Common Order: (Ramesh Ranganathan, J.)
The question which arises for consideration, in this batch of miscellaneous applications, is whether an interlocutory order, which travels beyond even the main relief sought for in these Writ Petitions and, in effect, results in the Writ Petitions being allowed, without even a counter-affidavit being filed by the respondent-Income-tax Department, can be passed at the stage of admission of the Writ Petitions?
Facts. In brief, are that the Deputy Commissioner of Income tax passed an the assessment order, for the assessment year 2012-2013 under Section 143(3) of the Income Tax Act, levying tax on APBCL for Rs.1,468.64 crores. The Assessing Authority relied on the earlier orders of the Income-tax Appellate Tribunal, passed in the appeals preferred by APBCL for the assessment years 2006-07, 2008-09 and 2009-10; and disallowed the deductions claimed by APBCL for the amount paid by them to the Government of A.P, towards value added tax, privilege fee, special privilege fee, special privilege fee for sports aggregating to Rs.2304.70 crores, as inadmissible expenditure. The disallowance was added back to the returned income and, consequently, APBCL was held liable to pay income-tax of Rs.1468.64 crores.
Aggrieved thereby, APBCL carried the matter in appeal to the Commissioner of Income Tax (Appeals) ( CIT(A) for short). hile matters stood thus, the Deputy Commissioner issued a notice of demand under Section 156 of the Income Tax Act on 14.01.2015 informing APBCL that they should pay the demanded amount, failing which, proceedings for recovery would be taken in accordance with Sections 222 to 229, 231 and 232 of the Income- Tax Act. APBCL made an application to the Deputy Commissioner of Income Tax, under Section 220(6) of the Income Tax Act, requesting him to stay recovery of the tax demand of Rs.1468.64 crores. By his order dated 12.02.2015, the Deputy Commissioner rejected the request of APBCL for stay of demand, and called upon them to fully pay the tax demand of Rs.1468.64 crores, for the assessment year 2012-13, to avoid initiation of coercive measures.
Thereafter APBCL approached the Commissioner of Income Tax seeking stay of recovery of the tax demand of Rs.1468.64 crores. This stay application was also rejected by the Commissioner of Income-Tax. No further challenge was made by APBCL to the orders of the Deputy Commissioner, and the Commissioner of Income-Tax, rejecting their applications for stay of recovery of the tax demanded. As APBCL failed to pay the tax, as per the demand, proceedings under Section 226(3) of the Income Tax Act were instituted on 16.02.2015 to attach the bank account of APBCL. Questioning these proceedings, APBCL filed W.P. No.4517 of 2015 which was dismissed by a Division bench of this Court on 26.02.2015, holding that the assessing authority had already passed the assessment order under the Income Tax Act quantifying a sum of Rs.1468.64 crores as tax; the order of assessment still remained unchallenged; as a result, recovery proceedings had been initiated by attaching the bank account of the petitioner; and they did not find any illegality or infirmity in the action, at present. The Writ Petition was dismissed granting liberty to APBCL to approach the appropriate forum.
Despite an opportunity being given by the Tax Recovery Officer to pay the tax demand, APBCL failed to do so. As the tax arrears of Rs.1468.64 crores could not be recovered, the Tax Recovery Officer, following the procedure laid down in the Second Schedule to the Income Tax Act, attached the stocks of beer, Foreign Liquor (FL), and Indian Made Foreign Liquor (IMFL), lying in the various godowns of APBCL.
Companies, which manufacture and supply beer, FL and IMFL to APBCL, invoked the jurisdiction of this Court, under Article 226 of the Constitution of India, contending that the stocks lying in the godowns of APBCL (which were attached by the Income Tax Department) belonged to them; and any delay in the sale of the attached stock of beer would result in wastage of the entire stock. The petitioners contended that the title over these goods (Beer, FL and IMFL) had not passed on to APBCL; beer was a perishable product and, as such, had a restricted shelf life of only six months, that too if it was stored in conducive conditions in terms of the temperature of storage; the shelf life would reduce in hot climatic conditions; they had also issued an advisory, printed on each bottle of beer, that beer should ideally be consumed within six months from the date of bottling; the stocks of beer, stored in warehouses of the APBCL, were already three months old; and if the stock of beer, lying in the godowns of APBCL, was let to languish, it would be rendered unfit for consumption, and would have to be drained as per the strict quality parameters laid down by the petitioners themselves.
What weighed with the Division bench, in admitting W.P. No.9254 of 2015 filed by one of the manufacturers, and in passing an ex parte ad-interim order therein, was that liquor was a perisable product which would lose its value six months after the date of manufacture, and would become waste. The Division bench was of the view that the intention of the revenue appeared to be to destroy unmindfully the marketable value of the material, and not to recover tax dues; and the dealer would be able to achieve the best price in the market, and not the revenue officials. It is in such circumstances, and in order to avoid delay and consequential wastage of the products, that the Income Tax Department was directed to depute a responsible officer to APBCL and, under his supervision, the entire stock was directed to be sold in accordance with law; and the statement of sale proceeds, after deducting incidental expenses, was directed be prepared and given to the revenue officials. On the premise that the shelf life of liquor (not only beer but also FL and IMFL) was six months, the entire stock of liquor (beer, FL and IMFL) was directed to be sold. In this context, it is necessary to note the petitioners had only claimed that the shelf life of beer was six months and it is admitted, across the bar by Sri S.Ravi, Learned Senior Counsel, that bottled FL and IFML do not have a restricted shelf life and can be stored for years together.
The interim order, passed in W.P. No.9254 of 2015, was to ensure that the attached stocks were not rendered waste by efflux of time. It is evidently with a view to protect the interests of the parties concerned (the petitioners and the Income Tax Department) that the sale proceeds were directed to be kept in a separate bank account, and it was made clear that no portion of the net sale proceeds should be appropriated either by the petitioner or anyone else, and should be kept in a separate account which would be subject to further orders of the Court. The Division bench also observed that the genuineness of the expenditure, to be incurred for sale, should be scrutinised by the revenue officials who would be deputed; if the genuineness of the expenditure was doubted, then the entire gross sale proceeds should be deposited; and, in that case, the petitioners should apply to the Court. The interim orders, to the extent the attached stocks were directed to be sold and the sale proceeds directed to be kept in a separate bank account, sought to protect the interests of both the petitioners and the Income Tax Department, and are, therefore, made absolute.
The sale of the attached property (beer, FL and IMFL), in terms of the interim orders passed by this Court, yielded Rs.489.07 crores. While the order, in W.P.M.P. No.12189 of 2015 in W.P. No.9254 of 2015 dated 02.04.2015 whereby incidental expenses were permitted to be deducted, has not been modified, in the Writ Petitions filed thereafter, the Division bench clarified that manufacturing expenses and incidental expenses for delivery should be deducted from the gross sale proceeds. Under the guise of deducting manufacturing expenses, and incidental expenses for delivery, almost the entire sale proceeds of Rs.489.07 crores has been handed over by APBCL to the petitioners and the Government of A.P, leaving a paltry sum of Rs.3.44 lakhs (Rupees three lakhs forty four thousand only) as the balance remaining in the separate account being maintained in terms of the interim orders passed by the Division bench. These acts of subterfuge has rendered the attachment order, passed by the Tax Recovery Officer, redundant for, even if the Writ Petitions were to be dismissed later, the Income Tax Department would be left only with Rs.3.44 lakhs to be adjusted against the income-tax dues of APBCL of Rs.1468.64 crores, though the sale proceeds of the attached stocks yielded more than Rs.489.07 crores.
The counter-affidavit, filed on behalf of APBCL, narrates in detail various interim orders passed by the Division bench, and the orders passed in clarification thereto. It is also stated therein that, in compliance with the orders of the Court, letters were addressed to the Income Tax Department in respect of several of their depots; the deductions made by them were under Section 17 of the A.P. Excise Act; they had requested the Income Tax Department to release the stocks, belonging to the suppliers, for its sale to retail vendors; by their letter dated 12.03.2015, addressed to the Income Tax Officer, they had informed that, due to attachment of liquor stocks in all their depots by the Income Tax authorities, they were forced to stop sales of IMFL and FL to licence holders of the Prohibition and Excise Department in the State of Andhra Pradesh; these attachments had brought the regular activity, of distribution of these goods to licence holders, to a grinding halt; the goods, stocked in their godowns, were highly inflammable; if the premises were sealed for longer periods, temperature may go up in the godown causing danger to public life; beer had a shelf life of only six months, and had to be destroyed thereafter; the abrupt stoppage of sales had adversely affected the revenues of the State Government; it may also have an adverse impact on public health, as anti-social elements could take advantage of the situation, and bring non-duty paid liquor, illicit and spurious liquor, and adulterated toddy, to fill the gap; non-supply of liquor may prompt retailers to black market the stocks jacking up the retail price; as per the interim orders, the sale of IMFL/FL/Beer from APBCL was commenced under intimation to the Income Tax Department; the sale proceeds were being deposited in a separate bank account as directed by the High Court, after deducting incidental expenses i.e, the government levies and cost of sales to the suppliers; and the statement, showing the same, was communicated to the Income Tax Department from time to time.
In the counter-affidavit filed by the Income Tax Department, it is stated that, if the petitioner or any other third party had any grievance against the attachment made by the department, they could approach the Tax Recovery Officer under Rule 11 of the Second Schedule to the Income Tax Act; in some of the Writ affidavits, it is admitted that the stocks belong to APBCL; it is, therefore, clear that the department had attached the stocks held by APBCL as per law, as they failed to pay the demand raised for the assessment year 2012-13; it is the responsibility of APBCL to pay up the taxes due to the department, keeping in mind the shelf life of the goods at its depots across the State; otherwise the same are liable to be sold, in auction by the Tax Recovery Officer, as per law; after the stocks were attached, the Income tax department was contemplating to proceed further in accordance with the provisions of the Income-tax Act; in the meanwhile, the petitioners had approached this Court seeking release of the attached stock; it is the statutory liability of APBCL to pay income tax; in the event of its failure to pay, the income tax department can recover the income-tax dues; due opportunity was provided to APBCL calling upon them to pay the taxes; APBCL did not respond to the several opportunities afforded to them; after exhausting other channels for collection of the taxes due to the department, the depots of APBCL were attached as a last resort for collection of taxes; under the guise of the order of this Court, the petitioners, in connivance with APBCL, had siphoned off the entire sale proceeds, running into over 500 crores, pursuant to the sales made at the various depots as per the directions of this Court; the net result is that paltry amounts have been deposited into the separate account directed to be maintained by this Court; a serious note should be taken of the blatant manner in which the petitioners, in connivance with APBCL, have violated, circumvented and have taken an unjustified advantage of the interim orders passed by this Court; and the interim orders should be vacated.
In the affidavit dated 07.12.2015, filed by the Managing Director of APBCL, it is stated that, despite Article 289 of the Constitution of India and the provisions of the A.P. Regulation of Wholesale Trade in IMFL and FL Act, 1993 which treats relationship between the State of Andhra Pradesh and the APBCL as a principal and agent, the Income tax Department took a stance that APBCL is liable to pay income tax; this stance was taken by them for the first time for the assessment year 2008-09; in respect of that assessment year, as well as the previous and subsequent years, income tax appeals are pending before this Court in ITTA Nos.158, 159 and 160 of 2014; when the Income Tax Department attached their properties, the Telangana Beverages Corporation approached the High Court; in W.P. No.5616 and 5606 of 2015, this Court passed a similar order on 04.03.2015, as has been passed in the present Writ Petitions; later when the Income Tax Department complained that state taxes were being deducted, the Court observed that it was crystal clear and required no further clarification; and this affidavit is being filed to bring to the notice of the Court what exactly happened before this Court earlier.
Reference to the order of the Division bench, in W.P. No.5616 and 5606 of 2015, is inapposite. The Telangana State Beverages Corporation Limited ( TSBCL for short) filed W.P. No.5606 of 2015 to declare the prohibitory orders issued by the Tax Recovery Officer as illegal and without jurisdiction; and W.P. No.5616 of 2015 to declare the warrant of attachment, of moveable property, issued by the Tax Recovery Officer as illegal and without jurisdiction. By a common order dated 01.05.2015 both the Writ Petitions were allowed. The Division bench held that TSBCL came into being as a company, and it was a separate legal entity on being incorporated on 30th May, 2014; the tax dues, in relation to which recovery was sought to be made, related to the assessment year 2012-13; at that time TSBCL was not in existence; admittedly TSBCL was not an assessee nor a deemed assessee or an assessee in default; no assessment order was passed against it nor was any notice of demand issued; TSBCL was not a person holding any money for, or on account of, the assessee for the tax dues of APBCL to be recovered from it; TSBCL was not the successor in interest of APBCL, and was a separate legal entity; it had not started business nor was any income derived; as it did not acquire any right, assets and properties of APBCL, the question of shouldering liability did not arise; and the action taken by the Revenue against TSBCL was without jurisdiction and wholly illegal. The Division bench, however, made it clear that TSBCL could not be equated with the Government in order to get constitutional immunity from payment of taxes. Reliance placed by the Managing Director of APBCL, on the orders passed in W.P. No.5606 and 5616 of 2015, is therefore misplaced.
After the petitioners have taken away the entire amount, due to the them towards the supplies made to APBCL, under the cover of the interim orders passed by this Court earlier, a request is now made by Sri S. Ravi and Sri R. Raghunandan, Learned Senior Counsel, and Sri K. Vivek Reddy, Learned Counsel appearing on behalf of the petitioners, that, instead of passing orders on the petitions filed by the Income-tax Department to vacate the earlier interim orders, the Writ Petitions be finally heard at this stage. Having surreptitiously paid a sum in excess of Rs.323 Crores to the Government of Andhra Pradesh, (under the guise of incidental expenses permitted to be deducted by the Division bench in the interim orders passed in the Writ Petitions filed by the manufacturers who supplied them beer, FL and IMFL), APBCL now requests this Court to hear the appeals preferred by them against the orders passed by the Income Tax Appellate Tribunal for the earlier assessment years 2006-07, 2008-09 and 2009-10.
The stand taken by Sri J.V.Prasad, Learned Senior Standing Counsel of the Income Tax Department, is that this Court should first examine whether the interim orders should be continued, and whether APBCL was justified in paying the entire amount due to the petitioners towards the supplies made by them, and in making payment to the Government of Andhra Pradesh under different heads, from the proceeds of Rs.489.07 crores received by APBCL on the sale of the attached stocks, leaving a paltry sum of Rs.3.44 lakhs (Rupees Three Lakhs forty four thousand) remaining in the account to be adjusted towards the Income Tax dues of APBCL in excess of Rs.1,468.64 crores. It would not be appropriate to hear the writ petitions finally at the interlocutory stage, without the consent of all the parties to these writ proceedings. We shall, therefore, confine our examination to the question whether the interim orders passed earlier should be vacated or made absolute; and consequential orders, if any, to be passed pursuant thereto.
Along with its counter-affidavit, APBCL has filed a tabular statement which contains the name of the supplier; payment made by the supplier, income tax deducted at source, amount paid towards value added tax, amount paid towards assessment fee on foreign liquor, amount paid towards privilege fee from clubs, amount paid towards additional privilege fee under the A.P. Excise Act, amount paid towards special privilege fee under the A.P. Excise Act, and privilege fee on the retailers in terms of Rule 16(9) of the A.P. Excise Rules. The tabular statement discloses that, as against the gross sale receipts of Rs.489.070 crores, Rs.489.036 crores was deducted under different heads, leaving the differential amount of Rs.3,44,755/- (Rupees three lakhs forty four thousand and seven hundred and fifty five) lying in the separate account being maintained pursuant to the interim orders of this Court.
The aforesaid tabular statement discloses that the entire amount due to them, towards supplies of beer, FL and IMFL to APBCL ie for a sum exceeding Rs.166.64 crores, was paid to the petitioners and, as a result, the petitioners have obtained, by way of an exparte ad-interim order, a relief which goes even beyond the final relief sought for in the Writ Petition. The interim relief which the petitioners herein were granted was even before a counter-affidavit was filed by the Income-tax Department, and without an adjudication on their claim that these stocks belong to them, and not to APBCL. If title to the goods (beer, IMFL and FL supplied by the petitioners) is held to have passed on to APBCL on delivery of goods to them, then the stocks lying in its various godowns must be held to belong to APBCL, notwithstanding that the amounts due on such supplies has not yet been paid to the petitioners herein. Consequently the Income Tax Department would be justified in attaching these stocks, which belong to APBCL, for recovery of its tax dues exceeding Rs.1468.64 crores. If, however, the petitioners continue to retain title over the goods, even after its delivery to the APBCL, the Income Tax Department would then be disabled from attaching these stocks for recovery of the tax dues of APBCL, as it is only the moveable properties of APBCL which can be attached, and not the moveable properties of the petitioners herein.
While the petitionerscontention before this Court is that the shelf life of beer is limited to six months from the date of manufacture, they have, under the cover of the ad-interim order, succeeded in also having their supplies, of FL and IMFL to APBCL, sold; and the sale proceeds being handed over to them. On a query from this Court whether the petitioners had furnished details of manufacturing expenses to APBCL, before receipt of the sale price on the supplies made by them to APBCL, and whether manufacturing expenses could be understood as the sale price itself, the reply given by Sri S. Ravi and Sri R. Raghunandan, Learned Senior Counsel appearing on behalf of the petitioners, is only that such a contention has not been raised in the counter-affidavit filed on behalf of the Income Tax Department. While the interim orders, no doubt, permitted manufacturing expenses to be deducted, the reasons, which weighed with this Court in permitting such deductions, are not reflected therein. In any event, permission to deduct manufacturing expenses cannot be equated to payment to the suppliers of the sale price itself.
What is even more disconcerting is that APBCL, even without filing a Writ Petition and without obtaining any order from this Court in their favour, has, under the guise of the interim orders passed at the petitionersbehest, paid the Government of Andhra Pradesh Rs.302.02 crores towards value added tax, Rs.6.98 crores towards assessment fee, Rs.3.39 crores towards privilege fee, Rs.11.52 crores towards additional privilege fee, Rs.1.08 crores towards special privilege fee, and Rs.1.91 crores towards additional privilege fee, though these very items, claimed by APBCL as permissible deductions under the Income Tax Act, had been disallowed by the Deputy Commissioner in his assessment order dated 14.01.2015. While the petitioners were paid the entire amount due to them of Rs.166.64 crores, the State Government was paid Rs.323 crores towards value added tax, assessment fee, privilege fee etc leaving a meagre sum of Rs.3.44 lakhs as the balance remaining in the account to be adjusted, (that too after the the Writ Petition is finally disposed of), towards the Income tax dues of APBCL of Rs.1,468.64 crores.
By his letter dated 23.04.2015, addressed to the Managing Director of APBCL, the Deputy Commissioner of Income Tax informed that, in accordance with the interim orders passed by the High Court, APBCL had furnished a consolidated sale statement of all IMFL depots for the period 17.04.2015 to 18.04.2015; from the statement, it was observed that APBCL had reduced the following expenses from the gross sales: (a) cost of stocks, (b) APVAT, and (c) privilege fee, additional privilege fee, special privilege feet etc; of these expenses, which were shown to be deducted from the gross sales, at best the cost of stock could be considered as being incidental manufacturing expenses in relation to sales; by no stretch of imagination could privilege fee, special privilege fee etc be considered as incidental expenses; right from the assessment year 2004-05 onwards, till the assessment year 2013-14, additions, on the issue of privilege fee, special privilege fee etc, had been made by the department during the scrutiny assessment proceedings under Section 143(3) of the Income Tax Act; and, hence, the deduction claimed under the head privilege fee ?, special privilege fee etc could not be treated as incidental expenses nor did it pertain to manufacturing expenses either; the interim order required APBCL, if it was found that the genuineness of the expenditure was doubted by the Income Tax Department, to deposit the entire gross sale proceeds; and, thereafter, for the writ petitioners to apply to the Court.
Though the interim orders, passed by this Court, required APBCL, in case the genuineness of the expenditure was doubted by the Income Tax Department, to deposit the entire gross sale proceeds into the separate account, it is clear that APBCL has not even complied with the interim order, and it is the Income Tax Department which has now filed a petition seeking vacation of the interim order passed earlier.
I. POWER TO GRANT AD-INTERIM EX PARTE ORDERS SHOULD BE EXERCISED WITH GREAT CIRCUMSPECTION:
Sri K. Vivek Reddy, Learned Counsel for the petitioner, would submit that as notices were served on the Income Tax Standing Counsel, the interim order passed by this Court cannot be construed as an ex parte ad-interim order. A copy of the Writ Petition is served on the Standing Counsel, before it is filed in the Court, in compliance with Rule 7(a) of the Writ Proceeding Rules, 1977, which stipulates that, whenever a petition or application is presented against the Government, or any authority, the copies of the petition, application and the accompanying affidavit and documents shall be served on the Government Pleader or the Standing counsel concerned, and the said petition or the application shall not be accepted in the Registry unless it contains an endorsement of service signed by the Government pleader or the Standing- Counsel concerned, or by the Secretary of the Government Pleadersoffice or by someone authorized by him in this behalf, not below the rank of a Superintendent, or by a Registered Clerk of the Standing Counsel concerned, as the case may be, or by a person so authorized by the Standing Counsel concerned under intimation to the Registry.
The mere fact that a copy of the Writ Petition is served on the Standing Counsel for the Income Tax Department, and he is present in Court at the stage of admission, does not denude the interim order of its character of an ex parte ad-interim order, as the said order was passed without the Income Tax Department being afforded an opportunity to contest the prayer, for grant of interim relief, on merits by filing their counter-affidavit. We are satisfied that the interim orders, which are now sought to be vacated, are ex parte ad-interim orders.
- Although the powers of the High Court, under Art. 226 of the Constitution, are far and wide, and Judges must ever be vigilant to protect the citizens against arbitrary executive action, nonetheless, Judges have a constructive role and, therefore, there is always the need to use such extensive powers with due circumspection. There has to be, in the larger public interest, an element of self-ordained restraint. The High Court should use its powers to grant ad interim ex parte orders with great circumspection. (State of Rajasthan v.Swaika Properties (AIR 1985 SC 1289); State of West Bengal v. Calcutta Hardware Stores (AIR 1986 SC 614). To grant interim relief straightaway and leave it to the respondents to move the Court to vacate the interim order may jeopardise the public interest. It is, therefore, necessary for the Courts to be circumspect in the matter of granting interim relief. (Union of India v. Oswal Woollen Mills Ltd. (1984) 2 SCC 646 = MANU/SC/0014/1984).
- It is settled law that Courts must be circumspect in granting interim orders of far-reaching dimensions, or orders causing administrative, burdensome inconvenience, or orders preventing collection of public revenue for no better reason than that the parties have come to the Court alleging prejudice, inconvenience or harm, and that a prima facie case has been shown. Prudence, discretion and circumspection are called for. There are several other vital considerations apart from the existence of a prima facie case. There is the question of balance of convenience. There is the question of irreparable injury. There is the question of the public interest. There are many such factors worthy of consideration. (Assistant Collector of Central Excise v. Dunlop India Ltd. (AIR 1985 SC 330); Calcutta Hardware Stores (supra).
II. ORDINARILY AD-INTERIM ORDERS, WHICH HAVE THE EFFECT OF GRANTING THE MAIN RELIEF ITSELF, SHOULD NOT BE PASSED:
Interim ex parteorders, which result in granting the main relief in the Writ Petition, should not be passed. It is a well-known rule of practice and procedure that, at the interlocutory stage, a relief, which is asked for and is available at the disposal of the matter, is not granted. (U.P.Junior DoctorsAction Committee v. Dr. B.Sheetal Nandwani (AIR 1992 SC 671). Ad interim ex parte orders, which practically have the effect of the grant of the main relief in the petition under Art. 226 of the Constitution, must not be passed. (Dunlop India Ltd. (supra); Calcutta Hardware Stores (supra): AIR 1986 SC 614).An interim order, which virtually grants a substantial part of the relief claimed in their writ petition, is not warranted. (Union of India v. Jain Shudh Vanaspati Ltd.(Judgment in C.A. No.11450 of 1983)Interim orders, which practically give the principal relief sought in the petition for no better reason than that a prima facie case has been made out, without being concerned about the balance of convenience, the public interest and a host of other considerations, should not be granted. (Bank of Maharashtra v. Race Shipping and Transport Co. Pvt. Ltd.(AIR 1995 SC 1368);Oswal Woollen Mills Ltd. (supra).
In order to examine whether the interim relief, granted at the stage of admission, travels beyond the main relief sought for in the Writ Petitions, let us take note of the main relief sought for in a few of these Writ Petitions as they are more or less similar to the main relief sought for in the other Writ Petitions also. The main relief sought for, in W.P. No.9254 of 2015 filed by M/s. United Breweries Limited, is to declare the action of the Income Tax Department, including its Tax Recovery Officer, in not allowing the APBCL to dispose of the stocks of beer supplied by the petitioner, and which has been attached by the Income Tax Department, despite the fact that the entire stock would be destroyed on expiry of six months from the date of its manufacture, as arbitrary, highhanded and violative of Article 14 of the Constitution of India. A consequential direction is sought to the Income Tax Department to release and dispose of the stocks, of beer attached in various depots/warehouses, through APBCL.
The main relief sought for, in W.P. No.9467 of 2015 filed by SAB Miller India Limited, is to declare the action of the Commissioner of Income Tax, in sealing the depots of APBCL containing the stocks of the petitioner, as illegal and arbitrary. A consequential direction is sought to the Commissioner of Income Tax to release the stocks of the petitioner, lying in various depots of the APBCL, for sale of the same to the retailers. The main relief sought for, in W.P. No.9779 of 2015 filed by Diageo India Private Limited, is to declare the action of the respondents in withholding the foreign liquor imported, and the IMFL manufactured, by the petitioner lying in the godowns and warehouses of APBCL, under the guise of attachment proceedings, as illegal and arbitrary; and for a consequential direction to the respondents to release the petitioner's stock, lying in the godowns and warehouses of APBCL, to retail vendors and realize the sale proceeds thereof.
The main relief sought for, in W.P. No.9789 of 2015 filed by United Spirits Limited, is to declare the action of the respondents in withholding the IMFL manufactured by the petitioner, lying in the godowns and warehouses of APBCL under the guise of the attachment order, as arbitrary and highhanded. A consequential direction is sought to the respondents to release the petitioner's stocks, lying in the godowns and warehouses of APBCL, to retail vendors and realize the sale proceeds thereof. The main relief sought for, in W.P. No.10109 of 2015 filed by Pernod Ricard India (P) Limited, is to declare the action of the Income Tax Officials, and the Tax Revenue Officials, in attaching the stocks of the petitioner company as illegal, arbitrary, contrary to Article 14 of the Constitution of India, and without jurisdiction. A consequential direction is sought to the Income Tax officials to lift the attachment of the stocks of the petitioner lying at various depots of the APBCL. The main relief sought for in W.P. No.10588 of 2015, filed by Bacardi India Private Limited, is to declare the action of the respondents, in attaching the stocks of the supplier/petitioner, as illegal, arbitrary, without jurisdiction, and contrary to the applicable Excise laws in the State of A.P. A consequential direction is sought to the respondents to lift the attachment against the stocks of the petitioner lying at various depots of APBCL.
Even if the main prayer in the Writ Petitions were to be granted, which can only be after the Writ Petition is finally heard and disposed of, it would only result in the order of attachment being lifted, the stock lying in the godowns of APBCL being released in favour of the licensed retailers, and the sale proceeds realized. Payment by APBCL to the petitioners, for the supplies made by the latter, would only have been made in accordance with the terms of the rate agreements. Even if the main prayer were to be granted, the petitioners would not have been entitled, merely thereby, to the sale proceeds, and they would have had to await payment from APBCL in terms of the rate agreements. On the other hand, even if the Writ Petitions were to be dismissed later, the Income Tax Department would be left with no money in the separate account for recovery of its tax dues, which it could have recovered, at least in part, on putting the attached property to sale. As the petitioners have been paid the entire sale proceeds, the interim relief, which they have been granted at the stage of admission, goes even beyond the relief which they could have been granted after the Writ Petitions are finally heard and allowed. It is settled law that High Courts should not pass orders, which have the effect of granting the final relief, except in those rare cases where the non-passing of such order would cause such injury as cannot be repaired later. The present batch of cases, for reasons to be detailed hereinafter, are not such. (Home Secretary v. Darshjit Singh Grewal (1993) 4 SCC 25).
III. INTERIM ORDERS SHOULD NOT BE PASSED FOR THE MERE ASKING:
Interim orders ought not to be passed for the mere asking. In Dunlop India Ltd. (supra), the Supreme Court held:-
.It is indeed a great pity - and, we wish we did not have to say it but we are afraid we will be signally failing in our duty if we do not do so - some courts, of late, appear to have developed an unwarranted tendency to grant interim orders - interim orders with a great potential for public mischief - for the mere asking. We feel greatly disturbed. We find it more distressing that such interim orders, often ex parte and non-speaking, are made even by the High courts while entertaining Writ Petition under Article 226 of the Constitution, and in the Calcutta High court, on oral application too. Recently in Samarias Trading Co. Pvt. Ltd. v. S. Samuel, we had occasion to condemn and prohibit this practice of entertaining oral applications under Article 226 and passing interim orders thereon. In several other cases, Siliguri Municipality v. Amalendu Das, Titaghur Paper Mills Co. Ltd. v. State of Orissa, Union of India v. Oswal Woollen Mills Ltd., Union of India v. Join Shudh Vanaspati Ltd., this court was forced to point out how wrong it was to make interim orders so soon as an 'application was but presented, when a second thought (or a second's thought) would expose the impairment of the public interest and often enough the existence of a suitable alternative remedy. Despite the fact that we have set our face against interfering with interim orders passed by the High courts and made it practically a rigid rule not to so interfere, we were constrained to interfere in these cases. .. (emphasis supplied)
Ordinarily, while passing an interim order, the Court is inclined to maintain status quo as obtaining on the date of the commencement of the proceedings. However, there are a few cases which call for the Court's leaning not in favour of maintaining the status quo, and still lesser in percentage are the cases when an order tantamounting to a mandamus is required to be issued even at an interim stage. There are matters of significance and of moment posing themselves as moments of truth. (Deoraj v. State of Maharashtra (2004) 4 SCC 697).
Situations emerge where the grant of an interim relief would tantamount to granting the final relief itself. And then there may be converse cases where withholding of an interim relief would tantamount to dismissal of the main petition itself; for, by the time the main matter comes up for hearing, there would be nothing left to be allowed as relief to the petitioner though all the findings may be in his favour. In such cases the availability of a very strong prima facie cases, of a standard much higher than just prima facie case, the considerations of balance of convenience and irreparable injury forcefully tilting the balance of the case totally in favour of the applicant may persuade the Court to grant an interim relief though it amounts to granting the final relief itself. Of course, such would be rare and exceptional cases. The court would grant such an interim relief only if it is satisfied that withholding it would prick its conscience, and do violence to its sense of justice, resulting in injustice being perpetuated throughout the hearing and, at the end, the Court would not be able to vindicate the cause of justice. Obviously such would be rare cases accompanied by compelling circumstances, where the injury complained of is immediate and pressing and which cause extreme hardship. The conduct of the parties shall also have to be seen and the Court may put the parties on such terms as may be prudent. (Deoraj (supra);Bombay Dyeing and Mfg. Co. Ltd. v. Bombay Environmental Action Group(2005) 5 SCC 61).Unless there is any special reason, to be indicated in clear terms in the interlocutory order, as a rule final relief cannot be granted at the interlocutory stage. (Dr.B.Sheetal Nandwani (supra).
While, in exceptional circumstances, an interim order may be passed which has the effect of allowing the Writ Petition itself, the Court is bound to assign reasons why it considers it appropriate to pass such an order. We find considerable force in the submission that, let alone referring to any special reasons for grant of such an ex-parte ad interim order at the stage of admission, there is not even a reference, in the interim order (under the cover of which almost the entire sale proceeds have been taken away), to the petitioner's claim nor is there any finding, even prima facie, that the petitioners continue to retain title over the attached goods lying in the godowns of APBCL.
IV. ARE THE PARAMETERS FOR GRANT OF, AND IN CONTINUING, THE INTERIM ORDERS, FULFILLED IN THE PRESENT CASES:
Courts do not, normally, pass interlocutory orders, which would affect a person, without giving him an opportunity of being heard. Only in extreme cases, an ad interim order can be passed, but even therefor, certain parameters are required to be complied. As a principle, ex parte interim orders should be granted only under exceptional circumstances. The factors which should weigh with the court in the grant of ex parte interim orders are whether irreparable or serious mischief will ensue to the petitioner; whether the refusal of an ex parte interim order would involve greater injustice, than the grant of it would involve; the Court would expect a party, applying for an ex parte order, to show utmost good faith in making the application; even if granted, the ex parte interim order should be for a limited period of time; and general principles like prima facie case, balance of conveniences and irreparable loss should also be considered by the Court. (Bombay Dyeing and Mfg. Co. Ltd. (supra);Morgan Stanley Mutual Fund etc. vs. Kartick Das etc. (1994) 4 SCC 225);Andhra Bank v. Official Liquidator (2005 (3) SCALE 178).The interim orders, passed in thesebatch of Writ Petitions, do not reflect any of these factors having been taken into consideration.
Courts have to strike a balance between two extreme positions, on the one hand whether the writ petition would itself become infructuous if interim order is refused, and the enormity of losses and hardships which may be suffered by others if an interim order is granted, particularly having regard to the fact that, in such an event, the losses sustained by the affected parties thereby may not be possible to be redeemed. (Bombay Dyeing and Mfg. Co. Ltd. (supra).Before an interim order is passed, the Court must consider the question as regards existence of a prima facie case, balance of convenience, and whether the Writ petitioners would suffer irreparable injury, if the interim relief sought for is refused. (Bombay Dyeing and Mfg. Co. Ltd. (supra).
V. HAS A PRIMA FACIE CASE BEEN MADE OUT IN THE PRESENT BATCH OF WRIT PETITIONS:
Has a prima facie case been made out for grant of an interim order? After referring to various clauses in the rate agreement entered into between the petitioners and APBCL, more particularly to clauses 2.2.A, 2.5(A) and (B), 2.8, 2.9, 2.10(B)(1) and (iii), 2.11(A), (B) and (C); 2.12, (A) (B), (C), (D) and (E) thereof, and several provisions of the Sale of Goods Act,Sri S. Ravi and Sri R. Raghunandan, Learned Senior Counsel, and Sri K.Vivek Reddy, Learned Counsel appearing on behalf of the petitioners, would submit that title to the goods continues to remain with the petitioners till the goods are sold by APBCL to the licensed retailers; it is at the point of sale by APBCL, to the licensed retailers, that back to back sales take place, firstly by the petitioners to APBCL, and immediately thereafter by APBCL to the licensed retailers; transfer of title to the goods does not take place when the goods are still lying in the godowns of APBCL, prior to its being sold to the licensed retailers; as the subject goods, hitherto lying in the godowns of APBCL, were attached prior to its sale to the licensed retailers, the title over these goods remained with the petitioners, and was not passed on to APBCL; and, consequently, the Income Tax Department could not have attached these movable properties for recovery of the tax dues of APBCL as it only the properties of APBCL which can be attached for realization of its tax dues.
On the other hand Sri J.V.Prasad, Learned Senior Standing Counsel for the Income-tax department, would submit that, not only do the petitioners have an effective alternative remedy, under the Second Schedule to the Income-tax Act, of pressing their claim before the Tax Recovery Officer, they also have the remedy of having their claim, to retain title over the subject stocks, adjudicated in a Civil Suit if their claims were to be rejected by the Tax Recovery Officer.
The Second Schedule to the Income Tax Act prescribes the procedure for recovery of income tax. Rule 4 of the Second Schedule prescribes the modes of recovery which includes, under clause (a) thereunder, by attachment and sale of the defaulter's movable property. Rule 8 stipulates that, whenever assets are realized by sale or otherwise in execution of a tax recovery certificate, the proceeds shall be disposed of firstly towards adjustment of the amounts due under the certificate in execution of which the assets were realized, and the costs incurred in the course of such execution; and, if there remains a balance after the adjustment, the same shall be utilized for satisfaction of any other amount recoverable from the assessee under the Income Tax Act which may be due on the date on which the assets were realized; and the balance, if any, remaining after the adjustments shall be paid to the defaulter. Under Rule 11(1) where any claim is preferred to, or any objection is made to, the attachment or sale of any property in execution of a certificate, on the ground that such property is not liable to such attachment or sale, the Tax Recovery Officer shall proceed to investigate the claim or objection. Under Rule 11(2) where the property, to which the claim or objection applies, has been advertised for sale, the Tax Recovery Officer, ordering the sale, may postpone it, pending investigation of the claim or objection, upon such terms, as to security or otherwise, as
the Tax Recovery Officer may deem fit. Rule 11(3)(b) requires the claimant or objector to adduce evidence to show that, in the case of movable property at the date of attachment, he had some interest in, or was possessed of, the property in question. Rule 11(4) stipulates that if the Tax Recovery Officer, after investigation, is satisfied that the property was in possession of the defaulter not on his own account, but on account of some other person, he shall make an order releasing the property wholly, or to such extent as he thinks fit, from attachment or sale. Rule 11(5) enables the Tax Recovery Officer to disallow the claim if he is satisfied that the property belongs to the defaulter. Rule 11(6) provides that, where a claim or an objection is preferred, the party against whom an order is made may institute a suit in a Civil Court to establish the right which he claims to the property in dispute; but, subject to the result of such suit, if any, the order of the Tax Recovery Officer shall be continued.
An elaborate procedure is prescribed, in the Second Schedule of the Income Tax Act, for a person, claiming to be the owner of the property attached for recovery of the income tax dues of another, to file objections and establish their claim before the Tax Recovery Officer. The remedy of a Suit is also provided to the claimant, under Rule 11(6) of the Second Schedule, against the order of the Tax Recovery Officer rejecting the claim. As the Income Tax Department contends that the petitioners ought to have approached the Tax Recovery Officer for adjudication of their claim, that the attached stocks hitherto lying in the godowns of APBCL belong to them and not to APBCL, it matters little that they have not specifically adverted to the petitioners claim of ownership of the goods in terms of agreement between them and the APBCL. The contention urged on behalf of the petitioners, on the grounds of non-traverse, does not therefore merit acceptance.
The remedy under Article 226 is, ordinarily, not meant to short-circuit or circumvent statutory procedures. It is only where statutory remedies are entirely ill-suited to meet the demands of extraordinary situations, as for instance where private or public wrongs are so inextricably mixed up and the prevention of public injury and the vindication of public justice require it, that recourse may be had to Article 226 of the Constitution. The Court must have good and sufficient reason to bypass the alternative remedy provided by the Statute. (Titaghur Paper Mills Co. Ltd. v. State of Orissa (1983) 142 ITR 663: (AIR 1983 SC 603).Whether the petitioners claim, of retaining title over the subject stocks, should be examined on its merits or they should be relegated to the statutory remedy available to them under the Second Schedule to the Income-tax Act, are matters to be examined when the Writ Petitions are finally heard.
While Sri S.Ravi, Learned Senior Counsel, and Sri K.Vivek Reddy, Learned Counsel appearing on behalf of the petitioners, would contend that existence of an alternative remedy is not a bar for invoking the jurisdiction of this Court under Article 226 of the Constitution of India, it cannot also be lost sight of that, ordinarily, a writ court would not go into a disputed question of title (Antonio S.C. Pereira v. Ricardina Noronha (dead) by LRs.(2006) 7 SCC 740), as such questions may not be amenable to be decided in summary proceedings under Article 226 of the Constitution, and the proper forum, to decide such questions, is either the jurisdictional Civil Court, (Church of South India Trust Assn. v. Shyamlal (2006) 10 SCC 310);G. Srinivas v. Govt. of A.P.(2005) 13 SCC 712), or the Tax Recovery Officer under the Second Schedule to the Income-tax Act. It is also well settled that an enquiry, as to title, may be more appropriately tried in a regular suit, than in Writ proceedings. (State of Orissa v. Ram Chandra Dev and Mohan Prasad Singh Deo(AIR 1964 SC 685). Whether the petitionersclaim of title over the goods, attached by the Income-tax department for recovery of tax dues of APBCL, should be examined in Writ proceedings under Article 226 of the Constitution are also matters to be considered when the Writ Petitions are finally heard. The rights and obligations of the parties would only be crystallized after the lis is adjudicated upon (Andhra Bank (supra), and the question whether the petitioners continue to retain title over the goods, even after its supply to APBCL and till these goods are sold by APBCL to licensed retailers, are not matters for examination at the interlocutory stage, more so, as it is debatable whether this Court would, even at the stage of final hearing of these Writ Petitions, examine questions of title in summary proceedings under Article 226 of the Constitution of India.
As the Writ Petitions have already been admitted, it must, necessarily, be presumed that the petitioners have made out a prima facie case. The fact, however, remains that a strong prima facie case, of a standard much higher than just a prima facie case, must be made out for an interim order to be passed, which would amount to granting the final relief in the Writ Petition. We are afraid that the petitioners have not made out a strong prima facie case for the grant of such relief.
VI. DOES THE BALANCE OF CONVENIENCE LIE IN FAVOUR OF THE PETITIONERS, AND WOULD THEY SUFFER IRREPARABLE INJURY IF THE INTERIM ORDERS ARE VACATED?
Considerations of balance of convenience, and irreparable injury, forcefully tilting the balance totally in favour of the petitioners, would alone justify granting a final relief by way of an interim order. While the balance of convenience may be in favour of retaining the sale proceeds in a separate account, and the amount therein to be paid to the person held entitled thereto on the Writ Petitions being finally heard and decided, it is certainly not in favour of the petitioners being paid the entire sale proceeds even without an adjudication of their claim that they continue to retain title over the goods even after its delivery to APBCL. When we pointed out that the petitioners, having received the entire consideration, could very well avoid a final adjudication, if need be by withdrawing the Writ Petitions itself, both Sri S.Ravi and Sri R. Raghunandan, Learned Senior Counsel, would submit that it is in the petitioners interest to have their claims adjudicated by this Court, as these issues are likely to crop up regularly; and the very fact that the petitioners are contesting the vacate stay petitions is proof of their bona-fides. Be that as it may, the balance of convenience is certainly not in favour of the petitioners being paid the entire amount due to them by way of interim orders, but in retaining the sale proceeds in a separate account till the Writ Petitions are finally heard so that they can then be paid to those who, the Court finds, are entitled thereto.
The petitioners cannot also be said to suffer irreparable injury, if the entire sale proceeds are retained in the separate account for, if they were to succeed later, they can always be paid their dues from the amounts available in the separate account. On the other hand, it is the Income-tax department which has suffered irreparable injury on the petitioners and the Government of Andhra Pradesh being handed over, almost the entire sale proceeds, by APBCL. If the interim order were to be made absolute now, only for the Writ Petitions to be dismissed later, the Income-tax department would then be able to lay its hands only on Rs.3.44 lakhs still lying in the account, towards recovery of the income-tax dues of APBCL of Rs.1468.64 crores. It must not be lost sight of that, even if the entire sale proceeds of Rs.489.07 crores were to be paid to the Income-tax department, the amount still due from APBCL, towards the balance income-tax dues, would be in excess of Rs.978 crores. By no stretch of imagination can the interim orders, granted in this batch of Writ Petitions, be categorized as those rare and exceptional cases where withholding of the interim order can be said to result in the conscience of the Court being pricked, or in doing violence to its sense of justice. As the petitioners could have been paid these amounts later also, there were no compelling circumstances, for APBCL not to retain the sale proceeds in a separate bank account, otherwise than on account of the interim orders passed by this Court earlier. The interim orders, to the extent it permitted the manufacturing expenses and incidental expenses for delivery, to be adjusted from the sale proceeds must be, and is hereby, vacated.
VII. CONCLUSION:
As a substantial part of the sale proceeds have already been paid by APBCL to the petitioners and the Government of Andhra Pradesh, what orders can this Court pass consequent upon the interim orders, passed earlier, being vacated in part? An order of stay, granted pending disposal of a writ petition or other proceeding, comes to an end with the dismissal of the substantive proceeding. It is the duty of the Court, in such a case, to put the parties in the same position they would have been but for the interim order of the court, (Kanoria Chemicals and Industries Ltd. v. U.P. State Electricity Board (1997) 5 SCC 772), applying the doctrine of restitution. The jurisdiction to make restitution is inherent in every court, and should be exercised whenever justice of the case demands. (Kavita Trehan v. Balsara Hygiene Products (1994) 5 SCC 380);Indian Council for Enviro-Legal Action v. Union of India (UOI) (2011) 8 SCC 161). Interests of justice require that any undeserved or unfair advantage gained by a party invoking the jurisdiction of the Court, by the mere circumstance that it has initiated a proceeding in the Court, must be neutralised. The simple fact of the institution of litigation by itself should not be permitted to confer an advantage on the party responsible for it. (Grindlays Bank Limited v. Income Tax Officer, Calcutta (1980) 2 SCC 191);Indian Council for Enviro-Legal Action20; Ram Krishna Verma v. State of U.P.(1992) 2 SCC 620).
While the doctrine of restitution can be applied when the Writ Petitions are finally heard and decided, can the Court apply analogous principles at the interlocutory stage, if it is satisfied that the ex-parte ad-interim orders have caused grave and irreparable injury not to those who invoked its jurisdiction, but to those against whom the interim orders were passed? Should the petitioners who secured a relief, more than the main relief, by way of these ad-interim orders not be asked to make reparation? Should not status-quo ante be restored, and the clock put back to a stage whereby the interest of all concerned, including the petitioners and the Income-tax department, can be secured without conferring undue advantage to any of the parties to the lis? Should not the Government of Andhra Pradesh be directed to return the amounts paid to them by APBCL, towards VAT, privilege fee etc, even without any order from this Court? Should the Government of Andhra Pradesh not await a final adjudication on the question whether they can claim priority over income-tax dues? The answers to all these questions can only be in the affirmative. Failure to restore status-quo ante, at least in part, would result in travesty of justice, and cause grave prejudice and irreparable injury to the Income-tax department for, even if the Writ Petitions were to be dismissed later, it would only be a pyrrhic victory as there would hardly be any money left in the account to be adjusted against the income-tax dues of APBCL.
The petitioners herein and the Government of A.P shall forthwith and, in any event, on or before 20.01.2016, re-deposit the amounts received by them from APBCL on the sale of the stocks (beer, FL and IMFL) attached by the Income-tax department. Such re-deposit would ensure that the entire sale proceeds (ie Rs.489.07 crores less the TDS of Rs.4.81 crores) remain in the separate account directed to be maintained by this Court. The interests of the petitioners, the Income Tax Department, and the Government of Andhra Pradesh would be secured thereby as, after the Writ Petitions are finally heard and decided, these amounts can be paid to those entitled thereto.
The amount lying in the separate account, after re-deposit of the amounts as directed hereinabove, shall be invested by the APBCL in short term cumulative fixed deposits, and proof thereof shall be furnished to the Income Tax Department latest by 26.01.2016. The amounts invested in Fixed deposits shall be subject to the result of the Writ Petition. It is made clear that failure on the part of the petitioners, and the Government of Andhra Pradesh, to re-deposit the amounts, paid to them by APBCL on the sale of the attached stock, within the time stipulated hereinabove would entitle the Income-tax department, notwithstanding the pendency of these Writ Petitions, to take action thereafter, in accordance with law, for recovery of the tax dues of APBCL of Rs.1468.64 crores. All these WVMPs and the WPMPs are, accordingly, disposed of.