SATYANARAYANA RICE MILL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This reference is made under sub-s. (1) of s.256 of the I.T. Act, 1961 (the Act). The assessee in this case is a firm which runs its business in the name and style of M/s. Satyanarayana Rice Mill, Amadalavalasa (the miller). The reference in the case arose in the following circumstances : In exercise of the powers under the Essential Commodities Act (10 of 1955) the State of Andhra Pradesh promulgated on 17/11/1967, an order known as "Rice Procurement (Levy) and Restriction on Sale Order, 1967". Under the order, rice-millers in the state were obliged to deliver a specified quantity of their turnover as levy rice to the Food Corporation of India-the agent of the State. The miller (assessee), defaulted to deliver the levy relevant to the period between 1/11/1972, and 23/02/1973. Thereupon, a specified quantity of rice was seized from the miller and subsequently, after an enquiry, under Act 10 of 1955, the seized rice was confiscated. The value of the confiscated rice is shown to be Rs. 43,974. The miller before the taxing authorities under the I.T. Act, 1961 (the Act), claimed the sum of Rs. 43,974 as a trading loss incurred in business under sub-s. (1) of s.28 or an amount expended in carrying out milling business under sub-s. (1) of s.37 of the Act. This claim of the miller was rejected by the authorities including the Appellate Tribunal. Thereupon, at the instance of the miller, the following question is referred to this court for its opinion :

(2.) The learned counsel for the miller referred to cls.3, 5, 7 and 8 of the 1967 Levy Order, the provisions in the Act 10 of 1955 and argued that the order of confiscation is not in the nature of penalty or punishment and contended that, in truth, the rice confiscated was not confiscated and the order was not a penalty order. This aspect was elucidated by the counsel showing that the order of confiscation is not punishment and cited the case of Mahalakshmi Sugar Mils Co. v. CIT [1980] 123 ITR 429 (SC). The Delhi High Court ([1972] 85 ITR 320) in that case held that demands made under the U.P. Sugar Cane Cess Act, 1956, was a penalty. This conclusion was reversed by the Supreme Court having considered the incidents of payments under the Sugar Cane Cess Act (at page 434). The court held "in truth, the interest provided for under s. 3(3) is in the nature of compensation paid to the Government for delay in the delay in the payment of cess" and, therefore, was not a penalty. A like argument is sought to be advanced by the miller to adopt a similar investigation to conclude that the rice seized, later confiscated by the authorities from the miller under Act 10 of 1955, in truth, is not a penalty and should not be understood as a measure of punishment against the miller, for it is argued that the miller was not guilty of any infraction of the levy order.

(3.) The attempt on the part of the miller cannot be countenanced in these proceedings. In the instant case, after the rice was seized, the confication order was affirmed in appeal by the Sessions Judge. Further, in revision, this court held that the order of confiscation was a proper order. Therefore, the miller cannot now be heard to contend that the confiscation order was passed without any justification or the miller had sufficient explanation for not delivering the rice between 1/11/1972, and 23/02/1973. The counsel for the miller, to support his contention, relied on the observations made in Arbind Kumar Debi v. Rex, AIR 1949 ALL 473 and Government of the Province of Bombay v. Laxman Govind Deshmukh, AIR 1950 Bom 257, to emphasise that what was defaulted was not a wilful default to result in confiscation. The case in Government of the Province of Bombay v. Laxman Govind Deshmukh, was referred to emphasise that what was defaulted was not a deliberate default. These contentions should have been urged in the criminal revision case referred to earlier and cannot be investigated by this court in this court in this case for more than one reason. The reasons are so obvious that they need not be recounted in these proceedings.