TMI Blog1990 (3) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... de, conducted by any other person or his agent (hereafter in this section referred to as the 'seller' ), (a) any goods in the nature of alcoholic liquor for human consumption (other than Indian-made foreign liquor), a sum equal to forty per cent. of the amount paid or payable by the buyer as the purchase price in respect of such goods shall be deemed to be the profits and gains of the buyer front the business of trading in such goods chargeable to tax under the head 'Profits and gains of business or profession'. (b) the right to receive any goods of the nature specified in column (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 column (3) of the said Table, of the amount paid or payable by the buyer in respect of the sale of such rights 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". TABLE -------------------------------------------------------------------------------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------------------------------------------------------------------------------------------------- Sl. No. Nature of goods Percentage (1) (2) (3) -------------------------------------------------------------------------------------------------------------------------------------------- (i) Alcoholic liquor for human consumption Fifteen per cent. (other than Indian-made foreign liquor). (ii) Timber obtained under a forest lease. Fifteen per cent. (iii) Timber obtained by any mode other than Five per cent. under a forest lease. (iv) Any other forest produce not being timber. Fifteen per cent. -------------------------------------------------------------------------------------------------------------------------------------------- Provided that where the Assessing Officer, 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 utilised 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) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st thereon referred to in sub-section (7) shall be a charge upon all the assets of the seller." The Memorandum Explaining the Provisions in the Finance Bill, 1988, mentions the reasons and the objects with which these provisions were inserted. The same is reproduced as under : "New provisions to counteract tax evasion by liquor contractors, scrap dealers, dealers in forest products, etc. 25. Considerable difficulty has been felt in the past in making assessment of incomes in the case of persons who take contracts for sale of liquor, scrap, forest products, etc. It has been the Department's experience that for taking such contracts, firms or associations of persons are specifically constituted and very often no trace is left regarding them or their members after the contract has been executed. Persons have also been found to have taken contracts in benami names by floating undertakings or associations for short periods. Since tax is payable in the assessment years in respect of the incomes of the previous years, the time by which the incomes from such sources become assessable, such persons are not traceable. At the time of assessment in these cases, either the accounts are no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Board directs, within seven days from the date of collection. It will be treated as tax paid on behalf of the person from whom the amount has been collected and credit shall be given for such amount in the assessment made under this Act on production of a certificate. The new section also provides that if a seller does not collect or after collecting fails to pay the tax, he shall be deemed to be an assessee in default in respect of the tax and the amount of the tax together with the amount of simple interest, calculated at the rate of two per cent. per month or part thereof, shall be a charge upon all the assets of the seller. A new section 276BB provides for prosecution of a person who falls to pay the tax collected at source for a period which shall not be less than three months but which may extend up to seven years and with fine. These amendments will be made effective from 1st June, 1988. " These provisions have been explained in the Notes on Clauses in the Finance Bill, 1988, and clauses 15 and 40 are relevant on this aspect : "Clause 15 seeks to insert a new section 44AC in the Income-tax Act. The new section provides for determination of the income of an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt of the sum furnish to the buyer a certificate to the effect that tax has been collected. Sub-section (6) provides that any person responsible for collecting the tax who fails to collect it shall, notwithstanding such failure, be liable to pay the tax to the credit of the Central Government. Sub-section (7) provides that if a seller does not collect, or after collecting fails to pay the tax, he will be required to pay simple interest at the rate of two per cent. per month or part thereof on the amount of such tax. Sub-section (8) provides that if the tax collected is not paid to the credit of the Central Government, the amount of tax together with the amount of simple interest shall be a charge upon all the assets of the seller. This amendment will take effect from 1st June, 1988." As a result of these amendments, the aggrieved petitioners not only questioned these amendments in various High Courts but also moved representations highlighting their grievances against this measure. However, their challenge had been confined to the competence of Parliament to enact the same, its arbitrariness, its violation of article 19(1)(g), principles of natural justice, the stage for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the petitions to substantiate this plea. They also submit that it was because of this nature of transaction that the Direct Tax Laws (Amendment) Act, 1989, inserted a proviso to section 44AC. Since they are also covered by this amendment, the demand of the respondents for payment of tax is illegal, being without authority of law. Perusal of many of these petitions, for example, Civil Writ Petition No. 173 of 1989 (Messrs. Som Dutt Dogra and Co. v. State of Himachal Pradesh) and Civil Writ Petition No. 356 of 1989 (Pardeep Kumar Sharma and Co. v. Union of India) shows that the petitioners have categorically asserted the application of this proviso, but the Union of India has not specifically assailed the claim of the petitioners in its reply to the writ petitions. So, the same could be held to have been admitted. However, Shri P. A. Sharma, learned standing counsel for the Union of India, made submissions in this behalf and contended that the addition of the proviso to section 44AC does not make any difference since the "buyer" referred to in section 206C from whom the "seller" referred to in section 44AC has to collect the tax in terms of section 206C is the same buyer even aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s enacted are taken into consideration (See Raja Bhagwan Baksh Singh v. Secretary of State, AIR 1940 PC 82). To quote Craies, the most firmly established rules for construing an obscure enactment are those laid down by the Barons of the Exchequer in Heydon's case [1584]76 E. R. 637 which has been continually cited with approval and acted upon. This rule is popularly known as the "Mischief Rule". The intention of this rule is always to make such construction as shall suppress the mischief and advance the remedy according to the true intention of the Legislature. The rules laid down by the Barons of the Exchequer are "that, for the sure and true interpretation of all statutes in general (be they penal or beneficial or restrictive or enlarging of the common law), four things are to be discerned and considered : (i) What was the common law before the making of the Act; (ii) What was the mischief and defect for which the common law did not provide. (iii) What remedy Parliament hath resolved and appointed to cure the disease of the Commonwealth. (iv) The true reason of the remedy. And then the office of all the judges is always to make such construction as shall suppress the mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unit without any provincial barrier that the Constitution-makers adopted article 286 in the Constitution. For, the purpose of construction, this rule is conveniently applied to cases where it is obvious that the intention of the Legislature is to remedy the ascertained evils to which the former law had given rise. It is, therefore, quite legitimate to refer to the former Act as well as to the latter Act which provides the remedy. Similarly, the Supreme Court applied this principle in CIT v. Smt. Sodra Devi [1957] 32 ITR 615 and Dr. Baliram Waman Hiray v. Justice B. Lentin [1989] 176 ITR 1. In the latter case, the court approved a number of previous decisions including H. H. Maharajadhiraja Madhav Rao Jiwaji Rao Scindia Bahadur v. Union of India, AIR 1971 SC 530, 576, wherein the court had observed : "The court will interpret a statute as far as possible, agreeably to justice and reason and that in case of two or more interpretations, one which is more reasonable and just will be adopted, for there is always presumption against the law maker intending injustice and unreason". Shri Indar Singh, learned Advocate-General, also does not subscribe to the contention of Shri P. A. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------------------------------------------------------------------ Thus, L-13 licensees take the liquor from the distillery for retail sale to L-14 vends and in case they fail to supply the same, L-14 licensees can make the purchase from other sources. As per Condition No. 51, supply of country liquor to the retail sale licensees has to be as per the rates given in annexure "I" throughout the excise year 1989-90. Perusal of this document demonstrates that the price of various sizes of bottles of country liquor has to be notified district-wise and their charges mentioned. According to clause 53, the price of country liquor mentioned in annexure "I" in respect of L-13 vends is inclusive of all charges, including cost of transportation, establishment, godown, packing material and the existing export fee imposed by the Uttar Pradesh, Punjab and Haryana Governments, etc. No other charges other than mentioned in Conditions Nos. 47 and 51 have been made admissible to the L-13 Licensees. These rates have been made subject to further revision with the prior permission of the Excise and Taxation Commissioner. The State admits that as per Condition No. 47 of the Annual Excise Announce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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