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TMI Blog2015 (7) TMI 1028X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the said provision w.e.f 1st April, 1992 is having a bearing with regard to the exigibility of tax to the very same item mentioned in the Table under 206C, is having no merit or significance. Collection of tax at source is discernible under other similar circumstances as well, as referred to hereinbefore. This being the position, the circumstance under s. 44AC was introduced or the consequence of deletion of the said provision w.e.f. 1st April, 1993, cannot have a bearing in non- satisfying the requirement by the concerned dealers under s.. 206C of the Act, in respect of the commodities specified in the 'Table' given under the said provision.For clarity and convenience, rate of tax to be collected is also specified under s. 206C, in respect of the concerned commodities, to be adjusted against the actual tax payable by the buyer under the regular assessment. This being the position, the source from which 'timber' came to the hands of the petitioners does not have any relevance at all, and it very much satisfies the term "obtained by another mode", as envisaged under the relevant provisions of law. The version of the petitioners is that it has to be read and understood givin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be treated as an assessee-in-default' under s. 206C(6); (ii) why interest under s. 206C(7) should not be charged against the petitioners; and (iii) why penal action should not be initiated against the petitioners. 3. On receipt of Ext. PI notice, the petitioners submitted Ext. P2. explanation, disputing the liability to effect tax collection and mainly contending that the petitioners were not covered under s. 206C(1) of the Act. After considering the reply, the 2nd respondent finalised the assessment, passing Exts. P3 to P7 orders for the different assessment years, holding that there was infringement of the mandatory requirement under s. 206C and hence the petitioners were to be deemed as 'assessee-in-default', thus demanding to satisfy the tax and interest. Pointing out that appeal will not be an effective alternative remedy, the impugned orders having been passed by placing reliance on the decision rendered by the Gujarat High Court in Shyam Timber (P.) Ltd.'s case [Annex. R2(C) produced along with the statement filed by the 2nd respondent], the petitioners have approached this Court, challenging the said orders in r these writ petitions. 4. A detaile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , was never considered by the apex Court in the said decision. Since it is settled law, that a decision will make it a 'precedent', only in respect of the issue that has been considered and decided, the learned senior counsel submits that, the above decision cannot be an authority on the question raised in these writ petitions and it requires to be independently considered. If there is no liability to collect the tax at source, the nature of transaction being different, involving import from abroad, the petitioners cannot act as the collection agents of the respondents and as such, there cannot be any 'bonded labour' or adverse consequence. 7. The learned senior counsel for the petitioners points out that, as discernible from the 'Object and reasons' for incorporating s. 44AC into the statute book and the 'Budget Speech' in this regard, that the Department was finding it extremely difficult to trace out the persons/parties and effect assessments, who were dealing with certain specified commodities like liquor', 'forest timber' etc. Such goods were being obtained even in bogus names or constituting establishments temporarily and evading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of tax in the aforesaid circumstances, the 'deeming fiction', in turn, has always to be given a restrictive interpretation. This is more so since, the remedial measures were brought about, to check the wide spread smuggling of forest produce out of reserve forests, which were mostly being transported with sham documents or without documents in the State. But the position is different insofar as the petitioners' case is concerned, as it involves import from other countries, supported by valid documents and subsequent sale on the strength of further records. 9. Mr. P.K. Ravindranatha Menon, the learned senior Central Government counsel (Taxes) points out that, the challenge raised against the proceedings finalized by the assessing authority is absolutely without any basis, legal or factual. Admittedly, the petitioners have not effected collection of tax at source, in spite of the clear mandate under s. 206C of the Act and in spite of upholding the constitutional validity of the provision, by this Court and also by the apex Court. It is evident from the impugned orders that, the proceedings have been finalized in respect of the sales effected only to the registered de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lords, payments on work contracts and the like. Non-collection of tax at source having been admitted, there is clear infringement of the statutory provision under s. 206C and as such, the impugned orders are not assailable under any circumstance, submits the learned counsel. Constitutional validity of s. 44AC and s. 206C of the IT 1961 was the subject-matter of consideration in P. Kunhammed Kutty Haji (supra) and validity of the statute was upheld by a learned Single Judge of this Court. This was affirmed by a Division Bench as per the decision in T.K. Aboobacker v. Union of India [1989] 177 ITR 358. The constitutional validity of the provision was upheld also by a Division Bench of the Andhra Pradesh High Court in A. Sanyasi Rao v. Government of Andhra Pradesh [1989] 178 ITR 31 . The question had come up for further consideration before another Division Bench of this Court again, raising some additional grounds (in K.M. Joseph Binoy's v. Union of India) [1992] 194 ITR 449 . After referring to the earlier decision rendered by this Court on the point and also by making a reference to the verdict passed by the Division Bench of the Andhra Pradesh High Court, the challenge was rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other mode; (b) the right to receive any goods of the nature specified in col. (2) of the Table below, or such goods, as the case may be, a sum equal to the percentage, specified in the corresponding entry in col. (3) of the said Table, of the amount paid or payable by the buyer in respect of the sale of such right or as the purchase price in respect of such goods shall be deemed to be the profits and gains of the buyer from the business of trading in such goods chargeable to tax under the head 'Profits and gains of business or profession': Sl. No. Nature of goods Percentage (i) Timber obtained under a forest lease Thirty five per cent (ii) Timber obtained by any mode other than under a forest lease Fifteen per cent (iii) Any other forest produce not being timber Thirty five per cent (2) For the removal of doubts, it is hereby declared that the provisions of Sub-s. (1) shall not apply to a buyer (other than a buyer who obtains any goods, fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided that where the AO, on an application made by the buyer, gives a certificate in the prescribed form that to the best of his belief any of the goods referred to in the aforesaid Table are to be utilized for the purposes of manufacturing, processing or producing articles or things and not for trading purposes, the provisions of this sub-section shall not apply so long as the certificate is in force. (2) The power to recover tax by collection under sub-s. (1) shall be without prejudice to any other mode of recovery. (3) Any person collecting any amount under sub-s. (1) shall pay within seven days the amount so collected to the credit of the Central Government or as the Board directs. (4) Any amount collected in accordance with the provisions of this section and paid under subs. (3) shall be deemed as payment of tax on behalf of the person from whom the amount has been collected and credit shall be given to him for the amount so collected on the production of the certificate furnished under sub-s. (5) in the assessment made under this Act for the assessment year for which such income is assessable. (5) Every person collecting tax in accordance with the provisions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39; means the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm or co-operative society. Subsequently, as per the Finance Act, 2003, cls. (a)(i) and (a)(ii) mentioned above came to be substituted w.e.f. 1st June, 1993 in the following terms : 10. Clauses (a)(i) and a(ii) have been substituted by the Finance Act, 2003 w.e.f. 1st June, 1993, which read as follow : (i) a public sector company, or (ii) a buyer in the retail sale of such goods obtained in pursuance of such 'sale. 14. Shortly thereafter, the above provisions were further substituted by the Taxation Laws (Amendment) Act, 2003, w.e.f. 8th Sept., 2003 which read as follows : 11. The said clauses further substituted by the Taxation Laws (Amendment) Act, 2003 w.e.f. 8th Sept., 2003 which read as below : Explanation.-For the purposes of this section,- (a) 'buyer' means a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in the table in sub-s. (1) or the right to receive any such goods but does not include,- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents at different levels. Apart from the relevant invoices issued in the name of the importer, there will be bills of entry, documents regarding the satisfaction of customs duty, receipts regarding satisfaction of advance tax under the local statute, lorry receipts, transit passes etc. It is true, that the petitioners stand on a different footing with proper identity and there may be transparency in their dealings. But the anxiety of the law makers was more with reference to the probable mischief, if any, played by the buyers and the chance for evasion of tax. It was with that intent, a duty was cast upon the sellers, to effect collection of tax at source and to have it remitted to the Government, to be credited against the account of, the buyers, as envisaged under sub-s. (4) of s. 206C. 17. By virtue of the nature of business and the type of commodity involved, the law makers, in their wisdom, thought it fit to fix a 'presumptive income' in respect of such transactions, which was brought about by incorporating s. 44AC w.e.f. 1st April, 1989. It is true that the .said provision had a life span only till 31st March, 1993 and the same was deleted, by virtue of a cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letion of s. 44AC from the statute book w.e.f. 1st April, 1992, there were several amendments to s. 206C as extracted hereinbefore. The scope of the said provision was widened and this is pursuant to conscious decisions taken by the law makers at different points of time. As made clear by the apex Court, s. 44AC is only an adjunct and Explanatory to s. 206C. Sec. 44AG does not levy any charge, as there is of course difference between the subject-matter of tax and the standard by which it is measured. 'Purchase price' is taken as the 'measure', to work out the figure and that is all. The presumptive income concept is to be read and understood to have only a limited field of application i.e. for collection of tax. In fact, there is no presumptive tax under s. 206C and it only fixes a measure, as to the amount to be collected and deposited in the account of the Government, to be credited against the account of the buyer. Proper assessment will follow and once the liability is fixed, it may turn to 'buyer' to pay the balance tax, or effect refund, if any. It is also relevant to note that, the legislature incorporated s. 206CA, by virtue of the amendment in the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... items have been identified and appropriate extent of collection of tax has been stipulated to be finalized in the due course, after verification of accounts of the buyers/traders concerned. It is known to everybody that 'Timber' is not such an item, transportation of which could be easily concealed. But the Department has come across several ways and means carved out by line traders in the field, to effect deals and evade tax through such dubious means. In such situation, commodity-wise preference has been made, identifying such items and the trade set up, considering the market conditions and such other circumstances. This includes trade in liquor, timber, tendu leaves, scrap, other forest produces, minerals being coal, lignite or iron ore. Depending upon the nature and extent of trade and the commodities concerned, different extent of deduction/percentage has also been specified, as given in the Table', his is on the basis of the conscience and wisdom of the law makers and it is not for the Court to question or substitute the same. Whether timber' is imported from outside the country or whether it comes to the ands of the petitioners by forest lease or any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to have been accrued, to attract imposition of tax. Considering the factual position involved, though the 'timber' was imported from abroad, after clearance from the Customs Department paying the customs duty, when sale is effected by the petitioners (sellers) to the concerned registered dealers or others (buyers), income can be said to have been accrued at the time of purchase to attract imposition of tax on the 'buyer'. For clarity and convenience, rate of tax to be collected is also specified under s. 206C, in respect of the concerned commodities, to be adjusted against the actual tax payable by the buyer under the regular assessment. This being the position, the source from which 'timber' came to the hands of the petitioners does not have any relevance at all, and it very much satisfies the term obtained by another mode , as envisaged under the relevant provisions of law. The version of the petitioners is that it has to be read and understood giving restrictive meaning referring to the circumstances under which s. 44AC was introduced w.e.f 1st April, 1988, does not hold any water at all. 25. There is a feeble attempt to contend that the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffect of s. 206C. According to the learned counsel, it has to be with reference to the factual scenario as existed at the time of introduction, when the provision prescribing for reckoning a portion of the purchase price as 'presumptive income' was brought into, by way of incorporation of s. 44AC of the IT Act, the difficulties experienced by the Revenue to identify persons engaged in the trade of specified Commodities (timber obtained by way of forest lease, forest produce, timber obtained by any other mode of transport) and the chances for evasion of tax, for want of proper identity and lack of infrastructure to trace out the defaulters. 27. In the above decision, reference has been made to principle of 'noscitur a sociis'. The said principle is [as explained in Advance Law Lexicon Vol. III-3rd Edition 2007-reprint (P. Ramanatha Iyer)]-the meaning of the doubtful word may be ascertained by reference to the meaning of the word associated with it. This Court finds that the said decision does not come to the rescue of the petitioners in any manner. Same is the position, with regard to the decision rendered by a Division Bench of the Madras High Court in CTT v. Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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