TMI Blog1988 (7) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... pply specified quantity of eucalyptus wood which is a raw material necessary for the manufacturing process, on payment of seigniorage at the rate of Rs. 23.49 per m.t. Later, the Kerala Government unilaterally raised the seiniorage by issuing Notification dt. 9th March, 1979, 7th March, 1980, 31st March, 1980 and 1st Dec., 1980. As a result of these Notifications, the assessee was saddled with additional liability in regard to acquisition of eucalyptus wood of a sum of Rs. 1,75,32,600. The break down of this figure is as under : 1980-81 Rs. 91,66,964 Interest Rs. 2,22,219 Rs. 93,89,183 1981-82 Rs. 65,55,767 Interest Rs. 6,57,867 Rs. 72,13,634 1982-83 Rs. 9,29,783 Rs. 9,29,783 Rs. 1,75,32,600 The above amounts were allowed as liability in the years to which they related on the basis of the provision made by the assessee. The Notifications were challenged by filing Writ Petitions before the Kerala High Court. By their judgment, dt. 15th April, 1981, the High Court of Kerala struck down the increase in seigniorage rate in respect of eucalyptus wood. However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there was no response from him. The assessee, therefore, had to presume that the State Government had no intention of accepting the decision of the High Court. The action of the State Government in issuing further Notifications raising the seigniorage on eucalyptus wood only strengthened the assessee's apprehension in this regard. The assessee did file Writ Petitions challenging the subsequent Notifications also. All these writ Petitions were hotly contested by the State Government even at the admission stage. The Kerala Government amended s. 4 of the Kerala Forests Produce (Fixation of Selling Price) Act, 1978 and included therein a provision enabling the Government to frame Rules in this regard with retrospective effect. The Government also appointed a Committee to refix the seigniorage rates for the period 1978 to 1981 and the said Committee submitted its report on 25th March, 1982 recommending still higher fixation of the seigniorage rates. All these actions of the Kerala Government led the assessee to believe that an appeal against the judgement dt. 15th April, 1981 striking down the Notifications increasing the seigniorage rates was in the offing. In these circumstances, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Court admitted the appeals where the delay was considerable. In one case, an appeal was admitted after the limitation period had expired and the delay was as high as 466 days. The assessee also, in particular, invited our attention to the decision of the Supreme Court 897. In that case, the Supreme Court had observed as under: "If appeals brought by government are lost for such defaults, no person is individually affected; but what, in the ultimate analysis, suffers is public interest. The decisions of Government are collective and institutional decisions and not share the characteristics of decisions of private individuals" The Court, it is submitted further, added that the law of limitation was, no doubt, the same for a private citizen as for Governmental authorities. Government, like any other litigant, must take responsibility of its officers. But a somewhat different complexion is imparted to the matter where Government makes out a case where public interest was shown to have suffered owing to acts of fraud or bad faith on the part of its officers or agents and where the officers were clearly at cross-purposes with it. Therefore, in assessing what, in a particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of taxation in the asst. yr. 1983-84. This was done after making proper assessment of the facts as available to the assessee. The matter was reviewed in that year and the assessee, thereafter, on the basis of mature assessment, offered the amount for taxation. It is not understood how in these circumstances, it could be said that the order passed by the ITO was erroneous or prejudicial to the interests of the Revenue. This is not a case where the assessee had withheld any information from the ITO seeking some mileage in the assessment proceedings. All the facts were laid bare before the ITO. The assessee had submitted a note before the ITO in the course of the assessment proceedings, stating therein, inter alia, that the Notifications issued by the Kerala Government increasing the seigniorage was impugned by Writ Petitions before the High Court of Kerala and the same were quashed. The note further made it clear to the ITO that the amount was being offered for taxation in the asst. yr. 1983-84. In these circumstances, it would only be reasonable to hold that the ITO had applied his mind and thereafter had come to the conclusion that the amount was not exigible to tax in the asst. yr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh seigniorage charges of eucalyptus wood. Shri Dastur concedes that it may not be proper to hold that the liability imposed by the Notifications ceased no sooner this judgment was delivered by the Court and that is was necessary to allow some time to elapse. This is because of the time taken to get certified copy of orders and to file an appeal against the order of the Court, but it has to be remembered that the judgment was passed on the 15th April, which was in the early part of the previous year relevant to the assessment year. The assessee had 11 months and more in which it could have assessed the facts in an objective manner and taken a decision regarding the treatment that it should give to the liability which no longer existed as a result of the High Court order. The plea on behalf of the assessee that it is not unusual for the Supreme Court to relax the rigours of the limitation in the case of Government organisations and admit appeal even if it has been considerably belated has to be rejected on the facts of the case. The purpose of s. 41(1) of the IT Act is to bring to tax revenue foregone as a result of a deduction allowed in an earlier year. If the plea of the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion before the Supreme Court which is a possibility that has to be ruled out having regard to the fact that the Government did not make oral application seeking leave of the Court to appeal when the judgment nullifying the Notification was delivered by the Court. The fact that leave to appeal was sought against the orders of the Court in subsequent writ Petitions filed by the assessee would also go to indicate that there was no likelihood of the Government ever seeking leave to appeal to the Supreme Court. Adverting to the arguments of the learned counsel for the assessee that the order passed by the ITO which was revised by the CIT under s. 263 of the IT Act could not be construed as erroneous order being prejudicial to the interests of the Revenue, it is submitted that such a view is wholly untenable. The CIT has wide powers to revise an order under s. 263 if it is erroneous and at the same time if it is prejudicial to the interests of the Revenue. These two conditions are eminently satisfied in this case. If an order passed by the ITO is found to be not accordance with the law and in consequence thereof, lawful revenue due to the State has not been realised, such order would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be incorrect. But to our mind, it appears to be in the realm of a remote possibility. To withhold Revenue's claim on the basis that there was a possibility of the revival of the liability would not be in order. The factors set out by the learned counsel for the assessee that the assessee apprehended that the State Government might file a belated appeal causing revival of the liability cannot also be considered as very real. As has been pointed out by the learned counsel for the Department that the co-respondents in this case being Government companies were denied leave to appeal by the High Court. This should be taken as a clear indication that even if the Government had preferred an application for leave to appeal to the Supreme Court, the Court might not have entertained the same. The fact that no oral application was made as required under Art. 134A of the Indian Constitution for a certificate of appeal to the Supreme Court and that no steps were taken as late as in March, 1982 to file an application for a certificate for leave to appeal to the Supreme Court are clear pointers that appeal was not contemplated. The amounts remitted as a result of the Court decision, therefore, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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