be classified as a vegetable for taxation purposes under the Orissa Sales Tax Act. The Sales Tax Tribunal referred the question to the High Court, seeking clarification on whether ginger falls under the definition of vegetables, which are not taxable under the Act. The Tribunal's decision was based on the test laid down in a previous case, Dhadi Sahu v. Commissioner of Sales Tax, Orissa I.L.R. 1961 Cutt. 175, which defined vegetables as plants primarily grown for food purposes. The Division Bench emphasized that vegetables are plants cultivated in kitchen gardens for consumption as food. The Court noted that ginger in Orissa is not primarily used as a food item but rather for enhancing the taste of main dishes, whether vegetarian or non-vegetarian.
The Court acknowledged that the definition of vegetables for taxation purposes differs from the common understanding of the term. It cited the Supreme Court's interpretation in Ramavatar v. Assistant Sales Tax Officer, Akola, and Another A.I.R. 1961 S.C. 1325, where vegetables were defined as plants grown in a kitchen garden or farm for table use. The Supreme Court's test did not require the vegetable to be the primary food item but rather suitable for table consumption. The Court distinguished between items like sugarcane and betel leaves, which, although grown in gardens, are not typically consumed directly as food. The judgment highlighted that certain items like mint or coriander, used for flavoring, are still considered vegetables if grown in a kitchen garden and used for the table.
The Court analyzed the Division Bench's decision in light of the Supreme Court's consistent interpretation of the term "vegetable." It clarified that the Division Bench's reliance on a particular passage led to an incorrect conclusion regarding the primary purpose of food consumption. The Court emphasized that the Orissa decision remains valid in determining vegetables based on local perceptions. The judgment referenced cases from Kerala and West Bengal supporting the classification of ginger as a vegetable. Ultimately, the Court held that ginger should be considered a vegetable for taxation purposes, overturning the Tribunal's decision. The parties were directed to bear their own costs, with the petitioner entitled to a refund of the deposited tax amount under the Orissa Sales Tax Act.
In conclusion, the High Court of Orissa clarified the classification of ginger as a vegetable for taxation under the Orissa Sales Tax Act based on the interpretation of the term "vegetable" as per legal precedents and local perceptions.
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1969 (6) TMI 34
The High Court of Andhra Pradesh dismissed the tax revision petition challenging the Sales Tax Appellate Tribunal's order. The petitioners, a Hindu joint family firm, were not entitled to exemption on the purchase and sale of oil products as they did not exclusively deal in oil produced from hand presses as required by the notification. The court held that dealing exclusively in oil from the presses was a necessary condition for exemption. The petition was dismissed, and no costs were awarded.
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1969 (6) TMI 33
The High Court of Madras dismissed the tax case as the question of exemption was not raised by the assessee before the assessing authority, making it no longer open for consideration by the Tribunal. The Tribunal did not have jurisdiction to allow the exemption question to be raised for the first time.
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1969 (6) TMI 32
Issues Involved:
1. Validity of the orders dated 5th March 1968 and 25th April 1968 passed by Divan J.
2. Applicability and mandatory nature of Rule 139 of the Companies (Court) Rules, 1959.
3. Jurisdiction of the court in the absence of compliance with Rule 139.
4. Effect of breach of audi alteram partem (principle of natural justice).
5. Waiver of breach of Rule 139 by the appellant.
6. Confirmation of the sale of the textile mill to the second respondent.
Issue-Wise Detailed Analysis:
1. Validity of the Orders Dated 5th March 1968 and 25th April 1968 Passed by Divan J.:
The orders dated 5th March 1968 and 25th April 1968 were passed by Divan J. without issuing notice to the appellant and giving him an opportunity to be heard. The appellant contended that these orders were null and void due to non-compliance with Rule 139 and breach of the principles of natural justice. The court held that these orders were judicial orders made by a single judge of the High Court and could not be disregarded unless set aside by adopting appropriate proceedings such as appeal or review. Since no proper proceedings had been adopted by the appellant to annul or set aside these orders, they stood valid and could not be ignored by the court as a nullity in subsequent proceedings.
2. Applicability and Mandatory Nature of Rule 139 of the Companies (Court) Rules, 1959:
Rule 139 requires that if the official liquidator wants to exercise his power to sell any property of the company under section 457(1)(c), he must take out a summons for directions with notice to the petitioning creditor. The court held that Rule 139 was applicable and mandatory. The Division Bench in Anant Mills' case had already concluded that Rule 139 was mandatory and essential, and its breach would invalidate the proceedings. The court rejected the contention that Rule 139 was directory and not mandatory.
3. Jurisdiction of the Court in the Absence of Compliance with Rule 139:
The court held that compliance with the requirements of Rule 139 is a condition for the exercise of the power to give directions in regard to the sale of the property of the company by the official liquidator. If the condition is not satisfied, the court cannot exercise the power, and the purported exercise of the power would be void and of no effect. The orders passed by Divan J. in disregard of the mandatory requirement of Rule 139 were held to be a nullity and void.
4. Effect of Breach of Audi Alteram Partem (Principle of Natural Justice):
The court emphasized that the principle of audi alteram partem is a rule of fundamental importance and basic to the system of administration of justice. A decision given in breach of this principle is null and void and not voidable. The court cited several decisions to support this view, including Ridge v. Baldwin and State of U.P. v. Mohammad Nooh. The court held that the orders passed by Divan J. in breach of audi alteram partem were null and void.
5. Waiver of Breach of Rule 139 by the Appellant:
The court found no factual foundation for the contention that the appellant had waived the breach of Rule 139. The appellant did not know about the orders until some time in May or June 1968 and took out a summons for directions for setting aside the orders of Divan J. without unreasonable delay. The appellant did not adopt fresh proceedings for quashing the orders after the first summons was withdrawn but appeared in answer to the first summons for directions and contended that the orders were a nullity. The court held that the appellant had not waived the breach of Rule 139.
6. Confirmation of the Sale of the Textile Mill to the Second Respondent:
The court held that if the orders dated 5th March 1968 and 25th April 1968 were valid, the sale in favour of the second respondent should have been confirmed. The appellant contended that the price at which the textile mill was proposed to be sold was unduly low, but the court found no material to support this contention. The court noted that the estimated value given in the statement of affairs was exaggerated, and the offers received by the official liquidator were in the range of Rs. 10,00,000 to Rs. 12,50,001. The court concluded that the offer of Rs. 12,50,001 made by the second respondent was not unduly low and should have been confirmed if the orders were valid.
Conclusion:
The court allowed the appeals, rejected the second summons for directions, and remanded the first summons for directions to the learned company judge for giving directions in accordance with law. The court granted leave to appeal to the Supreme Court under Article 133(1)(c) of the Constitution.
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1969 (6) TMI 23
Issues Involved:
1. Validity of the seizure of goods by Customs Authorities.
2. Legality of the order extending the period for issuing a show cause notice.
3. Validity of the show cause notices issued after the extension period expired.
4. Whether the Customs Officer was required to act judicially or quasi-judicially in making the extension order.
5. Whether the petitioner was entitled to a notice and an opportunity to be heard before the extension order was made.
6. Whether the goods seized were "imported goods" as per the Customs Act, 1962, after being cleared for home consumption.
7. Whether the Customs Authorities acted fairly in making the order of seizure and detention.
Detailed Analysis:
1. Validity of the Seizure of Goods by Customs Authorities:
The petitioner challenged the seizure of goods on the grounds that it was arbitrary and without basis. The court found that there were sufficient materials for the Customs Authorities to have a "reason to believe" that the goods were liable to confiscation, particularly due to documents relating to the import of watch parts against forged licenses. The court concluded that the seizure was valid as it was based on prima facie grounds indicating that the goods were unlawfully imported.
2. Legality of the Order Extending the Period for Issuing a Show Cause Notice:
The petitioner argued that the extension order was invalid as it was made without giving him an opportunity to show cause. The court held that the extension order under the proviso to Section 110(2) of the Customs Act, 1962, is an administrative order and does not require a show cause notice to the party. The court reasoned that disclosing the grounds for the extension to the party would defeat the purpose of the investigation and be against public interest. The court upheld the validity of the extension order.
3. Validity of the Show Cause Notices Issued After the Extension Period Expired:
The petitioner contended that the show cause notices were invalid as they were issued beyond the extended period. The court noted that the petitioner had obtained an injunction restraining the Customs Authorities from taking any steps in connection with the seizure and order of detention. Therefore, the Customs Authorities were prevented from issuing the show cause notices within the extended period. The court held that the petitioner could not now claim the notices were invalid due to the lapse of time caused by the injunction he had obtained. The show cause notices were deemed valid.
4. Whether the Customs Officer Was Required to Act Judicially or Quasi-Judicially in Making the Extension Order:
The petitioner argued that the Customs Officer should have acted judicially or quasi-judicially in making the extension order. The court disagreed, stating that the order of extension is an administrative order and does not require a judicial or quasi-judicial approach. The court emphasized that the statute does not require the Customs Officer to act judicially when making an order of extension under the proviso to Section 110(2) of the Act.
5. Whether the Petitioner Was Entitled to a Notice and an Opportunity to Be Heard Before the Extension Order Was Made:
The court held that the petitioner was not entitled to a notice or an opportunity to be heard before the extension order was made. The court reasoned that the purpose of the extension is to allow the Customs Authorities to complete their investigation, which must be conducted confidentially and without the knowledge of the party being investigated. Requiring notice and an opportunity to be heard would defeat the purpose of the investigation and be contrary to the scheme of the Act.
6. Whether the Goods Seized Were "Imported Goods" as per the Customs Act, 1962, After Being Cleared for Home Consumption:
The petitioner argued that the goods ceased to be "imported goods" once they were cleared for home consumption. The court rejected this argument, stating that if the import licenses used to clear the goods were forged, the goods were not lawfully imported. Therefore, they remained "imported goods" liable to confiscation under Section 111(d) of the Customs Act, 1962.
7. Whether the Customs Authorities Acted Fairly in Making the Order of Seizure and Detention:
The court found that the Customs Authorities acted fairly in making the order of seizure and detention. The affidavits filed by the respondents disclosed sufficient grounds for the "reason to believe" that the goods were liable to confiscation. The court concluded that there was no evidence of capricious, arbitrary, or dishonest conduct by the Customs Authorities in making the order of extension.
Conclusion:
The court dismissed the petition, upholding the validity of the seizure, the extension order, and the show cause notices. The court found that the Customs Authorities acted within their powers and in accordance with the law. All interim orders were vacated.
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1969 (6) TMI 22
Issues:
1. Conviction under section 135 of the Customs Act and Rule 126P(2) of the Defence of India Rules, 1962.
2. Possession of the third-floor room and the confiscated gold.
3. Discrepancies in the search process and search lists.
4. Production of the key for the steel cupboard and recovery of personal papers.
5. Failure of the prosecution to prove possession of the third-floor room and the gold.
Detailed Analysis:
1. The appellant was convicted under section 135 of the Customs Act and Rule 126P(2) of the Defence of India Rules, 1962, and sentenced to rigorous imprisonment and a fine for possession of gold bars and a gold rod. The appeal challenges this conviction based on the prosecution's case of possession of the confiscated gold.
2. The prosecution alleged that the appellant was in possession of the third-floor room where the gold was found. However, the defense claimed innocence and lack of association with the third-floor room or the gold. The prosecution failed to establish beyond reasonable doubt the appellant's possession of the third-floor room and the confiscated gold, raising doubts about the conviction.
3. The search process raised concerns as two separate searches were conducted simultaneously, resulting in discrepancies in the search lists. The entries in the search lists indicated different occupants for the rooms, casting doubt on the appellant's possession of the third-floor room where the gold was discovered.
4. The prosecution contended that the appellant produced the key for the steel cupboard where the gold was concealed. However, inconsistencies in witness testimonies and lack of concrete evidence raised doubts about the key's production and the recovery of personal papers linking the appellant to the confiscated items.
5. Ultimately, the court found that the prosecution failed to prove the appellant's possession of the third-floor room or the confiscated gold beyond a reasonable doubt. The discrepancies in the search process, lack of conclusive evidence, and inconsistencies in testimonies led to the acquittal of the appellant and the overturning of the conviction.
In conclusion, the judgment highlighted the importance of establishing possession beyond reasonable doubt in cases involving confiscated items. The lack of concrete evidence, discrepancies in the search process, and inconsistencies in testimonies undermined the prosecution's case, resulting in the appellant's acquittal.
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1969 (6) TMI 21
Issues:
Scope of Writ Petition regarding order confiscating goods under Customs Act, 1962 and imposition of penalties. Power of Appellate Collector to set aside order due to procedural irregularity. Applicability of criminal jurisprudence principles in customs proceedings. Authority of Assistant Collector to initiate fresh proceedings after order set aside.
Analysis:
1. The Writ Petition challenged the Appellate Collector's order setting aside the Assistant Collector's decision to confiscate goods under the Customs Act, 1962 due to procedural irregularity. The petitioner contended that the Appellate Collector exceeded his powers by allowing the Assistant Collector to initiate fresh proceedings. However, the Court clarified that the Appellate Collector did not direct a de novo enquiry but merely set aside the order due to a procedural flaw. As the decision was not based on merits, the Assistant Collector had the right to start fresh proceedings. The Court emphasized that the Appellate Collector's order did not constitute a direction to initiate proceedings anew, and the Assistant Collector was entitled to do so without any specific prohibition under the Act.
2. The petitioner argued that customs proceedings have penal characteristics and should follow criminal jurisprudence principles, preventing a fresh enquiry once an order is set aside. Citing a Supreme Court decision, the petitioner contended that burden of proof lies with customs authorities and restarting proceedings would be impermissible. However, the Court reasoned that the Supreme Court's observation on burden of proof was made in a different context. Since the petitioner was not acquitted on merits but due to a procedural error, the application of criminal jurisprudence principles did not preclude the Assistant Collector from commencing fresh proceedings.
3. The petitioner further contended that the Customs Act does not empower the Assistant Collector to initiate fresh proceedings after an order is set aside. The Court held that in the absence of any statutory restriction, an original authority can proceed afresh when an order is quashed due to procedural irregularity. As there was no provision explicitly prohibiting the Assistant Collector from starting new proceedings, the Court rejected this argument and upheld the authority's right to initiate fresh proceedings.
4. Consequently, the Court found no merit in the Writ Petition and dismissed it, affirming the Appellate Collector's decision to set aside the Assistant Collector's order and allowing the initiation of fresh proceedings in the case.
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1969 (6) TMI 20
Whether the Tribunal was justified in holding that the amount of Rs. 2 lakhs had been remitted to the taxable territories by the assessee during the accounting year out of his accrued profits of earlier years - assessee stays for more than 365 days in the four preceding previous years and for two months in the relevant previous year - burden of proving that the visit for two months in the latest previous year is only occasional or casual is on the assessee - onus being on the assessee to establish that the remittances were out of capital, the Tribunal was justified in holding that the conditions of section 4(1)(b)(iii) of the Income-tax Act have been complied
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1969 (6) TMI 19
Issues Involved:
1. Taxability of dividend declared by a company subject to remittance from a foreign country.
2. Interpretation of "declared" dividend under section 12(1A) of the Indian Income-tax Act, 1922.
3. Enforceability of conditional dividend declarations under company law.
Issue-Wise Detailed Analysis:
1. Taxability of Dividend Declared by a Company Subject to Remittance from a Foreign Country:
The primary issue was whether a dividend declared by a company, subject to remittance from Pakistan, could be taxed under section 12(1A) of the Indian Income-tax Act, 1922. The assessee argued that the Rs. 8,000 dividend was not assessable as the declaration was conditional, and no dividend warrants were issued. The Income-tax Officer, Appellate Assistant Commissioner, and Tribunal all rejected this contention, holding that the dividend was taxable as "deemed dividend" for the year it was declared.
2. Interpretation of "Declared" Dividend under Section 12(1A) of the Indian Income-tax Act, 1922:
Section 12(1A) states that any dividend declared by a company shall be deemed to be the income of the previous year in which it is declared. The court had to determine whether a conditional declaration of dividend falls within the ambit of this section. The court referred to previous cases, including Smt. Chandra Jalan v. Commissioner of Income-tax and Commissioner of Income-tax v. Smt. Panna Jalan, which dealt with similar issues. The court concluded that a declaration subject to a condition precedent, such as remittance from Pakistan, does not constitute a declaration under section 12(1A) until the condition is fulfilled.
3. Enforceability of Conditional Dividend Declarations under Company Law:
The court examined the nature of a dividend declaration under company law, referencing Supreme Court judgments and legal texts. It was established that a declaration of dividend creates an immediate debt payable to shareholders, enforceable by law. However, a conditional declaration, such as one subject to remittance from Pakistan, does not create an enforceable obligation until the condition is met. This was supported by the Supreme Court's analysis in J. Dalmia v. Commissioner of Income-tax and other authorities, which distinguished between final and interim dividends and their enforceability.
Supporting Judgments and Legal Provisions:
The court considered the House of Lords' decision in Aramayo Francke Mines Ltd. v. Public Trustee and the Madras High Court's decision in C. Hariprasad v. Amalgamated Commercial Traders Pvt. Ltd., which dealt with similar issues of conditional dividend declarations. However, the court noted that in those cases, the conditions related to the method of payment rather than the declaration itself. In contrast, the resolution in the current case affected the declaration itself, making it conditional on remittance from Pakistan.
The court also referred to section 207 of the Companies Act, 1956, which imposes penalties for failure to distribute dividends within forty-two days of declaration. This provision underscores the immediate enforceability of a declared dividend, further supporting the view that a conditional declaration does not constitute a valid declaration under company law.
Conclusion:
The court concluded that a declaration of dividend subject to remittance from Pakistan does not create an enforceable obligation and, therefore, cannot be taxed under section 12(1A) of the Indian Income-tax Act, 1922. The question referred to the court was answered in the negative, with each party bearing its own costs.
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1969 (6) TMI 18
Tribunal was right in holding that in calculating the penalty leviable u/s 271(1)(i) the amount paid by the assessee under the provisional assessment u/s 23B of the Indian Income-tax Act, 1922, was to be deducted from the amount of tax determined u/s 23(3) of that Act in order to determine the amount of tax on which the computation of penalty was to be based and in reducing the amount of the penalty
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1969 (6) TMI 17
Double income-tax relief - goods manufactured in India and sold in Burma which are also taxed in Burma - though the income has been assessed both in India and Burma, it cannot be said that the income is an income arising without the taxable territories - assessee cannot claim the benefit of section 49D
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