Karnataka High Court
Mysore Sales International Ltd. vs Deputy Commissioner Of Income Tax And ... on 27 October, 2003
Equivalent citations: (2003)185CTR(KAR)417, [2004]265ITR498(KAR), [2004]265ITR498(KARN), 2004 AIR - KANT. H. C. R. 394, 2004 TAX LR 252, (2004) 265 ITR 498, (2004) 178 TAXATION 239, (2004) 134 TAXMAN 193, (2003) 185 CURTAXREP 417
Author: R. Gururajan
Bench: R. Gururajan
ORDER R. Gururajan, J.
1. These two petitions involve interpretation of Section 206C(vi) of the Indian IT Act.
2. Facts are as under:
The petitioner Mysore Sales International Ltd., is a Karnataka Government undertaking and is engaged in manufacture of arrack. The petitioner is covered by the provisions of the IT Act (for short 'the Act'). The petitioner entered the arrack trade from 1st July, 1993, in terms of the excise laws. Prior to 1993, there were several private bottling units in the State of Karnataka and they were manufacturing and selling arrack. Auctions were conducted periodically for the purpose of conferring lease of right of retail vend of arrack. It was conducted with reference to designated areas. The successful bidders are entitled to procure arrack from the bottling units and then sell it in retail trade within their allotted area. The arrack trade is controlled by the State Government. The Karnataka Excise Act has framed several rules for appropriate enforcement of excise laws. In the year 1993, the Government discontinued private bottling units from engaging in the manufacture or bottling of arrack and instead decided as a policy to restrict those operations in the hands of companies or agencies owned and controlled by the State Government. The petitioner-MSIL and another Karnataka Government undertaking were entrusted with this task of bottling arrack and marketing it on behalf of the State Government. The petitioner was entrusted with bottling in northern districts of the State of Karnataka, Mysore Sugar was assigned with the task in the rest of the State. According to the petitioner, the job was in the nature of works contract. An excise supervisor is stationed and the petitioner's operations in manufacturing and bottling arrack when manufactured belongs to the State of Karnataka so much so the property therein vests with the State. The 4th respondent. Excise Commr. determines the amount realisable by the petitioner from the excise contractors in terms of the cost incurred by the petitioner. The excise contractors were to remit the requisite amount of excise duty into the State Government Treasury and then secure permit on production of which the petitioner delivers arrack to them. The State of Karnataka, according to the petition averments controls the entire operation including the amount realisable by the petitioner in terms of the Act.
3. The successful excise contractors would secure arrack from the petitioner depending upon the area. The lease of right of retail vend of liquors provides auctioning of a right of retail vend of liquor with reference to a designated area. The retail sale price is fixed by the Government in terms of the arrack Vend Special Conditions of Licenses Rules. The margin would depend upon various factors. The income-tax provision provides for deduction of income-tax at source. In view of large scale tax evasion, Section 206C came to be inserted into Chapter XVII providing for tax collection at source along with Section 44AC into Chapter III, the latter providing for estimation of profit on a presumptive basis. These provisions were inserted by Finance Act, w.e.f. 1st April, 1989. Insofar as liquor is concerned, the petitioner is to collect from the buyer of liquor a sum equivalent to 10 per cent of the price of the liquor and make it over to the Central Government. A circular came to be issued by the Excise Commissioner in this regard in terms of Annex. 'A'. Addendum was issued in terms of Annex. 'B'. Explanation was inserted to Section 206C of the Act. According to the petition averments, obligation thereunder to collect tax at source did not arise at all in the petitioner's case inasmuch as the petitioner was not selling arrack to the excise contractors in or by way of or pursuant to any auction whatever. The petitioner carried on its operation under the directions of the 4th respondent.
4. The first respondent issued a notice dt. 26th Oct., 2000, asking the petitioner certain queries with regard to excise trade. The petitioner submitted its reply in terms of Annex. 'D'. Thereafter, the first respondent passed orders under Section 206C(6) of the Act for the years 1995-96 to 2000-2001. According to the order, the excise contractors obtained arrack by way of auction and the prices at which they can sell, arrack are not fixed by or under any State Act. The petitioner finds fault with the order passed by the first respondent. The petitioner has raised several grounds in support of his, case. The main ground is that Section 206C is not applicable to the operation of the petitioner. With these facts and grounds the petitioner is challenging the order passed by the respondent at Annexs. 'E1 to E6' and consequent demand notices in terms of Annexs. 'F1 to F6' in these petitions.
5. The facts in WP Nos. 6967 to 6972/2001 in brief are as under:
The petitioner is a public limited company and majority of its shares are owned by the Government of Karnataka. It is managed by a senior IAS officer appointed by the State Government. The petitioner is engaged in the manufacture of sugar and also owns a distillery for the manufacture of alcohol. The petitioner manufactures arrack for human consumption in terms of the Karnataka Excise Rules. The petitioner bottles arrack under the supervision of the 4th respondent. Raw materials for arrack, that is rectified spirit, is lifted by the petitioner from distilleries as per the permit issued by the 4th respondent. The arrack, when manufactured belongs to the 5th respondent. The 4th respondent fixes the cost incurred by the petitioner inclusive of the cost of rectified spirit and conversion charges. Licencees are permitted to lift the arrack from the petitioner, and the petitioner is only a job worker for the 5th respondent. According to the petition averments, in terms of the standing instructions no deduction should be made. The petitioner says that the petitioner was therefore, under the bona fide impression that the provisions of Section 206C of the Act would not apply when arrack is lifted by various buyers.
6. Notice was issued to the petitioner on 20th Oct., 2000, by the respondent asking for information pertaining to the purported compliance with the provisions of Section 206C of the Act. Information was submitted by the petitioner in terms of various letters dt. 13th Nov., 2000/20th Nov., 2000/13th Dec., 2000/9th Jan., 2001 (Annexs. 'E1 to E4). Thereafter, an order has "been passed under Section 206C of the Act by the respondent dt. 17th Jan., 2001, for the asst. yrs. 2000-01, 1999-2000, 1998-1999, 1997-1998, 1996-1997, 1995-1996. Demands have been made. Orders are filed at Annexs. 'F1 to F6'. The petitioner also raised same/similar grounds in the case on hand.
7. The petitioner's essential contention is that the buyers of arrack are excluded under Explanation to Section 206C(6) of the Act inasmuch as the buyers do not obtain arrack through auction warranting any deduction at source.
8. Notices have been issued and the respondents have filed a very detailed objection supporting the action of the Department. In the lengthy objection statement, it is stated by the Department that the process of auction by the Excise Department of the Government and the purchase of goods by the successful excise contractors from the petitioner are not at all two distinct and independent acts as erroneously presumed by the petitioner, but, on the other hand, there exists an inextricable and non-detachable link between the two inasmuch as a successful excise contractor can alone purchase arrack from the petitioner. Nobody can purchase arrack unless one participates in the auction and makes a successful bid. The events, namely, participation of the excise contractor in the auction, becoming successful bidder thereto and the purchase of liquor by such excise contractors from the source, such as petitioner, are all well-knit together constituting an integrated act. Therefore, in reality, there exists only a single act, namely, purchase of goods but executed in two stages; (1) granting the excise contractors by conducting an auction and issuing permits, (2) the petitioner effecting sales of liquor to the excise contractors on production of permits issued by the Excise Department. The excise contractors are not bound to sell liquor at a specific fixed price. The excise contractors are at liberty to sell the liquor at any rate between the minimum and the maximum price at which sale of liquor can be effected and this, in terms of the percentage may come to almost 56 per cent.
9. The respondents also refer to the provisions of the Act to contend that the auction of the respondents are fully justified in law. According to the respondent, the Excise Commissioner absolutely has no jurisdiction to issue any such circular interpreting the provisions of the IT Act and on erroneous interpretation tax at source in terms of Section 206C of the Act. Respondents also refers to various provisions and support the order of the Department, They deny various allegations/averments made in the writ petition.
10. Matter was heard on several days in the light of an interesting interpretation to be given by this Court on the facts of this case and in terms of Section 206C of the Act in the light of interesting educative argument advanced by the, learned counsel on both sides.
11. Sri K.P. Kumar, learned counsel appearing for MSIL, took me through the pleadings to contend that the buyers in the case on hand cannot be categorised as 'buyers' in the case on hand. The explanation under the Act excludes the buyers. The counsel says that prices are determined and are fixed by the State Government. There is no middleman as sought to be made out by the petitioner. According to the counsel, auction is totally unrelated to actual, sale by MSIL. Section 206C Explanation comes to the rescue of the petitioner. There is no link between the auction and sale between MSIL. Price fixation is done by MSIL in terms of the Act. Counsel also refers to Section 44AC and Section 206C of the Act. Counsel also says that the present Explanation has been omitted and that gives an indication that the Act is not applicable to the petitioner. Learned counsel, while elaborating the first point says that the auction only provides for a right to vend liquor which would not include a subsequent sale by MSIL. There are two totally independent transactions. According to them, a sale by MSIL is not referable to auction in terms of IT Act r/w terms of the excise laws. Counsel says that the price fixation is done by the State Government in terms of the statute and that, therefore, there is a price fixation which again exclude the petitioner from Section 206C of the Act.
12. Learned counsel relies on several judgments in the matter of interpretation of statute in the matter of understanding of Section 206C and the judgment of the Supreme Court in identical circumstances, according to him. Strong reliance is placed on the judgments of the Punjab High Court in the case of K.K. Mittal & Co. v. Union of India and Ors. , Chandigarh Distillers & Bottlers Ltd. and Ors. v. Union of India and Ors. , Gian Chand Ashok Kumar & Co. and Ors. v. Union of India and Anr. , Union of India v. Om Prakash S.S. & Co. and Anr. (2001) 248 ITR 105 (SC), Naresh Kumar & Co. and Ors. v. Union of India . In so far as price fixation is concerned, learned counsel relies on 1974 (2) SCC 632 and .
13. Learned counsel argues that in terms of the IT laws, a person who has issued the notice is incompetent and is a person who is without jurisdiction. Reliance is placed on the notification issued by the Government.
14. Dr. Krishna, learned counsel for other petitioner, supports Sri K.P. Kumar, learned counsel with regard to the auction sale being independent in character. Learned counsel also says that the buyer concept is accepted but the entire articles/goods belong to Government and the petitioner only undertakes labour contract. There is already a first sale taken place and therefore, the second sale if at all cannot be subjected to rejection.
15. Per contra, Sri Indra Kumar, learned standing counsel took me through the history of Section 44AC and the need for interpretation of Section 206C(3). He read to me the judgment of the Supreme Court with regard to the laudable object of deduction at source in the case of excise trade. Learned counsel says that the Act identifies liquor trade and timber and this sequence has been introduced in the light of large scale evasion of IT Act and he reminds me repeatedly the object of the Act. Learned counsel has taken me through various case laws with regard to interpretation of the Act.
Insofar as the first argument is concerned, he says that there is a vital link between auction and sale. Without auction there is no sale. According to him, no auction no sale and no arrack. He wants me to understand that all these three form same part of the same transaction. Learned counsel refers to me various case laws with regard to fixation of price. He says that there is no fixed price as understood in law insofar as the price fixation is concerned. He says that the Excise Commissioner has no power or jurisdiction to interpret IT Act. A detailed reply argument was pressed.
16. After hearing the learned counsel, according to me, there emerges 5 issues which requires consideration :
(1) History of the legislation (2) Law of interpretation and scope of Section 206C(6) (3) Jurisdiction (4) Concluding remarks/observations (5) Relief Reg. Point No. 1: History
17. The IT Act provides for a law relating to income-tax and super-tax. Section 44AC provides for a special provision for computing profits and gains from the business of trading in certain goods. Sub-section (1)(a) of Section 44AC deals with the goods in the nature of alcoholic liquor for human consumption (other than Indian-made foreign liquor). Sub-section (b) of Section 44AC(1) refers to timber obtained under a forest lease. Thereafter, Section 44AC was introduced in terms of direct tax (Amendment) Act of 1981 w.e.f. 1st April, 1989. Later, in terms of the Finance Act, of 1988, Section 206C was introduced. Section 44AC and Section 206C were subjected to the Constitutional test in Court and ultimately the matter reached the apex Court. The apex Court, in the case of Union of India and Anr. v. A. Sanyasi Rao and Ors. noticed that the object in enacting Sections 44AC and 206C of the IT Act, 1961, was to enable the Revenue to collect the legitimate dues of the State from the persons carrying on particular trades in view of the peculiar difficulties experienced in the past. Trade or business produces or results in income which can be brought to tax. In order to prevent evasion of the legitimately due on such 'income', Sections 44AC and 206C were enacted so as to facilitate the collection of tax on that income which is bound to arise or accrue, at the very inception itself or at an anterior stage. These provisions are akin to advance tax. The standard by which the amount of tax is measured, being the purchase price, will not in anyway alter the nature and basis of levy, viz., that the tax imposed is a tax on income. It cannot be labelled as a tax on purchase of goods.
18. The Court ultimately, ruled that Section 44AC is a valid piece of legislation and is an adjunct to and explanatory to Section 206C of the Act. The Supreme Court in the very same judgment noticed as under with regard to the object of the provision:
"It appears that the Government wanted to get over the problems in assessing income and recovering tax in the case of persons dealing in country liquor, timber, forest produce, etc. Experience revealed that a large number of persons dealing in the said commodities did not maintain any books of account or the books of account maintained by such persons were incomplete. The business of the above mentioned persons existed only for a short period a year or two. After the period of contract or agreement, it was impossible to trace them in many cases. Many of them were found to be dealing in Benami names. There was evasion on a large scale. The Government found it difficult to collect the tax due from such persons. Section 44AC occurs in Chapter IV of the Act dealing with computation of total income. Heading-D deals with computation of profits and gains of business or profession.
Section 44AC(1) determines the profits and gains of the year from the business of trading in certain specified, goods like liquor (other than Indian-made foreign liquor, timber and forest produce) at a particular percentage specified therein. Section 44AC(2) states that the above provisions shall not apply to the second or subsequent sale of such goods. Section 44AC(3) is only a clarificatory provision. The Explanation to the section specifies the seller as Central Government, State Government, local authority, corporation, etc. Section 206C deals with collection and recovery of tax. Section 206C(1) obliges the seller of the specified goods to collect from the purchaser an amount equal to the percentage mentioned in the Table as income-tax. The goods mentioned in the Table are the very same goods mentioned in Section 44AC. Sub-sections (2) to (5) of Section 206C of the Act are further machinery provisions. In particular, Sub-section (4) provides that any amount collected under the section shall be deemed to be payment of tax on behalf of the purchaser and provides for the issuance of a certificate evidencing such payments. Section 44AC came into force from 1st April, 1989. Section 206C came into effect from 1st June, 1988."
19. This section as mentioned earlier was upheld. Thereafter, in terms of the Finance Act, 1992, Section 44AC was omitted. Section 206C provides for collection of tax at source and is continued to operate the deduction at source. Therefore, the history of the case would show that Section 206C has been introduced by the Parliament with the laudable object of preventing tax evasion by certain dealers particularly liquor traders in the light of the experience as reflected in the judgment of the Supreme Court. With this history, let me notice the other submissions made by the learned counsel.
Law of interpretation and scope of Section 206C(6):
20. In the case on hand, elaborate arguments have been advanced with regard to the understanding of Section 206C(6) of the IT Act. For a proper understanding, both the counsel have placed before me several case laws with regard to law and interpretation of statute.
21. Sri K.P. Kumar, learned counsel and Dr. Krishna, learned counsel appearing for the petitioners, invited my attention to law and interpretation of statutes. According to them, the interpretation is to be in their favour to see that the interpretation has to be in conformity with the excise operation in Karnataka. On the other hand, Sri Indra Kumar, learned counsel refers to me various case laws in support of his submissions.
22. It is well settled that Parliament intends that an enactment shall remedy a particular mischief. It is presumed, therefore, that Parliament intends the Court, in construing the enactment, to endeavour to apply the remedy provided by it in such a way as to suppress that mischief. According to Sri Indra Kumar, learned counsel, the mischief of a particular trade is to be taken note of by this Court in interpreting Section 206C.
The Supreme Court in The State of Tamilnadu v. M.K. Kandaswami etc., considered the scope of Section 7A of Tamilnadu General ST Act in paras 26 and 34. The Court ruled that "it may be remembered that Section 7A is a charging as well as a remedial provision. Its main object is to plug leakage and prevent evasion of tax. In interpreting such a provision, a construction which would defeat its purpose and in effect, obliterate it from the statute book should be eschewed. If more than one construction is possible, that which preserves its workability, and efficacy is to be preferred to the one which would render it otiose or sterile."
23. The Supreme Court has also ruled in the case of Keshavji Ravji & Co. v. CIT AIR 1991 SC 1806, ( 1990 ) 1 CompLJ 374 ( SC ), that "as long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislative intent becomes impermissible. The supposed intention of the legislature cannot then be appealed to whittle down the statutory language which is otherwise unambiguous. If the intendment is not in the words, it is nowhere else. The need for interpretation arises when the words used in the statute are, on their own terms, ambivalent and do not manifest the intention of the legislature". The Court further rules that "to say that the Court could not resort to the so-called 'equitable construction' of a taxing statute is not to say that, where a strict literal construction leads to a result not intended to subserve the object of the legislation, another construction, permissible in the context, should not be adopted. In this respect, taxing statutes are not different from other statutes."
24. The Supreme Court in the recent judgment in the case of High Court of Gujarat v. Gujarat Kishan Mazdoor Panchayat in Supreme Today 2003 (2) 672 has noticed various case laws and ultimately the Court considered the law of interpretation. The Supreme Court notices the judgment of United Bank of India v. Abhijit Tea Co. Ltd. and Ors., . The Court notices the purpose of interpretation reading as under:
"In regard to purposive interpretation, Justice Frankfurter observed as follows :
Legislation has an aim, it seeks to obviate some mischief, to supply an inadequacy, to effect a change of policy, to formulate a plan of Government. That aim, that policy is not drawn, like nitrogen, out of the air; it is evidenced in the language of the statute, as read in the light of other external manifestations of purpose [Some Reflections on the Reading of Statutes, 47 Columbia LR 527, at p. 538 (1947)].
That principle has been applied to this very Act by this Court recently in Allahabad Bank v. Canara Bank. If the said principle is applied, it is clear that the provision in s. 31 must be construed in such a manner that after the Act, no suit by the bank is decided by the civil Court and all such suits are decided by the Tribunal."
Again in para 35, the Court notices as under:
"The Court while interpreting the provision of a statute, although, is not entitled to rewrite the statute itself, is not debarred from ironing out the creases'. The Court should always make an attempt to uphold the rules and interpret the same in such a manner which would make it workable."
Para 36 is also relevant, which I deem it proper to quote :
"It is also a well settled principles of law that an attempt should be made to give effect to each and every word employed in a statute and such interpretation which would render a particular provision redundant or otiose should be avoided."
Ultimately, in para 40, the Court emphasizes the need of purposive construction which gives effect to the legislative purpose.
25. The Court also notices in that in taxing statutes where two interpretations are reasonably possible, one beneficial to the assessee should be given.
26. The Division Bench of this Court in ILR 2003 Kar 3834 has ruled that while interpreting the taxing provisions, the Court has to adopt interpretation that favours assessee if the provision is ambiguous or capable of more meaning than one.
27. The Court again interpreted the same interpretation beneficial to assessee in Mysore Minerals Ltd. v. CIT .
28. The same was reiterated again in the case of CIT v. Podar Cement (P) Ltd. .
29. The Supreme Court in the case of Jaipur Zilla Sahakari Bhoomi Bank. Ltd. v. Shri Ram Gopal Sharma and Ors., has ruled that "It is well settled rule of interpretation that no part of statute shall be considered as unnecessary or superfluous".
30. The Supreme Court in the latest judgment in the case of Shankar Ram & Co. v. Kasi Naicker in 2003(9) ILD 5 has noticed the principles of cardinal rule of construction. The Supreme Court ruled at para 5 after noticing Jaipur Zila Shakati Bhoomi Bank Ltd. v. Ram Gopal Sharma (supra) that interpretation of statute must be such that it should advance the legislature intent and serve the purpose for which it is made rather to frustrate it.
31. From all these judgments, what is. clear to me is that the Court should not dilute or frustrate the object of legislation. There are two interpretations possible. The one beneficial to the assessee has to be "noticed by the Court that and is subject to achieving the object of the Act in the given circumstances. Let me see as to whether interpretation has to be given to Section 206C(6) in the given circumstances in the light of the object of prevention of Revenue loss by liquor trade in these cases.
32. Facts are almost admitted. The petitioners in the writ petition as well as in the course of these arguments admit that petitioners manufacture arrack and effect sales to excise contractors who are successful bidder in the auction held by the State of Karnataka. The State of Karnataka confer the right of vend of arrack in the light of the result of the auction held for the period from 30th June of the previous year to 30th June of the next year. After acceptance of the bid, agreements are entered into between the State and the excise contractors. In the light of the amendment to the Excise Act, they are compelled to procure their arrack from the petitioners who are the sole manufacturers in arrack in terms of excise laws. It is equally admittedly before me that these petitioners do sell arrack to the excise contractors but they have not deducted tax at source at the time of sale transaction.
33. At this stage, I must notice a somewhat interesting argument of Dr. Krishna, learned counsel with regard to 'no sale' in the case on hand. In this connection, one has to see the pleadings. In the pleadings, it is stated that the 4th respondent as per the provisions of the excise rules, licenses the retail vendors of arrack to lift arrack, and vend it in retail, on payment of Kist to the State. The licensees are permitted to lift the arrack from the petitioner. Such a permit is granted after the licensees deposit the excise duty with the fourth respondent. The petitioners receive from such, licensees the amount fixed by the 4th respondent to cover the cost of rectified spirit. The property in the arrack vests in the 5th respondent. The petitioner is only a job worker. The petitioner is a seller of arrack.
34. Learned counsel tries to develop an argument on the said basis. To consider the submission, one has to see the facts made available to the Court. This Court is deciding this case in terms certiorari proceedings. Certiorari proceedings are available against a decision of a subordinate authority/Tribunal in terms of the laws governing the field. In the case on hand, it is seen that the licensee (petitioner) would be both manufacturing and bottling arrack. Price payable by the arrack contractor to the manufacturer is Rs. 4. The Dy. CIT has addressed a letter to the petitioner with regard to the details of selling alcoholic liquor and in reply, the petitioner stated that "we have not collected any tax for sale of arrack" (All underlining, italicised in print, is by this Court). The sale of arrck is based on the demands of the authorised contractors. The petitioner-company is a Government company selling arrack to the licence-holders. A. subsequent letter has been sent by the petitioner providing statement showing details of sale. In addition, a show-cause notice has been issued to the petitioner. The petitioner replied to the show-cause notice and stated that the provisions of Section 206C is not applicable to the sales made to the licence-holders who sell price of goods fixed by the under State Act. It is on this basis the entire case is developed. Therefore, at no point of time, the petitioner stated that there is no sale at all between the petitioner and the excise contractor. In these circumstances, I am not inclined to permit the petitioner to turn around on facts and take a different plea in the case on hand. I must also notice at this stage the statement of objection filed by the State. The State in the affidavit states that the petitioner has been entrusted with the work of manufacturing, bottling and supply of arrack to the licensees. It is categorically stated that there is no sale at all. Even the learned Advocate General would not say that there is no sale at all between the petitioner--My Sugar and excise contractor. In fact, in the connected case, the petitioner MSIL fairly submitted that there is a sale between the petitioner and the excise contractor. What is contended by MSIL is that notwithstanding the sale they are not liable for deduction in terms of the provisions. In these circumstances, I am not able to accept the submissions of Dr. Krishna, learned counsel that there is no sale at all between the petitioner and the excise contractor in the given set of facts and in the absence of any factual foundation.
35. Section 206C is a beneficial provision meant for arresting revenue loss. After noticing large scale tax evasion in liquor trade, the Parliament in its wisdom provided for deduction at source in the case of various tax-payers including certain category of dealers.
Section 206C is a special provision providing for collection from the buyer of any goods of 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. The Table provides for 10 per cent in the case of alcoholic liquor for human consumption.
Sub-section (2) provides for collection without prejudice to any other mode of recovery.
Sub-section (3) provides for 7 days payment after collection.
Sub-section (4) provides for a deemed payment of tax on behalf of the person from whom the amount has been collected in terms of the IT laws.
Sub-section (5) provides for a certificate with regard to the tax collection. Sub-sections (5A) and (5B) provides for return in the matter.
Sub-section (6) provides that in the event of failure to collect tax from the person responsible for collecting the tax he shall notwithstanding such failure be liable to pay the tax to the credit of the Central Government.
Sub-section (7) provides for a simple interest at the rate of 2 per cent per month in this regard. The amount so collected is treated as a charge upon the assets of the seller.
Sub-section (11) with which we are concerned provides for an application in this regard. However, in the Explanation it is stated for the purpose of this section:
Buyer means a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in the Table in Sub-section (1) or the right to receive any such goods but does not include,
(i) a public sector company;
(ii) a buyer in the further sale of such goods obtained in pursuance of such sale; or
(iii) a buyer where the goods are not obtained by him by way of auction and where the sale price of such goods to be sold by the buyer is fixed by or under any State Act;
(iv) 'seller' means the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provisional Act, or any company or firm or co-operative society,
36. I must also notice the observations of Richard Posner in the book styled as 'Dynamic Statutory Interpretation'. The learned author in his book has noticed the observations of Richard in the book styled as 'Problems of Jurisprudence'. The author noticed the role of a Judge in interpreting the statute. The author has noticed as under:
"A Judge interpreting a statute, says Posner is like a platoon commander following orders in battle. Not infrequently the commander finds his forces in an unexpected situation not contemplated by existing orders. Given battlefield conditions, he may be unable to communicate with the high command, but he has to do something. In this situation he must go beyond-and sometimes even against existing orders to ensure the success of the overall battle plan. "The responsible platoon commander will ask himself what his captain would have wanted him to do if communications should fail, and similarly Judges should ask themselves, when the message imparted by a statute is unclear, what the legislature would have wanted them to do in such a case of failed communication."
37. In the case on hand, the definition of buyer and the seller has to be noticed for proper understanding of the case by the petitioners. These expressions have been debated, discussed, explained and argued by both the counsel.
38. The history as I narrated above would show that Sections 206C and 44AC have been inserted with a laudable object of plugging the revenue loss from certain type of traders in the light of the experience of the State as with regard to those transactions. The laws of interpretation as held by the Supreme Court is to achieve the object of the statute and every word in it has a meaning. The legislature intent is to be covered from the history and the language so as to see the purpose of legislation is achieved while interpreting. The main argument of the petitioners with regard to Section 206C is concerned is that Section 206C provides for 4 categories of buyers and petitioners stood excluded from the scope of Section 206C. According to petitioners, Section 206C is not applicable to the facts of the case since according to them, a buyer namely, excise contractor does not obtain arrack by way of auction. Lot of arguments have been advanced with regard to arrack by way of auction. The petitioners say that in terms of excise laws only a license to vend was granted to them and that was by auction. Whereas the subsequent sale is not by way of auction and that, therefore, the excise contractor being the buyers get out of Section 206C.
39. Per contra, the argument of the Revenue is that the auction and the subsequent sale cannot be divided for the purpose of Section 206C.
40. Material on record, no doubt, reveal that in terms of excise laws, auctions are being conducted for the excise year in the matter of vending of arrack by excise contractor. A right has been created in terms of the auction held by the respondents. A statutory contract has been entered into with regard to a right in their favour in the matter of vending arrack in terms of the contract. After entering into contract, in terms of the excise laws, the petitioners are to obtain their arrack only from two monopoly excise manufacturers namely, MSIL and My Sugar. All these facts are not disputed. The dispute is only as to whether the buyers namely, excise contractor obtained goods by way of auction. A reading of the excise laws and the subsequent statutory contract and the procedure would show that the excise contractors have no option but to obtain arrack only from the petitioners. Is it by way of auction is the question that is required to be considered by this Court. It cannot be forgotten that if there is no auction there is no right to vend arrack. Output of the auction is a right to vend arrack and it results in obtaining arrack from the petitioner in terms of the statutory provisions. Obtaining arrack can only be by way of a sale by the petitioner to the excise contractor. Therefore, the statutory provisions and the chain of events as rightly pointed out by the Department would categorically go to show that there cannot be any two independent transactions as sought to be made out by the petitioners. It is not as though the sale is independent of retail right. A sale right cannot be frustrated or divided by the petitioner. The very object of right to vend itself is to obtain arrack and thereafter, sell the same to the retailers. Therefore, it is not possible for this Court to accept the hyper technical plea of diluting the facts of 'not obtaining arrack' by way of auction. Auction cannot be wiped out or erased in a transaction like this between the petitioners and the excise contractors. Auction is the foundation not only to have a right but also a subsequent, consequential obtaining arrack by way of sale as a buyer in terms of laws. It is of interest to note that the real aggrieved party namely the excise contractors have not chosen to plead this plea at any point of time.
41. The petitioner strongly relies on the following judgments:
(1) Saini & Co. v. Union of India (FB);
(2) K.K. Mittal & Co. v. Union of India (supra) (3) Ashok Kumar v. Union of India ; and (4) Chandigarh Distillers & Bottlers Ltd. and Patiala Distilleries and Manufacturers Ltd. v. Union of India and Ors. (supra).
42. Let me see as to whether these judgments could be made applicable to the facts of these cases.
43. The Full Bench of the Himachal Pradesh High Court in the case of Saini & Co. v. Union of India (supra) considered Section 206C of the Act. Before noticing the law laid down, it is necessary to notice the facts of this case. In that case, the petitioner filed petitions praying for writ of mandamus directing the respondents not to deduct tax at source under Section 206C of the IT Act from the petitioner who are holding L-13 licences treating them as buyers where goods have not been obtained by them by auction and where sale price of such goods to be sold by them is fixed by the State Government. The petitioners were engaged in the business of liquor in the State of Himachal Pradesh. They were granted licences under the Punjab Excise Act. They obtained a licence at a fixed fee by the Government. That was not a case where another agency was involved with regard to sale of arrack. That was also not a case of an auction and the facts would show that they were only acting as a stockists of the Government.
44. The second case is from the Punjab & Haryana in the case of K.K. Mittal & Co. v. Union of India (supra). The facts in those cases would show that the petitioner in those cases were country liquor contractors and were also L-14 and L-13 licensees. It was also a challenge by liquor contractors. It is also seen there that the permits provided for a restriction to sell more than the quantity of liquor fixed by the excise authorities. The excise authority were under obligation to supply the requisite quantity of liquor against permit. The liquor left unsold at the end of the financial year, it should be handed over to the excise contractor.
45. In the case of Ashok Kumar v. Union of India (supra) there the Court was considering with regard to deduction at source from the licence paid by L-14A licensees. The Court noticed at p. 204 as under:
"The amount payable is that amount which is payable at the time of debiting the amount to the account of the buyer or at the time of receiving money from him in cash or by cheque or by draft or by any other mode for the goods sold to him. That amount, in our opinion, is the purchase price which the buyer pays to the seller for the goods sold and in the cases before us the amount which the petitioners pay to the wholesaler after they have obtained a permit from the Excise Department by depositing the excise duty. The amount payable would only be the price which the buyer will pay to the seller. It cannot by any stretch of reasoning include licence fee which the buyer has to pay for the licence that he has obtained. The payment of this fee is wholly unrelated to the amount to be paid at the time of purchasing country liquor from the wholesalers. Even if an L-14A licensee does not purchase any country liquor, the licence fee has nevertheless to be paid by him to the Department and it will be preposterous to suggest that income-tax should still be recovered. The licence fee is therefore, not a part of the amount payable at the time of the sale of country liquor. In this view of the matter, we have no hesitation in holding that the amount payable in Section 206C of the Act does not include the licence fee which has to be paid by the licensee to the State Government. The Dy. CIT was in error in including the licence fee in the amount payable under Section 206C of the Act and the Excise and Taxation Commissioner was not required to collect 10 per cent of the licence fee from the L-14A licensees like the petitioners and it follows that the petitioners were not liable to deposit that amount."
The Court was considering deduction from the licence fee in the said case.
46. In the case of Chandigarh Distillers and Bottlers Ltd. and Patiala Distilleries & Manufacturers Ltd. v. Union of India and Ors. (supra) the Court notices Punjab liquor licensees vis-a-vis Section 206C of the Act. In that case, the Court notices that the Dy. CIT has held that the Excise Commissioner who issued L-14 licences to the petitioner in an open auction to the seller within the meaning of Section 206C of the Act and was, therefore, required to collect 10 per cent of the licence fee as income-tax at source. In all these cases, it is to be noticed that there was no intermediate agent like the petitioner who was statutorily authorised to effect sale and deduction was insisted at the time of sale by the petitioner to excise contractor. However, all these judgments are to be noticed in the light of UOI v. Om Prakash & Co. (supra).
47. This matter reached the Supreme Court. Both the counsel strongly relies on the judgment of the Supreme Court. As I mentioned earlier, the three cases on which very heavy reliance is placed on by the petitioner would show that the foundation in those cases were deduction at source on the licence fee. Those cases were not like the present one where demands have been issued in the light of obtaining arrack by the excise contractor from the petitioner namely sellers after obtaining a right in terms of laws which I have ruled as part of the same transaction.
48. Sri Indra Kumar, learned counsel and Dr. Krishna strongly relies on the Supreme Court judgment in the case of Union of India v. Om Prakash (supra) which is a short judgment. The Supreme Court noticed Section 206C and thereafter the Supreme Court has ruled as under :
"It is quiet evident that Section 206C of the IT Act refers to a case where by reason of the payment to the seller the producer gets specific goods mentioned in the Table to the said section or gets a right to collect or receive those goods by virtue of that payment. In the instant case, when the Government issues a license, it only enables the licensee to carry on trade or business in that item. The payment made by the licensee by way of license fee does not ipso facto entitle the licensee to lift the goods. For obtaining the goods mentioned in the Table, the licensee has to place an order on the manufacturer or supplier of the said goods and it is at that point of time that Section 206C would get attracted. The Supreme Court has also ruled that the buyer has to be a buyer of goods and not merely a person who acquires a license to carry on the business."
49. Sri Indra Kumar, learned counsel heavily relies on the judgment to contend that the argument of the petitioner is totally diluted or required to be rejected in the light of the clear pronouncement of the Supreme Court. The Supreme Court was considering the case of Naresh Kumar wherein Section 206C was pressed into service at the time of grant of licence. Noticing that, the Supreme Court ruled that a licence only enables to carry on trade or business. But the Supreme Court ruled that when the movement of order is placed, at that point of time Section 206C is get attracted. In the case on hand, the demand is when the excise contractors have placed an order on the manufacturer namely the petitioner for supply of goods and the Department sought for deduction in terms of Section 206C. The point of time is the placement of an order in terms of the apex Court rulings. In the case on hand, the demand is made not at source namely grant of licence or licence fee but at that point of time, namely placement of an order by the contractor on the petitioners. In the light of the clear pronouncement of law by the apex Court namely source being place of order, it is unnecessary for me to go into the minute details in the other judgments of the Punjab High Court as sought to be relied on by the petitioners. The Supreme Court has made very clear in its judgment that once an order is placed, Section 206C gets attracted. The facts are not disputed in the case on hand. Orders have been placed on the petitioners and at that point of time, demands have been made by the Department. Therefore, it cannot be said that the demands in these cases on hand are totally unsustainable or illegal. Section 206C has to be understood as providing a. deduction in the light of the excise contractor obtaining goods from the manufacturers by placing an order on the petitioners.
(Underlining, italicised in print, is mine)
50. At this stage, I must also notice the argument that the legislature in its wisdom has chosen to use the word "obtained and not purchased" I could have understood the argument of second sale or separate transaction if the words show 'purchase' of goods. Obtaining of goods is a link to the auction for license. Therefore, Sri Indra Kumar, learned counsel has rightly pointed out that the facts of the case would show that Section 206C is squarely applicable to the petitioners.
Let me also notice the Dictionary meaning of 'obtain'.
51. Black's Law Dictionary provides the meaning to the word 'obtain' meaning to get hold of by effort; to get possession of; to procure; to acquire, in anyway.
52. Chambers 21st Century Dictionary provides for a meaning to the word 'obtain' to get something, to become the owner, or come into possession of something, often by effort or planning; to gain something.
53. Encyclopaedic Dictionary and Ultra's Legal & Commercial Dictionary would show that the word 'obtain' would mean procured with effect.
54. Judicial Dictionary by Justice L.P. Singh 'obtains' would mean obtains the property and not merely the possession.
55. In the case on hand, the arrack is obtained in terms of a license by way of auction. Therefore, the argument that obtaining arrack is totally independent of the auction cannot be accepted with the facts of this case. It is nothing but another side of the same coin.
56. It is also necessary at this stage to notice the judgment of the English Courts in Commissioner of Customs and Excise v. Top Ten Promotions, Ltd. 1969(3) All England Law Reports. That was a case dealing with duty of pool betting. The Court ruled that words to be construed are like Chameleons. They take their colour from their context. There are in my view certain general considerations which should guide us in determining which of their many possible shades of meaning Parliament intended the words to bear.
57. The Court also notices that there are few greater stimuli to human ingenuity that the prospect of avoiding fiscal liability. Experience shows that under this stimulus human ingenuity outreaches Parliamentary prescience. Once the transaction to be taxed has been described by reference to its legal characteristics the potential taxpayer gets to work to devise new transactions whose legal characteristics do not comply with the statutory description yet nevertheless achieve the same kind of economic result. In construing such an amendment the Court should start with a predilection for the view that Parliament did not intend to alter the rational basis of the tax but to protect the Revenue by applying it to the new transactions. I must also notice in the same judgment reading as under:
"As always happens in cases where Parliament rightly had employed simple non-technical language in every day use the argument has ranged over a large number of examples where, in the desire to persuade your Lordships that a very limited construction should be placed on the word "connected', exaggerated cases are exemplified, such as suppliers who could be held to be connected with, or at all events benefiting from, the promotion of the betting; or that T.T.P might carry on two disconnected business but both benefit from the other by the use of, at all events to some extent the same staff.
My Lords, I am never impressed by these arguments. It is highly dangerous, if not impossible, to attempt to place an accurate definition on a word in common use; you can look up examples of its many uses if you want to in the Oxford Dictionary but that does not help on definition; in fact it probably only shows that the word normally defies definition. The task of the Court in construing statutory language such as that which is before your Lordships is to look at the mischief at which the Act is directed and then, in that light, to consider whether as a matter of commonsense and every day usage the known, proved or admitted or properly inferred facts of the particular case bring the case within the ordinary meaning of the words used by Parliament."
58. Privy Council 1958 AC 549 also requires to be noticed at this stage.
"I prefer to start with the proposition affirmed by my noble arid learned friend, Lord Beid, in Goodrich v. Paisner : "No Court is entitled to substitute its words for the words of the Act". I look upon the suggested interpretations only as attempts to elucidate it. When searching for the meaning of a statute, it is natural to try to put it into your own words--so as to express its meaning as it appears to you. But you must be careful not to write your own words into the statute as if they were part of it. It may well be that no words of yours convey the meaning of Parliament quite so well as the words which Parliament itself has chosen. You can often appreciate the meaning of a section--get the feel of it, so to speak--without being able to translate it into other words with exactly the same meaning. At the conclusion of the argument the function of the Court is to apply, not its own words, but the words of the statute to the given situation.
I return, therefore, to the question : What is the true meaning of Section 42 as it stands? This cannot be answered by simply looking at the words of the statute and nothing else. A statute is not passed in a vacuum, but in a framework of circumstances so as to give a remedy for a known state of affairs. To arrive at its true meaning, you should know the circumstances with reference to which the words were used: and what was the object, appearing from those circumstances, which Parliament had in view. That was emphasized by Lord Blackburn in River Wear Commissioners v. Adamson and by the Earl of Halsbury L.C. in Eastman Photographic Materials Co. Ltd. v. Comptroller-General of Patents, Designs and Trade Marks in passages which are worth reading time and again. But how are the Courts to know what were the circumstances with reference to which the words were used ? And what was the object which Parliament had in view ? Especially in these days when there are no preambles or recitals to give guidance. In this country we do not refer to the legislative history of an enactment as they do in the United States of America. We do not look at the explanatory memoranda which preface the bills before Parliament. We do not have recourse to the pages of Hansard. All that the Courts can do is to take judicial notice of the previous state of the law and of other matters generally known to well-informed people. Thus one of the best ways, I find, of understanding a statute is to take some specific instances which, by common consent, are intended to be covered by it. This is especially the case with a Finance Act. I often cannot understand it by simply reading it through. But when an instance is given, it becomes plain, I can say at once: "Yes, that is the sort of thing Parliament intended to cover." The reason is not far to seek. When the draftsman is drawing the Act, he has in mind particular instances which he wishes to cover. He frames a formula which he hopes will embrace them all with precision. But the formula is as unintelligible as a mathematical formula to anyone except the experts: and even they have to know what the symbols mean. To make it intelligible, you must know the sort of thing Parliament had in mind. So you have to resort to particular instances to gather the meaning."
59. In the light of my discussion, it is seen that the respondent-officer concerned has chosen to reject the arguments of no auction sale, and no obtaining arrack by way of auction is well found. He has placed a finding in the light of the statutory provisions and though not for the very same reasons but for additional reasons, I accept the finding of the authority that the transaction is covered by Section 206C of the Act.
60. Looking from any angle it cannot be said that the petitioners are not the sellers and that the excise contractors are not the buyers who obtain goods by way of auction. The arguments of the petitioners are, therefore, to be rejected in the light of well accepted principles of interpretation of statute and in the light of the object being to eliminate the mischief of tax evasion. That mischief cannot be perpetuated or continued by placing a very narrow interpretation as suggested by the petitioners thereby defeating the very object of the legislation in arresting tax evasion by liquor dealers in the light of the judgment of the apex Court.
Issue of two interpretations
61. Counsel argued that when two interpretations are possible, the one beneficial subject is to be given to the petitioners, They rely on Hindustan Lever Ltd. v. Municipal Corporation of Greater Bombay and Mysore Minerals Ltd. v. CIT (supra).
62. Per contra, the respondents deny the same. 1995(3) SCC ruled in para 11 that when interpretations are reasonably possible one, beneficial to the assessee is to be given.
63. In the case on hand, in my view, there cannot be any two interpretations and there could be only one interpretation on facts and that is the interpretation of obtaining arrack by way of auction.
64. The second judgment Mysore Minerals Ltd. v. CIT (supra) says that interpretation has to be given while interpreting the tax notwithstanding statute. Interpretation of statute benefit has to be given. That would depend upon the facts of each case. When a fiscal statute is introduced to eliminate a mischief, Court cannot provide a beneficial interpretation thereby continuing the mischief which is to be avoided in terms of the statute and in terms of the legislative power. Therefore, I am clearly of the view on the facts of this case that beneficial interpretation cannot be given to the petitioner and any beneficial interpretation would be ruining the very object of enactment of Section 206C would result in continuing the tax evasion by a section of traders. This argument of the petitioner is therefore rejected. Therefore, the authority is right in holding that there is no fixed price in the case on hand warranting exclusion as such as argued by the petitioners.
Jurisdiction under Section 206C(6)
65. The petitioner says that the authority who has issued the order has no jurisdiction in terms of the IT laws. The same is disputed. The respondent filed Annex. 'R-3' in support of their contentions. It is a notice issued by the Chief CIT dt. 6th July, 1998. A notification provides for jurisdiction. Section 206C further provides for a responsibility for collection of tax and in the event of failure to collect the tax, he is liable to pay the tax to the credit of the Central Government. It further provides for simple interest in the matter. Duty is cast on the petitioner in the matter of collection. Rule 37F provides for a jurisdiction.
Moreover, on account of non-collection, the petitioners are to be labelled as assessees in default. Moreover, no such specific objections have been taken at the relevant point of time. Even otherwise, this Court cannot nullify an order in the given set of circumstances. In fact, what the Department has done is only to provide an opportunity. Such opportunity is not called for in terms of Section 206C of the Act. An opportunity given to the petitioner cannot be taken as a ground of no jurisdiction in the given set of circumstances. On the other hand, without even notice, the petitioners are duty-bound in terms of the statute to collect the tax. This argument does not appeal to me in the given circumstances particularly by public sector undertakings. At any rate, now in terms of this order, I have upheld the Department's claim and I have further given certain directions in the matter of payment. In the light of my other findings, this issue gets diluted. Assuming that the petitioners have made out a case then, only course open to me is to remand the matter for reconsideration, Since the parties have advanced arguments on the merits of the matter, it is unnecessary for me to give any specific findings on this issue. Even otherwise, as I mentioned earlier, power is available in terms of the Act.
Fixation of retail price
66. I have come to a conclusion on facts in the light of statutory principles and the laws governing that there is a buying in terms of auction. The second limb of the argument namely whether fixation of price by the State is also necessary in the light of the context of the applicability of Section 206C in the light of exclusion of the exemption in terms of Section 206C(11) Explanation. However, I deem it proper to give a finding on this issue as well since the arguments have been advanced before me.
67. The authority also has concluded in the order in the light of the objection that prices are fixed by the Government thereby attracting Section 206C of the Act. The authority has rightly ruled that the petitioners are the sellers and they have collected the tax.
68. For the purpose of fixed price, the authority has noticed the word 'fixed' and thereafter he comes to a conclusion that prices are fixed by the excise department and that therefore, there is a fixed price available in terms of the statute. The same is disputed by the petitioners'. The petitioners argue that no doubt, the Excise Commissioner has fixed the price. But that price is in the light of excise by the state. What is fixed by the Excise Commissioner according to them is only a maximum price and not a fixed price. They rely on the judgment of 1974(2) SCC 230 and 75(3) SCC 323. They also rely on Sir Shadi Lal Enterprises Ltd. v. Union of India .
69. Per contra, the Revenue argues that in the case of petitioners, there is no fixation of price of arrack sold to their buyers. They refer to the order of the authority to say that there exists a minimum selling price in the case on hand. The Revenue further says that there is a range of same price and there is no fixed price as such. The Revenue relies on the judgment of 41 STC 409 and AIR 90 SC 147. The section categorically provides for fixation of sale price. It is no doubt true that price is fixed. Fixation of price is in terms of the excise laws. Lot of freedom is provided to the excise contractor to fix a price of their own without exceeding the price fixed by the Government in the light of their expenses in this regard, Certain amount of discretion is provided to the excise contractor. Therefore, from the facts available on record what can be covered is a price fixed. Is it a fixed price? is to be noticed by this Court. The petitioners rely on 1974(2) SCC 630 is a case of fixation of price in terms of Essential Commodities Act. The Court notices the control order and in the light of the permits in the control order r/w Essential Commodities Act. The Court ruled as to whether fixation price has been done or not. That case is distinguishable on facts.
70. In , is again pressed into service by the petitioner. That again is under Essential Commodities Act. The Court was considering as to whether a higher control price would prevail over the contract price. The Court was considering s. 3 of the Act in that case. While placing reliance on the judgments, the Court has to be careful to notice the facts involved and the legal provisions providing for an interpretation on the given set of facts. No judgment can be applied without noticing the facts. The facts in those two cases do not in anyway come near to this case.
71. Sir Shadi Lal Enterprises Ltd. v. Union of India (supra) is another judgment relied on by the petitioners. A reading of the said judgment would show that retail licensees purchase liquor at the price fixed by the State and there is no negotiation in that auction. There was also a circular issued by the Commissioner with regard to no collection. That stands on a different footing.
72. Courts cannot give a go-bye to the facts in a given circumstances and only rely on certain passage in a judgment. The judgment has to be read in its entirety in the context of facts and law for the purpose of applicability of the case laws to the given set of circumstances. In the case of the Allahabad judgment in the case of Sir Shadilal Enterprises Ltd. v. Union of India (supra), the Court was considering the retail price under Rule 16 of the Rules. In terms of the Rules, the petitioner was required to provide string of regular place of manufacture, full work and quantity of work. Therefore, the said judgment stands totally on a different footing compared to the facts of this case. At the most, the fixation price and the actual price can be treated as range of sale price but definitely not a fixed sale price in terms of the statute. The Supreme Court and the interpretation of statutes say that cardinal rule of construction provides for consideration of every word used in the statute. No word or provision should be considered redundant or superfluous in interpreting the provisions of the statute. The purpose and intention of the legislation is to exclude such transactions where prices are fixed by the State. In the case on hand, first of all there is no fixation of the price by the State and secondly, the fixation is nothing but range of sale price and that therefore, the argument on this basis is also required to be rejected. Here again, it is to be noticed that the real right person namely the contractors are not before the Court. Their say would have been of some assistance in the matter.
Concluding remarks
(a) Excise Commissioner circular
73. The petitioners finally on facts say that they have not deducted tax at source in the light of the circular issued by the Excise Commissioner. It is seen from the material on record that standing Circular 144 and Addendum to Circular 144 do provide no recovery of advance income-tax from the contractors. This country follows federal structure of Government in terms of the Constitution. Their exists a Central Government and their exists a State Government. Lists 1, 2 and 3 of Schedule VII provides for legislative powers to both State and Central Government in the matter of levy of tax. When the Central Government introduces a Central Act providing for, tax deduction at source, the State Government has to be careful in saying "no" to deduction in these matters as otherwise the object of legislation is defeated. The Excise Commissioner being a public authority is not expected to issue a circular having an adverse effect on the Central revenue without proper appreciation and without proper consideration of the object of statute. The circular has to be issued after deliberation and after careful consideration particularly when the circular involves revenue collection. It should not be issued in mechanical manner. If need be, the Commissioner could have sought clarification of the CIT. On account of this circular, certain embarrassment is caused to the petitioner. It is hoped that in future at least such lapses are avoided in the larger interest of the revenue collection to the country as a whole. Such circular defeats the object of tax evasion.
74. Insofar as the petitioners are concerned, it is to be stated here that both the petitioners are large public sector undertakings. They have to apply their mind before blindly following the circular particularly in the matter of revenue collection and in the larger interest of tax evasion. At the most, these two circulars may, to certain extent show bona fides and certainly these circulars cannot be pleaded as a legal excuse for non-recovery. A statute has a prime place and circular cannot dilute or deface a statutory provision.
(b) Observations and relief
75. Having come to these conclusions that all the legal contentions of the petitioners are unsustainable, I have no option but to confirm the order of the authority. But at the same time, I cannot forget that the petitioners are public authorities. Now they are virtually paying tax where the same is payable by the excise contractors. Large sums of money are involved in the case on hand. Though, I have confirmed the order still I deem it proper to reserve liberty to the petitioners even now to place such material as are necessary in the matter of tax payment by the excise contractor. To that extent, their burden could be lessened in terms of the order in public interest. In these circumstances, I deem it proper to give them six weeks time from the date of receipt of a copy of this order to obtain and provide material with regard to the factual aspect of the tax paid by the contractors and on the basis of the records and if any such materials are placed, not withstanding the order of the authority and notwithstanding this order, the Department is to consider the same on its merits and provide appropriate deductions, if possible, and in accordance with law. The Excise Commissioner is also directed to provide the necessary assistance to the petitioners in providing material particulars in the larger interest of saving State revenue in the light of the petitioners status as Government undertakings.
76. In the normal circumstances, I would have awarded costs but the petitioners are public undertakings. They were under a bona fide impression that in the light of the Commissioner's circular, no deduction is permissible in law. They were also under the bona fide impression that no tax can be deducted, Legal niceties are also available to the petitioner. Taking into consideration an overall picture, I deem it proper not to burden the petitioners with costs in these cases.
77. Before concluding, as rightly pointed out by Sri Indra Kumar, learned counsel I deem it proper to quote what Lord Greene, M.R., has stated in his judgment in Lord Howard de Walden :
"For years a battle of manoeuvre has been waged between the legislature and those who are minded to throw the burden of taxation off their own shoulders on to those of their fellow-subjects. In that battle the legislature has often been worsted by the skill, determination and resourcefulness of its opponents, of whom the present appellant has not been the least successful. It would not shock us in the least to find that the legislature has determined to put an end to the struggle by imposing the severest of penalties, It scarcely lies on the mouth of the taxpayer who plays with fire to complain of burnt fingers."
78. In the result, these petitions stand rejected. Orders are confirmed with liberty and directions in terms of this order. No costs.