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TMI Blog2015 (12) TMI 1771X X X X Extracts X X X X X X X X Extracts X X X X ..... 629, 12767 and 13009 of 2015. Ramesh Ranganathan And M. Satyanarayana Murthy JJ. For the Parties : Vinod Kumar Tadakamalla, A. Santosh Kumar, J. V. Prasad (SC for Income Tax), B. Narayana Reddy, Asst. Solicitor General, Gandham Durga Bose, K. Vivek Reddy, N. Jayasurya, and G. Madhusudhan Reddy Advocates. JUDGMENT Ramesh Ranganathan J.- 1. The question which arises for consideration, in this batch of miscellaneous applications, is whether an interlocutory order, which travels beyond even the main relief sought for in these writ petitions and, in effect, results in the writ petitions being allowed, without even a counter-affidavit being filed by the respondent-Income-tax Department, can be passed at the stage of admission of the writ petitions ? 2. Facts in brief, are that the Deputy Commissioner of Income-tax passed an assessment order, for the assessment year 2012-13 under section 143(3) of the Income-tax Act, levying tax on APBCL for Rs. 1,468.64 crores. The assessing authority relied on the earlier orders of the Income-tax Appellate Tribunal, passed in the appeals preferred by APBCL for the assessment years 2006-07, 2008-09 and 2009-10 ; and disallowed the deductions claime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting liberty to APBCL to approach the appropriate forum. 5. Despite an opportunity being given by the Tax Recovery Officer to pay the tax demand, APBCL failed to do so. As the tax arrears of Rs. 1468.64 crores could not be recovered, the Tax Recovery Officer, following the procedure laid down in the Second Schedule to the Income-tax Act, attached the stocks of beer, foreign liquor (FL), and Indian made foreign liquor (foreign liquor), lying in the various godowns of APBCL. 6. Companies, which manufacture and supply beer, foreign liquor and Indian made foreign liquor to APBCL, invoked the jurisdiction of this court, under article 226 of the Constitution of India, contending that the stocks lying in the godowns of APBCL (which were attached by the Income-tax Department) belonged to them ; and any delay in the sale of the attached stock of beer would result in wastage of the entire stock. The petitioners contended that the title over these goods (beer, foreign liquor and Indian made foreign liquor) had not passed on to APBCL ; beer was a perishable product and, as such, had a restricted shelf life of only six months, that too if it was stored in conducive conditions in terms of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be kept in a separate bank account, and it was made clear that no portion of the net sale proceeds should be appropriated either by the petitioner or anyone else, and should be kept in a separate account which would be subject to further orders of the court. The Division Bench also observed that the genuineness of the expenditure, to be incurred for sale, should be scrutinised by the Revenue officials who would be deputed ; if the genuineness of the expenditure was doubted, then the entire gross sale proceeds should be deposited ; and, in that case, the petitioners should apply to the court. The interim orders, to the extent the attached stocks were directed to be sold and the sale proceeds directed to be kept in a separate bank account, sought to protect the interests of both the petitioners and the Income-tax Department, and are, therefore, made absolute. 9. The sale of the attached property (beer, foreign liquor and Indian made foreign liquor), in terms of the interim orders passed by this court, yielded Rs. 489.07 crores. While the order, in W. P. M. P. No. 12189 of 2015 in W.P. No. 9254 of 2015, dated April 2, 2015 whereby incidental expenses were permitted to be deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State Government ; it may also have an adverse impact on public health, as anti-social elements could take advantage of the situation, and bring non-duty paid liquor, illicit and spurious liquor, and adulterated toddy, to fill the gap ; non-supply of liquor may prompt retailers to black market the stocks jacking up the retail price ; as per the interim orders, the sale of Indian made foreign liquor/foreign liquor/beer from APBCL was commenced under intimation to the Income-tax Department ; the sale proceeds were being deposited in a separate bank account as directed by the High Court, after deducting incidental expenses, i.e., the Government levies and cost of sales to the suppliers ; and the statement, showing the same, was communicated to the Income-tax Department from time to time. 12. In the counter-affidavit filed by the Income-tax Department, it is stated that, if the petitioner or any other third party had any grievance against the attachment made by the Department, they could approach the Tax Recovery Officer under rule 11 of the Second Schedule to the Income-tax Act ; in some of the Writ affidavits, it is admitted that the stocks belong to APBCL ; it is, therefore, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pending before this court in ITTA Nos. 158, 159 and 160 of 2014 ; when the Income- tax Department attached their properties, the Telangana Beverages Corporation approached the High Court ; in W. P. Nos. 5616 and 5606 of 2015, this court passed a similar order on March 4, 2015, as has been passed in the present writ petitions ; later when the Income-tax Department complained that state taxes were being deducted, the court observed that it was crystal clear and required no further clarification ; and this affidavit is being filed to bring to the notice of the court what exactly happened before this court earlier. 14. Reference to the order of the Division Bench, in W.P. No. 5616 and 5606 of 2015, is inapposite. The Telangana State Beverages Corporation Limited ("TSBCL" for short) filed W.P. No.5606 of 2015 to declare the prohibitory orders issued by the Tax Recovery Officer as illegal and without jurisdiction ; and W. P. No. 5616 of 2015 to declare the warrant of attachment of moveable property, issued by the Tax Recovery Officer as illegal and without jurisdiction. By a common order dated May 1, 2015 both the writ petitions were allowed. The Division Bench held that TSBCL came into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m orders should be continued, and whether APBCL was justified in paying the entire amount due to the petitioners towards the supplies made by them, and in making payment to the Government of Andhra Pradesh under different heads, from the proceeds of Rs. 489.07 crores received by APBCL on the sale of the attached stocks, leaving a paltry sum of Rs. 3.44 lakhs (rupees three lakhs forty-four thousand) remaining in the account to be adjusted towards the Income-tax dues of APBCL in excess of Rs. 1,468.64 crores. It would not be appropriate to hear the writ petitions finally at the interlocutory stage, without the consent of all the parties to these writ proceedings. We shall, therefore, confine our examination to the question whether the interim orders passed earlier should be vacated or made absolute ; and consequential orders, if any, to be passed pursuant thereto. 17. Along with its counter-affidavit, APBCL has filed a tabular statement which contains the name of the supplier ; payment made by the supplier, Income-tax deducted at source, amount paid towards value added tax, amount paid towards assessment fee on foreign liquor, amount paid towards privilege fee from clubs, amount pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eign liquor to APBCL, sold ; and the sale proceeds being handed over to them. On a query from this court whether the petitioners had furnished details of manufacturing expenses to APBCL, before receipt of the sale price on the supplies made by them to APBCL, and whether manufacturing expenses could be understood as the sale price itself, the reply given by Sri S. Ravi and Sri R. Raghunandan, learned senior counsel appearing on behalf of the petitioners, is only that such a contention has not been raised in the counter-affidavit filed on behalf of the Income-tax Department. While the interim orders, no doubt, permitted manufacturing expenses to be deducted, the reasons, which weighed with this court in permitting such deductions, are not reflected therein. In any event, permission to deduct manufacturing expenses cannot be equated to payment to the suppliers of the sale price itself. 20. What is even more disconcerting is that APBCL, even without filing a writ petition and without obtaining any order from this court in their favour, has, under the guise of the interim orders passed at the petitioners' behest, paid the Government of Andhra Pradesh Rs. 302.02 crores towards value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt. 22. Though the interim orders, passed by this court, required APBCL, in case the genuineness of the expenditure was doubted by the Income-tax Department, to deposit the entire gross sale proceeds into the separate account, it is clear that APBCL has not even complied with the interim order, and it is the Income-tax Department which has now filed a petition seeking vacation of the interim order passed earlier. I. Power to grant ad interim ex parte orders should be exercised with great circumspection : 23. Sri K. Vivek Reddy, learned counsel for the petitioner, would submit that as notices were served on the Income-tax standing counsel, the interim order passed by this court cannot be construed as an ex parte ad interim order. A copy of the writ petition is served on the standing counsel, before it is filed in the court, in compliance with rule 7(a) of the Writ Proceeding Rules, 1977, which stipulates that, whenever a petition or application is presented against the Government, or any authority, the copies of the petition, application and the accompanying affidavit and documents shall be served on the Government pleader or the standing counsel concerned, and the said petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been shown. 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. (Assistant Collector of Central Excise v. Dunlop India Ltd. [1985] 154 ITR 172 (SC) ; AIR 1985 SC 330 Calcutta Hardware Stores, AIR 1986 SC 614). 27. As an ex parte ad interim order has already been passed, and petitions to vacate the said orders have been filed by the Income-tax Department, we must examine whether the interim orders granted earlier should be vacated or made absolute. Before doing so, let us examine the contention of Sri J. V. Prasad, Learned standing counsel for the Income-tax Department, that the interim orders granted earlier go even beyond the main relief sought for in these writ petitions. II. Ordinarily ad interim orders, which have the effect of granting the main relief itself, should not be passed : 28. Interim ex parte orders, which result in granting the main relief in the writ petition, should not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A consequential direction is sought to the Commissioner of Income-tax to release the stocks of the petitioner, lying in various depots of the APBCL, for sale of the same to the retailers. The main relief sought for, in W.P. No. 9779 of 2015 filed by Diageo India Private Limited, is to declare the action of the respondents in withholding the foreign liquor imported, and the Indian made foreign liquor manufactured, by the petitioner lying in the godowns and warehouses of APBCL, under the guise of attachment proceedings, as illegal and arbitrary ; and for a consequential direction to the respondents to release the petitioner's stock, lying in the godowns and warehouses of APBCL, to retail vendors and realise the sale proceeds thereof. 31. The main relief sought for, in W. P. No. 9789 of 2015 filed by the United Spirits Limited, is to declare the action of the respondents in withholding the Indian made foreign liquor manufactured by the petitioner, lying in the godowns and warehouses of APBCL under the guise of the attachment order, as arbitrary and high-handed. A consequential direction is sought to the respondents to release the petitioner's stocks, lying in the godowns and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here the non-passing of such order would cause such injury as cannot be repaired later. The present batch of cases, for reasons to be detailed hereinafter, are not such. (Home Secretary v. Darshjit Singh Grewal [1993] 4 SCC 25). III. Interim orders should not be passed for the mere asking : 33. Interim orders ought not to be passed for the mere asking. In Dunlop India Ltd., the Supreme Court held (174 of 154 ITR) : ". . . 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 poten tial for public mischief-for the mere asking. We feel greatly dis turbed. 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 petition under article 226 of the Constitution, and in the Calcutta High Court, on oral application too. Recently in Samarias Trading Co. Pvt. Ltd. v. S. Samuel (Civil Appeal No. 4466 of 1984), we had occasion to condemn and prohibit this practice of entertaining oral applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d do violence to its sense of justice, resulting in injustice being perpetuated throughout the hearing and, at the end, the court would not be able to vindicate the cause of justice. Obviously such would be rare cases accompanied by compelling circumstances, where the injury complained of is immediate and pressing and which cause extreme hardship. The conduct of the parties shall also have to be seen and the court may put the parties on such terms as may be prudent. (Deoraj [2004] 4 SCC 697 ; Bombay Dyeing and Mfg. Co. Ltd. v. Bombay Environmental Action Group [2005] 5 SCC 61). Unless there is any special reason, to be indicated in clear terms in the interlocutory order, as a rule final relief cannot be granted at the interlocutory stage. (Dr. B. Sheetal Nandwani, AIR 1992 SC 671). 36. While, in exceptional circumstances, an interim order may be passed which has the effect of allowing the writ petition itself, the court is bound to assign reasons why it considers appropriate to pass such an order. We find considerable force in the submission that, let alone referring to any special reasons for grant of such an ex parte ad interim order at the stage of admission, there is not even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Bombay Dyeing and Mfg. Co. Ltd. (supra)). V. Has a prima facie case been made out in the present batch of writ petitions : 39. Has a prima facie case been made out for grant of an interim order ? After referring to various clauses in the rate agreement entered into between the petitioners and APBCL, more particularly to clauses 2.2.A, 2.5(A) and (B), 2.8, 2.9, 2.10(B)(1) and (iii), 2.11(A), (B) and (C) ; 2.12, (A) (B), (C), (D) and (E) thereof, and several provisions of the Sale of Goods Act, Sri S. Ravi and Sri R. Raghunandan, learned senior counsel, and Sri K. Vivek Reddy, learned counsel appearing on behalf of the petitioners, would submit that title to the goods continues to remain with the petitioners till the goods are sold by APBCL to the licenced retailers ; it is at the point of sale by APBCL, to the licenced retailers, that back to back sales take place, firstly by the petitioners to APBCL, and immediately thereafter by APBCL to the licenced retailers ; transfer of title to the goods does not take place when the goods are still lying in the godowns of APBCL, prior to its being sold to the licenced retailers ; as the subject goods, hitherto lying in the godowns of APBC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requires the claimant or objector to adduce evidence to show that, in the case of movable property at the date of attachment, he had some interest in, or was possessed of, the property in question. Rule 11(4) stipulates that if the Tax Recovery Officer, after investigation, is satisfied that the property was in possession of the defaulter not on his own account, but on account of some other person, he shall make an order releasing the property wholly, or to such extent as he thinks fit, from attachment or sale. Rule 11(5) enables the Tax Recovery Officer to disallow the claim if he is satisfied that the property belongs to the defaulter. Rule 11(6) provides that, where a claim or an objection is preferred, the party against whom an order is made may institute a suit in a civil court to establish the right which he claims to the property in dispute ; but, subject to the result of such suit, if any, the order of the Tax Recovery Officer shall be continued. 42. An elaborate procedure is prescribed, in the Second Schedule of the Income-tax Act, for a person, claiming to be the owner of the property attached for recovery of the Income-tax dues of another, to file objections and establi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; G. Srinivas v. Govt. of A.P. [2005] 13 SCC 712), or the Tax Recovery Officer under the Second Schedule to the Income-tax Act. It is also well settled that an enquiry, as to title, may be more appropriately tried in a regular suit, than in writ proceedings. (State of Orissa v. Ram Chandra Dev and Mohan Prasad Singh Deo, AIR 1964 SC 685). Whether the petitioners' claim of title over the goods, attached by the Income-tax Department for recovery of tax dues of APBCL, should be examined in writ proceedings under article 226 of the Constitution are also matters to be considered when the writ petitions are finally heard. The rights and obligations of the parties would only be crystallised after the lis is adjudicated upon (Andhra Bank (supra)), and the question whether the petitioners continue to retain title over the goods, even after its supply to APBCL and till these goods are sold by APBCL to licenced retailers, are not matters for examination at the interlocutory stage, more so, as it is debatable whether this court would, even at the stage of final hearing of these writ petitions, examine questions of title in summary proceedings under article 226 of the Constitution of India. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account. On the other hand, it is the Income-tax Department which has suffered irreparable injury on the petitioners and the Government of Andhra Pradesh being handed over, almost the entire sale proceeds, by APBCL. If the interim order were to be made absolute now, only for the writ petitions to be dismissed later, the Income-tax Department would then be able to lay its hands only on Rs. 3.44 lakhs still lying in the account, towards recovery of the Income-tax dues of APBCL of Rs. 1468.64 crores. It must not be lost sight of that, even if the entire sale proceeds of Rs. 489.07 crores were to be paid to the Income-tax Department, the amount still due from APBCL, towards the balance Income-tax dues, would be in excess of Rs. 978 crores. By no stretch of imagination can the interim orders, granted in this batch of writ petitions, be categorised as those rare and exceptional cases where withholding of the interim order can be said to result in the conscience of the court being pricked, or in doing violence to its sense of justice. As the petitioners could have been paid these amounts later also, there were no compelling circumstances, for APBCL not to retain the sale proceeds in a se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioners and the Income-tax Department, can be secured without conferring undue advantage to any of the parties to the lis ? Should not the Government of Andhra Pradesh be directed to return the amounts paid to them by APBCL, towards VAT, privilege fee, etc., even without any order from this court ? Should the Government of Andhra Pradesh not await a final adjudication on the question whether they can claim priority over Income-tax dues ? The answers to all these questions can only be in the affirmative. Failure to restore status quo ante, at least in part, would result in travesty of justice, and cause grave prejudice and irreparable injury to the Income-tax Department for, even if the writ petitions were to be dismissed later, it would only be a pyrrhic victory as there would hardly be any money left in the account to be adjusted against the Income-tax dues of APBCL. 50. The petitioners herein and the Government of Andhra Pradesh shall forthwith and, in any event, on or before January 20, 2016, redeposit the amounts received by them from APBCL on the sale of the stocks (beer, foreign liquor and Indian made foreign liquor) attached by the Income-tax Department. Such redeposit wou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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