MODERN THREADS (INDIA) LTD. VS UNION OF INDIA
1999 P T D 3683
[230 I T R 598]
[Rajasthan High Court (India)]
Before Anshuman Singh, J
MODERN THREADS (INDIA) LTD.
Versus
UNION OF INDIA and others
S. B. Civil Writ Petition No. 1814 of 1997, decided on 31/03/1997.
(a) Income-tax---
----Recovery of fax---Writ---Stay of recovery proceedings---Appeal and application for stay pending before Tribunal---Tribunal not functioning properly for past fifteen months---Failure to appoint Judicial Member-- Interim 'stay ordered for three months by High Court---High Court directing constitution of Tribunal within a month to hear case---Indian Income Tax Act, 1961---Constitution of India. Art.226.
(b) Income-tax---
--Appeal to Appellate Tribunal---Failure to appoint Judicial Member of Jaipur Bench---Direction to Union of India to appoint permanent Judicial Member of Jaipur Bench and as an interim measure to constitute a Bench at Jaipur twice in a month---Indian Income Tax Act, 1961---Constitution of India, Art.226. ,
Held, that once the petitioner has availed of an alternative remedy o' filing second appeal before the Tribunal the petitioner cannot be permitted to invoke the extraordinary writ jurisdiction of the High Court without waiting for the result of the appeal filed by him before the Tribunal. It is also settled law that even if the application for stay of recovery proceedings is rejected pending appeal filed by the petitioner, normally the High Court should not interfere against the order passed on the stay application, unless the order is wholly arbitrary or per se illegal. But there were special facts in the instant case, which justified interference by the High Court under Article 226 of the Constitution. The Central Government had failed to discharge its duties in appointing a permanent Judicial Member in the Tribunal, Jaipur Bench, Jaipur, even after 15 months and the number of appeals pending before the Tribunal were in thousands. In view of this, the Union of India had to appoint a permanent Judicial Member at Tribunal, Jaipur Bench, Jaipur, within a period of three months from the date of service of the order of this Court and in the meantime, as an interim measure, a Bench must be constituted at Jaipur twice in a month if not weekly. The Income-tax Department could not adopt coercive methods for the realisation of the amount in question against the petitioner-company for a period of three months. The Union of India had to constitute a Bench of the Tribunal, Jaipur Bench, Jaipur, within 30 days from the date of service of the order of this Court and the Bench so constituted should dispose of at least the stay application if not the appeal of the petitioner, within a period of one month thereafter.
Badrilal Bholaram v. B.K. Srivastava, I.T.O. (1970) 77 ITR 954 (MP); Hi Life Tapes (P.) Ltd. v. Collector of Central Excise (1986) 26 ELT 935 (Mad.) and Vargltese (P.V.) v. CEGAT, Madras (1989) 41 ELT 625 (Ker.) ref.
Paras Kuhad for Petitioner
JUDGMENT
The facts giving rise to this petition under Artic a 226 of the Constitution of India h: icily stated are that the petitioner Modern Threads (India) (P.) Ltd., is, a company incorporated and registered under the Companies Act. 1956 having its registered officer at A-4, Vijay Path, Tilak Nagar Jaipur. The said company is a public limited company engaged in the manufacture of synthetic yarn, woollen yarn, etc. For manufacturing of the aforesaid goods, the company is alleged to have entered into an agreement with Technimont, S. P.A. Milan of Italy, for the supply of technical know how and basic process engineering documentation on December 15, 1995. As per the terms of the agreement, the petitioner has agreed to pay 300 lakhs US dollars to the foreign collaborator for the supply of technical know-how and 35 lakhs US dollars for the supply of basic process engineering documentation. The said agreement is also alleged to have been approved by the Government of India, vide letter dated March 27, 1996. It has been further averred that subsequently some amendments were made in the original agreement and even the amendments made subsequently were also approved by the Government of India vide letter dated July 15, 1996. It has been further averred that the petitioner-company filed an application under section 195(2) of the Income Tax Act, 1961 (hereinafter referred to as the "Act 1961 "), before the Assessing Office: the Deputy Commissioner of Income-tax, Special Range II, Jaipur, on October 29, 1996, to determine the taxability of income under the head technical know-how fees and basic process engineering fees and also for NOC to remit the first instalment of the same. The Assessing Officer, vide order dated December 20, 1996, rejected the aforesaid application and the copy of the order was received by the petitioner on December 23, 1996. The petitioner feeling aggrieved against the aforesaid order preferred an appeal before the Commissioner of Income-tax (Appeals) under section, 248 of the Act, 1961. A photocopy of the same has been annexed as Annexure-2 to the writ petition. Along with the appeal, the petitioner also filed an application under section 119 of the Act, 1961, to review the order passed by the Deputy Commissioner of Income-tax (Appeals) praying therein that the order passed by the Assessing Officer under section 195(2) of the Act, 1961, dated December 20, 1996, may be quashed and permission may be given to the petitioner to remit technical know-how fees and basic process engineering documentation tee without deduction of income-tax or in the alternative' pending the application permission may be given to the petitioner to remit the first instalment of 75 lakhs US dollars as technical know-how fees and 10.5 lakhs US dollars for basic process engineering documentation fee subject to deferment of payment of tax till the decision of the application or first appeal whichever is earlier as an interim relief. The petitioner was informed, vide letter dated December 27, 1996, by the Chief Commissioner of Income-tax, Rajasthan, Jaipur, that necessary instructions in the matter had been issued to the Assessing Officer. A photocopy of the said letter, has been filled as Annexure-3 to the writ petition. After receipt of the aforesaid letter the petitioner is alleged to have contacted the Assessing Officer who directed petitioner to give a personal guarantee of the Chairman of the company in favour of the Income-tax Department, Jaipur and also undertaking to discharge the income-tax liability pursuant to in order uncle section 195 of the Act, 1961. Accordingly, the personal guarantee of the chairman and an undertaking was submitted. Photocopies of the personal guarantee and the undertaking were filed as Annexure-4 and Annexure-5, respectively, to the writ petition. After the personal guarantee and undertaking were given, by the chairman of the company the Deputy Commissioner of Income-tax (Assessment) Special Range 11, Jaipur, issued ,a no objection certificate which runs as under.
"No objection certificate:
With reference to the application dated December 27, 1996, filed by Modern Threads (India) Ltd., with the Chief Commissioner of Income-tax, Rajasthan, Jaipur, and the Chief Commissioner's letter No. CC/AC(T) pet: under section 1,19 of 1996-97/3130, dated December 27, 1996, I have no objection that Modern Petrol Chemicals, a unit of Modern Therads (I) Ltd., having its registered officer at A-4, Vijay Path, Tilak Nagar, Jaipur, 302 004 (Rajasthan (PAN: 30-2-029-CY-0457 (DC(A), Sr.II, Jaipur), for remitting US dollars 75 lakhs (USD seventy-five lakhs only) towards lumpsum technical know-how fees arid US dollars to 5 lakhs (USD ten lakhs fifty thousand only) towards lumpsum payment of basic process engineering fees to Technimont, S. P. A. Milan of Italy.
Sd./ (O. P. Meena), Deputy Commissioner of Income-tax (Assessment) special Range-2, Jaipur."
The Deputy Commissioner of Income-tax (Assessment-, Special. Range 11, Jaipur, vide letter dated December 30, 1996, directed the petitioner to pay f13S demand arising due to the remittance of 75+10.5 US dollars before March 15 1997, in case the petitioner-company is unable to obtain a favourable decision from the Commissioner of Income-tax (Appeals) or a favourable decision from the Central Board of Direct Taxes by March 15, 1997, and also advised the petitioner company that on failure to pay the sane, interest will be charged as per rules. A photocopy of the said letter is filed as Annexure-6 to the writ petition. The Commissioner of Income-tax (Appeals, Rajasthan 11, Jaipur, vide order dated March 11, 1997, upheld the order of the Deputy Commissioner of Income-tax (Assessment) Special Range-II, Jaipur, but allowed the appeal directing the assessing authority to exclude the tax payment to be made by the petitioner on the remittance to the foreign collaborator. 'The petitioner feeling aggrieved by the order dated March 11, 1997, passed by the Commissioner of Income-tax (Appeals) preferred an appeal before the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, along with a stay application. It is not disputed that the appeal as well as the stay application filed by the petitioner are still pending before the Income-tax Appellate Tribunal. Jaipur Bench, Jaipur. In the meantime, the petitioner has been served with the letter dated March 14, 1997, whereby, the petitioner-company has been directed to deposit TDS payment on account of remittance of USD 75 lakhs plus USD 10.5 lakhs to Technimont S. P. A. Italy, immediately. After receipt of the aforesaid demand letter, the petitioner has approached this Curt under Article 226 of the Constitution of India for staying the recovery against the petitioner and restraining the respondents not to press the recovery till the disposal of the appeal/stay application filed by the petitioner before the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur. It is well-settled that once the petitioner has availed of an alternative remedy of filing second appeal before the Tribunal, which has not been decided as yet, the petitioner cannot be permitted to invoke the extraordinary writ jurisdiction of this Court without waiting for the result of the appeal filed by him before the Tribunal. It is also settled that even if the stay application is rejected pending appeal filed by the petitioner, normally, this Court should not interfere against the order passed on the stay application unless the order is wholly arbitrary or per se illegal but there are certain special facts on the basis of which learned counsel for the petitioner has vehemently urged that in the special facts and circumstances of the case, this Court may invoke its power under extraordinary writ jurisdiction. The facts, which have been brought to the notice of the court by learned counsel for the petitioner, are contained in Taxman Vo1.90, January 4, 1997, Part I-, page 31. In this magazine, there are two representations made by the Rajasthan Tax Consultants Association for (i) posting of the Judicial Member at Jaipur Bench, and (ii) Setting up one more Bench for the State of Rajasthan at Jaipur or Jodhpur. I consider it proper to incorporate the peculiar facts of the aforesaid representations in extenso, which runs as under:
"The Jaipur Bench of the Income-tax Appellate Tribunal was set up in the year 1971 for the whole of the State of Rajasthan. At that time, the pendency of appeals was of about 1,500. Later, when the pendency rose to 4,000 an additional Bench functioned for more than one year to liquidate pendency and in order to dispose of an appeal within six to eight months of the institution. The present pendency in the Jaipur Bench of the Tribunal is more than 12,000 and it is taking more than six years for disposal. Some of the appeals instituted in the years 1989, 1990 are also pending.
On the elevation in July, 1995, of Mr. M. A. A. Khan; the then Judicial Member, posted at 'Jaipur Bench of the Tribunal as the Judge of the High Court of Judicature of Rajasthan, the seat became vacant. The regular posting was made in February 1996, of Mr. N.
K. Agarwal. Meanwhile very few visiting Benches functioned. Mr. N. K. Agarwal was also elevated as Judge of the Rajasthan High Court in March, 1996. Mr. M. A. Bakshi was posted as Judicial Member. He took over on April 15,1996. However, he too stands transferred to Bombay Benches with effect from September 23, 1996. Since then the Jaipur Bench is not functioning. Thus, during the last 15 months, the Division Bench of Jaipur Bench, Jaipur, functioned for not more than four months. On account of non-regular functioning, the appeals have piled up. Some of the taxpayers had to approach the High Court for stay of disputed demand/auction of properties causing avoidable inconvenience to the taxpayers.
Your honour had been nice enough to visit Jaipur in November, 1995. The situation was explained and your honour were kind enough to declare that one additional Bench shall also be set up for the State of Rajasthan.
It is, therefore, most humbly and respectfully prayed that Judicial Member be posted forthwith and an additional Bench be also constituted to liquidate the pendency."
Learned counsel urged that in spite of the said representations having been made by the Rajasthan Tax Consultants Association, Jaipur, no Judicial member has been posted at Jaipur Bench, Jaipur, after transfer of Mr. M. A. Bakshi to Bombay on September 23, 1996. From the above facts, it is crystal clear that the Division Bench of the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, has not been properly functioning for the last 15 months. Appellate have filed up and the figure has been mentioned as 12,000 in the representations made by the Association. It is also mentioned that in the last 15 months the Jaipur Bench has not functioned for more than four, months in total. It has been urged by counsel for the petitioner that if a permanent Judicial Member has not been appointed at Jaipur Bench, a Division Bench must be constituted at least twice in a month by calling a Judicial Member from the other Bench of the country. In view of the mentioned above, I am constrained to observe that because of the inaction on the part of the Central Government in appointing a permanent Judicial Member in Jaipur Bench not only assessees but also the Revenue are being put to great hardship and that inaction compels the assessees to approach this Court prematurely for exercise of power of this Court under Article 226 of the Constitution of India pending appeal/stay application before the Tribunal. Learned counsel for the petitioner in support of his contention has placed reliance on a decision of the Madras High Court in Hi Life Tapes (P.) Ltd. v. Collector of Central Excise (1986) 26 ELT 935. I have perused the aforesaid judgment. The facts of the said case are almost similar inasmuch as, pending appeal/stay application the recovery was being made against the assessee without passing any order on the stay application and the Court directed the Appellate Tribunal to decide the stay application within a fixed period and in the meantime the recovery was stayed. Learned counsel in order to strengthen his argument placed reliance on another decision of the Madhya Pradesh High Court in Badrilal Bholaram v. B.K. Srivastava, ITO (1970) 77 ITR 954. The observation made by the Court in the case of Badrilal Bholaram (1970) 77 ITR 954 (MP), is also to the effect that if the Income-tax Officer fails to discharge his duties, he should be compelled by a writ under Article 226 of the Constitution of India to stay leis hands without disposing of the stay application. Lastly, learned counsel for the petitioner places reliance on a decision of the Kerala High Court in P.V. Varghese v. CEGAT, Madras (1989) 41 ELT 625. In that case too, the Court observed that the Appellate Tribunal is duty-bound to expeditiously consider the application for stay and if he fails to do so the Court may interfere under Article 226 of the Constitution of India. I have carefully perused all the facts and observations made in the aforesaid three cases and I find myself in full agreement with the ratio laid down in the aforesaid cases.
Lastly, counsel for the petitioner urged that it is not known whether a permanent Judicial Member shall be appointed or even a Bench could be constituted by calling the other Judicial' Member from the other Bench and has submitted that pending the stay application recovery proceedings should remain stayed. Before parting with this case, I would like to observe that the Central Government has failed to discharge its duties in appointing a permanent Judicial Member in the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, even after 15 months and the number of appeals pending before the Tribunal are in thousands. It is also not understandable that if a permanent Judicial Member is not appointed at Jaipur Bench then why at least a Bench cannot be constituted at least twice in a month for disposing of the stay applications only. I am also of the view that in view of the peculiar facts of the case, directions should also be issued to the Central Government to appoint/post a permanent Judicial Member at the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur.
I, therefore, direct the respondent-Union of India to appoint a permanent Judicial Member at the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, within a period of three months from the date of service of the order of this Court and in the meantime as an interim measure a Bench must be constituted at Jaipur twice in a month if not weekly in order to discourage the assessees running to this Court for invoking a writ jurisdiction under Article 226 of the Constitution of India. Normally, this Court should refuse to interfere in directing the Revenue authorities to stay recovery proceedings pending appeals and stay applications but, keeping in view the special facts and circumstances of the case stated above and in view of the inaction on the part of the Central Government in appointing a permanent Judicial Member at Jaipur Bench, the petitioner has made out a case for interference by this Court in exercise of its extraordinary jurisdiction. I further direct the respondents not to adopt coercive methods for the realisation of the impugned amount against the petitioner-company for a period of three months and I also direct the respondent-Union of India to constitute a Bench of the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, within 30 days from the date of service of the order of this Court and the Bench so constituted should dispose of at least the stay application if not the appeal of the petitioner within a period of one month thereafter.
With the observations and directions contained above, the petition stands finally disposed of at the admission stage itself. Let a certified copy of this order be sent to the Finance Secretary, Ministry of Finance, Government of India, New Delhi, at once.
M.B.A./3164/FCOrder accordingly.