MUNICIPAL CORPORATION OF CITY OF HUBLI

SUBHA RAO HANUMATHARAO PRAY AG & ORS.

March 24, 1976

[H. R. KHANNA, P. N. BHAGWATI AND A. C. GUPTA, JJ.J

Bonibay Municipal Borougl1s Act, \Born. 18 of 1925), Ss. 78 to 84-WheJhcr 1usessn1ent list should be authenticated before the expiry of the official year.

Stare Decisis-Principle when State High Courts have given a particular interpretation to State e11actn1ent.

interpretation of statutes-Statute 1nust be read as a whole-Legislative interpretation as u guide.

The scheme of ::-..:.. /8 to 84 of the Bombay Municipal Boroughs Act, 1925, shows that tne official year is the unit o: time for the levy of rates on buildings and lands.

Under these provisions the provisional assessment hst is prepared for the official year, e.ther before the co111mencement or in the cour.e of. the official year, objections are invited, and amendments con,,, cqu n 1 npon tile decisions on the ob1ections are carried out in the list.

The assessment list is then authenticated. 1 he precess of as:.t.~S1nent and levy of tax .. hich begins with the preparation of the provisional assessment list is thus completed when the assessment list is authenticated.

The assessment list. when authenfcated. becomes effective from the first dav of the official vear and gives rise to the liability of the rate-payers to pay the tax levied. [8R8 G-889 Cj

For the assessment year 1951-52, the appell<1nt followed the rrocedure but the authentication was on July 24, 1952, after the expirv of the otfi ial year on March 31, 1952.

Since property tax in accordance with the revised rates was sougnt to be levied, the respondents filed a suit for a declaration that the

appel1ant was not entitled to recover ahy property tax at the rt:vised :a'es.

' The suit was decreed and the decree was affirmed by the High Court,

In appeal to this Court, it was contended that, ( 1) the authentication of the assessment list in order to be valid and effective, need not be made befoe the expiry of the official year to which the assessment list relates; and (2) the suit was barred under s. 206A of the Act.

Dismissing the appeal, F

HELD : ( 1) The assessment list in order to be effective in_ levying the tax must be authenticated b:fore the expiry of the officiat year aild if it is not, the assessn1ent list would be void and inoperative and would not 12ive rise to any liability in the tate-i:; ayers to pay tax. (891 H]

(a) Once the view is taken that the process of levying the tax is complete only when the assessment list is authenticated and it is only then that the tax is levied on the rate-payers, it follows that the authentication must be made within the official year. The tax being a tax for the official year must obviously be levied during the official vear and since the ie,-y of tax is complete only when the assessment list is authenticated it must follow a fortiori that the authentication must take place in the official vear.

Otherwise.· the tax for an official year would be leViable at any time, Without any time limit, even years after the expiration of the official year, which could not have been the intention of the legislature, since it is an annual tax intended to be levied for each official year.

[889 D-FJ

' (b) Section 84 provides that it shall not be necessary to prepare a new as.sessment list every year but subiect to the condition of revision once in everv four years, the Chief Officer may adopt the as$essment l'st for any veaf, with necessary alterations for the year immediately following. The provision

A postulates that there would be an assessment list, that is, the authenticated assessn1ent list, for each official yea•r before the close of that official year so that it can be adopted by the Ch.:ef Officer for the immedia.ely foliowine year.

Otherwise, he would have to prepare a new provisional assessment list every

lime wnen the AssessmenL List for the precec..ung year is not finalised and au.lr.;; nticated, and this might lead to the sta• tling result of there befng mo.re than one provisional assessment list in the process of finalisation at the same

time. (889 G-890 CJ

(c) ln interpreting a provision of a statute the court is entitled and indeed bcu.nd to consider any other parts of the Act which throw light on the intention of the legislature. The statu:e must, therefore, be read as a whole and every provision in it must be construed with reference to the context and other clauses so as, as far as possible, to make a consistent enactment of the whole statute. Section 82 ( 1 ) provides for making of an amendment in the assessment list by insertion or alteration of an entry in certain events, after hearing any objections to the amendment, Section 82(3) makes the amendment effective from 'the earliest day in the current official year in which the circumstances justifying the entry or alteration existed.' The expression clearly signifies the earliest day in the official year which is current when the amendment in the assessment list takes place, that is, the official year which is running at the time when the amendment is made by insertion or alteration of an entry.

Therefore, a combined reading of s. 82(1) and (3) shows that an amendment, in order to be effective in levying tax for an official year, must be made during the currency of the official year. The Scheme of ss. 78 to 81 is identical with s. 82 and in both cases what is contemplated first is a proposal to which objections are invited and after the objections are investigated and disposed of, the assessment Ust in orie case, and the altered entry ih the other, are authenticated, giving rise to liability in the rate.payer. It must follow a fortiori, that if an alteration in the assessment list in order to fasten liability on the rate payer, is required to be made during the currency of the official year, equa1ly, the assessment list, in order to give rise to liability in the rate payer, must a1so be authenticated before the expiry Of the official year. [890 C-.

891 BJ Sholapur Municipality v. Governor Central, 49 Born. L.R. 752 and Sholapur Municipal Corporation v. Ran1chandra 74 Born. L.R. 489 referred to.

(d) Three High Courts having jurisdiction or the territories in which the Act is in force have all taken this view over a course of years and this Court will not be justified in departing from it, merely on the ground that a different view is possible. This Court is ordinarily loathe to interfere with the interpretation of a State statute which has prevailed in the State for a long number of years and which the State Legislature has chosen not to disturb by legislative amendment. (891 C-D] ( e) In the present case, the Bombay Legislature has accepted the interpretation of ss. 78 to 81 bv the three High Courts and given legislative recognition to it by introducing s. 84A by Bombay Act 53 Of 1954. This provision makes it clear that the legislature not only did not amend the Act for the purpose of removing the time limit of the official vear as interpreted bv the High Courts or enlarging such time limit. but on the contrary, made the time limit more stringent by oroviding that the authentication shall be made by the Municipal Boroui!h not later than July 31, of the official year, and that if the authentication is not made within that time, the Stnte Government !llbaU be entitled to appoint a person for the puroose of authenticating the asse:ii!!- ment 1ist and that the authentication bv such oers0n shall not, in any event,'

be later than the Iast day of the official year. [891 D-H]

(2) Section 206A provides, inter alia, that no suit shall lie against a muhi~ cipality in resoect of any act done in pursuance of execution or intended execution of the Act unless it is commenced within 6 months next after the accrual of the cause of action. It coud not, however, be contendf'd that the cause of action for the suit in the present cae arose in favour of the respond~ ents and other rate payers on July 24, 1952, when the list was authenticated, and that the suit, not having been filed within 6 month-; of that date is barred.

The assessment list in the present case was authenticated after the' expiry Of

MUNJC. CORP. HUBL! v. SUBHA RAO (Bhagwati, J.) 8 85

the official year and was void and inoperative and the respondents and other rate-payers were entitled to ignore it as a nullity.

Their cause of action arose only when the appellant sought to recover the amount of tax from them on the strength of that assessment list.

In the absence of material to show 'vhen the notices of demand requiring the re<; pondents ahd 01hcr rate-payers to pay the amount of tax were issued, or which rate-payers paid and when it is not possible to say whether the cause of action for filing' le suit arose to the respondents withih six months before the filing of the suit or earlier.

[892 A-E]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2406 of 1968.

From the Judgment and Order dated 13-2-1968 of the High Court of Mysore at Bangalore in R.S.A. No. 477 of 1962.

M. S. K_ Sastri and M. S. Narasimhan for the Appellant

B. D_ Bal, R. B. Datar and Rajan Yashpal for the respondents 1, 5, C 6, 10, 11, 17, 19, 23, 25, 26, 27, 35, 36 and 50.

The Judgment of the Court was delivered by

BHAGWATI, J.

This appeal by special leave raises two questions relating to the interpretation of certain provisions of th_c Bombay Municipal Boroughs Act, 1925.

The facts giving rise to the appeal are few and may be briefly stated as follows : D

The respondents are rate-payers liable to pay property tax in respect of their lands and buildins situate within the limits of the erstwhile Municipal Borough of Dharwar now converted into the Hubli Dharwar Municipal Corporation.

The Municipal Borough of Dharwar (hereinafter referred to as the Municipal Borough) was at the material time governed by the provisions of the Bombay Muni- E pal Boroughs Act, 1925 (hereinafter referred to as the Act) . fhe Chief Officer of the Municipal Borough prepared an assessment list for the official year 1951-52 containing revised valuation and assessment of the lands and buildings situated within the limits of the Municipal Borough and published it on !st May, 1951 in accordance with the provisions of the Act.

The respondents and several other rate-payers filed their objections against the valuation and assessment F in the assessment list and consequent on the decisions on the objections, modifications were made in the assessment list and the assessment list so finalised was authenticated on 24th July, 1952_ Sinee the authentication of the assessment list was made after the expiry of the official year, the respondents and other rate-payers took the view that the assessment list was void and inoperative and the Municioal Borough was not entitled to recover property tax at the revised rates G which were higher than '.he rates charged in the previous official years_ It seems, however, that from a few persoru;, whose names do not appear in the record,. property tax in accordance with the revised rates was collected by the Municipal Borough. There was consequently an agitation amongst the rate-payers and a body called the Citizens Welfare Association championing the causes of the rate-payers address

ed a communication dated 30th November, 1952 to the Director of H Local Authorities requesting him to direct the Municipal Borough to refund the excess amount of property tax collected from the ratepayers, because according to them the levy and collection of property

A tax at the revised rates was illegal in view of the fact that the assessment list was authenticated only on 24th July, 1952 beyond the expiration of the official year for which the property tax was sought to be levied.

The Director of Local Authorities by his reply dated 16th December, 1952 informed the Citizens Welfare Association that the levy of pro.verty tax under the authenticated assessment list was, according to hzm, perfectly valid.

The President of the Municipal B Borough thereaf, er issued a publ'c notice dated 10th November, 1954 calling upon the rate-payers to "pay immediately all the tax still due from them aod extend their full cooperation to the Municipal Borough".

Since the Municipal Borough was determined to recover the amount of proper'y tax from the rate-payers at the enhanced rates appearing in the assessment list, the respondents, acting for and on behalf of themselves and other rate-payers, filed a suit against the Municipal C Borough on 6th June, 1955. after giving notice dated ls!' April, 1955 on the hypothesis that such notice was required to be given under s. 206A of the Act.

The main reliefs claimed in the suit were, fin; tly, a declaration that the Municipal Borough was. not entitled to recover property tail: from the rate-payers at the revised rates since the assessment list was authenticated beyond the expiration of the official year D and secondly, an order directing the Municipal B"rou!!h to refund the excess property tax recovered by i_t from the rate-payers.

The Municipal Borough in its written statement raised a preliminary objection that the suit was barred by limitation since it was not filed within six months of the accrual of the cause of action as required by s. 206A of the Act and it also disputed the claim of the rate-payers on merits on the ground that there was nothing in the Act which E required that the assessment list should be authenticated before the expiration of the official year and that even if the assessment list was authenticated beyond the expiration of the official year, it did not have the effect of invalidating the assessment list.·

The Trial Court negatived the plea of limitation based on s. 206A of the Act and so far as the merits were concerned, held that since F the authentication of the assessment list was admittedly made beyond the expiry of the official year, -the assessment list was void and inoperative and -the Municipal Borough was not entitled to levy and _ _ co1lect property tax at the revised rates on the strength of such assessment list.

The Municipal Borough, being aggrieved by this decision, filed an appeal to the District Court, but the appeal was unsuccessful and a second appeal to the High Couit also failed.

G Hence the present appeal by the Municipal Borough with special leave obtained from this Court.

The principal contention that was urged before us on behalf of the Municipal Borough was that on a true construction of the relevant provisions of the Act, the authentication of the assessment list, in tient to impose liability to tax for the official year even if it is made the official year to which the assessment list relates and it is sufficient to impose liability to tax for the official year even if it is made at any time after the expiry of the official year and, therefore, in the present case, though the authentication of the assessment list for the official year 1951-52 was made on 24th July, 1952 after the expiry of

• '

. MUNIC. CORP. IIUDLI v. SUBllA RAO (Bhagwati, J.) 887

lhe official year, it was valid and effective and operated to create habJ.uy "" tn" , ax payers rur payment of tax at the revised rates .. In oruer lv appreciate lhls contenuon it is necessary to examine br1eily the scheme of the Act in regard to assessment and levy of property ta.A. .. .uw .1.a::i1,; n .. u1us oi. 51,;;1,;1.~..., u aom / ts to 89 aeals with assessment of and liability to rates of buildings and lands.

These sections set out the procedure which must be followed for levy of rates on buildings and lands.

Secuon 78, sub-s. (1) reqtiues the Chief Officer to cau>e an assessment list of all lands and buildings in the Mun1c1pal Boruugn to be prepared -Cvu...atn111g var1vu~ parL1culars set out in the section.

When the preparation of the assessment list is completed, the Chief Officer is required under s. 80 to give public

notice of the list and of the place where the list or a copy thereof could be inspected.

Simultaneously the Chief Officer. has also to give public notice under sub s. (1) of s. 81 of a date not less than one month after such publication before which objections to the valuation or assessment in such list shall be made.

Sub-s. (2) provides for the mode in which the objections must be made and sub-s.

(3) provides for the hearing and disposal of the objections by the Standing Committee and the proviso to this sub-section permits the powers and duties of the Standing Co=ittee to be transferred to anyother committee or to any officer of the government. This sub-section provides that before the objections are investigated and disposed of, the objector shall be given an opportunity of being heard in person or by an agent and it is only after the hearing the objectors that the objections can be disposed of. When the objections are thus considered and disposed of, the assessment list with the modifications which may have been made consequent upon the decisions on the objections has to be authenticated in the manner set out in sub-s. (4). Suh-section (5) provides that the list so authenticated shall be deposited in the Municipal office and shall be open for inspection during office hours to all rate payers_ The completion of this procedure leads to certain important consequences and. they are set out in sub-s. ( 6) which reads as follows :

"(6) Subject to such alterations as may be made therein under the provisions of section 82 and to the result of any appeal or revision made under sec. 110, the entries in the assessment-list so authenticated and deposited and the entries, . if any, inserted in the said list under the provisions of sec. 82 shall be accepted as conclusive evidence- . (1)

(ii) for the purposes of the rate for which such assessment-list has been prepared, of the amount of the rate liable on such buildings or lands or both buildings and land in any official year in which such list is in force."

section 82 then provides for amendment of assessment list in certain cases.

This section is rather material and it may be reproduced in full : }[ "82. (1) The standing committee may at any time alter the assessment-list by inserting or altering an entry in respect of any property, such entry having been omitted from or

erroneously niade in the assessment-list through fraud, accident or mistake or in respect of any building constructed altered, added to or reconstructed in whole or in part, where such construction, alteration, addition or reconstructfon had been completed after the preparation of the assessment-list, after giving notice to any person interested in the alteration of the list of a date, not less than one month ·

from the date of service of such notice, before which any objection to the alteration should be made.

(2) An objection made by any person interested in any such alteration, before the time fixed in such notice, and in the manner provided by sub-section

(2) of section 81, shall be dealt with in all respects as if it were an application under the said section. .(3) An entry or alteration made under this section shall subject to the provisions of section 110, chave the same effect as if it had been made in the case of a building constrcted altered, added to or reconstructed on the day on which such construction, alteration, addition or reconstruction was completed or on the day on which the ne\v construction, alteration, addition or reconstruction was first occupied, whichever first occurs, or in' other cases, on the earliest_ day in the current official year on which the circumstances justifying the entry or alteration existed; and the tax or the enhaEced tax as the case may be shall be levied in suoh year in the proportion which the remainder of the year after such day bears to the whole year."

The next important section is s. 84 which provides for the adoption ".: of valuation and assessment contained in the assessment list of any \ particular year for the year immediately following.

That section is in the following terms :

"84. (1) It shall not be necessary. to prepare a new assess-. ment list every year. Subject to the condition that every part of the assessment list shall be completely revised not less than once in every four years, the Chief Officer may adopt the valuation and assessment contained in the list for any year, with such alterations as may be deemed necessary, for the year immediately following.

(2) But the prmisions of sections 80, 81 and 82 shall be applicable every year as if a new assessment list had been completed at the commencement of the officill; l year." The other sections in this group are not material and it is not necessary_ to refer to them. ·

- It is clear from the scheme of these provisions that the official year is the unit of time for the levy of the tax.

The provisional assessment -list is prepared for the official year.

This may be done before the commencement of the official year or: even ther; eafter in the course of the official year.· Then objections are invited and when made, they are disposed of andc amendments consequential upon the

MUNIC. CORP. IIUBLI v. SUBIIA RAO (Bhagwati, J.)- - 889 ' A

' /

decisions on the objections are carried out in the assessment list. The assessment list is then authenticated. The process of assessment and levy of the tax which begins with the preparation of the provisional assessment list is thus completed when the assessment list is authenticated.

The assessment list, when aulhe1mcated, becomes effective from the first day of the official year and gives rise to the liability to pay tax. It is on the authentication of the assessment list that the liability of the rate-payers to pay tax arises and the tax is levied on the rate-payers.

This position would seem to be clear as a matter of plain interpretation and in any event there is a long line of decisions of the Bombay High Court commencing from Sholapur. .f11unicipality v. Governor Gener111( 1). and ending has Sholapur Municipal Corporation v.

Ramchandra( 2 ) which has consistently accepted this position and the learned counsel appearing on behalf of the Municipal Borough did not dispute the correctness of these decisions.

The only contention raised by him was as to within what time the assessment list must be authenticated, if it is to be a valid and effective assessment list. It is to this contention that we must now address ourselves.

Now, once we take the view that the process of levying the tax is complete only when the assessment list is authenticated and it is only then that the tax is levied on the rate-payers, it is ditlicuit to resist the conclusion that the authentication must be made within the official year.

The tax, being a tax for the official year, must obviously be levied during the official year and since the levy of the tax is complete only when the assessment list is authenticated, it must follow a fortiori that the authentication on the making of which alone the levy of the tax is effected, must take place in the official year. Any other view would result in an anomalom and rather absurd situation, namely, that the tax for an official year would be leviable at any time, even years after the expiration of the official year.

Th:it could not possibly have been intended by the legislature.

That would indeed be a strange consequence in case of a tax which is annual in its structure and organisation and which is intended to be levied for each official year.

But, apart from this consideration, there is inherent evidence in the sections themselves which shows that the authentication wa5 intended by the legislature to be a step which must be taken before the close of the officbl year.

Section 84 provides that it shall 11ot be nece>-

sary to prepare a new assessment Est every year but, subject to he __ G conditions tha_t every part of the assessment list shall be completely c __. revised not less than once in every four years, the Chief OrTiccr may ' adopt the valuation and assessment contained in the list for any year, with such alterations as may be deemed necessary, for the year immediately following.

This provision postulates that there would be an assessment list for each official year at the close of that official year, so that the valuation and assessment contained in it can he adopted by H the Chief Officer for the immediately following year. Now clearly the assessment list which can be adopted for the immediately following year -

(I) 49 Born. L. R. 752.

(2) 74 Born. L. R. 489. -

is the authenticated assessment list and it would, therefore, seem that the Jeg.slat1ve assumpt.on unue1Jymg LlliS provision is that in respect or eaeh omc1al year, there woulu be an amhent1cated assessment list before the cluse ot thar ornc.ai year, o inai. w~ ah.1.uuvl.l '1.Lau ......,,.,..,;').sment con.ameCI m ll can be aoopteCI by the Clue! Owc<r xor me . immea1alt:Jy rollowmg year.

ULncrwe, •l wuu1u not bt: pu~~101e tor the Clltef Ullicer to aaopt the vamauon ana assessment 01 rne p1eccding v111l:.tal ycal auu uc woulu. navt: to prepare a new prov1s1onal assessment Lst every tune when the assesment. J1st for Lile p1ct.:t:u.u.lg year J!) uuL 11.ual1su a.nu _aucuen~.cal .... u au.u t.h1:, m1gnt lead to the rather startling result of there beillg several provmonal a"e>'mcnt lists for d!lferent otticrnl years m the process ot hnal.tsatlon at me same. time.

We shoulCI be slow to accept an interpretat10n which Dllght lead to such a strange consequence.

Then again considerable Lght on this question is thrown by the provis10n enacted m s. 82.

It IS a well setJed rule of 11i.crpreiat10n that the Court is "enc.tied and inaeea bounu, when cunsau.ug the terlllS of any provision xound m a staiute, to consider any otl!er pru ts of the Act wh1ch throw Lgnt on the liltenuon 01 the Jg1sl<J.LUte, and which may serve to show that the parucular provision ought not to be construed as it would be alone and apart trom the rest of the Act." The statute must be read as a whole and every prov1S1on in the statute must be consrrued with reference to the contex1 and other clauses in the staLUte so as, as far as poss.ble, to make a consistent enactment of the whole statu<e.

Obv.ously, therefore, section 78 to 81 must be'so consrrued as to harmonise with s. 82. 'Ibey must be read together so as to form part of a connec, ed whole. etion 82, sub-s. (1) provides for making of an amendment in the assessment llSC by insertion or alteration of an entry in certain events after hearing objections which may b~ made by any person interested in opposing the amendment.

Sub-section (3) of s. 82 makes the amendment effective from "the ear1est nay in the currcu. ., llic.al year on which ihe circumstances ju,"1y.ng the entry or alteration

existed." The expression 'current official year' in the context in which it occurs in s. 82, sub-s. (3) clearly signifies the earliest day in the official year which . is current when the amendment in the assessment list takes place and that expression refers only to the official year which is running at the time when the amendment is . made by insertion or alteration of an entry under sub-s. (1) of s. 82.

It would, therefore, seem clear, on a combined reading of sub-ss. (1) and ( 3) of s. 8 2, that an amendment, in order to be effective in levying tax for an official year, must be made during the currency of the official year.

That is now well settled as a result of several decisions of the Bombay High Court cuJminatiug in the Full Dench decision in Sholapur Municipal Corporar1011 v. Ramchandra (supra) and we do not see any reason to take a different view.

Now the scheme of ss. 78 to 81 is identical with that of s. 82 and in both cases what is contemplated first is a proposal to which objections are invited and after the objections are iuvcstigated and disp 0 sed of. the assessment F<• in the OPe rase and the altered entry in the other are authenticated giving rise to liability in the rate-payer. It must follow a forliori that if an alteration in the assessment list, in order

MUNC. CORP. HUBL! v. SUBHA RAO (Bhagwati, J.) -- 891

to fasten liability on the rate-payer, is required to be made during the A currency of the official year, equally, on a parity cf reasoning, the asses~ f , J ment !1st, in order to give nse to hability rn the rate-payer, must also be / autncnt1cated betore tne expiry of the otticial year. Moreover, it is diffi! cult to believe (hat the legislature did not intend that there should be any time limit in regard to the levy of tax for an official year and that the tax should be legally leviablc at any time after the close of the ollicial year. There is, in our opinion, sufticient indication in the various pro- B visions of the Act to show that the authentication of the assessment list, in order to be valid and effective, must be made within the official year, though the tax so levied may be collected and recovered even after the expiry of thq _official year.

We may p"aint out that the Karnataka High Court_is not alone in taking this vic\V in the present case. This vie\V has been consistently taken by the Bomoay High Court in a scncs ot decisions over the years and it has also been followed by the Gujarat High Court._ When we find that c

--;-- three High Courts having jurisdiction over the territories in which the Act is in force have all taken this vie\V over a course of years, ;, ve do not think we would be justified in departing from it, merely on lhe ground

that a different view is possible. This Court is ordinarily loathe to interfere Viith the interpretation of a State statute which has prevailed in tho State for a long number of years and which the State Legislature has chosen not to disturb by legislative amendment. As a matter of fact, we find that, in the present case, the Bombay Legislature accepted this interpretation of ss. 78 to 81 and gave legislative recognition to it by introducing s. 84A by Bombay Act 53 of 1954. That section pwvidcs that where in any year a new assessment list is prepared, or a list is revised, or the valuation and assessment contained in the list fer the year immediately preceding is adopted v.rith er \Vithout ~11tera ir-n. "u"'li --,, v, revised or adopted assessment list shall be authenticated in the manner provided by section 81 at any time not later than the thirty-first day of July of the official year to which the list relates, and if it is not so authenticated, then the State Government shall appoint such person or persons as it thinks fit to prepare, revise or adopt and authenticate the assessment list, and !hereupon such person or persons shall duly authenticate such list at any time before the last.day Of the official year to wh'c s"'ch list refates, and sections 78 to 81 or section 84 sliall,.as far as may be, apply to the preparation, revision or adoption of the list, as the case may be, by the person or persons appointed by the State Government. It is

clear from this provision that the Legislature not only did not amend the Act for the purpose of removing the time limit of the official year or enlarging such time limit, but on the contrary, made the time limit more -c stringent by providing that the ai:thentication shall be made by the Muni- - cipal Borough not later than 31st July of the official year and if the authentication is not made within that time, the State Government shall be . entitled to oppoint a person fer the purpose of authenticating the assessment list and the authentication by such person shall not, in any event, be later than the last day of the official yea.r. We are, therefore, of the view that the assessment list;- in order to be effective in levying the tax, must be authenVcated before the expiry of the official year and if it is not, the assessment list '"ould be void and inoperative and not give rise to liability in the rate-payers to pay t~.

892 SUPREME COURT.REPORTS~· - [1976] 3 s.c.R.

That takes u3 to the second contention urged on behalf of the Municipal Borough based on s. 206A. That secuon provides inter alia that Jlu swt snail lie against a municipality or against any officer or servant of any municipality in respect of any act done in pursuance or execution '. • or intended cxecuuon of tne Act, or in respect ot any alleged neglect or C!efault in the execution of the Act, unless it is co=enced w1U11n six montns next after the accrual of the cause of action. The argument of the Municipal Borough was that the cause of action for the sull arose in favour_ of the respondents and other rate-payers on 24th July, 1952 when the assessment-list was authenticated and smce the suit was not Wed within six months from that date, it was barred by limitation under s. 206A: This argument is plainly unsusta.nable.

The assessment lL't being authenticated on 24th July, 1952, after the expLry of the official year 1951-52, was void and inoperative and the respondents and other rate-payers were entitled to ignore it as a nullity. It is only when the Municipal Borough sought to recover the amount of tax from them en the strength of the assessment list, that il became necessary for them t to challenge the validity of the assessment Est with a view to resisting .· the demand of the Municipal Borough. Then and then only could a cause of action be said to have accrued to them which they were required to enforce within a period of six months. Now, in the present case, there is no material to show as to when notices of demand requiring the respondents and other rate-payers to pay the amount of tax wre issued by the Municipal Borough or which rate-payers paid the amount of t:ni: and when. It is not possible to say, in the absence of such mater'c.l, as to when the cause of action for filing the suit arose to the respondents and other rate-payers and whether it arose within six months before the filing of the snit or at a point of time earlier than that. The Municipal Borough cannot, in the circumstances, be held to have established that the suit was not commenced by the respondents and other rate-payers , within six months after the accrual of the cause of action and the plea of limitation based on s. 206A must fail.

We are, therefore, of the view that there is no substance in th.e appeal and it must be dismissed, but in the peculiar circumstances of the case, we make no order as to costs.

V.P.S. • Appeal dismissed.

MUNICIPAL CORPORATION OF CITY OF HUBLI

SUBHA RAO HANUMATHARAO PRAY AG & ORS

March 24, 1976

H. R. KHANNA

P. N. BHAGWATI

A. C. GUPTA, JJ

Ss. 78 to 84

Bombay Municipal Boroughs Act, 1925

s. 206A

Section 84

Section 82

Section 82(3)

s. 82(1)

ss. 78 to 81

s. 82

Bombay Legislature

ss. 78 to 81

s. 84A

Section 206A

July 24, 1952

High Court of Mysore at Bangalore

M. S. K_ Sastri

M. S. Narasimhan

B. D_ Bal

R. B. Datar

Rajan Yashpal

BHAGWATI

Bombay Municipal Boroughs Act, 1925

Dharwar

Hubli Dharwar Municipal Corporation

Municipal Borough of Dharwar

Bombay Muni- E pal Boroughs Act, 1925

!st May, 1951

24th July, 1952

The respondents and several other rate-payers filed their objections against the valuation and assessment F in the assessment list and consequent on the decisions on the objections, modifications were made in the assessment list and the assessment list so finalised was authenticated on 24th July, 1952 Sinee the authentication of the assessment list was made after the expiry of the official year, the respondents and other rate-payers took the view that the assessment list was void and inoperative and the Municioal Borough was not entitled to recover property tax at the revised rates G which were higher than '.he rates charged in the previous official years It seems, however, that from a few persoru;, whose names do not appear in the record,.

30th November, 1952

10th November, 1954

Municipal C Borough

6th June, 1955

s. 206A

s. 206A

s. 206A

s. 80

s. 81

section 82

sec. 110

sec. 82

section 82

section 81

section 110

s. 84

sections 80, 81 and 82

Bombay High Court

Sholapur

Section 84

s. 82

section 78 to 81

s. 82

s. 82

s. 82

s. 82

s. 8

ss. 78 to 81

s. 82

Bomoay High Court

Gujarat High Court

ss. 78 to 81

s. 84A

section 81

sections 78 to 81

section 84

s. 206A

s. 206A

s. 206A


MOHAN SINGH MALHI v.

STATE OF PUNJAB

March 25, 1976

[A. N. RAY, C.J. AND JASWANT SINGH, J.]

Cotr1pulsory retirement after attaining the age of 55, with three 1no11ths' salc.ry in lieu of ndtice-Competerrcy of the State Gov.erntncnt to retire-Scope of Rule 5.32 (c) ( 1) of the Punjab Ciril Service Rales, Vol. ll.

Under Section 5.32(c) (i), a retiring pension is granted to a Government Servant, other than a Class IV Government servant, who is retired by the Appointing Authority on or after he attains the age of 55 years by giving him not less than three months' notice.

The appellant who was served with an order on September 2, 1967, retiring him from service 'vith effect from the date of communication to him of the order on payment of three months' salary and. allowances in lieu of notice required by rule 5.32(c)(i) of the Punjab Civil Service Rules Vol. 11 challenged the order 011 the ground that the State Government was. competent to retire him ohly with three months' notice but not with sala_ry and allowance5 in lieu of the notice under the rules.

The Writ Petition was acce:ited by a single

judge and in Letters Patent Appeal by the State, the Division Bench referred it D to the Full Bench. The Full Bench by majority ans\vered the question referred to it in the affirmative and in favour of the State.

Dismissing the appeal by special leave the Court, HELD : Rule 5.32 merely provides for a contingency in which a retiringi pension is to be granted to a Government servant. Even assuming that the rule by implication requires three months' notice to be given to a Government servant of the description referred to therein before retiring him from service the requirement of the rule cannot be said to be violated if instead of three E months' notice, payment of three months salary ahd allowance is made. The object of the notice being to give sufficient time to the Govemment servant whom it is intended to retire from service to find employment" elsewhere and to prevent hin1 from his being suddenly left in lurch without any rri_eans of livelihood, no prejudice can be said to be caused to the Government servant if in lieu of three months' notice. he is given three months salary and allowances. In fact he is put in a more advantageou9 pos.:.tj_on by being paid three months' salary and allowances instead of the notice for that period as he is thereby relieved of the obligation to spend his time in the office attending to F his duty and gets all the time to himself which he can utilize in finding an alternative job or se!ting his affairs.

Therefore if the appointing authO:rity wahts to exercise its right to retire a government servant who has attained the age of 55 years, there is nothing to debar it from validly doinQJ so by payment to him of a sum equivalent to the amount of bis pay and allowances for the period of notice. (895 F-H, 896 A-BJ

CIVIL APPELLATE JURISDICTION : 1970.

Civil Appeal No. 1601 of G

Appeal from the Judgment and Order dated the 20-2-70 of the Punjab and Haryana High Court in LP.A. No. 552 of 1968.

V. C. Mahajan and S. S. Khanduja, for the Appellant.

0. P. Sharma, for the Respondent.

The Judgment of the Court was delivered by

JASWANT SINGH, J.-The question that arises for decision in this appeal by certificate granted by the High Court of Punjab and

7-725SCl/76

A Haryana against its Judgment and order dated February 20, l 970 in L.P.A. No. 552 of 1968 is whether under Rule 5.32(c) of the Punjab Civil Service Rules, Vol. II, the Government can retire an employee

on or after he attains the age of 55 years by giving him three months' °' salary and allowances in lieu of three months' notice.

The facts giving rise to the appeal lie in a hart compass and may be stated thus;

Before the partition of the country, the appellant joined the Veterinary Department of the Punjab Government as an Assistant Surgeon on December 1, 1933.

Iri course of time, he was appointed as Director of Animal Husbandry and Warden of Fisheries which post he held from March 16, 1957 to August 14, 1959, when Shri PritaD C Singh Brar was appointed Director in his place.

On Shri Pritam

Singh Brar's attaining the age of superannuation, the appellant was again appointed as Director, Animal Husbandry, on regular basis on August 4, 1965.

On September 2, 1967, the appellant was served 1 with the following order :-

"The Governor of Punjab is pleased to retire Shri Mohan Singh Malhi, P.V.S.I. Director, Animal Husbandry, Punjab, Chandigarh with effect from the date of communication to him of this order on payment of three mqnths salary and allowances in lieu of notice required by rule 5.32(c) of the Punjab Civil Service Rules, Volume II.

"2. Shri Harbhajan Singh Saini, Technical Expeyt Poultry is hereby directed to relieve Shri Moha:i Singh Malhi.

Chandigarh,

Dated the 2nd Sept. 67

S.S. GREWAL Secretary to Government Punjab

Animal Husbandry Department

"No. 3840/ AH(I)-67 /6213 Chandigarh <lated the 2nd Sept. 196'1.

A copy is forwarded to Shri Mohan Singh Malhi, P.V.S.I."

Against this order, the appellant made serveral representations which did not evoke a fayourable response.

Eventually, he approached the High Court on March 18, 1968, by means of a petition under Articles 226 and 2n of the Constitution of India foe issue of an appropriate writ quasl1ing the aforesaid order dated September 2, 1967, and declaring that he still continued to be in service. A Single Judge of the High Court allowed the appellant's petition by judgment and order dated April 22, 1968, and quashed the aforesaid order retiring the appellant from service.

Aggrieved by the judgment and order of the Single Judge, the State of Punjab preferred a Letters Patent Appeal.

The Bench hearing the appeal referred the above mentioned question for decision to a Full Bench of the Court.

l )

MOHAN SINGH v. PUNJAB (Jaswanl Singh, J.) 895

December 18, 1969, the Full Bench by majority answered the question referred to it in the affirmative.

Thereupon the appellant applied for and obtained a certificate of fitness to appeal to this Court.

This is how the appeal is before us.

Appearing in support of the appeal, counsel for the appellant has vehemently contended that the aforesaid majority decision of the Full Bench of the High Court is erroneous as there is no provision in the Pnnjab Gvil Service Rules like the one contained in Rule 5 of the Central Civil Services (Temporary Service) Rules, 1949, authorising the State Government to give three months' salary in 1ieu of three months' notice.

For a proper decision of the question, it is necessary to refer to Rule 5.32(c) of the Punjab Civil Service Rules, Vol. II which runs C as under:-

"5.32

(c) (Vide No. 1243-SFRI-64/1143 dated 4.2.1964) A retiring pension is also granted to a Government servant other than a class IV Government servant;

(i) Who is retired by the Appointing Authority on or after he attains the age of 55 years, by giving him not less than 3 months notice,

(ii) Who retires on or after attaining the age of 55 years by giving not less than three months notice of his intention to retire to the appointing authority.

Provided that where the notice is given before the age of 55 years is attained, it shall be given effect to from a date not earlier than the date on which the 55 years is attained.

Norn :-Appointing authority retains an absolute right to retire any Government servant except a Class IV servant F on or after he has attained the age of 55 years without assigning any reason. A corresponding right i> also available to such a Government servant to retir:; on or after he has attained the age of 55 years."

It will be noticed that the Rule as reproduced above merely pr0vides for a contingency in which a retiring pension is to be granted t0 a Government servant. Assuming that the rule by implicatiou requires three months' notice to be given to a Government servant of the description referred to therein before retiring him from ,, ervice, we are unable to understand how that requirement can be said to be violated if: instead of three months' notice, payment of three months salary and allowances is made to him.

The object of the notice, as well known, is to give sufficient time to the Government nervant whom it is intended to retire from service to find employment elsewhere and to orevent his being suddenly left in lurch without any means of livelihood. If that be the object of the notice, no

prejudice can be said to be caused to the Government servant if in lieu of three months' notice, he is given three months salary and

cilowances. In fact, he is put in a more advantageous position by ' f being paid three months' salary and allowances instead of notice for ti1at period as he is thereby relieved of the obligation to spend his time in the office attending to his duty and gets all the time to himself which he can utilize in finding an alternative job or settling his affairs.

Thus we are of opinion that if the appointing authority wants to exercise its right to retire a Government servant other than a Class IV Government servant who has attained the age of 55 years, thre is nothing to debar it from validly doing so by by payment to him of a sum equivalent to the amount of his pay and allowances for the reriod of the notice.

For the foregoing reasons, we are unable to interfere with the majority view of the Full Bench of the High Court. In the result, the appeal fails and is dismissed but in the circumstances of the case without any order as to costs. i-

S.R.

Appeal dismissed.

MOHAN SINGH MALHI

STATE OF PUNJAB

March 25, 1976

A. N. RAY, C.J.

Section 5

September 2, 1967

V. C. Mahajan

S. S. Khanduja

P. Sharma

December 1, 1933

March 16, 1957

August 14, 1959

PritaD C Singh Brar

Pritam

Singh Brar

August 4, 1965

Governor of Punjab

Mohan Singh Malhi

Harbhajan Singh Saini

Moha:i Singh Malhi

S.S. GREWAL

Mohan Singh Malhi

Articles 226 and 2

Constitution of India

State of Punjab

Norn


' \'

NATIONAL TRANSPORT COMPANY v.

STATE OF BIHAR

March 25, 1976

[H. R. KHANNA A..ND P. K. GOSWAMI, JJ.]

Bihar Taxation on Passengers and Goods (Carried by Pf.4Plic Service Motor Vehicles} Act, 1961, .s. 2(d)-Owner, wha is-'ln-charge' of a vehicle, scope of

Under s. 3 ( 1) and (2) of the Bihar Taxation on Passenaers and Goods (Carried by Public Services lotor Vehicles) Act, 1961, every owner shall pay to the State Government a tax on all passengers and goods carried by a public motor vehicle. Under s. 2(d), 'owner' means not only the owner of the specified type of vehicle but also includes, inter alia, "any perS9!1 for the time being in-charge of such vehicle". Under s. 4(1) every owner liable to pay tax shall apply for registration, and under s. 6 every owner shall furnish the prescribed return to the prescribed authority. Section 18 provides _for penalties for failure to apply for registration or to sumit the return.

The assessee was the sole transporting company of the cement of a manufacturing company.

Since it did not have its own fleet of trucks, Jt used to engage trucks for use in its transport work. It was provi9ing petrol and oil for the running of the trucks in the transport work although tbe prices paid by the assessee were later on adjusted in the hiring charges. The assesse was obtaining the receipts of delivery of the goods to the various stockists indicating the quantities of cement received through a particular vehicle.

On delivery to the appellant of the buyers' receipt by the truck owner or his representative, the bills of hire charges of the truck owner were paid by the appellant as per the agreement between the appellant and the truck owner. The assessee was maintaining a complete record of the trucks used by it for the transport work, of the \barges realisable and realised from the stockists on account of freight payable by 1hen1, and of the charges actually paid to the .truck owners. The assessee was not registered under s. 4.

After a surprise check, the total taxable amount of the assess:ee was determined and the tax and a pehalty were imposed on the assessee. The assessee's appeal, revision to the tribunal, and reference to the High Court, were all decided against the assessee.

Dismissing the appeal to this Court,

HELD : The appellant was in-charge of the trucks for the purpOSe of its F business 'during the entire course of transportation of the cement frcim the factory to the various stockists and, as such, came within the definition of owner under s. 2(d). [904 D.E]

( 1) Whether a certain person is in-charge of the vehicle for the time being depends on the particular facts of each case.

Beihg 'in-charge' of tho vehiclt• in the context of the vruvisions of the Act, does not relate to mere physical charge or control in the process of movement of the vehicle from one l)lace to another but 'to charge or control' for fulfilment of the le2al obligation under the Act for payment of taxes for the carriage of goods or passengers.

The words "for the time being in-charge of such vehicle" have to be comprehended in the context of the provisions of the taxing statute and these words have nexus with the actual realisation and approprialion of the freight for the goods carried by the vehicle.

In a given case, the person, who is for the time being in-char!!\' of the loaded truck and who or on whose behalf some one like a driver or conductor received the freight or fare. is also a

owner within the meanin!!: of the definitioh in s. 2(d). [9Q3 C.D; 904 C-D]

(2) On the facts of the present case the appellant took full responsibility for the carriage of the goods from the factory to various destinations. Tue freigbt had been realised by the appellant from the stockists and the truck

owner received only 'hire cb.arges'. There is nothing to shO\\' nor is t4ere any averment by the appellant that those charges included the taxes under the Act.

The matter might have been different if the truck owners had been given the tax collections in addition to the hire charges.

Further tlie absence of any provision for tax payment by the truck owners in the agreement militates against. the contenton that it is only the truck owners thrtt are liable. [90'2

B-C, 0•.903 BJ

(3) The case of Jagir Singh v. State oi Bihar [19·761 2 SCR 809 was an application uhder Art. 32 9f the C.Onstitution and was coneerned with booking agents and forwarding agents whew were sought to he made liable under the Act at the instance of the truck owners but the truck owners were held to be Jiab•e. l.Tnlike t'hat case, the liability to pay taxes was_ entirely upon the appeJlants ih the present case as the truck owners were entitled only to hire charges. [903 F-G; 904 A]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1462 of 1971.

Appeal by special leave from the Judgmt>M and Order dated 16th April 1971 of the Patna High Court in Tax Case No. 76/68.

A. K. Sen, S. T. Desai, Somen Bose, D. N. Mukheriee and K. N.

Jain, for the appellant.

V. S. Desai and B. P. Singh for the Respondent.

The Judgment of the Court was delivered by

GOSWAMI, J.

This appeal , by special leave is directed against the judgment of the Patna High Court in a reference under section 2 lB ( 1) of the Bihar Taxation on Passengers and Goods (Carried by Public Service Motor Vehicles) Act, 1961 (briefly the Act) as amended.

The facts as appearing from the statement of case annexing the various orders of the authorities may briefly be stated : The appellant, M/s. National Transport Company, is a tn!nsport undertaking without its transport.

The appellant (hereinafter to be described as the assessee) was the sole transporter by road of the cement manufactured by the Associated Cement Company at Sindri

(briefly the company) from Sindri to different stockists at various places i'a Bihar and West Bengal. In order to have some sort of uniformity in price at different places the manufacturing company used to iix the transport charges according to a schedule.

The assessee's contract with the manufacturing company commenced some time on October 12, 1963. Since the assessee did not have its own fleet of trucks, it used to engage thirtysix trucks covered by public carrier permits belongi'ag to various persons at different times for transporting the cement.

The assessee was not registered under section 4 of the Act.

On September 3, 1966, there was a surprise inspection of the 9ffice of the assessee and certain books of acconnts containing accounts of transport charges realised by the assessee for transporting of ceme"1t from the Sindri factory to the stockists 'in Bihar and West Bengal were seized. The assessce also produced some books of accounts during the hearing before the Officer. The assessee maintained his accounts ledger-wise in respect of the transport charges realised and realisable from different stockists of Bihar and West Be!,1gal for transport of cement by it from the Sindri factory to their godowns.

There were two ledgers. One was party-wise showing charges realised or realisable from the stockists and the other truck-wise showing hire charges

' f

l /

NATIONAL TRA"ISPORT co. v. BIHAR (Goswami, J.) 899

paid to various trucks.

The assessee also produced a list of trucks A showing the names of the truck owners with their respective places of residence. Out of thirtysix trucks, twentyfour were registered in Bilrar and twelve in West Bengal.

Agreements with the truck owners were also produced by the assessee.

The Bills from the petrel supplying company which were paid by the assessee were also filed showing the total amount and the lruclc-wise amount. The ledger party-wise showed rates charged from the stockists.

The ledger truck-wise showed B hire charges and also deductions on account of petrol, diesel and other lubricants.and also for loss in the way as per agreement.

CM the basis of the statement furnished by the asscssee as corroborated by the books of accounts maintained by it the Assessing Officer determined the total taxable amount and imposed , a tax of Rs. 1,41,618.37 by his order of November 1, 1966.

A, penalty of C Rs. 5000/- was also imposed under section 7(5) of the Act.

The assessee appealed to the Additional Deputy Commissioner of Commercial Taxes without success. Thereafter the assessee preferred an application in revision before the Commercial Taxes Tribunal, Bihar, which also met with the same fate.

The Tribunal, however, on the application of the assessee under section 218(1) of the Act referred the following question of law to the High Court :

"Whether in the facts and circumstances of the case t.he Tribunal has rightly held the applicant to be the 'owner' of the vehicles within the meaning of section 2(d) of t.he Act and whether the imposition of tax and levy of penalty was legal and justified".

The High Court noted the facts found by the Tribunal as follows :

(a) The assessee was the sole transporting company of the cement of the manufacturing company,

(b) it had engaged certain trucks for use in his (sic) transport work,

(c) it was providing petrol and oil for the running oft.he trucks in the transport work, although the prices paid by the assessee were later on adjusted in the hiring charges,

(d) it was obtaining receipts for delivery of the goods to the stockists,

(e) it was maintaining a complete record of the trucks used by it for the transport work,

(f) it was keeping a complete record of the charges realisable and realised from the stockists on account of freight payable by them,

(g) it was keeping a complete record of the charges actually paid to the real owners of the trucks, and

(h) the receipts given by the stockists indicated that they had received from the assessee, certain quantities of cement by a particular vehicle".

From the above eight factors the Tribunal came to the conclusion that the assessee was in-charge of the trucks for the time being within the meaning of section 2 ( d) of the Act. The High Court agreed with the Tribunal in the following words :-

''In any case, even if the conclusion that the assessee was in-charge of the trucks, for the time being, be a conclusion in law, I do not think that any error in law has been committed by the Tribunal, in arriving at its conclusion against the contentious raised on behalf of the assessee.

Relevant facts have been found and a relevant finding has been given on them, before saddling the assessee with liability".

The High Court thereupon upheld the Tribunal's decision against the assessee.

The only question that is canvassed by Mr. A. K. Sen on behalf of the appellant is that, on th.e various facts found by the Tribunal, it has D erred in law in holding that the assessee is an 'owner' within the mean- ' ing of section 2(d) of the Act. We may, therefore, immediately turn to the definition of owner as given under section 2(d):

2 ( d) " 'owner' means the owner of a public service motor vehicle in respect of which a permit has been granted by a Regional or State Transport Authority under the provisions of the MotorVehicles Act. 1939 (IV of 1939) and includes the holder of a permit under the said Act in respect . of a public service motor vehicle or any person for the time being in charge of such vehicle or responsible for the management of the place of business of such owner".

It is olear that the above definition is an inclusive definition. Owner means not only the owner of the specified type of vehicle but also includes the permit holder in respect of such a vehicle as also any person for the time being in charge of such vehicle or any . person responsible for the management of the place of business of such owner.

The definition has fairly widened the meaning of "owner".

We are only concerned in this appeal with one category included in the definition, namely, that an owner is a person for the time being in charge of a public service motor vehicle. There is no dispute that the trucks in question are public service motor vehicles. We are only required to consider whether the assessee is u 'pemm "for the time being in-charge of such vehicle".

As the preamble shows the Act is to provide for the levy of tax on passengers and goods carried by public service motor vehicles. The taxing event is, thus, the carriage of goods and passengers by public service motor vehicles.

By section 2(a) 'business' means the business of the owner for the purpose of this Act.

l /

Section 3 is the charging section and may be read :

3 (1) "On and from the date on which this Act is deemed to have come into force nuder sub-section ( 3) of section 1, there shall be levied and paid to the State Government a tax on all passengers and goods carried by a public service motor vehicle; such tax shall be levied and paid at the rate of twelve and a half per centum of the fares and freights payable to the owner of snch vehicle;

* • * •

(2) Every owner shall, in the manner prescribed in section 9, pay to the State Government, the amount of tax due under this section.

(3) Every passenger carried by a public service motor vehicle and every person whose goods are carried by su.ch vehicle shall be liable to pay to the owner the amount of tax payable under this section and every owner shall recover sucli tax from such passenger or person, as the case may be." D • • • Under section 4(1) every owner liable to pay tax shall apply for his registration within such period and in such manner as may be prescribed. Under sub-section (2) of section 4; if the application is in order, the prescribed , authority shall grant a certificate of registration in the_prescribed form.

Y Under section 6 every owner shall furnish to the prescribed authority such returns, within such period, as may be prescribed. There is a provision under this section for imposition of penalty on failure to submit a return without any reasonable cause.

Section 18 is the penal section for various offences under the Act F including failure to apply for registration or to submit return 'or for contravention of any other provision of the Act of the Rules and the offender is punishable with fine which may extend to Rs. 1000/-, and when the offence is a continning one, with a daily fine not exceeding fifty rupees during the period of the continuance of the offence.

By section 3 (h) of the Act, a 'public service motor vehicle' means G any motor vehicle used or adopted to be used for the carriage of passengers and goods for hire or reward and includes a motor cab, a stage carriage, a contract carriage or a public carrier.

For the purpose of tax under the Act not every public service motor vehicle but only such a vehicle carrying goods and passengers is exigible to tax for the carriage of those goods and passengers under the Act.

H The tax again is a percentage of the fares or freights realised. The fares and freights have to be realised as a fact. Such a vehicle carrying goods and passengers driven by employees of the owner of the

vehicle would ordinarily be in-charge of that owner or of tho permitholder wherever it may ply.

The physical presence of the owner or the proprietor or of the permit holder in the running vehicle is not ' I essential. Even if the driver or the conductor realises ti1~ freight it is done on behalf of the owner of the vehicle or of the perm!t holder and the former 1s accountable to the latter. Suppose the conductor misappropriates _the _collection en route, that will not absolve the permit holder from hab1hty to pay the tax actually realised for the carriage of the goods or the passengers.

In view of the terms of the agreement, on which great reliance has been placed b) Mr Sen, it can be safely assumed that the appellant took full responsibility for the carriage of the goods from the Sindri factory to various destinations. This is manifest even in absence of prodnction by the appellant of agreements, if any, between it and the company or the stockists.

Cement bags will not be loaded on any and every vehicle that reports at the factory bnt only on those vehicles -l whose registration numbers must have been communicated to the 1 company or which were taken there by the appellant's representative who has to be present at the time of loading the trucks with cement as will appear from clause (I) of the agreement. Clause (I) reads "Cement will be loaded into your lorry at the Sindri Works through us".

The Sindri factory, -therefore, entrusted the carriage of their cement bags to the appellant for delivery to various stockists who again in turn, at destinations, gave buyer's receipts as per clause (3) of the agreement.

Clause (3) States : "You will obtain proper receipts for such deliveries from the consignees on the challans handed over to you and bring back all the documents including the challan duly signed by the consignees leaving one copy of the challan with the con-

'"°I signees".

On delivery to the appellant.of the buyer's receipt by the truck owner or his representative, "the bills of hire charges" of the truck owner are paid with three weeks thereafter at the rates "as per our schedule" F agreed between the appellant and the truck owners". Clause ( 12) of the agreement says :

"Your bills of hire charges as per our schedule will be prepared every fortnight and will be paid within 3 weeks thereafter."

The truck owners. in this case, received as per agreement, only "hire charges" and there is nothing to show nor is there any averment by the appellant that those charges incltjded taxes under the Act although freight had been admittedly realised by the appellant from the stockists.

In the above background of facts and circumstances, there is no escape from the conclusion that the appellant was in charge of the H trucks for the purpose of the 'business' of the appellan~ during the entire course of transportation of the cement bags from the Sindri factory to the various stockists and as such comes within the third clause of the definition under section 3(d) of the Act.

The fact that under the terms of the agreement some incidental arrangement involving contingent financial implications in respect of carriage of the goods had been entered upon does not entitle the appellant to be relieved of the "charge" of the loaded truck for the purpose of tax nnder the Act for the carriage of the goods. The matter wonld have been different if the truck owners had been given the tax collections in addition to the hire charges, but absence of any provision for tax payment by the truck owners in the agreement militates against the contention that in this case the truck owners are liable for the payment of tax under the Act for the carriage of the cement bags.

The owner of the truck under a public carrier permit or a public carrier permit holder is undoubtedly an 'owner' under section 2(d)

of the Act. But in a given case, the person who is for the time being in-charge of the loaded truck and who or on whose behalf some one C received the freight or fare is also an 'owner' within the third clause of the definition under section 2(d) of the Act.

The significant words "for the time being in charge of such vehicle" have to be comprehended in the context of the provisions of the taxing statute and these words have nexus with the actual realisation and appropriation of the freight for the goods carried by the vehicle. The I> meaning given to the words "in-charge of vehicle" in connection with traffic cases in criminal prosecution, as has been referred to by Mr. Sen citing two English cases, is of no avail to the appellant in_this case.

Mr. Sen forcefully submits that the present case is squarely covered by a decision of this Court in faflir Sinflh & Ors. etc. v. State nf Bilwr and A nr. (') This was a case where the same Act with some identical Acts from other States came up for consideration. It is submitted by E Mr. Sen that the truck owners lost in that decision and in this appeal also, therefore, they cannot escape from their legal liabiHty by shifting it to the appellant.

We must bear in mind that those applications were under article 32 of the Constitution while the present matter comes to us out of a reference in the fifth tier of litigation after the matter had been gone F into in great detail taking note of various facets of the rival pleas by the respective authorities and lastly by the High Court.

In Jagir Singh's case (supra) this Court was concerned merely with Booking Agents and Forwarding Agents who were sought to be made liable nnder the Act at the instance of the permit holders of the public service ''chicles who did not own their liability for payment of tax under the Act. This Court observed in that case as follows :- G "If the permit holder lets out the vehicle to any person on hire it is a matter of internal arrangement between the owner who is the permit holder and the person who is allowed by the permit holder to hire the vehicle to collect tax in order to enable the owner to discharge the liability. If the owner does not make adequate provision in that behalf the owner cannot escape liability by pleading that the hirer of the vehicle is liable to pay tax and the owner is not liable".

(!) [1976] 2 S.C.R. 809

From the terms of the agreement in the present case, it is clear that the liability to pay taxes was entirely upon the appellant as the owners of the trucks were only entitled to "hire charges".

Legal liability for payment of tax under the Act is well known to the appellant carrying on transport business. The appellant has taken charge of the vehicles for the purpose of the collection of tax for the carriage of the goods. The appellant has actually collected the freight from the stockists on delivery of cement bags.

The appellant has only paid to the truck owners "the hire charges" as per its own schedule of rates without ani mention of tax.

These facts clearly distinguish the present case from what apears to have been pleaded in the writ application in lagir Singh's case (supra) and he decision is of no aid to the appellant.

Being "in charge" of the vehicle in the context of the provisions of the Act does fiot relate to mere physical charge or control in the process of movement of the vehicle from one place to another but to '+ charge or control for fulfilment of the legal obligation under the Act for payment of taxes for the carriage of goods or passengers. Whether a certain person is in charge of the vehicle for the time being depends always on the particular facts of each case and the answer cannot be put in the strait-jacket of a formula.

On the facts of the. present case we are clearly of opinion that the appellant comes within the meaning of the third clause of the definition under section 2(d) of the Act.

We should observe that once the tax is realised for a particular transaction from one category of owner as defined, no further tax can be collected for the same carriage from any other person even thongh that person also may come within the definition of "owner" under the Act.

The Tribunal was, therefore, justified in holding the appellant as "owner" for the purpose of the Act.· The High Court was right in not interfering with the conclusion of the Tribunal and in answering the question against the assessee.

In the result the appeal is dismissed but we make no order as to costs.

V.P.S, .,4ppeal dismissed.

NATIONAL TRANSPORT COMPANY

STATE OF BIHAR

H. R. KHANNA A..ND P. K. GOSWAMI, JJ.

s. 2(d)

s. 3

s. 2(d)

s. 4(1)

s. 6

Section 18

s. 4

s. 2(d)

s. 2(d)

Art. 32

A. K. Sen

S. T. Desai

Somen Bose

D. N. Mukheriee

K. N.

Jain

V. S. Desai

B. P. Singh

GOSWAMI

Patna High Court

section 2

National Transport Company

Sindri

Bihar

West Bengal

October 12, 1963

section 4

September 3, 1966

Bilrar

November 1, 1966

section 7(5)

Commercial Taxes Tribunal, Bihar

section 218(1)

section 2(d)

section 2

A. K. Sen

section 2(d)

section 2(d)

section 2(a)

Section 3

section 1

section 9

section 4(1)

section 4

section 6

Section 18

section 3

Sen

section 3(d)

section 2(d)

section 2(d)

article 32

Jagir Singh

[1976] 2 S.C.R. 809

lagir Singh

section 2(d)


; /

SOUTH INDIA COIR MILLS POOCHAKKAL

THE ADDITIONAL COLLECTOR OF CUSTOMS AND

CENTRAL EXCISE AND ANOTHER

March 25, 1976

(Y. V. CHANDRACHUD, V. R. KRISHNA IYER AND N. L.UNTWALIA, JJ.J )).

Foreign Exchange Regulation Act (7 of 1947), s. 12(1) as amended by Act 40 of 1969-Scope of.

The appellant is a dealer and exporter in coir yarn. On its behalf a shippino bill for export of 150 bales of coir yarn to a port in Italy was filed, but th~ consignee was shown to be a firm of Yugoslavia. The invoice and the form of declaration prescribed under the Foreign Exchange Regulation Acl, 1947, were drawn up by the appellant on rupee terms in accordance .wit!i the contract with the Yugoslav firm.

The Collector of Customs, after 1ssu1ng a show cause notice to the appellant and considering the explanation Qf the appellant, held that the appellant had misde.lared the material particulars regarding the prescribed manner of payment, and that there was a contravention of s. 12(1), Fcreign Exchange Regulation Act read with s. 11 Customs Act, and ordered the confiscation of the goods under s. 113 and imposed a penalty of Rs. 25.000/- under s. 114. Customs Act. The High Court upheld the order.

Dismissing the appeal to this Court,

HELD : In the circumstances of the case, the quantum of penalty is reduced to Rs. 15,000/ .. [912 F]

(1) By virtue of s. 23A, Foreign Exchange Regulation Act the prohibition imposed under s. 12(1) of the Act becomes a prohibition imposed under

s. 11, Customs Act. Section 11, Customs Act, empowers the Central Govern- E meat to prohibit the export of goods absolutely or conditionally and s. 113, Customs Act, provides for confiscation of goods exported contrary to any prohibition imposed, and the person attempting to export is liable to penalty under s. 114. [908 D, F-0]

(2) Section 12(1). Foreign Exchange Regulation Act. as amended bv Act 40 of 1969, consists of 3 r;>arts : (a) Issuance of a notification by th"e Central Government prohibiting the export of certain goods to any place specified in the notification. (b) The prohibition is relaxed and export is permitted whe_n F the exporter furnishes a declaration in the prescribed form which must be true in all material particulars including the amount representing the full export value of the goods or the expected exported value of the goods. ( c) Apart from furnishing the declaration containing the true statements in all material particulars, the exporter is also required to affirm in the said declaration that is, in the document or paper containing the declaration, that the full xport value of the goods will, within the prescribed period be paid in the prescribed manner. This affirmation is not required to be in anv prescribed form. Until G a11d unless the exporter so affirms, he cannot, in the interests of conserving the foreign exchange, be allowed to export the goods. [910 BD]

(3) Jn the present case there was no affirmation that the full export value of th~ goods has been or will, within the prescribed period, be paid in the prescribed manner, and, the absence C5f the affirmation is tantamount to failure

?n the prt of the. appellant to comply th the requi1rements of law engrafted

1h s. 12(1). pgre1gn Exchange Regulation Act. [912 DJ ·

(a) The declaration of the buyer's name as the Yugoslav firm was found to be wrng, but that did no~ attract the provisions of s. 12(1), because. in the prescribed form, the buyers name was not to be inserted.

[910 G-HJ

{19J:o] 3 S.C.R.

(b) The High Court was wrong in holding that because the mode of payment mentioned in the declaration is contrary to r. 7 of the Foreign Exchange Rules. 1952. there was a misdedaration of material farticulars. The appel- .lant has managed to get the payment in Indian rupee through the Yugoslav .firm. , Therefore. even after the statement that the country of destination \Vas

; Italy, the statement that the payment was tobe recei,,.ed in India in Indian

T, JJpees was not untrue, although. it was C<?ntrary to the mode prescribed in r. 7.

But the absehce of the affirmation is" sgnificant. [911 E-G; 912 BJ

(c) Rule 7 provides that the amount representing the full valu~ of the goods exported to the countries specified in the 2nd scht; dule shall be paid through .an authorised dealer and unless authorised by the Reserve Bank, shall be paid in the manner specified in the schedule. _The approved methods of payment in .the case of Italy, which is in Group A of the schedule, are : liJ Currency of any country in the sub-group; (ii) sterling from an 'Extern:il Account' as •defined .under the U.K. Exchange Control Regulations; and (iii) Rupees from the account of a bank in any country in the Convertible Account group. [91 I

G-912 A]

(d) The appellant could not have affirmed that the full export value of the goods would be paid in one of the prescribed modes. If such a..'firmation ".Vas .made it would have been false because of the statement in the d:!claratjon that the. value of the goods was to be received in India in Indian rui::ees.

If in the :affirmation the aripellant had stated that for the valW! of the soods exported to Italy it was to receive payment in Indian rupees, then the affirmation would have violated s. 12(1) as it would not have been an affirmaticn stating that the export_ value would be paid in the prescribed manner. Hence, the decision of the High Court that the appellant had attempted to export goods in violatioh of s. 12(1) is correct, though it is upheld on a different lnsis. [912 B-EJ ( 4) Though it is an economic offence and relates . to the la.w of foreign exchange since the Jaw was not clear either to the Customs authorities Or the High Court and has resulted in the recording of finding against the-- appellant

on a wrong basis, although not affecting the substance of the viey.r that the

appe1Jant violated s. 12(1), the quant_µm of penalty is reduc_ed. [912 F.G]

.E CIVIL APPELLATE JURISDICTION : Civil Appeal No. 244 of 1976.

Appeal by Special Leave from the Judgment and Order d; tcd 9-10-74 of the Kerala High Court in W. A. No. 142 of 1972.

M. N. Phadke, S. K. Mehta, K. R. Nagaraja and P. N. Puri, for the Appellant.

F G. L. Sanghi and Girish Chandra, for Respondent No. I.

D. N. Misra,. for, Respondent No: 2.

The Jlldgment of the Court was delivered by

UNTWALIA, J.-In this appeal by special leave an important question of law falls for our determination .. It concerns the interpretation of section 12 ( 1) of the Foreign Exchange Regulation Act, 19 4 7, Central Act 7 of 1947 as it stood ameniJed at the relevant time by Act 40 of 1969. ·· ,

The appellant is a firm, one of the partners or proprietors of which is Shri T. K. Seethy. It is a dealer in Coir Yam and exports the said commodity to foreign buyers also. On March 24, 1971 a shipping bill was filed on behalf of the appellant for the export of 150 bales of Coir Yarn to Trieste a port in Italay. The consignee's name in the shlJ?ping bill was shown as M/s Ferolektro, Sarajavo, Yugoslavia.

IndtSputably the Central Government had published a notification in

•• •

, ,

the official gazette under section 12(1) of the Foreign Exchange Regulauon Act prohibiting the export of coir yarn from India to certain places specified in the notification including Italy unless ccrtacn conditions were fulfilled.

The exporter was, therefore, required to comply with the requirement of the said provision of law and file a declaration in the prescribed form.

The relevant prescribed from in the Foreign Exchange Regulation Rules, 1952-hereinafter referred

to as the Rule>-framed under section 27 of the Act of 1947 was B Form G.R.I.

The Invoice and G. R. I. Form were drawn up by the appellant on rupee terms in accordance with the contract dated 1.3.1971 which it claimed to have had with M/s Ferolektro, Sarajavc,

Yugoslavia.

The Customs Authority found that the goods were attempted to be exported to Italy while payment, according to the form, was to be received in rupees.

So the appellant was asked to explain the discrepancy in the declaration.

A request was made on behalf of the appellant to amend the lnvoicc and G.R.i. shewing payment in Sterling. It was not allowed to do so.

On April 20,

,. !971 the premises of the appellant firm and the house of its owner were simultaneously searched and certain documents including some letters exchanged between the appellant and some foreign firms of Italy were seized.

It appeared to the Assistant Collector of Cust0ms, Customs House, Cochin that the goods in question were being bought D by M/s Tobia Giacomini, Italy while the buyer shown in the shipping document was M/s Ferolektro, Sarajavo, Yugoslavia.

Such a discrepancy in the bill was against the provisions of section 50 of the Customs Act, 1962-Central Act 52 of 1962. The Assistant Collector further found that in the declaration furnished by the appellant in accordance with section 12(1) of the Foreign Exchange Regulation Act the manner of payment for the goods sought to be exported was contrary to Rule 7 of the Rules.

The misdeclaration or untrue declaration made by the appellant in the shipping bill and

G.R.I.

Form was rrima facie not true in material particulars ;; nd violated section 12(1) of the Foreign Exchange Regulation Act. In view of the 11th section in the Customs Act, the violation attracted

the confiscation of the goods under section 1 l3(d) and imposition of penalty under section 114 of the said Act.

A showcause notice dated May 19, 1971 was issued by the Assistant Collector to the appellant. The appellant filed a long reply to the show cause notice. 'The Additional Collector of Customs by bis order dated July 6, 1971 held:

"By declaring the buyer's name as

FEROELETRO YUGOSLAVIA and the port of discharge and country of final destination as 'Trieste' and Italy respectively in the shipping bill and the mode of payment as in rupees in the shipping bill as well as in the G. R. I. form, the exporters have misdeclared the material particulars regarding the prescribed manner of payment and have thus clearly contravened the provisions of Section 12(1) of the F.E.R.A. read with section 11 of the Customs Act.

The goods are, therefore, liable for confiscation under section 113(d) and 113(i) of the Cn<toms Act anrl the, exoorters are liable for penalty under section 114 of the Customs Act."

~UPREME COURT REPORTS

[1976) 3 S.C.R.

I He accordingly confiscated the goods, giving an option to the appellant to redeem them on payment of Rs. 5,000/- in lieu thereof.

A penalty of Rs. 25,000/- was imposed under section 114 of the Customs Act. ' .

The appellant filed a writ petition in the Kerala High Court to challenge the erder of the Additional Collector.

It had exercised its option of getting the goods released on payment of Rs. 5,000/-. The fine of Rs .. 25,000/- was also paid.

A learned single Judge of the High Court took the view that there was no violation of section 12 (l) of the Foreign Exchange Regulation Act and quashed the order of the Additional Collector.

The Customs Authority took the matter in appeal before a Bench of the High Court.

The Bench has allowed the appeal and upheld the order of the Additional Collector.

Hence this appeal was . filed after obtaining special leave of this Court.

Section 23A of the Foreign Exchange Regulation At provides, inter i alia, that the restrictions imposed by or under sub-section ( 1) of section 12 shall be deemed to have been imposed under section 11 of the Customs Act and all the provisions of that Act shall have the effect accordingly.

Section 11 of the Customs Act empowers the Central Government to prohibit eit_her absolutely or subject to such conditions as may be specified in a notification the import or export of goods of a~ specified description.

Section 113 says: ·

"The following export goods sha:ll be liable to confiscation.-

(d) any goods attempted to be exported or brought with- '\ in the limits of any customs area for the purpose of being exported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force;"

By virtlie of Section 23A of the Foreign Exchange Regnlation Act the prohibition imposed under section 12(1) of that Act becomes a prohibition imposed nnder section 11 of the Customs Act.

And if the goods wete attempted to be exported contrary to the said prohibition the goods became liable to confiscation under section 113 ( d) of the Customl! Act.

Consequently the person attempting to export the goods also became liable to pay penalty under section 114.

There has been no difficulty in correct appreciation of the law so far either by the Customs Authority or the High Court.

A good deal of difficulty and confusion however cropped up in the interpretation of section l 2 (1) of the Foreign Exchange Regulation Act.

Sub-section ( l ) of section 12 as it stood prior to the amendment brought about by Act 40 of J 969 read as follows :

"The Central Government may, by notification in the Official Gazette, prohibit the taking or sending out by land, sea or air (hereinafter-in this section referred to as export)

SOUTH INDIA COIR MILLS V. ADDL. COLLECTOR CUSTOMS 909 (Untwalia, /.) of any goods or class of goods specified in the notification from India directly or indirectly to any place so specified unless a declaration supported by such evidence as may be prescribed or so specified, is furnished by the exporter to the prescribed authority that the amount representing the full export value of the goods has been, or will within the prescribed period be paid in the prescribed manner."

In Union of India & Ors. v. M/s Rai Bahadur Shree Ram Durga Prasad (P) Ltd: & Ors.(')., Hegde, J. speaking for himself and Bachawat, J gave a narrow interpretation to section 12(1) as it stood then. Sikri, J, as he then was, in his dissenting judgment said :

"I have to construe an Act which was enacted in the interest of the national economy.

A deliberate large-scale contravention of its provisions would affect the. interests of C every man, woman and child in the country.

Such an Act, I apprehend, should be construed so as to make it workable; it should, however, receive a fair construction, doing no violence to the language employed by the Legislature.

It was said that if two constructions are possible the one that is in favour of the subject should be accepted. It is not necessary to pronounce on this proposition for I have D come to the conclusion that there is one true construction of s. 12(1). But I should not be taken to be assenting to this proposition in so far as it is applicable to an enactment like the Exchange Act, for no subject has a right to sabotage the national economy."

Section 12(1) was, thereafter, amended by Act 40 of 1969. It then E read as follows :

"The Central Govermnent may, by notification in the Official Gazette, prohibit the taking or sending out by land, sea or air (hereinafter in this section referred to as export) of all goods or of any goods or class of goods specified in the notification from India directly or indirectly to any place so specified unless the exporter furnishes to the prescribed authority a declaration in the prescribed form supported by such evidence as may be prescribed or so specified and true in all material particulars which, among others, shall include the amount representing-

( i) the full export value of the goods; or

(ii) if the full export value of the goods is not ascertainable at the time of export, the value which the exporter, having regard to the prevailing market conditions, expects to receive on the sale of the goods in the course of international trade,

and affirms in the said declaration that the full export value of the goods (whether ascertainable at the time 0f H

(I) [1969] 2 S.C.R. 727.

8-725SC!/76

SUPREME COURT REPORTS

[1976) 3 S.C.R.

export or not) has been, or will within the prescribed period be, paid in the prescribed manner."

Under the changed law the Exporter was required to furnish a declaration in the prescribed form which must be true in all material particulars including the amount representing the full export value of the goods or the expected export value of the goods.

Apart from the furnishing of the declaration containing the true statements in all material particulars the exporter under the amended section 12 (1 ) of the Foreign Exchange Regulation Act was also required to affirm in the said declaration, i.e. in the document or the paper containing the declaration, that the full export value of the goods will within the prescribed period be paid in the prescribed manner.

The ailirmation under the last part of section 12(1) is not required to be in any prescribed form.

Therefore, in the form prescribed for the declaration no form of ailirmation has been specified.

Broadly speaking section 12(1) consists of 3 parts (1) issuance of a notification by the Central Government prohibiting the export of certain goods to any place specified in the notification; (2) the prohibition is relaxed and export is permitted when the exporter furnishes a declaration and (3) when he ailirms in the said deolaration that the payment will be in the prescribed manner.

Until and unless the exporter affirms that the payment would be in the prescribed manner, he cannot be allowed to export the goods.

This is for the purpose of conserving and preserving the foreign exchange so that by a subterfuge no person may be able to harm the national economy by exporting the goods without such affirmation.

In the instant case on the findings of fact recorded by the Additional Collector which were accepted to be correct by the High Court, both by the single Judge and the Division Bench, the stress seems to have been laid on the alleged violation of the requirement of giving true material particulars in the declaration.

And that enabled Mr.

M. N. Phadke to strenonsly attack the decision of the High Court in appeal.

Counsel submitted that whatever the appellant had stated in the declaration was all true and nothing but true. It may well be, he submitted, that it violated certain provisions of the Customs Act or the Foreign Exchange Regulation Act.

Bnt surely the material particulars furnished by the appellant in its declaration not being untrue in any respect, there was no infraction of section 12 (1) of the Fon; ign Exchange Regulation Act.

The argument as presented had substance and force but did not merit acceptance on close scrutiny.

The declaration of the buyer's name even if wrong in the shipping bill and invoice did not attract the provisions of section 12(1) of the Foreign Exchange Regulation Act.

In the form prescribed under Rule 3 of the Rules (G.I.R. being one such form) the buyer's name was not to be inserted. It was not given in the declaration furnished by the appellant in tha~ to:m.

But the finding of te Aditional Collector is that the destmal!on of the goods was Tneste m Italy and in the declaration furnished in form G.I.R. the appellant had stated that the pavment was to be received in India in Indian rupees and this statement was untrue as being against the prescribed manner.

It is to be noticed that under section 12 ( 1) as it stood prior to the amendment by Act 40 of 1969 the declaration had to contain a statement that the amount representing the full export value of the goods will be paid in the prescribed manner.

But now this is not to be a part of the declaration but has to be separately affirmed although in the declaration itself.

The learned single Judge noticed in his judgment that section 12(1 )(ii) will not apply and the obligation of the exporter was :

"(a) to furnish to the prescribed authority a declaration in the prescribed form supported by such evidence as may be prescribed :

(b) which declaration must be true in all materia, l particulars and that among others shall include 'the amount representing the full export value of the C goods' aud ( c) he must affirm in the said declaration that the full export value of the goods will, within the prescribed period, be paid in the prescribed mauner."

Stating that "There is no case that there is no affirmation in the decclaration" the single Judge held that section 12(1) was not violated.

D The Division Bench, however, noted the fact that the declaration furnished by the appellant "did not contain an affirmation as required by the last portion of the said sub-section". Yet because of the mode of payment mentioned in the declaration being contrary to Rule 7 of the Rules the Division Bench upheld the view of the Additional Collector that the appellant "had misdeclared the material particulars and attempted to export the goods in question in contravention of the E prohibition contained in section 12(1) of the Act." On the facts and in the circumstances of this case we are constrained to hold that even after the statement in column 2 of Form G.R. I that the country of destination of goods was Italy the statement in column 5 that the payment was to be received in India in Indian Rupees was not untrue.

The appellant had managed or manouvered to get the payment through the firm of Yugoslavia in Indian Rupees.

The statement therefore, F was not untrue although it was against the mode prescribed under Rule 7 of the Rules. But here comes in the importance of the affirmation in the declaration.

Rule 7 of the Rules says :

"The amount representing the full value of goods exported to the countries specified in the Second Schedule shall be paid through an authorised dealer and unless otherwise authorised by the Reserve Bank, shall be paid in the manner specified in the said Schedule." In the Second Schedule Italy occurs in Group A-"Convertible Account Countries". In that case the approved methods of payment are

"(a) Currency of any country' in this sub-group. ·

(b) Sterling from an 'External Account', as defined under the U. K. Exchange Control Regulations.

SUPREME COUR'J.'. REPO~TS

[1!176) 3 S.C.R.

A ( c) Rupees from the accouut of a bauk iu imy couutry iu the Couvertible Accouut group."· Yugoslavia iu the Secoud Schedule fiuds place iu Group B "Bilateral Accouut couutries" where the approved method of paymeut is. "Rupees from the accouut of a bauk iu the couutry of import."

Iu the preseut case the abseuce of affinnatiou had its owu sigui- B ficauce.

It was difficult, ahuost impossible, for the appellant to affirm that the full export value of the goods was to be paid in oue of the three modes prescribed iu the Secoud Schedule to the Rules for the export of the goods to Italy. We are, therefore, of the opiniou that although the statemeut in the declaration that the value of the goods mentioned iu column 4 at Rs. 63,301.50 was to be received iu Iudia in Iudian rupees for the export of goods to Italy was not C untrue, the affirmation, if made, would have been either false or contrary to the requirement of the law. If iu the affirmatiou the appellant had stated that for the value of the goods exported to Italy it was to receive the paymeut iu Iudian rupees through the Chartered Bank i Ltd. Cochin as per the declaration, then the affirmation would have violated section 12(1) as it would not have been an affirmation stating that the. export value would be paid in the prescribed manuer. Absence D of affirmation in the declaration furnished by the appellant is tantamount to failure on the part of the appellant to comply with the requirement of the law engrafted in section 12(1) of the Foreign Exchange Regulation Act. That beiug so, the decisiou of the Division Bench of the High Cqurt that the appellant had attempted to export goods in violation of the restrictions imposed under section 12(1) of the Foreign Exchange Regulation Act is fit to be upheld, but E on a different basis.

In cases of economic offences and specially in relation to the law of Foreign Exchange uo leniency in the quantum of punishment is warranted. But on the facts and in the circumstances of this case we feel persuaded to reduce the amount of penalty imposed upon the appellant from Rs. 25,000/- to Rs. 15,000/-. The direction as to the payment of Rs. 5,000/- in lieu of confiscatiou of the goods is upheld.

Since the law eugrafted in the amended Section 12(1) of the Foreigu Exchange Regulation Act was not very clear either to the Custom Authorities or to the High Court resulting iu the recQiding of the findings against the petitioner ou a wrong b.asis, although not affecting the substance of the view that the appellant had violated Section 12(1) of the Foreign Exchange Regulation Act, we have thought it fit to reduce the quautum of penalty by Rs. 10,000/-.

Before we part with this case we may just mention that now the Foreign Exchange Regu.Jation Act iu force is an Act of 1973-Centrat Act 46 of 1973. Section 18(1) (a) is ahuost the same as Section 12(1) of the Act of 1947.

In the result the appeal is dismissed but subject to the modification iu the quautum of penalty imposed under Section 114 of the Customs Act 1962. In the circumstances we shall make no order as to costs iu this Court.

V.P.S.

Appeal dismissed~

SOUTH INDIA COIR MILLS POOCHAKKAL

March 25, 1976

Y. V. CHANDRACHUD

V. R. KRISHNA IYER

N. L.UNTWALIA, JJ

Foreign Exchange Regulation Act

s. 12(1)

Italy

s. 12(1)

Fcreign Exchange Regulation Act

s. 11

Customs Act

s. 113

s. 114

Customs Act

s. 23A

Foreign Exchange Regulation Act

s. 12(1)

s. 11

Customs Act

Section 11

Customs Act

Central Govern- E meat

s. 113

Customs Act

s. 114

Section 12(1)

Foreign Exchange Regulation Act

Central Government

s. 12(1)

Exchange Regulation Act

s. 12(1)

India

Exchange Control Regulations

s. 12(1)

s. 12(1)

s. 12(1)

M. N. Phadke

K. Mehta

K. R. Nagaraja

P. N. Puri

F G. L. Sanghi

Girish Chandra

D. N. Misra

UNTWALIA

section 12

T. K. Seethy

Coir Yam

March 24, 1971

Trieste

Italay

Sarajavo

Yugoslavia

section 12(1)

section 27

Sarajavc

April 20,

,

Cochin

Tobia Giacomini

Ferolektro

section 50

Customs Act, 1962

section 12(1)

section 12(1)

Customs Act

section 1

section 114

May 19, 1971

Section 12(1)

section 11

Customs Act

section 113(d) and 113(i)

section 114

Customs Act

section 114

Customs Act

Kerala High Court

section 12

Section 23A

section 12

section 11

Customs Act

Section 11

Customs Act

Section 113

Section 23A

section 12(1)

section 11

Customs Act

section 113

section 114

section 12

Hegde

Bachawat

section 12(1)

Sikri

s. 12(1)

Section 12(1)

Central Govermnent

[1969] 2 S.C.R. 727

SUPREME COURT REPORTS

[1976) 3 S.C.R.

section 12

section 12(1)

section 12(1)

M. N. Phadke

Customs Act

section 12

Exchange Regulation Act

section 12(1)

section 12

section 12(1 )(ii)

section 12(1)

section 12(1)

Second Schedule

Second Schedule

Exchange Control Regulations

Chartered Bank i Ltd. Cochin

section 12(1)

section 12(1)

section 12(1)

Section 12(1)

Section 12(1)

Jation Act iu force is an Act

Section 18(1)

Section 12(1)

Section 114

Customs Act 1962