KHIVRAJ MOTORS LTD. VS DEPUTY COMMISSIONER OF INCOME-TAX
1995 P T D 114
[205 I T R 465]
[Madras High Court (India)]
Present: Janarthanam, J
KHIVRAJ MOTORS LTD.
Versus
DEPUTY COMMISSIONER OF INCOME-TAX and others
W. P. No. 16802 and W. M. P. No. 26155 of 1993, decided on 13/09/1993.
Wealth tax--
----Recovery of tax---Stay order against recovery---Interim relief when can be granted---Prima facie case in favour of Revenue---Balance of convenience not in favour of assessee---Stay - order cannot be granted---Constitution of India, Art.226---Indian Wealth Tax Act, 1957.
There are cases which demand that interim orders should be made in the interests of justice. Where gross violations of the law and injustices are perpetrated or are about to be perpetrated, it is the bounden duty of the Court to intervene and give appropriate interim relief. In cases where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizen's faith in the impartiality of public administration a Court may well be justified in granting interim relief against a public authority. But since the law presumes that public authorities function properly and bona fide with due regard to the public interest, a Court must be circumspect in granting interim orders of far-reaching dimensions or orders causing administrative, burdensome inconvenience or orders preventing collection of public revenue for no better reason than that the parties have come to the Court alleging prejudice, inconvenience or harm and that a prima facie case has been shown. There can be and there are no hard and fast rules. But prudence, discretion and circumspection are called for. There are several other vital considerations apart from the existence of a prima facie case. There is the questions of balance of convenience. There is the question of irreparable injury. There is the question of public interest. There are many such factors worthy of consideration.
Held, that, in the instant case, the assessing as well as the appellate authorities had recorded a concurrent finding negativing the claim of the assessee that part of a certain property was stock-in-trade, not exigible to wealth tax, thereby establishing a prima facie case in favour of the Department. Even assuming that there was a prima facie case in favour of the assessee, that, by itself, was not a ground for grant of stay. From the point of view of balance of convenience, it was definitely not in favour of the assessee, even if it succeeded in the appeal ultimately. The assessee would have the benefit of refund with interest, as prescribed under the relevant statutory provisions, without even resorting to the filing of a civil action for such a purpose. Therefore, an order granting stay of collection of wealth tax could not be passed.
Assistant Collector of Central Excise v. Dunlop India Ltd. (1985) 154 ITR 172; (1985) 58 Comp Cas 145 (SC) ref.
V. Ramachandran for K. Mani, Mallika Srinivasan and N. Balasubramaniam for Petitioner.
JUDGMENT
Messrs Khivraj Motors Ltd., Madras-6 (petitioner, for short, "the company"), it is said, is a company registered under the Companies Act and is a regular assessee under the Income Tax Act, 1961. The companies like the petitioner were relieved of the obligation to pay wealth tax, as a consequence of suspension of wealth tax on companies with effect from April 1, 1960, by the Finance Act, 1960 (13 of 1960). By section 40 of the Finance Act, 1983 (11 of 1983), with effect from April 1, 1983, wealth tax was revived in a limited way on and from the assessment year 1984-85, in the case of closely-held companies. The said section 40 was further amended by the Finance Act, 1988 (26 of 1988).
The petitioner-company owns assets in the shape of property at Nandhanam, as well a property at Delhi, apart from other assets. The company, it appears, was subjected to wealth tax assessment, ever since the assessment year 1985-86 onwards. For the four assessment years, namely, 1985-86 to 1988-89, the assets of the company had been valued for the purpose of wealth tax on the respective dates .of valuation, relatable to the assessment year as per the modalities prescribed. The company, it appears, took the stand that part of the property at Nandhanam should be regarded as stock-in-trade and, therefore, such portion of that property must be excluded from the computation for determining the net value of the assets exigible to wealth tax.
This sort of a contention had been negatived not only by the Deputy Commissioner of Income-tax, Special Range, Madras (first respondent)--the assessing authority, but also by the Commissioner of Income-tax, Tamil Nadu-1, Madras-34 (second respondent)--the appellate authority, taking into account the enormity and colossal nature of the rental income received from Nandhanam property--a capitalized asset in the form of investment.
The company, aggrieved by the said orders, filed appeals in T. A. Nos.1013, 1057 and 1058/(Mds) of 1981 and 1024/(Mds) of 1992 before the Income-tax Appellate Tribunal, Bench 'D'. Madras (third respondent). The Tribunal, besides filing a petition for stay in S.P. No.59/(Mds) of 1993, praying for stay of proceedings of the net demand of Rs.11,82,628 relating to the assessment years 1985-86 to 1988-89 on the ground that the entire demand is disputed and the assessee is not having the requisite resources to comply with the demand.
The Tribunal, by order dated August 6, 1993, dismissed the stay petition holding that the tenability or otherwise of the demand is a matter falling for consideration in the arena of discussion in the appellate proceedings and not in the stay proceedings and that no evidence had been furnished regarding the alleged financial stringency or constraint, as pleaded by the company, besides finding that there are no other extraordinary circumstances warranting interference by way of grant of stay as prayed for. Aggrieved by the said order, the company resorted, to the present action praying for issue of a writ of certiorari to quash the same and pass such further or other orders, as this Court may deem fit and necessary, in the circumstances of the case.
Alongwith the writ petition, the company also filed W. M. P. No.26155 of 1993 praying for stay of collection of the amount as demanded.
Mr. V. Ramachandran, learned senior counsel, appearing for the petitioner, would resort to mounting a relentless attack on the order impugned as being perverse and, therefore, not sustainable, in the eye of law, inasmuch as there is an omission to give a finding as respects the prima facie nature of the case by relegating such a question to regular appeal proceedings, besides airing a view on the question of financial stringency or constraint, which is not at all germane and relevant for the purpose of consideration of grant of otherwise of the stay sought for.
In projection of such a submission, of course, true it is, implicit reliance had been placed upon certain decisions of various High Courts and the Supreme Court by learned senior counsel, which need no mention, in the light of the latest pronouncement on the subject by a larger Bench of the Supreme Court in the case of Assistant Collector of Central Excise v. Dunlop India Ltd. (1985) 154 ITR 172 (SC).
In order to have a fine grasp of the principles evolved therein, better it is, I feel, to pen down the facts of that case:
(a) The respondent, Dunlop India Limited, is a manufacturer of tyres, tubes and various other rubber products. By a notification dated April, 6, 1984, issued by the Government of India, Ministry of Finance (Department of Revenue), in exercise of the powers conferred on it by rule 8(1) of the Central Excise Rules, 1944, tyres, falling under item No. 16 of the First Schedule to the Central Excises and Salt Act, 1944, were exempt from a certain percentage of excise duty to the extent that the manufacturers had not availed themselves of the exemption granted under certain other earlier notifications. The Department was of the view that the company was not entitled to the exemption as it has cleared the goods earlier without paying central excise duty, but on furnishing bank guarantees under various interim orders of Courts. The company claimed the benefit of the exemption to the tune of Rs.6.05 crore and filed a writ petition in the Calcutta High Court and sought an interim order restraining the central excise authorities from the levy and collection of excise duty.
(b) The learned Single Judge took the view that a prima facie case had been made out in favour of the company and by an interim order allowed the benefit of the exemption to the tune of Rs. 2,93,85,000, for which amount the company was directed to furnish a bank guarantee, that is to say, the goods were directed to be released on the bank guarantee being furnished.
(c) An appeal was preferred by the Assistant Collector of Central Excise under clause 10 of the Letters Patent and a Division Bench of the Calcutta High Court confirmed the order of the learned Single Judge, but made a slight modification in that the Collector of Central Excise was given the liberty to encash 30 per cent. of the bank guarantee.
(d) The Assistant Collector of Central Excise aggrieved by the said order, preferred an appeal before the Supreme Court, by way of special leave. The Supreme Court, by an interim order dated November 15, 1984, vacated the orders passed by the learned Single Judge as well as by the Division Bench, by granting two weeks' time to the respondent to file a counter.
(e) No counter has been filed. But, however, the company was represented by learned senior counsel, Mr. F. S. Nariman.
(f) In such a context, the Supreme Court said (at page 182);
We do not have the slightest doubt that the orders of the learned Single Judge as well as a Division Bench are wholly unsustainable and should never have been made. Even assuming that the company had established a prima facie case, about which we do not express any opinion, we do not think that it was sufficient justification for granting the interim orders as was done by the High Court. There was no question of any balance of convenience being in favour of the respondent-company. The balance of convenience was certainly in favour of the Government of India. Governments are not run on mere bank guarantees. We notice that, very often, some Courts act as if furnishing a bank guarantee would meet the ends of justice. No Governmental business or for that matter no business of any kind can be run on mere bank guarantees. Liquid cash is necessary for the running of a Government as indeed any other enterprise. We consider that where matters of public revenue are concerned, it is of the utmost importance to realize that interim orders ought not to be granted merely because a prima facie case has been shown. More is required. The balance of convenience must be clearly in favour of the making of an interim order and there should not be the slightest indication of a likelihood of prejudice to the public il1erest. We are very sorry to remark that these considerations have not been borne in mind by the High Court and an interim order of this magnitude had been granted for the mere asking. The appeal is allowed with costs.
(g) By giving vent to such an expression in arriving at a conclusion in the case before them, the Supreme Court also expressed (at page 178);
"We have come across cases where the collection of public revenue has been seriously jeopardized and budgets of Governments and local authorities affirmatively prejudiced to the point of precariousness consequent upon interim orders made by Courts. In fact, instances have come to our knowledge where Governments have been forced to explore further sources for raising revenue sources which; they would rather well leave alone in the public interest, because of the stays granted by Courts. We have come across cases where an entire service is left in a state of flutter and unrest because of interim orders passed by the Court, leaving the work they are supposed to do in a state of suspended animation. We have come across cases where buses and lorries are being run under orders of Court though they were either denied permits or their permits had been cancelled or suspended by the transport authorities. We have come across cases where liquor shops are being run under interim orders of Court. We have come across cases where the collection of monthly rentals payable by excise contractors has been stayed, with the result that at the end of the year the contractor has paid nothing but made his profits from the shop and walled out. We have come across cases, where dealers in food grains and essential commodities have been allowed to take back the stocks seized from them as if to permit them to continue to indulge in the very practices which were to be prevented by the seizure. We have come across cases where land reform and important welfare legislations have been stayed by Courts. Incalculable harm has been done by such interim orders. All this is not to say that interim orders may never be made against public authorities. There are, .of course, cases which demand that interim orders should be made in the interests of justice. Where gross violations of the law and injustices are perpetrated or are about to be perpetrated, it is the bounden duty of the Court to intervene and give appropriate interim relief. In cases where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizen's faith in the impartiality of public administration, a Court may well be justified in granting interim relief against a public authority. But since the law presumes that public authorities, function properly and bona fide with due regard to the public interest, a Court must be circumspect in granting interim orders of far-reaching dimensions or orders causing -administrative, burdensome inconvenience or orders preventing collection of public revenue for no better reason than that the parties have come to the Court alleging prejudice, inconvenience or harm and that a prima facie case has been shown. There can be and there are no hard and fast rules. But prudence, discretion and circumspection are called for. There are several other vital considerations apart from the existence of a prima facie case. There is the question of balance of convenience. There is the question of irreparable injury. There is the question of the public interest. There are many such factors worthy of consideration. We often wonder why in the case of indirect taxation where the burden has already been passed on to the consumer, any interim relief should at all be given to the manufacturer, dealer and the like. "
Worthwhile it is, at this juncture, to pen down the frowning of the Supreme Court, with agony and anguish, as to the grant of stay orders by entertaining writ petitions under Article 226 of the Constitution of India, as found stated even at the threshold of the said judgment (at page 174);
"It is indeed a great pity--and, we wish we did not have to, say it but we are afraid we will be signally failing in our duty if we do not do so- some Courts, of late, appear to have developed an unwarranted tendency to grant interim orders--interim orders with a great potential for public mischief--for the mere asking. We feel greatly disturbed. We find it more distressing that such interim orders, often ex parte and non -speaking, are made even by the High Courts while entertaining writ petitions under Article 226 of the Constitution, and in the Calcutta High Court, on oral application too."
Now, coming to the facts of the case on hand, it is beyond the pale of controversy that the assessing as well as the appellate authorities, namely, respondents Nos.1 and 2 recorded a concurrent finding negativing the claim of the company that part of the Nandhanam property is stock-in-trade, not exigible to wealth tax, thereby establishing a prima facie case in favour of the Department. Even assuming that there is a prima facie case in favour of the company, that, by itself, is not a ground for grant of stay as prayed for as per the above dictum of the Supreme Court and to which, by way of reiteration, other vital consideration, apart from the existence of a prima facie case, must be taken into account, in the matter of grant or otherwise of stay sought for. Such questions may lie on balance of convenience, irreparable injury, public interest and many such factors worthy of consideration.
In the case on hand, as already indicated, not even a prima facie case is made out in favour of the company, apart from the absence of the other vital questions for consideration, as indicated by the Supreme Court, leaning in favour of the company and what is worse is that public interest demands non-grant of stay of collection of tax as demanded. Even from the point of view of balance of convenience, it is definitely not in favour of the company, even if it succeeds in the appeal ultimately. The company will have the benefit of refund with interest, as prescribed under the relevant statutory provisions, without even resorting to the filing of a civil action for such a purpose.
In this view of the matter, the existence or otherwise of the financial v stringency or constraints, as urged by the company and taken due note of by the Tribunal, is of no consequence.
For the reasons given above, the writ petition as well as the writ miscellaneous petition deserve dismissal even at the admission stage and they are, accordingly, dismissed.
M.B.A./296/T.FPetitions dismissed.