GANESH ENTERPRISES PRIVATE LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) . The petitioners basically question the restraint order dated 2-4-1991 issued under Section 132(2) of the Income Tax Act, 1961 (the Act), as modified by the order dated 25-4-1991. The other reliefs are consequential to this basic relief sought by the petitioners. By the impugned order dated 25-4-1991 the third respondent clarified that the earlier order dated 2-4-1991 was confined to an amount lying with the 5th respondent company as on the said date of 2-4-1991 and there was no bar against the party (the petitioner company) from carrying out further business transactions with the 5th respondent company. According to the petitioners, the first petitioner is a company engaged in the business of manufacture and sale of non-ferrous metals, alloys etc. and the company owns a factory in Okhla Industrial Area. The second petitioner is a Director of the said company. The petitioner company has been subjected to assessment under the Income Tax Act and assessments upto the years 1988-89 have been completed while for the subsequent years they were pending at the time of the writ petition. For the purpose of the petitioner's manufacturing activity the Commissioner of Industries fixes and allots the quota of Copper wire bars which is the raw material used by the petitioner company. The raw material is bng supplied by the 5th respondent company which is a public sector undertaking. On fixation of the allotment of the quota the petitioner gets itself registered with the 5th respondent company for the requirements, and the petitioner company had to make payment of the price in advance at the rates stipulated by the 5th respondent. As and when the material is made available petitioner company takes the same. In March, 1991 the price of the Copper wire bars was Rs. 1 lac per M.T. The petitioner sought release of the quota of 32 M.T. of Copper wire bar for the said month and paid a sum of Rs. 31,36,925 by way of bank pay order. The 5th respondent issued an appropriate receipt for the same. Another 412 Sum of Rs. 9,80,289 was paid by way of by order dated 30-3-1991 towards 10 M.T. of the raw material. However, 14 M.T. of Copper wire bars were directed to be delivered though in fact only 12.720 M.T. was delivered. A balance of 29.280 M.T. of the raw material had to be delivered by the 5th respondent out of 42 M.T. Since the petitioner had paid the full price, the 5th respondent had with it a substantial balance amount to the credit of the petitioner company. This amount was restrained under Section 132(3).

(2.) The petitioner asserts that the petitioner company usually receives advance payments from its customers for supply of finished products and accordingly in March, 1991 the petitioner company received a sum of Rs. 31,35,000 from M/s. Gandhi Metals by way of account payee crossed cheque. Similarly it received Rs. 8,80,000 by way of cheque dated 27-3-1991 and another sum of Rs. 35,000 by way of cheque and these were from M/s. R. A. International, New Delhi, as. advance payments. These amounts were used by the petitioner company for making payments to the 5th respondent company. The impugned restraint order restrained the 5th respondent from releasing 29.280 MT raw material to the petitioner by the 5th respondent. Future releases were also restrained. This other was subsequently modified by confining the restraint order to the amount as on 2-4-1991 with the 5th respondent company to the credit of the petitioner company.

(3.) On 3-4-1991, the 2nd petitioner was asked to attend the enquiry with the books of account etc. On 16-4-1991 petitioner company wrote explaining the nature of the transactions and the circumstances under which this company made payment to 5th respondent company. On 25-4-1991, the restraint order was modified by permitting future business between the petitioner and the 5th respondent. On 13-5-1991, petitioner wrote, again, explaining in detail the nature of its business, advances received by the petitioner from the customers and payment made to the 5th respondent for supply of the raw materials.