Lakshmanasami Gounder Vs. C.i.T. Selvamani and ors. - Court Judgment

Excerpt:
- finance act (32 of 1994) sections 65 (19), explanation (as inserted by finance act 2008) & 65 (105): [s.b. sinha & cyriac joseph, jj] service tax - business auxiliary service - organising lottery by state held, organising lottery by the state is tolerated being an economic activity on its part so as to enable it to raise revenue. raising of revenue by the state, by itself cannot amount to rendition of any service. it may be true that for the purpose of invoking the provisions of taxing statute, the morality aspect may not be of much consequence but such a question assumes significance for the purpose of ascertaining as to whether the same amounts to rendition of service within the meaning of section 65(19). service provided in respect of the matters envisaged under clause (19) of section 65 must be construed strictly. before a tax is found to be leviable, it must come within the domain of legitimate business and/or trade. the doctrine of res extra commercium was invoked in the united states of america where keeping in view the nature of right conferred on its citizens and the concept of imposition of reasonable restrictions thereon being absent, it was held that gambling should be frowned upon being opposed to constitutional jurisprudence. while borrowing the said principle in the indian context, however, it must be borne in mind that constitution of india envisages reasonable restriction in respect of almost all the fundamental rights of the citizens. no citizen has an absolute fundamental right. whereas the same principle may apply in australia but it may not apply to the european countries where gambling and even sale of narcotic drugs subject to licensing provisions, if any, is permissible. the explanation appended to section 65(19) cannot be said to be a simple clarification as it introduces a new concept stating that organizing of the lottery is a form of entertainment. introduction of such new concept itself would have a constitutional implication. in the year 2003, while amending the provisions of 1994 act, the constitution was also amended and article 268-a and entry 92-c in list i were inserted. the courts are in future required to determine whether a service tax within the meaning of entry 92-c would cover sale of lottery or it would come within the purview of residuary entry containing entry 97, list i. if it is held to be a taxing provision within the purview of entry 97, the same will have a bearing on the states. the explanation so read appears to be a charging provisions. it states about taxing need. it can be termed to be a sui generis tax. if it is different kind of tax, the same may be held to be running contrary to the ordinary concept of service tax. it may, thus, be held to be a stand alone clause. a constitutional question may have to be raised and answered as to whether the taxing power can be segregated. if by reason of the said explanation, the taxing net has been widened, it cannot be held to be retrospective in operation. no doubt, the explanation begins with the words for removal of doubts. does it mean that it is conclusive in nature? in law, it is not. it is not a case where by reason of a judgment of a court, the law was found to be vague or ambiguous. there is also nothing to show that it was found to be vague or ambiguous by the executive: in fact, the board circular shows that invocation of clause (ii) had never been in contemplation of the taxing authorities.by inserting the explanation appended to clause (19) of section 65 of the act, a new concept of imposition of tax has been brought in. the parliament may be entitled to do so. it would be entitled to raise a legal fiction, but when a new type of tax is introduced or a new concept of tax is introduced so as to widen the net, it should not be construed to have a retrospective operation on the premise that it is clarificatory or declaratory in nature. therefore, subject to the constitutionality of the act, in view of the explanation appended to this, the service tax, if any, would be payable only with effect from may, 2008 and not with retrospective effect. sections 65 (19) (i) & 65 (50):what comes within the purview goods held, it must be construed having regard to provisions of sale of goods act, 1930 in view of its definition contained in section 65(50) of act. interpretation of statutes statutes: if two views are not possible, resort to clarification and /or declaration may not be permissible. - where the consequence of failure to comply with any requirement of a provision is provided by the statute itself, the consequence has to be determined with reference to the nature of the provision, the purpose of enactment and the effect of non-compliance thereof. this responsibility is not only salutary to vouch safe bona fides in the conduct of the sale officer but also to ensure fairness in the procedure adopted in bringing the property of the debtor to sale.k. ramaswamy, j. :special leave is granted.this appeal is against the judgment dt. 4th april, 1991 of the madras high court. a sum of rs. 12,163.50 p. was alleged to have been misappropriated by the appellant (now he was acquitted of the charge of misappropriation) and for the recovery thereof his 13.07 acres of coffee estate situated in semmanthaputhur village was brought to sale under the tamil nadu revenue recovery act, 1894 (for short the act). on 30th march, 1979 the sale by auction was held by the tahsildar. the first respondent purchased for a sum of rs. 12,225 and deposited a sum of rs. 2,000 being 15% of the sale price. under s. 36 of the act, the first respondent should have deposited the balance consideration within 30 days from the date of the auction. on 23rd october, 1981 the sale was confirmed and the balance amount was deposited on 4th november, 1981. the appellant filed an application but by proceeding dt. 23rd october, 1981, the revenue divisional officer overruled the objections and dismissed the application. on appeal the addl. dist. collector, salem set aside the sale on 13th october, 1982. the first respondent filed writ petition no. 246 of 1984 in the high court. the learned single judge by judgment dt. 21st august, 1990 quashed the order of the addl. dist. collector. on writ appeal, the division bench dismissed it. thus this appeal.2. the formidable objection raised by the appellant is that it is mandatory under s. 36 that the date and place of sale shall be published in the gazette and that the publication did not mention the place of sale. therefore, the sale is invalid in law. it is also his further plea that it is equally mandatory that the balance sale consideration of 85% should be deposited within 30 days from the date of sale which was done only on 4th november, 1981 long after one year and eight months of the date of sale. the sale and confirmation thereof are, therefore, illegal. the learned single judge and the division bench held that from 7a of the forms prescribed under the act read with relevant provisions of the board standing order no. 41 does not prescribe the place of sale and that, therefore, the omission to specify the place of sale does not render the sale invalid nor an irregularity. shri selvamani, the first respondent-in-person (himself a practising advocate) contended that it is form 7 and not form 7a that would be applicable to the facts of the case. form 7 contains the place of sale and that it was complied with. therefore, the sale is not illegal. it is also contended that the deposit was made after protracted correspondence and that, therefore, the non-deposit within 30 days from the date of sale is not illegal. at any rate, having accepted the amount, the authority acquiesced to the deposit. therefore, the confirmation of the sale is not illegal. we find no substance in either of the contentions. the contention that form 7 and not form 7a would be applicable to the facts, is not the case set up or argued either before the authorities or the courts below. for the first time he cannot raise that plea in this court. that apart specifically the high court (learned single judge and the division bench) held that it is form 7a that is applicable and that it does not prescribe publication of place of sale and, therefore, the omission thereof does not render the sale invalid. the high court wholly misconceived of s. 36. a reading of s. 36 manifests that the word 'shall' is mandatory in the context.3. the publication is an invitation to the intending bidders to prepare and participate at the bid. unless there is a due publication of the date and place of sale, the intending purchasers cannot be expected to run after the sale officer to find out the date and place of sale and to participate thereat. the sale officer has a statutory duty and a responsibility to have the date and place of sale mentioned in the notice and given due publication in terms of the act and the rules. public auction is one of the modes of sale intending to get highest competitive price for the property. public auction also ensures fairness in actions of the public authorities or the sale officers who should act faily, objectively and kindly. their action should be legitimate. their dealing should act fairly, objectively and kindly. their action should be legitimate. their dealing should be free from suspicion. nothing should be suggestive of bias, favouritism, nepotism or be set with suspicious features of underbidding detrimental to the legitimate interest of the debtor. the fair and objective public auction would relieve the public authorities or sale officers from above features and accountability. any infraction in this regard would render the sale invalid.4. it is settled law that the word shall be construed in the light of the purpose the act or rule that seeks to serve. it is not an invariable rule that even though the word shall is ordinarily mandatory but in the context or if the intention is otherwise, it may be construed to be directory. the construction ultimately depends upon the provisions itself, keeping in view the intendment of the enactment or of the context in which the word shall has been used and the mischief seeks to avoid. where the consequence of failure to comply with any requirement of a provision is provided by the statute itself, the consequence has to be determined with reference to the nature of the provision, the purpose of enactment and the effect of non-compliance thereof. in its absence the consequence has to be determined with reference to the effect of the non-compliance of the provision of the legislature. mere use of the word shall need not be given that connotation in each and every case that the provision would be invariably interpreted to be mandatory or directory. but given due consideration to the object, design, purpose and scope of the legislation, the word shall be construed and interpreted in that design and given due emphasis. sec. 36 obligates the sale officer (tahsildar) that he shall publish the date and place of sale. the object thereby is an invitation to the public at large that the notified property would be brought to sale at that specified time and place and that they are invited to participate, if they so desire. to reiterate for emphasis and continuity that the object of the sale is to secure the maximum price and to avoid arbitrariness in the procedure adopted before sale and to prevent underhand dealings in effective sale and purchase of the debtors property. as a responsibility as sale officer and a duty towards the debtor, the sale officer should conduct the sale strictly in conformity with the prescribed procedure under the statute and the rules as the case may be. such due and wide publicity would relieve the debtor from the maximum liability he owes and payable to the creditor. this responsibility is not only salutary to vouch safe bona fides in the conduct of the sale officer but also to ensure fairness in the procedure adopted in bringing the property of the debtor to sale. considered from this perspective the non-compliance of s. 36, i.e., omission to mention the place of sale would visit with deprivation of the property to the debtor for an inadequate sale consideration due to absence of competing bidders. thus, we hold that specification of the date and place of sale shall be mandatory. the forms either 7 or 7a are only procedural and they should be in conformity with s. 36. the form cannot prevail over the statute. the omission of specification of the place of sale in the form renders the sale not merely irregular but also invalid.5. equally the second objection is insurmountable. it is mandatory that 'the balance of the sale amount shall be remitted within 30 days from the date of auction' and if not the earnest money deposited is liable to forfeiture. confirmation of the sale should precede the deposit of the sale amount. sec. 36 mandates remittance of the balance of 85% of the sale consideration within 30 days from the date of auction. it is obligatory by an order of the court or tribunal from so making deposit. the non-compliance renders the 15% deposit liable to forfeiture. therefore, the confirmation of the sale without compliance, is illegal. we hold that the sale is vitiated by manifest error of law and rightly set aside by the addl. dist. collector, salem (appellate authority). the high court, both the learned single judge and the division bench, committed manifest error of law in interfering with the order of the appellate authority. the appeal is accordingly allowed. the writ petition stands dismissed and that of the order of the addl. dist. collector, salem restored, but in the circumstances parties are directed to bear their own costs throughout.