JAIPUR BENCH
ANSHUMAN SINGH, J. :
The facts giving rise to this petition under Art. 226 of the Constitution of India briefly stated are : that the petitioner M/s Modern Threads (India) (P) Ltd. is a company incorporated and registered under the Companies Act, 1956 having its Registered Office at A-4, Vijay Path, Tilak Nagar, Jaipur. The said company is a public limited company engaged in manufacture of synthetic yarn, woolen yarn, etc. For manufacturing of the aforesaid goods, company is alleged to have entered into an agreement with M/s Technimont, S. P. A. Milan of Italy for the supply of Technical know-how and basic process engineering documentation on 15th Dec., 1995. As per the term of the agreement the petitioner has agreed to pay 300 lacs US Dollar to the foreign collaborator for the supply of technical know-how and 35 lacs US Dollar for the supply of basic process engineering documentation. The said agreement is also alleged to have been approved by the Government of India vide letter dt. 27th March, 1996. It has been further averred that subsequently some amendments were made in the original agreement and even the amendments made subsequently were also approved by the Government of India vide letter dt. 15th July, 1996. It has been further averred that petitioner-company filed an application under s. 195(2) of the IT Act, 1961 (hereinafter referred to as the Act, 1961) before the AO, the Dy. CIT, Special Range II, Jaipur on 29th Oct., 1996 to determine the taxability of income under the head technical know-how fees and basic process engineering fees and also for NOC to remit the first instalment of the same. The AO vide order dt. 20th Dec., 1996 rejected the aforesaid application and the copy of the order was received by the petitioner on 23rd Dec., 1996. The petitioner feeling aggrieved against the aforesaid order preferred an appeal before the CIT(A) under s. 248 of the Act, 1961. A photocopy of the same has been annexed as Annexure 2 to the writ petition. Along with the appeal petitioner also filed an application under s. 119 of the Act, 1961 to review the order passed by the Dy. CIT(A), praying therein that order passed by the AO under s. 195(2) of the Act, 1961 dt. 20th Dec., 1996 may be quashed and permission may be given to the petitioner to remit technical know-how fees and basic process engineering documentation fee without deduction of income-tax or in the alternative pending the application permission may be given to the petitioner to remit the first instalment of 75 lacs US Dollar as technical know-how and 10.5 lacs US Dollar for basic process engineering documentation fee subject to deferment for payment of tax till the decision of the application or first appeal whichever is earlier as an interim relief. The petitioner was informed vide letter dt. 27th Dec., 1996 by the Chief CIT, Rajasthan, Jaipur that necessary instructions in the matter had been issued to the AO. A photocopy of the said letter has been filed as Annexure 3 to the writ petition. After receipt of the aforesaid letter the petitioner alleged to have contacted the AO who directed the petitioner to give personal guarantee of the chairman of the company in favour of the IT Department, Jaipur and also undertaking to discharge the income-tax liability pursuant to order under s. 195 of the Act, 1961. Accordingly, personal guarantee of the chairman and an undertaking was submitted. Photocopies of personal guarantee and the undertaking were filed as Annexure 4 and Annexure 5, respectively to the writ petition. After personal guarantee and undertaking given by the chairman of company the Dy. CIT(Asst.) Spl. Range, II, Jaipur, issued a No Objection Certificate, which runs as under :
'No Objection Certificate
With reference to the application dt. 27th Dec., 1996 filed by M/s Modern Threads (India) Ltd., with Chief CIT, Rajasthan, Jaipur and Chief CITs letter No. CC/AC(T) Pet. under s. 119/96-97/3130 dt. 27th Dec., 1996, I have no objection that M/s Modern Petro Chemicals, a unit of M/s Modern Threads (I) Ltd., having its registered office at A-4, Vijay Path, Tilak Nagar, Jaipur-302 004 (Rajasthan) (PAN : 30-2=029-CY-0457 [DC(A), Sr.-II, Jaipur] for remitting US Dollars 75 lacs (USD seventy five lacs only) towards lump sum technical know-how fees and US Dollars 10.5 lacs (USD ten lac fifty thousand only) towards lump sum payment of basic process engineering fees to M/s Technimont, S. P. A. Milan of Italy.
Sd/- (O. P. Meena) Dy. CIT (Asst.) Spl. Range-2, Jaipur.'
2. The Dy. CIT(Asst.) Spl. Range-II, Jaipur vide letter dt. 30th Dec., 1996 directed the petitioner to pay TDS demand arising due to the remittance of 75+10.5 US Dollars before 15th March, 1997 in case the petitioner-company is unable to obtain a favourable decision from the CIT(A) or a favourable decision from CBDT by 15th March, 1997 and also advised the petitioner company that on failure to pay the same, interest will be charged as per rules. A photocopy of the said letter is filed as Annexure 6 to the writ petition. The CIT(A), Rajasthan II, Jaipur vide order dt. 11th March, 1997 upheld the order of the Dy. CIT (Asst.) Spl. Range-II, Jaipur, but allowed the appeal directing the assessing authority to exclude the tax payment to be made by the petitioner on the remittance to the foreign collaborator. Petitioner feeling aggrieved by the order dt. 11th March, 1997, passed by the CIT(A) preferred an appeal before the Tribunal, Jaipur Bench, Jaipur along with a stay application. It is not disputed that the appeal as well as the stay application filed by the petitioner are still pending before the Tribunal, Jaipur Bench, Jaipur. In the meantime, the petitioner has been served with the letter dt. 14th March, 1997 whereby, the petitioner-company has been directed to deposit TDS payment on account of remittance of US Dollars 75 lacs plus US Dollars 10.5 lacs to M/s Technimont S. P. A., Italy immediately. After receipt of the aforesaid demand letter the petitioner has approached this Court under Art. 226 of the Constitution of India for staying the recovery against the petitioner and restraining the respondents not to press the recovery till the disposal of the appeal/stay application filed by the petitioner before the Tribunal, Jaipur Bench, Jaipur. It is well settled that once the petitioner has availed an alternative remedy of filing second appeal before the Tribunal which has not been decided as yet, the petitioner cannot be permitted to invoke the extraordinary writ jurisdiction of this Court without waiting for the result of the appeal filed by him before the Tribunal. It is also settled that even if the stay application is rejected pending appeal filed by the petitioner, normally this Court should not interfere against the order passed on the stay application unless, the order is wholly arbitrary or per se illegal but there are certain special facts on the basis of which learned counsel for the petitioner has vehemently urged that in the special facts and circumstances of the case, this Court may invoke its power under extraordinary writ jurisdiction. The facts which have been brought to the notice of the Court by the learned counsel for the petitioner, are contained in (1996) 136 CTR 35 : 1997 90 Taxman 31. In this magazine, there are two representations made by Rajasthan Tax Consultants Association for; (i) Posting of Honble Judicial Member at Jaipur Bench and (ii) Setting up one more Bench for the State of Rajasthan at Jaipur or Jodhpur. I consider it proper to incorporate the peculiar facts of the aforesaid representations in extenso, which runs as under :
'The Jaipur Bench of the Tribunal was set up in the year 1971 for whole of the State of Rajasthan. At that time the pendency of appeals was of about 1,500. Later when the pendency rose to 4,000, an additional Bench functioned for more than one year to liquidate pendency and in order to dispose of an appeal within six to eight months of the institution. The present pendency in the Jaipur Bench of the Tribunal is more than 12,000 and it is taking more than six years for disposal. Some of the appeals instituted in the years 1989, 1990 are also pending.
On the elevation in July, 1995 of Honble Mr. M. A. A. Khan, the then Judicial Member, posted at Jaipur Bench of the Tribunal as Honble Judge of the High Court of Judicature for Rajasthan, seat became vacant. The regular posting was made in Feb., 1996 of Honble Mr. N. K. Agarwal. Meanwhile very few visiting Benches functioned. Honble Mr. N. K. Agarwal was also elevated as Honble Judge of the Rajasthan High Court in March, 1996. Honble Mr. M. A. Bakshi was posted as Judicial Member. He took over on 15th April, 1996. However, he too stands transferred to Bombay Benches w.e.f. 23rd Sept., 1996. Since then Jaipur Bench is not functioning. Thus, during last 15 months, Division Bench of Jaipur Bench, Jaipur functioned for not more than four months. On account of non-regular functioning, the appeals have piled up. Some of the taxpayers had to approach Honble High Court for stay of disputed demand/auction of properties causing avoidable inconvenience to the taxpayers.
Your honour had been nice enough to visit Jaipur in November, 1995. The situation was explained and your honour were kind enough to declare that one additional Bench shall also be set up for the State of Rajasthan.
It is, therefore, most humbly and respectfully prayed that Judicial Member be posted forthwith and an additional Bench be also constituted to liquidate the pendency.'
3. Learned counsel urged that in spite of said representations having been made by the Rajasthan Tax Consultants Association, Jaipur no Judicial Member has been posted at Jaipur Bench, Jaipur after transfer of Honble Mr. M. A. Bakshi to Bombay on 23rd Sept., 1996. From the above facts, it is crystal clear that Division Bench of Tribunal, Jaipur Bench, Jaipur has not been properly functioning for the last 15 months. Appeals have piled up and the figure has been mentioned at 12,000 in the representations made by the Association. It is also mentioned that in the last 15 months Jaipur Bench has not functioned for more than 4 months in total. It has been urged by the counsel for the petitioner that if a permanent Judicial Member has not been appointed at Jaipur Bench, a Division Bench must be constituted at least twice in a month by calling a Judicial Member from the other Bench of the country. In view of the facts mentioned above, I am constrained in observing that because of the inaction on the part of the Central Government in appointing a permanent Judicial Member in Jaipur Bench not only assesses but also Revenue are being put to great hardships and that inaction compels the assessees to approach this Court prematurely for exercise of power of this Court under Art. 226 of the Constitution of India pending appeal/stay application before the Tribunal. Learned counsel for the petitioner in support of his contention has placed reliance on a decision of Madras High Court in Hi Life Tapes (P) Ltd. vs . Collector of Central Excise & Ors. : 1986(26)ELT935(Mad) . I have perused the aforesaid judgment. The facts of the said case are almost similar inasmuch as, pending appeal/stay application the recovery was being made against the assessee without passing any order on the stay application and the Court directed the Tribunal to decide the stay application within a fixed period and in the meantime the recovery was stayed. Learned counsel in order to strengthen his argument placed reliance on another decision of Madhya Pradesh High Court in Badrilal Bholaram vs . B. K. Srivastava, ITO : [1970]77ITR954(MP) . The observation made by the Court in the case of Badrilal Bholaram (supra) is also to the effect that if the ITO fails to discharge his duties, he should be compelled by a writ under Art. 226 of the Constitution of India to stay his hands without disposing of the stay application. Lastly, learned counsel for the petitioner places reliance on a decision of Kerala High Court in P. V. Varghese vs. Cegat Madras : 1989(41)ELT625(Ker) . In that case too the Court observed that Tribunal is duty bound to expeditiously consider the application for stay and if he fails to do so the Court may interfere under Art. 226 of the Constitution of India. I have carefully perused all the facts and observations made in the aforesaid three cases and I find myself in full agreement with the ratio laid down in the aforesaid cases.
4. Lastly, counsel for the petitioner urged that it is not known whether a permanent Judicial Member shall be appointed or even a Bench could be constituted by calling other Judicial Member from the other Bench and has submitted that, pending stay application, recovery proceedings should remain stayed. Before parting with this case, I would like to observe that the Central Government has failed to discharge its duties in appointing a permanent Judicial Member in Tribunal, Jaipur Bench, Jaipur even after 15 months and number of appeals pending before the Tribunal are in thousands. It is also not understandable that if a permanent Judicial Member is not appointed at Jaipur Bench then why at least a Bench cannot be constituted at least twice in a month for disposing of the stay applications only. I am also of the view that in view of the peculiar facts of the case, directions should also be issued to the Central Government to appoint/post a permanent Judicial Member at Tribunal, Jaipur Bench, Jaipur.
5. I, therefore, direct the respondent-Union of India to appoint a permanent Judicial Member at Tribunal, Jaipur Bench, Jaipur within a period of three months from the date of service of the order of this Court and in the meantime as an interim measure a Bench must be constituted at Jaipur twice in a month if not weekly in order to discourage the assessees running to this Court for invoking writ jurisdiction under Art. 226 of the Constitution of India. Normally, this Court should refuse to interfere in directing the Revenue authorities to stay recovery proceedings pending appeals and stay applications but, keeping in view the special facts and circumstances of the case stated above and in view of the inaction on the part of the Central Government in appointing a permanent Judicial Member at Jaipur Bench, the petitioner has made out a case for interference by this Court in exercise of its extraordinary jurisdiction. I further direct the respondents not to adopt coercive methods for the realisation of the impugned amount against the petitioner-company for a period of three months and I also direct the respondent-Union of India to constitute a Bench of the Tribunal, Jaipur Bench, Jaipur within 30 days from the date of service of the order of this Court and the Bench so constituted should dispose of at least stay application if not appeal of the petitioner within a period of one month thereafter.
6. With the observations and directions contained above, the petition stands finally disposed of at the admission stage itself. Let a certified copy of this order be sent to the Finance Secretary, Ministry of Finance, Government of India, New Delhi at once.