Full Judgment Text
2014:BHC-AS:1172-DB
SKC WP-9588-13 JUDGMENT
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 9588 OF 2013
Walchandnagar Industries Limited ]
A company incorporated under the ]
Indian Companies Act, 1882, ]
having its Registered Office at 3, ]
Walchand Terraces, Tardeo Road, ]
Mumbai 400 034, Through its ]
Authorized Representative ] ..Petitioner
Versus
1. The Municipal Corporation of the ]
City of Pune ]
having its address at Pune ]
Mahanagar Palika Bhavan, ]
Shivajinagar, Pune 411 005 ]
2. The Municipal Commissioner of the ]
City of Pune, having its address at ]
Pune Mahanagar Palika Bhavan, ]
Shivajinagar, Pune 411005 ]
3. The Deputy Commissioner cum ]
Assessor and Collector of Taxes ]
The Municipal Corporation of the ]
City of Pune, having its address at ]
Pune Mahanagar Palika Bhavan, ]
Shivajinagar, Pune 411005 ]
4. The District Collector, Pune ]
Summons to be served, ]
in accordance with Rules 1, 2 and 3 ]
of Order III of the Code of Civil ]
Procedure, 1908, read with Order V ]
thereof,on The Assistant Government]
Pleader, High Court of Bombay, ]
Mumbai ]
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5. The State of Maharashtra ]
Summons to be served, ]
in accordance with Rules 1, 2 and 3 ]
of Order III of the Code of Civil ]
Procedure, 1908, read with Order V ]
thereof,on The Assistant Government]
Pleader, High Court of Bombay, ]
Mumbai ] ..Respondents
Mr. S. G. Aney - Senior Advocate i/b. Mr. Shamsunder G. Datar
for Petitioner.
Mr. Rajdeep S. Khadapkar for Respondent Nos. 1 to 3.
Mr. V. S. Gokhale – AGP for Respondent Nos. 4 and 5.
CORAM : A. S. OKA & M. S. SONAK, JJ.
16TH JANUARY 2014
JUDGMENT ( Per : M. S. SONAK, J.) :-
1] Rule. With the consent of the learned counsel appearing for
the parties, the Rule is made returnable forthwith.
2] The Petitioner challenges constitutional validity of Section
406(2)(e) of the Bombay Provincial Municipal Corporations Act
1949 (now known as “Maharashtra Municipal Corporation Act”),
which provides that no appeal against determination of the rateable
value or capital value or tax fixed or charged under this Act shall be
entertained unless the amount of rateable value or capital value or
disputed tax claimed or chargeable upto the date of filing the appeal
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has been deposited by the Appellant with the Commissioner.
3] Shorn of irrelevancies, the facts and circumstances in which
the challenge has been raised are that the Petitioner claims to be
owner of the lands bearing Survey Nos. 87A/1A and 87A/3, Aundh,
Taluka Haveli, Pune City admeasuring approximately 103 Acres
and 21 Gunthas (hereinafter referred to as “the said property”). In
respect of the said property, the Petitioner was served with a
property tax assessment special notice dated 08.05.2008 by the
Deputy Commissioner cum Assessor and Collector of Taxes
Municipal Corporation of the City of Pune (Respondent No. 3)
informing that annual rateable value in respect of the said property
has been proposed at Rs.1,07,91,850/- with effect from 01.04.2008.
The Petitioner filed its objections to the proposed assessment on
12.06.2008. The Commissioner of Respondent No. 1 Corporation
inspected the said property, complied with the procedure prescribed
under Rules 7 and 8 of the Taxation Rules contained in Chapter VIII
of the said Act, including afford of hearing to the Petitioner.
However no final order was communicated to the Petitioner.
Instead the Petitioner was served with yet another property tax
assessment special notice dated 27.09.2011, virtually
recommencing the entire process. The Petitioner nevertheless filed
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objections in pursuance of the notice dated 27.09.2011. The
procedure prescribed under the Rules was repeated and the
Petitioner was served with a tax bill dated 11.01.2012 in an amount
of Rs.3,25,07,350/- towards tax for the billing period 01.04.2008 to
31.03.2012 in respect of the said property. On 27.01.2012, the
Petitioner preferred an Appeal (Municipal Tax Appeal No. 6 of 2012)
before the Appellate Authority which is the Small Causes Judge,
Pune challenging interalia the annual rateable value of the bill dated
11.01.2012 under Section 406 of th said Act. The Petitioner also
applied for 'stay' on the recovery of tax bill amount during the
pendency of the Appeal. During the pendency of the Appeal, the
Petitioner was served with a computer generated bill / demand in an
amount of Rs.4,18,94,919/- towards taxes. Hence the Petitioner
preferred writ petition no. 3791 of 2013 before this Hon'ble Court
questioning such levy. By judgment and order dated 17.06.2013 the
Division Bench of this Court disposed of the said writ petition on the
ground that alternate and efficacious remedy of appeal was
available to the Petitioner and that the same be resorted to. On
23.08.2013, the Petitioner received yet another computer
generated bill / demand in an amount of Rs.6,13,58,804/- towards
taxes. The Officers of the Respondent Corporation visited the
premises of the Petitioner and threatened coercive action of
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attachment, in case the amounts referred to in the bills / demands
were not cleared. Accordingly, the Petitioner filed application for
stay dated 27.08.2013, which was rejected by the Small Causes
Court by an order dated 19.09.2013. The rejection is interalia on
the ground that under Section 406 (2)(e) no such appeal can be
entertained unless the amount of disputed tax claimed upto the date
of filing has been deposited by the Appellant with the
Commissioner. Hence the present petition questioning the order
dated 19.09.2013 (impugned order) and the constitutional vires of
Section 406(2)(e) of the said Act.
4] Mr. S. G. Aney, the Senior Advocate appearing for the
Petitioner made the following submissions in support of the Petition:
(A) That styling the proceedings under Section 406 of the
said Act as an 'Appeal' is misnomer, since the said
proceedings are in fact 'original proceedings before a judicial
authority'. The imposition of any precondition of deposit of
entire disputed tax claimed for entertainment of said
proceedings is ex facie arbitrary, unreasonable,
unconstitutional, null and void;
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(B) The provisions contained in Section 406 (2)(e) of the
said Act impose an onerous and unreasonable condition of
depositing the entire disputed tax claimed as a precondition
for entertainment of the appeal. The very imposition of such
an onerous and unreasonable condition renders the right of
appeal illusory. There is no provision contained in Section
406 empowering the judicial authority to waive this condition
in case of genuine and undue hardships. For these reasons,
the provisions contained in Section 406(2)(e) are ex facie
illegal, arbitrary, unconstitutional, null and void.
5] In support of the aforesaid submissions, Mr. Aney placed
reliance upon the decision of the Division Bench of Delhi High
1
Court in case of Gagan Makkar & Anr. vs. Union of India & Ors . ,
which concern challenge to the Proviso to Section 169 of the Delhi
Municipal Corporation Act, 1957. The Division Bench, upon
reference to various decisions of the Supreme Court ruled that the
proviso to Section 169(1) of the DMC Act imposed an onerous and
unreasonable condition of paying the full amount of property tax
before filing of an appeal and that such provision renders the right
of appeal illusory. The Division Bench went on to observe that it is
true that the legislature need not have given a right to appeal at all,
1 192 (2012) Delhi Law Times 186 (DB)
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but having decided in its wisdom, to give a right of appeal, the same
cannot be made illusory by imposing an onerous or unreasonable
condition as to amount to a deprivation of that very right which it
intended to give. Accordingly the proviso, which made the deposit
of entire tax a precondition for entertainment of appeal was struck
down as being violative of Article 14 of the Constitution of India.
6] For appreciation of the challenge, reference is required to be
made to the provisions contained in sub section (1), (2) and 2A of
Section 406 of the Maharashtra Municipal Corporations Act, 1949
(“said Act”) and some Rules contained in Chapter VIII entitled
“Taxation Rules” which provide for a detailed procedure to be
adopted by the Corporation in the matter of determination of
rateable value, capital value or tax in respect of land and property.
7] The provisions contained in sub sections (1), (2) and (2A) of
Section 406 of th said Act read as under:
“ 406. Appeals when and to whom to lie ( 1) Subject
to the, provisions hereinafter contained, appeals against
any rateable value (or the capital value, as the case
may be) or tax fixed or charged under this Act shall be
heard and determined by the Judge.
(2) No such appeal [shall be entertained] unless--
(a) it is brought within fifteen days after the accrual of
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the cause of complaint ;
(b) in the case of an appeal against a rateable value (or
a capitable value, as the case may be,) a complaint has
previously been made to the Commissioner as provided
under this Act and such complaint has been disposed
of;
(c) in the case of an appeal against any tax (including
interest and penalty imposed) in respect of which
provision exists under this Act for a complaint to be
made to the Commissioner against the demand, such
complaint has previously been made and disposed of ;
(d) in the case of an appeal against any amendment
made in the assessment book for property taxes during
the official year, a complaint has been made by the
person aggrieved within twenty one days after he first
received notice of such amendment and his complaint
has been disposed of ;
(e) in the case of an appeal against a tax, or in the case
of an appeal made against a rateable value (or the
capitable value, as the case may be), (the amount of
the disputed tax claimed from the appellant or the
amount of the tax chargeable on the basis of the
disputed rateable value (or the capitable value, as the
case may be), up to the date of filing the appeal, has
been deposited by the appellant with the
Commissioner]:
(2A) Where the appeal is not filed in accordance with
the provisions of clauses (a) to (e) of sub section (2), it
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shall be liable to be summarily dismissed.
8] The provisions contained in Chapter VIII i.e. “Taxation Rules”
(Rules 15 to 19) read as under:
15. Time for filing complaints against valuations to
be publicly announced
(1) The Commissioner shall, at the time and in the
manner prescribed in rule 13, give public notice of a day,
not being less than [twenty one days] from the publication
of such notice, on or before which complaints against the
amount of any rateable value [or the capitable value, as
the case may be,] entered in the ward assessment-book
will be received in his office.
(2) In every case in which any premises have for the
first time been entered in the assessment-book as liable
to the payment of property-taxes, or in which the rateable
value [or the capital value, as the case may be,] of any
premises liable to such payment has been increased, the
Commissioner shall, as soon as conveniently may be
after the issue of the public notice under sub-rule (1),give
a special written notice to the owner or occupier of the
said premises specifying the nature of such entry and
informing him that any complaint against the same will be
received in his office at any time within [twenty one days]
from the service of the special notice.
16. Time and manner of filing complaints against
valuation.- (1) Every complaint against the amount of
any rateable value [or the capital value, as the case may
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be,] entered in the assessment-book or against the
mention of the name of any person as primarily liable for
the payment of property taxes or against the treatment of
any building or land as liable to be assessed to the
general tax must be made by written application to the
Commissioner, which shall be left at his office on or
before the day or the latest day fixed in this behalf in the
public or special notice aforesaid.
(2) Every such application shall set forth briefly but the
fully the grounds on which the valuation is complained
against.
17. Notice to complainants of day fixed for
investigating their complaints.- The Commissioner
shall cause all complaints so received to be registered in
a book to be kept for this purpose and shall give notice in
writing, to which complaint, of the day, time and place
when and whereat his complaint will be investigated.
18. Hearing of complaint.- (1) At the time and place
so fixed, the Commission or shall investigate and
dispose of the complaint in the presence of the
complainant, if he shall appear, and, if not, in his
absence.
(2) For reasonable cause, the Commissioner may from
time to time adjourn the investigation.
(3) When the complaint is disposed of, the result
thereof shall be noted in the book of complaints kept
under rule 17 and any necessary amendment shall be
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made in accordance with such result in the assessment-
book.
19. Authentication of ward assessment- books
when all complaints have been disposed of .- (1)
When all such complaints, if any, have been disposed of
and the entires required by clause (e) of rule 9 have
been completed in the ward assessment book, the said
book shall be authenticated by the Commissioner, who
shall certify, under his signature, that except in the cases,
if any, in which amendments have been made as shown
therein, no valid objection has been made to the rateable
value (or the capital values, as the case may be) entered
in the said book.
(2) Thereupon the said ward assessment-book,
subject to such alterations as may thereafter be made
therein under the provisions of rule 20 shall be accepted
as conclusive evidence of the amount of each property-
tax leviable on each building and land in the ward in the
official year to which the book relates.
9] In the case of Mardia Chemicals Ltd. & Ors. vs. Union of
2
India & Ors . , the Supreme Court in the context of Securitisation
and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 observed that the proceedings thereunder,
though styled as 'appellate proceedings' were in fact proceedings in
the nature of an initial action brought before the forum prescribed
2 (2004) 4 SCC 311
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under the said Act raising grievance against the action or measures
taken by one of the parties to the contract. Therefore, the
proceedings were akin to filing of a suit. The Supreme Court after
noting the basic distinction between suit and appeal drawn out in its
3
earlier judgment in the case of Ganga Bai v. Vijay Kumar , in that
there is an inherent right to file a suit of a civil nature but the right of
appeal inheres in no one and therefore an appeal for its
maintainability must have a clear authority of law, went on to
observe that the requirement of pre-deposit of 75% of the demand,
at the initial proceedings itself sounds unreasonable and
oppressive, more particularly when the secured assets / the
management thereof along with the right to transfer such interest
has been taken over by the secured creditor or in some cases
property is also sold.
10] The first submission of Mr. Aney obviously takes clue from the
reasoning of the Supreme Court in the case of Mardia Chemicals
(supra). However, in our opinion, there is absolutely no warrant to
style proceedings under Section 406 of the said Act as 'original or
initial proceedings'. The Taxation Rules, including in particular Rules
15 to 19 referred to above, make it absolutely clear that 'original or
initial proceedings' arise when an owner or occupier lodges
3 (1974) 2 SCC 393
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objection / complaint in response to property tax assessment
special notice under Rule 15. Rule 16 provides that the complaint
shall set forth briefly but fully the grounds on which the valuation is
complained against. Rule 17 then provides that the Commissioner
shall cause all complaints so received to be registered in a book to
be kept for this purpose and shall give notice in writing to the
complainant of the day, time and place when and where its
complaint will be investigated. Rule 18 provides for afford of hearing
to the complainant and investigation and the disposal of the
complaint in the presence of the complainant, if he shall appear
and, if not, in his absence. Upon disposal of the complaint, the
result thereof is to be noted in the book of complaints kept under
Rule 17 and any necessary amendment is to be made in
accordance with such result in the assessment bill. Rule 19(1)
provides for authentication of the assessment bill by the
Commissioner and Rule 19(2) provides that the assessment book
so authenticated by the Commissioner shall be accepted as
conclusive evidence of the amount of property tax leviable on each
building and land in the ward in the official order to which the book
relates.
11] In the context of Section 406(2)(c) of the said Act, the
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Supreme Court in the case of Gujarat Agro Industries Co. Ltd. vs.
4
Municipal Corporation of the City of Ahmedabad & Ors . at
paragraph 11 observed thus :
“We also note that under clause (c) of sub-section (2) of
Section 406, a complaint lies to the Municipal
Commissioner against imposition of any property tax
and only after that when the complaint is disposed of
that appeal can be filed. Appeal to the court as
provided in clause (e) may appear to be rather a
second appeal.”
12] In the aforesaid circumstances, we are of the opinion that
proceedings under Section 406 of the said Act cannot be styled or
compared to 'initial or original proceedings'. The ruling and
principle laid down in the case of Mardia Chemicals Ltd . (supra) is
neither attracted nor applicable. Accordingly, we are unable to see
any merit in the first submission of Mr. Aney and the same is hereby
rejected.
13] In so far as the second submission of Mr. Aney is concerned,
the position in law is no longer res integra .
14] A Single Judge of this Court in the case of Elora Construction
4 (1999) 4 SCC 468
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5
Co. v. Municipal Corporation of Greater Bombay upheld an almost
similar provision contained in Section 217(2)(d) of the Bombay
Municipal Corporations Act, 1888. This Section provided that in the
case of an appeal against a tax, or in the case of an appeal made
against a rateable value the amount of the disputed tax claimed
from the appellant, or the amount of the tax chargeable on the basis
of the disputed rateable value, up to the date of filing of the appeal,
has been deposited by the appellant with the Commissioner.
The aforesaid clause (d) is in similar terms as clause (e) of
Section 406(2) of the said Act.
15] The judgment in the case of Elora Construction Co . (supra)
was noted with approval by the Supreme Court in the case of
Gujarat Agro Industries Co. Ltd . (supra).
16] A Division Bench of this Court in the case of Peninsula Land
6
Ltd. vs. Brihan Mumbai Mahanagarpalika & Ors. has upheld the
constitutional validity of Section 217(5) of the Bombay Municipal
Corporation Act, 1888 which provided that in case of any appeal
against any rateable value or property tax fixed or charged under
the said Act which may have been entertained by a Chief Judge
5 AIR 1980 Bom 162
6 2008 (6) ALL. M.R. 519
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before the commencement of the Act or which may be entertained
by him after the said date, the Chief Judge shall not hear and
decide such appeal unless the property tax, if any, payable on the
basis of the original ratable value plus eighty per centum, of the
property tax claimed from the appellant on the increased portion of
the rateable value of the property out of the property tax claimed
under each of the bills which may have been issued, from time to
time, since the filing of appeal, is also deposited with the
Commissioner within a period prescribed under the Act. In case of
default by the appellant on getting an intimation to that effect from
the Commissioner at any time before the appeal is decided, the
Chief Judge shall summarily, dismiss the appeal. In this case the
Division Bench noted that the decision of the Single Judge in the
case of Elora Construction Co . (supra) was approved with specific
reference by the Supreme Court in the case of Shyam Kishore vs.
7
Municipal Corporation of Delhi and Government of Andhra Pradesh
8
& Ors. vs. P. Laxmi Devi (Smt. )
17] Yet another Division Bench of this Court in the case of Amco
Metal Industries vs. Additional Commissioner of Central Excise &
9
Ors . repelled the challenge to the constitutional validity of the first
7 1993 (1) SCC 22
8 2008 (4) SCC 720
9 2008(2) LJSOFT (URC)4
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proviso to Section 19(1) of Foreign Exchange Management Act,
2000, by observing thus :
“During the course of argument, the issue relating to the
constitutional validity of the first proviso to section 19(1)
of FEMA, which requires any person appealing against
the order of adjudicating authority to deposit the amount
of penalty while filing the appeal was not canvassed. It
is only by way of written submission the validity of the
first proviso to section 19(1) is challenged. In any event,
the said issue is not res integra. The Apex Court in the
case of Gujarat Agro Industries Ltd. vs. Municipal
Corporation reported in 1999 (4) SCC 468 while
considering a similar provision contained in Section
406(2)(e) of the Bombay Provincial Municipal
Corporation Act, 1949, held that the right to appeal being
a statutory right, it is for the legislature to decide whether
to make the right subject to any condition or not. The
Apex Court further held that any challenge to the
constitutional validity of a provision for predeposit before
entertaining an appeal on the ground that onerous
conditions have been imposed and right to appeal has
become illusory must be negatived and such a provision
cannot be said to be ultra vires Article 14 of the
Constitution. Therefore, the challenge to the validity of
the first proviso to Section 19(1) of FEMA and the
challenge to Rule 10 of the FEMA Adjudication
Proceedings and Appeal Rules, 2000 do not merit any
consideration in the present case.”
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18] In upholding constitutional validity of clauses which provide
for pre-deposit of disputed amount as a pre-condition for
entertainment of an appeal, various courts have applied the position
established in law, that the right of appeal is a creature of a statute
and it is for the legislature to decide whether the right of appeal
should be unconditionally given to an aggrieved party or it should be
conditionally given. If the statute does not create any right of appeal
then no appeal can be filed. The right of appeal is neither an
absolute right nor an ingredient of the principles of natural justice.
There is a clear distinction between a suit and an appeal. While
every person has an inherent right to bring a suit of civil nature
unless the suit is barred by statute, in regard to an appeal, the
position is opposite. The right to appeal inheres in no one and
therefore, for maintainability of an appeal there must be authority of
law. When such a law authorises filing of an appeal, it can impose
conditions as well. The object of such provisions is to keep in
balance the right of appeal conferred upon a person aggrieved with
a demand of tax and the right of the Corporation to speedy recovery
of the tax. A disability or disadvantage arising out of parties own
default or omission cannot be taken to be tantamount to the
creation of two classes offensive to Article 14 of the Constitution of
India, especially when that disability or disadvantage operates upon
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all persons who make the default or omission.
19] In this case, we are concerned with a statute which deals with
recovery of tax upon lands and buildings in Municipal areas. In this
sense, we are concerned with a statute dealing with an economic
matter. There is always a presumption in favour of the
constitutionality of a statute. Every legislation particularly in
economic matters is essentially empiric and it is based on
experimentation or what one may call-trial and error method. There
may be crudities and inequities in complicated experimental
economic legislation but on that account alone it cannot be struck
down as invalid. The courts cannot be converted into tribunals for
relief from such crudities and inequities. The Court must therefore
adjudge the constitutionality of such legislation by the generality of
its provisions and not by its crudities or inequities or by the
possibilities of abuse of any of its provisions. The Court must defer
to legislative judgment in matters relating to social and economic
policies and must not interfere, unless the exercise of legislative
10
judgment appears to be palpably arbitrary.
20] The intent of legislature cannot be defeated merely for the
reason that it may operate a bit harshly on a small section of
10 1981(4) SCC 675 R. K. Garg v. Union of India
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peoples where it may be necessary to make such provisions for
achieving the desired objective of providing a right of appeal and at
the same time prevent unnecessary delay in recovery of tax. If the
very provision for an appeal cannot be regarded as any
constitutional mandate or requirement of the principles of natural
justice, surely the provision for an appeal, even if hedged with
conditions does not fall foul of any constitutional guarantees merely
because in a given case some hardship might result. As observed
by the Supreme Court in the case of Fatehchand Himmatlal v.
11
State of Maharashtra.
“Every cause claims its martyr and if the law,
necessitated by practical considerations, makes
generalizations which hurt a few, it cannot be helped by
the Court. Otherwise, the enforcement of the Debt Relief
Act will turn into an enquiry into scrupulous and
unscrupulous creditors, frustrating through endless
litigation, the instant relief to the indebted which is the
promise of the legislature.”
21] In the aforesaid circumstances, with great respect, we are
unable to subscribe to the view taken by the Division Bench of the
Delhi High Court in case of Gagan Makkar & Anr. vs. Union of India
& Ors . (supra).
11 (1977) 2 SCC 670
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22] The impugned order rejects 'stay' on the recovery of the taxes
by the corporation interalia by reliance upon Section 406(2) of the
said Act, which bars the very entertainment of appeal unless the
disputed tax claimed from the appellant upto the date of filing the
appeal has been deposited by the appellant with the Commissioner.
The meaning of the word 'entertained' has been explained by the
Supreme Court in the case of Lakshmiratan Engineering Works Ltd.
12
vs. CST (Judicial ) in the following manner:
“To begin with it must be noticed that the proviso merely
requires that the appeal shall not be entertained unless it
is accompanied by satisfactory proof of the payment of
the amount of tax admitted by the appellant to be due. A
question thus arises what is the meaning of the word
'entertained' in this context? Does it mean that no
appeal shall be received or filed or does it mean that no
appeal shall be admitted or heard and disposed of
unless satisfactory proof is available? The dictionary
meaning of the word 'entertain' was brought to our notice
by the parties, and both sides agreed that it means
either 'to deal with or admit to consideration'. We are
also of the same opinion.”
23] As we detect no constitutional infirmity in Section 406(2)(e) of
the said Act, there is absolutely no warrant to fault the impugned
order which is premised upon the provision contained in Section
12 AIR 1968 SC 488
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406(2)(e) of the said Act.
24] In the result, we see no merit in either of the submissions
made by Mr. Aney, the learned Senior Advocate appearing for the
Petitioner. The Petition, under the circumstances, is liable to be
dismissed.
25] The Petition is hereby dismissed. Rule is discharged. There
shall however be no order as to costs.
(M. S. SONAK, J.) (A. S. OKA, J.)
Chandka
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