Dist. Dhule v. The Commissioner Of Income-Tax

-1- MGN IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE CIVIL JURISDICTION WRIT PETITION NO.3357 OF 1996 The Satpuda Tapi Parisar ) Sahakari Sakhar Karkhana Ltd., ) Purushotam Nagar, Tal. Shahada, ) Dist. Dhule. )..PETITIONER Versus 1.The Commissioner of Income-Tax) Naasik,Kendriya Rajaswa Bhavan) Gadkari Chowk, Old Agra Road ) Nashik-422 002. ) 2.Income-tax Officer (T.D.S.) ) Income-tax Officer, Bhikchand ) Jain Market, Jalgaon. ) 3.Union of India, Aayakar ) Bhavan, M.K. Marg, New Marine ) Lines, Mumbai-400 020. )..RESPONDENTS Mr. K.B. Bhujle for the Petitioner None for the respondents; CORAM: F.I. CORAM: F.I.REBELLO &J.H. BHATIA, JJ.DATED: 13th April, 2009 J.H. BHATIA, JJ. DATED: 13th April, 2009 -2- ORAL JUDGMENT (PER F.I. REBELLO, J.) . The petitioner in the instant case is a Co-operative Sugar Factory registered under the provisions of the Maharashtra Co-operative Societies Act,1960. The petitioner by the present petition had challenged the constitutional validity of Section 206 of the Income Tax Act. That prayer has now been given up as learned Counsel fairly points out that the constitutional validity of the said provision has been upheld. . The other prayer sought for by the petitioner is for a declaration that the orders of the 1st and 2nd respondents dated 26th September, 1994 and 25th February, 1994are illegal, invalid and without jurisdiction. There are some other consequential reliefs which need not be referred to. 2. The petitioner is a manufacturer of country liquor which is one of its business apart from manufacture of sugar. Section 206-C as it now stands as substituted by the Finance Act, 1992 was introduced with effect from 1st April, 1992. The effect of the Section is that the seller of alcoholic liquor and other goods described in the schedule has to collect from the buyer a sum equal to the percentages set out in the Tables. The -3- constitutional validity of the Section was challenged and this Court granted interim relief restraining the seller from collecting the amount. The question is whether the seller who was restrained and did not collect the amount from the buyer has to account for the same. For the purpose of deciding the controversy we may make gainful reference to some of the provisions of Section 206-C which read as follows:- 206-C(1) Every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature specified in column (2) of the Table below, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax:- TABLE ---------------------------------------------------- Sr. No. Nature of goods Percentage: ---------------------------------------------------- (1) (2) (3) (i) Alcoholic Liquor for human One per cent (ii) Tendu leaves Five per cent (iii) Timber obtained under a Two and one- forest lease half per cent (iv) Timber obtained by any Two and one- mode other than under a half per cent -4- forest lease. (v) Any other forest produce not being timber or tendu Two and one- leaves. half per cent (vi) Scrap One per cent. ---------------------------------------------------- Provided that every person, being a seller shall at the time, during the period beginning on the 1st day of June 2003 and ---------------------------------------------------- (1) (2) (3) (i) Alcoholic Liquor for human One per cent (ii) Tendu leaves Five per cent (iii) Timber obtained under a Two and one- forest lease half per cent (iv) Timber obtained by any Two and one- mode other than under a half per cent -4- forest lease. (v) Any other forest produce not being timber or tendu Two and one- leaves. half per cent (vi) Scrap One per cent. ---------------------------------------------------- Provided that every person, being a seller shall at the time, during the period beginning on the 1st day of June 2003 and ending on the day immediately preceding the date on which the Taxation Laws (Amendment) Act, 2003 comes into force, of debiting of the amount payable by the buyer to the account of the buyer or of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature specified in column (2) of the Table as it stood immediately before the 1st day of June, 2003, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax in accordance with the provisions of this Section as they stood immediately before the 1st day of June, 2003. (1A).............. (1B).............. (1C).............. -5- (2)............... (3) Any person collecting any amount under sub-section (1) or sub-section (1C) shall pay within the prescribed time the amount so collected to the credit of the Central Government or as the Board directs: (emphasis supplied). Provided that the person collecting tax on or after the 1st day of April, 2005 in accordance with the foregoing provisions of this section shall, after paying the tax collected to the credit of the Central Government within the prescribed time, prepare quarterly statements for the period ending on the 30th June, the 30th September, the 31st December and the 31st March in each financial year and deliver or cause to be delivered to the prescribed income-tax authority, or the person authorised by such authority, such statement in such form and verified in such manner and setting forth such particulars and within such time as may be prescribed. (4)............... (5)............... -6- (6) Any person responsible for collecting the tax who fails to collect the tax in accordance with the provisions of this section, shall, notwithstanding such failure, be liable to pay the tax to the credit of the Central Government in accordance with the provisions of sub-section (3)." 3. The petitioners, considering the above provisions, had to collect tax from the purchasers. Some of the purchasers had challenged by way of Writ Petition the constitutional validity of Section 206-C. One of such petitions was Writ Petition No.1637 of 2003. Similarly, there were a large number of other petitions. By an order dated 30th June, 1993 while granting Rule, interim relief was granted in terms of prayer clause (4) of the said petition. The effect of the interim relief had an effect on implementation of the provisions contained in Section 206-C. There was further direction to Respondent Nos. 6 to 9 then not to collect tax at source from the petitioners until further orders of this Court. According to the petitioner he was a respondent in that petition. By order dated October 11, 1993, the learned Bench of this Court sitting at Nagpur, in the various petitions pending before it -7- was pleased to vacate the stay granted. 4, By order dated 25thFebruary, 1994 the Income No.1637 of 2003. Similarly, there were a large number of other petitions. By an order dated 30th June, 1993 while granting Rule, interim relief was granted in terms of prayer clause (4) of the said petition. The effect of the interim relief had an effect on implementation of the provisions contained in Section 206-C. There was further direction to Respondent Nos. 6 to 9 then not to collect tax at source from the petitioners until further orders of this Court. According to the petitioner he was a respondent in that petition. By order dated October 11, 1993, the learned Bench of this Court sitting at Nagpur, in the various petitions pending before it -7- was pleased to vacate the stay granted. 4, By order dated 25thFebruary, 1994 the Income Tax Officer (TDS) Nashik was pleased to make an order of determination of tax under Section 206C(6) of the Income Tax Act holding that the petitioner was obliged to have collected the tax and consequently to deposit the tax on sales (inclusive of excise duty) effect during the the period of stay. As per the annexure the amount involved is Rs.25,40,738.00. A direction was given to the petitioners to deposit the said amount. The petitioner being aggrieved preferred a revision to the Commissioner of Income Tax. The Revision preferred was dismissed and consequently the present Writ Petition. 5. This Court while granting Rule was pleased to grant interim relief which was by way of injunction to restrain the respondents and their officers and agents from proceeding further by way of recovery otherwise than in pursuance of the orders dated 25th February, 1994 and 26th September, 1994. 6. A statement had also been made on behalf of the petitioners that in so far as the persons from whom the tax was due to be collected in their final -8- assessments they had applied order of refund. 4. A reply has been filed on 18th July, 1996 by Shri C.R. Kadbhane, Income Tax Officer dealing with the issue as to whether most of the purchasers of the country liquor, their income tax assessment has resulted in a refund. It is set out that it is not possible to make any statement on affidavit as those assesses were spread over different geographical regions and was not possible to know what orders had been specifically passed in their cases. 7. None appears for the respondent Department at the time of hearing. 8. The short question that we are called upon to consider is whether considering the interim relief granted by this Court whereby the petitioner herein was restrained from collecting the tax from the purchasers, would invite the provisions of Section 206C of the Act. 9. We have earlier reproduced the relevant provisions of Section 206C. It may also be noted at this stage that the constitutional validity of Section 206-C(6) is no longer in issue in this petition. Under Section 206C(1) every person, being a seller, had to collect from the buyer of any goods -9- of the nature specified in column (2) of the Table a sum equal to the percentage specified in the said Table. Under Sub-section (6) of Section 206C any person responsible for collecting tax in accordance with the provisions of this section, shall, notwithstanding such failure, be liable to pay the tax to the credit of the Central Government in accordance with the provisions of sub-section (3). Sub-section (3) of Section 206C sets out that any person collecting any amount has to credit the same to the credit of the Central Government as prescribed. 10. On an order passed by this Court restraining the petitioner from collecting the tax for the period, from the date the stay till its vacation, is the petitioner liable pursuant to the provisions of sum equal to the percentage specified in the said Table. Under Sub-section (6) of Section 206C any person responsible for collecting tax in accordance with the provisions of this section, shall, notwithstanding such failure, be liable to pay the tax to the credit of the Central Government in accordance with the provisions of sub-section (3). Sub-section (3) of Section 206C sets out that any person collecting any amount has to credit the same to the credit of the Central Government as prescribed. 10. On an order passed by this Court restraining the petitioner from collecting the tax for the period, from the date the stay till its vacation, is the petitioner liable pursuant to the provisions of Section 206C(6). The language used is any person responsible for collecting the tax and who fails to collect the tax. It is true that the petitioner being a seller is normally responsible. However, does it amount to ’failure to collect’ when he was restrained from collecting the tax. Would he then be responsible to collect the tax. In the instant case admittedly considering the language of the interim relief itself the petitioner who otherwise was responsible for collecting the tax was prevented from collecting the tax. Once the petitioner was -10- prevented from collecting the tax, it cannot be said that he was "a person responsible for collecting the tax". The responsibility would have arisen if he could collect the tax. The expression "responsible", therefore, has to be read in the context of statutory duty to collect which the petitioner was bound to perform by virtue of the provisions. The order of the Court would be binding and had to be complied with. The issue of collection would arise at the point of sale. The interim order was a blanket order of restriction from collecting. The question of the petitioner, therefore, collecting the tax and, therefore, responsible would not arise. There was a bar on him to collect the tax. If he could not collect the tax at the point of time of order, the question of he depositing the sum under sub-section (3) or of Section 206C would not arise till such period the disability is disappeared. Alternatively on account of the interim relief it cannot be said ’to failure to collect tax’. Failure would contemplate an act or omission on the part of the party. The party was aware that he had to collect the tax. This Court however, at the instance of the buyer restrained him ‘ from collecting the tax. 11. In the instant case the disability disappeared on the stay being vacated by this Court -11- on 11th October, 1993. Thus for the period when the stay was in operation as the petitioner was prevented from collecting the tax it cannot be said that he would be liable under sub-section (6) of Section 306C. A duty was cast on the petitioner by operation of law. Petitioner could not discharge that duty by virtue of an order of this Court. The question, therefore, of calling on him to pay the amount which he was disabled to collect would be illegal. If the petitioner had collected the tax it would have been in contempt of this Court. We are, therefore, clearly of the opinion that even though it can be said that considering the provisions of Section 206C a duty had been cast on persons like the petitioner to collect the tax, by virtue of the interim relief he could not collect the tax for the relevant period. Section 206C would, therefore, not be attracted. To that extent the Respondents 1 and 2 have held otherwise clearly discloses error of law apparent on the face of the record. . In the light of that petition will have to be allowed and allowed in terms of prayer clause (a)(ii). Consequently the petition is also allowed in terms of prayer clause (b). illegal. If the petitioner had collected the tax it would have been in contempt of this Court. We are, therefore, clearly of the opinion that even though it can be said that considering the provisions of Section 206C a duty had been cast on persons like the petitioner to collect the tax, by virtue of the interim relief he could not collect the tax for the relevant period. Section 206C would, therefore, not be attracted. To that extent the Respondents 1 and 2 have held otherwise clearly discloses error of law apparent on the face of the record. . In the light of that petition will have to be allowed and allowed in terms of prayer clause (a)(ii). Consequently the petition is also allowed in terms of prayer clause (b). (J.H. BHATIA, J.) (F.I.REBELLO, J.) (J.H. BHATIA, J.) (F.I.REBELLO, J.)