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TMI Blog1994 (2) TMI 325X X X X Extracts X X X X X X X X Extracts X X X X ..... if a bond for such payment is executed. It reads thus, No liquor or intoxicating drug shall be exported unless its export is permitted by the Government or any officer authorised by the Government in this behalf and unless: (a) the duties, taxes, fees and such other sums as are due to the Government under this Act, in respect of such liquor or intoxicating drug, have been paid, or (b) a bond for such payment on its exportation or re-exportation has been executed. The bond is required to be executed in a form provided by the rules made under the Abkari Act, called the Distillery and Warehouse Rules. The form (Form VI) reads thus. Know all men by these presents that I/We...(hereinafter called the bounden/boundens) and...(hereinafter called the surety) are bounden to the Governor of Kerala (hereinafter called the Government) in the sum of Rs...(rupees...) to be paid to the Government for which payment we bind ourselves and our legal representatives. Dated this the...day of...corresponding to the day of.... (signed) Whereas the bounden has/bounding have been permitted by the Government under the Distillery and Warehouse Rules 19...and the amendments ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the instrument in question was not a bond but an agreement because the obligation mentioned in it was incurred under Section 7 of the Abkari Act and not an obligation created under it. 4. Sub-Clause (i) of Clause (9) of Section 2 of the Kerala Stamp Act reads thus : (a) 'bond' includes - (i) any instrument whereby a person obliges himself to pay money to another, on condition that the obligation shall be void if a specified act is performed, or is not performed, as the case may be. 5. Learned Counsel for the appellant contended that under instrument in question the respondents obliged themselves to pay the sum of money set out therein, the obligation to be void on the happening of events specified therein. There was, in his submission, no warrant for holding that the obligation of the respondents arose under the Abkari Act and that, therefore, the instrument in question created no new obligation so that it was not a bond. Learned Counsel for the respondents submitted that for an instrument to be a bond the obligation must be created thereunder. In the instant case, the respondents were obliged to pay the excise duty on the liquor exported by them outside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicated that the obligation to pay money should arise under the terms of the instrument itself. In other words the obligation should be created by the instrument. In the case before the Special bench, the liability to pay sales tax existed under the provision of the Sales Tax Act itself and the mere recital in the document that Adukiya would discharge the liability did not create a new liability under and by the instrument. The instrument was, therefore, held not to be a bond. In Patel Stone Trading Co., Nagpur v. Ramsing AIR1975Bom79 , a learned single judge of the Bombay High Court considered an instrument in which the defendant acknowledged liability in a stated amounts and expressly promised to repay the same. The learned Judge held that the document was executed for the purposes of creating an obligation whereby the defendant agreed to pay to the plaintiff the stated amount and interest thereon. This being the dominant purpose and intention of the instrument, it was a bond. En passant the learned Judge said, and upon this sentence much emphasis was laid. In the present case, either in the statute or common law there was no pre-existing right or liability between the parties. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondition that the liquor shall be delivered into the custody of the Excise Officer in charge of the importer and excise duty shall be paid to that Excise Officer on all or any portion of the liquor which is not so delivered. As required by the Abkari Act, the respondents oblige themselves in the event of breach of the condition, to pay to the State of Kerala the sum of money mentioned in the instrument in question, being the amount of the excise duty. Under the instrument in question the respondents clearly oblige or bind themselves to pay to the State of Kerala a specified sum of money and can be sued thereon. The instrument in question is, therefore, an instrument whereby a person obliges himself to pay money to another, the obligation to become void if a specified act is performed. It is a bond within the meaning of the Kerala Stamp Act. 9. It was submitted in the alternative by learned Counsel for the respondents that, even though the instrument in question may be a bond, it was not liable to duty under Entry 13 of the Schedule of the Kerala Stamp Act but was liable to duty under Entry 32 which related to indemnity bonds. Entries 13, 25, 32, 49 and 50 deal with bonds. Entry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement as defined in Article 5 of the Schedule of the Act. 15. The manufacture, sale and supply of Indian made Foreign Liquor in the State of Kerala is governed by the Kerala Abkari Act. Under it a distiller is permitted to export liquor manufactured by it outside the State after obtaining permission from the excise authorities. Since such liquor is consumed in another State the Government in exercise of its power under Section 17 of the Act issued notification levying concessional duty of ₹ 0.50 per proof litre. But if the quantity exported did not reach the destination or there was wastage etc. then the liability to pay normal duty arose. To ensure such payment the distiller is required to execute a bond under Clause (b) of Sub-section (1) of Section 7 of the Abkari Act which reads as under : No liquor or intoxicated drug shall be exported unless its export is permitted by the Government or any officer authorised by the government in this behalf and unless : (a) the duties, taxes, frees and such other sums as are due to the Government under this Act, in respect of such liquor or intoxicating drug, have been paid, or (b) a bond for such payment on its expo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the instrument, and not if it was in respect of pre-existing right. The High Court was of opinion that since the bond executed by the distillers was an obligation incurred under Section 7 of the Abkari Act it was not an obligation created under the bond. It is the correctness of this view that has been assailed by the State. 17. 'Bond' dictionary means a certificate or evidence of debt. In Oxford Dictionary it is defined as, 'binding engagement, agreement, deed by which person binds himself to pay another; government's or public company's documentary promise to repay borrowed money. Stroud's Judicial Dictionary defines it as, 'an obligation by deed.' Black's Law Dictionary defines it as, 'a certificate or evidence of a debt on which the issuing company or governmental body promises to pay the bondholders a specified amount of interest for a specified length of time, and to repay the loan on the expiration date. In every case a bond represents debt-its holder is a creditor. Commonly, bonds are secured by a mortgage'. Thus a bond is a promise to pay money at a future date. It is an instrument in writing or written acknowledgment for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grain or other agricultural produce to another; Both Section 2 of the Kerala Act and Section 2 of the Indian Stamp Act are identical. The purpose of extracting the definition is to demonstrate that whereas Clause (a) of the Indian Stamp Act or the Kerala Act deals with conditional obligation Clauses (b) and (c) are concerned with simple obligation. In Gisborne Co. v. Subalbowri 8 Cal. 234 it was observed that, 'the definition of a bond in Section 2(5) of the Act is precisely what we understand by a bond in England and it is an obligation of a different character from a covenant to do a particular act'. This observation was made on Section 5(2) as it stood in the original Stamp Act and was similar to what it is 5(2)(a) now in the Act. In Chimnaji v. Ranu (1880) I.L.R. 4 Bom 19 where the defendant promised to repay with interest the sum borrowed and promised in addition to pay 'pailies' of nagli in the month of Phalgoon of the year and on failure to give width at rate of quarter of a maund for every maund per year, it was held that proper stamp duty payable on it was as required for agreement. Similar view was taken in Venkata Chinniaya Rau Garu v. Ventaramaya Ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or purposes of levy of stamp duty must create an obligation to pay for the first time. It must not be in recognition of any pre-existing right. As far back as 1895, in Hira Lal Sircar v. Queen Empress, 22 ILR Cal. 757 it was held that the word 'oblige' indicates that a document can be a bond only when it creates an obligation to pay money as is the case with those documents which are known as bonds but is not the case with the acknowledgments of advances, or of the purchase and receipt of goods, the obligation to pay for which is not created by instrument, but arises from the promises to repay advances and to pay for goods, which the law always implies when money is borrowed or goods are purchased. In M.D. Gupta v. Board of Revenue, 1969 ALJ 333 it was held that where an obligation to pay was a pre-existing one the document executed subsequently giving the nature of the obligation or the terms and conditions of the contract shall be a mere agreement. In Dadri Railways Pvt. Ltd. v. Chinaria Transport Co. and Ors. (1971) RLR 531 it was held that in order that a certain document itself should be bond within the meaning of Section 2(5) of the Act, it was necessary that document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... events stipulated in Clause (a) cannot be reversed in order to bring an instrument within its purview. In Board of Revenue v. Shellwell T. Agencies (1984) K.L.T. 955 a full Bench of the Kerala High Court held that an instrument could be termed as a bond only if an obligation to pay on its basis was created for the first time. Same view was taken by Kerala High Court in Mathai Mathew v. Thampi (1989) 1 K.L.T. 138. 22. The bond under the Abkari Act is executed by a manufacturer for payment of exportation duty as required under Sub-section (1) of Section 7 of the Abkari Act. It is the liability to pay under the Statute which is reduced in form of a bond of as provided under Rules 47 and 50 of the Distillery and Warehouse Rules (referred as rules) framed under Section 29 of the Act. Even if no bond would have been executed the manufacturer would have been liable to pay duty as required under the Abkari Act and the notifications issued under it. But the mere fact that a document is executed to do what the law requires to be done does not alter either the nature of liability or the character of the document. In Halsbury's Law of England it is stated that, 'the test is not w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39; in Section 7 of the Abkari Act does not render it a bond for purposes of stamp duty. The agreement in Form VI has been reproduced earlier. The distiller executing this agreement avails of the facility of exporting the liquor without payment of duty. But it undertakes to pay the amount if the duty on liquor sent to another State is not paid to it. The obligation to pay under the instrument, thus, arises not as a creditor or debtor in the commercial sense or special sense but for failure of duty enjoined by law. 23. The meaning of ordinary and special bond is explained by Rule 51. A special bond is executed for specified occasion or particular consignment of spirit removed from distillery under Rule 50 without payment of duty on condition that duty shall be paid on the prescribed rate in case of failure to account for the satisfaction of the Commission. The specified occasion as is clear from Form VI is the breach of condition of the permit issued by the Excise authorities. The written obligation under the bond which gives rise to payment of money to Government is breach of any of the conditions of the permit granted by the Excise Officer. The obligation to pay arises not unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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