Sec. 158 and 250 of Revenue code and Sec.35 M.P. Ceiling on Agricultural Land Holdings Act, 1960 - allotment of land with Bhumiswami Rights to the appellant who sold the same with in 2 years to the respondent - on application after 3 years of sale - collector order for re allotment of the same to the appellant and Thasildar order for restoration of land - respondent filed a civil suit - which was dismissed - first appeal was also dismissed - High court allowed the second appeal - Apex court held that we find that in the instant case the land, which was declared surplus land, was allotted by the State in purported exercise of power under Section 35 of the said Act giving Bhumiswami right to the appellants. The said allotment was made in the year 1973. Within two years from the date of the said allotment, the land was purchased by the respondent by sale deed dated 4.7.1975, which, according to the appellants, was without consideration and the respondent in connivance with the other persons managed to keep the appellants out of possession. Prima facie, therefore, the sale deed alleged to have been executed by the appellants in favour of the respondent on 4.7.1975 is null and void and the same does not confer any right, title or interest in favour of the respondent-Sattar Khan.The trial court and the first appellate court, therefore, correctly recorded a finding that the sale deed, said to have been executed by the appellants in favour of the respondent, is null and void and is without consideration. The High Court while reversing the judgment has not considered these provisions contained in the M.P. Revenue Code. We, therefore, allow this appeal and set aside the judgment and order passed by the High Court and restore the judgment of the trial court. = CIVIL APPEAL NO.(s). 6471 OF 2014 (Arising out of Special Leave Petition (Civil) No.7039 of 2006) Tolya etc. ………Appellants Versus State of M.P. & Another etc. ……..Respondents = 2014 - Aug.Part - http://judis.nic.in/supremecourt/filename=41840

    Sec. 158 and 250 of Revenue code and Sec.35 M.P. Ceiling on Agricultural Land Holdings Act, 1960 - allotment of land with Bhumiswami Rights to the appellant who sold the same with in 2 years to the respondent - on application after 3 years of sale - collector order for re allotment of the same to the appellant and Thasildar order for restoration of land - respondent filed a civil suit - which was dismissed - first appeal was also dismissed - High court allowed the second appeal - Apex court held that we find that in the  instant case the land, which was declared surplus land, was allotted  by  the  State in purported exercise of power under Section  35  of  the  said  Act  giving Bhumiswami right to the appellants.  The said  allotment  was  made  in  the year 1973.  
Within two years from the date of the said allotment,  the  land was purchased  by  the  respondent  by  sale  deed  dated  4.7.1975,  which, according to the appellants, was without consideration  and  the  respondent in connivance with the other persons managed to keep the appellants  out  of possession.  Prima facie, therefore, the sale  deed  alleged  to  have  been
executed by the appellants in favour of the respondent on 4.7.1975  is  null and void and the same does not  confer  any  right,  title  or  interest  in favour of the respondent-Sattar Khan.The trial court and the first appellate  court,  therefore,  correctly recorded a finding that the sale deed, said to have  been  executed  by  the appellants in favour of the respondent, is null  and  void  and  is  without consideration.  The  High  Court  while  reversing  the  judgment  has   not
considered these  provisions  contained  in  the  M.P.  Revenue  Code.   We, therefore, allow this appeal and set aside the judgment and order passed  by the High Court and restore the judgment of the trial  court.  =

The land in dispute is  an  agricultural  land,  originally  owned  by
Jagannath Singh.
In a land ceiling proceedings initiated  against  Jagannath
Singh, under M.P. Ceiling on Agricultural Land Holdings Act, 1960,  land  in
question was declared as surplus  land.  
Consequently,  it  vested  in  the
State Government, who in turn allotted the land to the  defendant-appellants
some times in the year 1973, under the Bhumiswami  Right,  purported  to  be
under Section 35 of the said Act.

4.    The appellants sold the said land allotted to them by sale deed  dated
4.7.1975 in favour of respondent No.2.
It appears  that  sometimes  in  the
year 1979 on a complaint, the Collector Shajapur, proceeded  to  revise  the
allotment and action was contemplated to re-allot the land according to  the
Rules.
The  respondent  filed  a  revision  against  the  decision  of  the
Collector before the Board of  Revenue,  where  the  allotment  of  land  in
favour of the appellants and subsequent  transfer  to  respondent  No.2  was
upheld.
5.    It further appears from the record that proceedings under Section  250
of the Land  Revenue  Code,  1959  was  initiated  for  restoration  of  the
property in favour of the appellants, who was illegally dispossessed  and  a
notice to that effect was issued to the  respondent  for  directing  him  to
hand over the land to the appellants, failing which the allotment  shall  be
cancelled.
The respondent then moved the Civil Court by  filing  suits  for
declaration  of  ownership  in  respect  of  the  said  property  which  was
dismissed by judgment dated 19.11.1998.= Appeal was also dismissed but High court reversed the same =

 We have perused the impugned order passed by the  High  Court.  
Prima
facie we are of the view that the High Court has not  correctly  appreciated
the law in this regard.
10.   Before we consider the contention made by the  counsel  appearing  for
the parties,
we would like to refer Sections 35 and 36 of the  M.P.  Ceiling
on Agricultural Holdings Act, 1960.
The said section reads as under:-
“Section 35 - Allotment of surplus land  vesting  in  the  State  Government
under this Act-
(1) Subject to the provisions of this Act and the  rules  framed  thereunder
surplus land vesting in the State under section  12  shall  be  allotted  in
Bhumiswami rights to  the  persons  mentioned  hereunder  in  the  order  of
priority as indicated therein on payment of  a  premium  equivalent  to  the
compensation payable in respect of such land --
(i) agricultural labourers,
(a) belonging to Scheduled Castes and Scheduled tribes; and
(b) others;
(ii)  joint  farming  society,  the  members  of  which   are   agricultural
labourers, or landless persons  whose  main  occupation  is  cultivation  or
manual labour on land, or a combination of such persons;
(iii)  better  farming  society,  the  members  of  which  are  agricultural
labourers, or landless persons  whose  main  occupation  is  cultivation  or
manual labour on land, or a combination of such persons;
(iv) freedom fighters;
(v) displaced tenants subject to  the  provisions  of  section  202  of  the
Madhya Pradesh Land Revenue Code, 1959 (No. 20 of 1959);
(vi) holders holding contiguous land;
(vii) joint farming society of agriculturists;
(viii) better farming society of agriculturists;
(ix) any other co-operative farming society subject to  the  condition  that
land (including the land as owner or tenant individually by  members)  shall
not exceed the area equal  to  the  number  of  members  multiplied  by  the
ceiling area;
(x) an agriculturist holding land less than the ceiling area :
Provided that unless the State Government  otherwise  directs  surplus  land
consisting of compact area shall be either reserved for Government  farm  or
allotted to co-operative societies or any other public purpose.
Explanation I -- For the purpose of clause (iv), "freedom fighter"  means  a
person who by reason of  his  taking  part  in  any  national  movement  for
independence prior to the 15th August, 1947--
(i) had been awarded capital punishment; or
(ii) had to suffer imprisonment or detention  for  a  period  exceeding  six
months; or
(iii) had been permanently incapacitated on  account  of  injuries  infected
upon his person in firing or lathi charge; or
(iv) had to suffer loss of property, whether wholly or  partly  or  loss  of
employment or loss of his means of livelihood, and  includes  his  principal
heir where such person --
(a) was hanged in execution of the capital punishment; or
(b) died during the course of imprisonment or detention.
Explanation II -- For the purpose of Explanation I, "principal  heir"  means
the eldest son of the deceased or, if there is no son of  the  deceased  or,
if there is no son surviving, such  other  heir  of  the  deceased,  as  the
Collector may declare to be the principal heir.
(2) The premium payable under sub-section (1) may be paid  by  the  allottee
either in  a  lump  sum  within  six  months  of  the  commencement  of  the
agricultural year next following the date of allotment or  in  twenty  equal
instalments, the first instalment being payable on the commencement  of  the
agricultural year next following the date of allotment. If  the  premium  is
paid in instalments the unpaid balance of such premium shall carry  interest
at the rate of 3 per centum per annum with effect from  the  date  on  which
the first instalment falls due.
(3) Where the land allotted under Sub-section (1) is an orchard  other  than
banana gardens and vine yards,  the  allottee  shall  maintain  the  orchard
intact.

Section 36 – Recovery of premium in case of transfer of allotted land:-
Where land allotted under section 35 is transferred, the amount  of  premium
remaining unpaid in respect of such land shall be  a  first  charge  thereon
and shall be recoverable from the  transferee  in  the  same  manner  as  an
arrear of land revenue.”


11.   From a bare reading of  the  aforesaid  provision,  it  is  manifestly
clear that Section 35 makes  a  provision  for  allotment  of  surplus  land
declared under the Ceiling Act after vesting of  the  surplus  land  in  the
State.  According to this provision, the State shall allot the surplus  land
under “Bhumiswami right” to the persons mentioned thereunder  in  the  order
of priority.  First, the surplus land  shall  be  allotted  to  agricultural
labourers belonging to SC & ST and, thereafter, to other persons.

12.   “Bhumiswami Right” has not been defined  in  the  Ceiling  Act,  1960.
Section 158 of the M.P. Land Revenue Code 1959  defines  classes  of  tenure
and Bhumiswami.  Section 158 reads as under :-
158.  Bhumiswami –
(1)  Every person who at the time of  coming  into  force
of this Code, belongs to any of the following  classes  shall  be  called  a
Bhumiswami and shall  have  all  the  rights  and  be  subject  to  all  the
liabilities conferred or imposed upon a Bhumiswami by or  under  this  Code,
namely –
……………..
……………..
……………..
……………..
……………..

(3)         Every person –

Who is holding land in Bhoomiswami right by virtue of  a  lease  granted  to
him by the State Government or the Collector or the Allotment Officer on  or
before the commencement of the Madhya Pradesh Land Revenue code  (Amendment)
Act, 1992 from the date of such commencement, and;

To whom land is allotted in Bhumiswami right by the State Government or  the
Collector or the Allotment Officer after  the  commencement  of  the  Madhya
Pradesh Land Revenue Code (Amendment)  Act,  1992  from  the  date  of  such
allotment,

shall be deemed to be a Bhumiswami  in respect of such  land  and  shall  be
subject to all the rights and  liabilities  conferred  and  imposed  upon  a
Bhumiswami  or under this Code;

      Provided that no such person shall transfer such land within a  period
of ten years from the date of lease or allotment.

      Explanation- In this Section the expression      “Ruler”  and  ‘Indian
State” shall have the same meanings as are assigned to these expressions  in
clauses (22) and (15) respectively by article 366  of  the  Constitution  of
India.”
13.    Sub-section (3) of Section 158 clearly provides  that  land  allotted
by the State to any person giving ‘Bhumiswami right’ shall  have  all  right
to deal with the property.  However, proviso mandates that  such  Bhumiswami
shall not transfer land so allotted to him within  a  period  of  ten  years
from the date of lease or allotment.

14.   Section 250 of the Code is also worth to be quoted hereunder:-

“250. Reinstatement of Bhumiswami improperly dispossessed-

For the purpose of this Section and Section 250-A, Bhumiswami shall  include
occupancy tenant and Government lessee.
(1-a)  If a Bhumiswami  is dispossessed of the land otherwise  than  in  due
course of law or if any person unauthorisedly  continues  in  possession  of
any land of the Bhumiswami to the use  of  such  person  has  ceased  to  be
entitled under any provision of this Code, the Bhumiswami or  his  successor
in interest apply to the Tehsildar for restoration of the possession –
……………
……………
(2)………………
(3)………………
(4)……………….
(5)……………….
(6)……………….
(7)……………….
(8)………………
(9)………………..”

15.   In the light of the aforesaid provisions,
we find that in the  instant
case the land, which was declared surplus land, was allotted  by  the  State
in purported exercise of power under Section  35  of  the  said  Act  giving
Bhumiswami right to the appellants.  
The said  allotment  was  made  in  the year 1973.
Within two years from the date of the said allotment,  the  land
was purchased  by  the  respondent  by  sale  deed  dated  4.7.1975,  which,
according to the appellants, was without consideration  and  the  respondent
in connivance with the other persons managed to keep the appellants  out  of
possession.  
Prima facie, therefore, the sale  deed  alleged  to  have  been
executed by the appellants in favour of the respondent on 4.7.1975  is  null
and void and the same does not  confer  any  right,  title  or  interest  in
favour of the respondent-Sattar Khan.

16.   The trial court and the first appellate  court,  therefore,  correctly
recorded a finding that the sale deed, said to have  been  executed  by  the
appellants in favour of the respondent, is null  and  void  and  is  without
consideration.  
The  High  Court  while  reversing  the  judgment  has   not
considered these  provisions  contained  in  the  M.P.  Revenue  Code.   
We,
therefore, allow this appeal and set aside the judgment and order passed  by
the High Court and restore the judgment of the trial  court.  
 Consequently,
the  suit  filed  by  the  respondent  is  dismissed.   Appeal  is   allowed
accordingly with no order as to costs.

2014 - Aug.Part - http://judis.nic.in/supremecourt/filename=41840


                                                               REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION


                     CIVIL APPEAL NO.(s). 6471  OF  2014
       (Arising out of Special Leave Petition (Civil) No.7039 of 2006)

Tolya etc.                                   ………Appellants

                                   Versus

State of M.P. & Another etc.            ……..Respondents


                               J U D G M E N T

M.Y. EQBAL, J.


1.    This appeal is directed against the order  dated  5.8.2004  passed  by
the High Court of Madhya Pradesh, Bench at Indore, in Second Appeal  No.165-
166 of 1999, whereby the Second Appeal was allowed, the judgment  and  order
passed by the Courts below have been set aside.

2.    The facts of the case, which are common, lie in a narrow compass.
3.    The land in dispute is  an  agricultural  land,  originally  owned  by
Jagannath Singh. In a land ceiling proceedings initiated  against  Jagannath
Singh, under M.P. Ceiling on Agricultural Land Holdings Act, 1960,  land  in
question was declared as surplus  land.   Consequently,  it  vested  in  the
State Government, who in turn allotted the land to the  defendant-appellants
some times in the year 1973, under the Bhumiswami  Right,  purported  to  be
under Section 35 of the said Act.

4.    The appellants sold the said land allotted to them by sale deed  dated
4.7.1975 in favour of respondent No.2.  It appears  that  sometimes  in  the
year 1979 on a complaint, the Collector Shajapur, proceeded  to  revise  the
allotment and action was contemplated to re-allot the land according to  the
Rules.  The  respondent  filed  a  revision  against  the  decision  of  the
Collector before the Board of  Revenue,  where  the  allotment  of  land  in
favour of the appellants and subsequent  transfer  to  respondent  No.2  was
upheld.
5.    It further appears from the record that proceedings under Section  250
of the Land  Revenue  Code,  1959  was  initiated  for  restoration  of  the
property in favour of the appellants, who was illegally dispossessed  and  a
notice to that effect was issued to the  respondent  for  directing  him  to
hand over the land to the appellants, failing which the allotment  shall  be
cancelled.  The respondent then moved the Civil Court by  filing  suits  for
declaration  of  ownership  in  respect  of  the  said  property  which  was
dismissed by judgment dated 19.11.1998.

6.    Appeal filed by the respondent against the  said  judgment  was  stood
dismissed on 17.3.1999.   The respondent then  filed  Second  Appeal  before
the High Court which was eventually allowed in terms of judgment  and  order
dated 5.8.2004 and the Judgment and Orders passed by  the  trial  court  and
the appellate court were set aside.

7.    The High Court while reversing the judgment  of  the  trial  court  as
also the appellate court has taken the view that the land  was  allotted  to
the appellants  under  Section  35  of  the  M.P.  Ceiling  on  Agricultural
Holdings Act, 1960 (for short  “Ceiling  Act  of  1960”)  and  there  is  no
provision under the Act  for  resumption  of  land  in  case  such  land  is
allotted to any person not entitled to such allotment.  The High Court  also
proceeded on the basis that neither the State nor any  Revenue  officer  has
taken any  proceeding  for  cancellation  of  allotment  in  favour  of  the
appellants.  On the contrary, the Board of Revenue has allowed the  revision
filed by the respondent and has upheld the allotment  and  directed  not  to
proceed for resumption of land since the  premium  has  already  been  paid.
The High Court further held that  the  Ceiling  Act  does  not  provide  for
cancellation of patta of surplus land under Section 35 or for resumption  of
land of the State in case the land had  been  allotted  to  any  person  not
entitled to such allotment.  On these legal provisions, the High Court  held
that the judgment passed by the trial court  and  the  appellate  court  are
contrary to law.

8.    We have heard learned counsel appearing for the parties.

9.    We have perused the impugned order passed by the  High  Court.   Prima
facie we are of the view that the High Court has not  correctly  appreciated
the law in this regard.

10.   Before we consider the contention made by the  counsel  appearing  for
the parties, we would like to refer Sections 35 and 36 of the  M.P.  Ceiling
on Agricultural Holdings Act, 1960.  The said section reads as under:-
“Section 35 - Allotment of surplus land  vesting  in  the  State  Government
under this Act-
(1) Subject to the provisions of this Act and the  rules  framed  thereunder
surplus land vesting in the State under section  12  shall  be  allotted  in
Bhumiswami rights to  the  persons  mentioned  hereunder  in  the  order  of
priority as indicated therein on payment of  a  premium  equivalent  to  the
compensation payable in respect of such land --
(i) agricultural labourers,
(a) belonging to Scheduled Castes and Scheduled tribes; and
(b) others;
(ii)  joint  farming  society,  the  members  of  which   are   agricultural
labourers, or landless persons  whose  main  occupation  is  cultivation  or
manual labour on land, or a combination of such persons;
(iii)  better  farming  society,  the  members  of  which  are  agricultural
labourers, or landless persons  whose  main  occupation  is  cultivation  or
manual labour on land, or a combination of such persons;
(iv) freedom fighters;
(v) displaced tenants subject to  the  provisions  of  section  202  of  the
Madhya Pradesh Land Revenue Code, 1959 (No. 20 of 1959);
(vi) holders holding contiguous land;
(vii) joint farming society of agriculturists;
(viii) better farming society of agriculturists;
(ix) any other co-operative farming society subject to  the  condition  that
land (including the land as owner or tenant individually by  members)  shall
not exceed the area equal  to  the  number  of  members  multiplied  by  the
ceiling area;
(x) an agriculturist holding land less than the ceiling area :

Provided that unless the State Government  otherwise  directs  surplus  land
consisting of compact area shall be either reserved for Government  farm  or
allotted to co-operative societies or any other public purpose.

Explanation I -- For the purpose of clause (iv), "freedom fighter"  means  a
person who by reason of  his  taking  part  in  any  national  movement  for
independence prior to the 15th August, 1947--
(i) had been awarded capital punishment; or
(ii) had to suffer imprisonment or detention  for  a  period  exceeding  six
months; or
(iii) had been permanently incapacitated on  account  of  injuries  infected
upon his person in firing or lathi charge; or
(iv) had to suffer loss of property, whether wholly or  partly  or  loss  of
employment or loss of his means of livelihood, and  includes  his  principal
heir where such person --
(a) was hanged in execution of the capital punishment; or
(b) died during the course of imprisonment or detention.

Explanation II -- For the purpose of Explanation I, "principal  heir"  means
the eldest son of the deceased or, if there is no son of  the  deceased  or,
if there is no son surviving, such  other  heir  of  the  deceased,  as  the
Collector may declare to be the principal heir.
(2) The premium payable under sub-section (1) may be paid  by  the  allottee
either in  a  lump  sum  within  six  months  of  the  commencement  of  the
agricultural year next following the date of allotment or  in  twenty  equal
instalments, the first instalment being payable on the commencement  of  the
agricultural year next following the date of allotment. If  the  premium  is
paid in instalments the unpaid balance of such premium shall carry  interest
at the rate of 3 per centum per annum with effect from  the  date  on  which
the first instalment falls due.
(3) Where the land allotted under Sub-section (1) is an orchard  other  than
banana gardens and vine yards,  the  allottee  shall  maintain  the  orchard
intact.

Section 36 – Recovery of premium in case of transfer of allotted land:-
Where land allotted under section 35 is transferred, the amount  of  premium
remaining unpaid in respect of such land shall be  a  first  charge  thereon
and shall be recoverable from the  transferee  in  the  same  manner  as  an
arrear of land revenue.”


11.   From a bare reading of  the  aforesaid  provision,  it  is  manifestly
clear that Section 35 makes  a  provision  for  allotment  of  surplus  land
declared under the Ceiling Act after vesting of  the  surplus  land  in  the
State.  According to this provision, the State shall allot the surplus  land
under “Bhumiswami right” to the persons mentioned thereunder  in  the  order
of priority.  First, the surplus land  shall  be  allotted  to  agricultural
labourers belonging to SC & ST and, thereafter, to other persons.

12.   “Bhumiswami Right” has not been defined  in  the  Ceiling  Act,  1960.
Section 158 of the M.P. Land Revenue Code 1959  defines  classes  of  tenure
and Bhumiswami.  Section 158 reads as under :-
158.  Bhumiswami – (1)  Every person who at the time of  coming  into  force
of this Code, belongs to any of the following  classes  shall  be  called  a
Bhumiswami and shall  have  all  the  rights  and  be  subject  to  all  the
liabilities conferred or imposed upon a Bhumiswami by or  under  this  Code,
namely –

……………..
……………..
……………..
……………..
……………..

(3)         Every person –

Who is holding land in Bhoomiswami right by virtue of  a  lease  granted  to
him by the State Government or the Collector or the Allotment Officer on  or
before the commencement of the Madhya Pradesh Land Revenue code  (Amendment)
Act, 1992 from the date of such commencement, and;

To whom land is allotted in Bhumiswami right by the State Government or  the
Collector or the Allotment Officer after  the  commencement  of  the  Madhya
Pradesh Land Revenue Code (Amendment)  Act,  1992  from  the  date  of  such
allotment,

shall be deemed to be a Bhumiswami  in respect of such  land  and  shall  be
subject to all the rights and  liabilities  conferred  and  imposed  upon  a
Bhumiswami  or under this Code;

      Provided that no such person shall transfer such land within a  period
of ten years from the date of lease or allotment.

      Explanation- In this Section the expression      “Ruler”  and  ‘Indian
State” shall have the same meanings as are assigned to these expressions  in
clauses (22) and (15) respectively by article 366  of  the  Constitution  of
India.”


13.    Sub-section (3) of Section 158 clearly provides  that  land  allotted
by the State to any person giving ‘Bhumiswami right’ shall  have  all  right
to deal with the property.  However, proviso mandates that  such  Bhumiswami
shall not transfer land so allotted to him within  a  period  of  ten  years
from the date of lease or allotment.



14.   Section 250 of the Code is also worth to be quoted hereunder:-

“250. Reinstatement of Bhumiswami improperly dispossessed-

For the purpose of this Section and Section 250-A, Bhumiswami shall  include
occupancy tenant and Government lessee.

(1-a)  If a Bhumiswami  is dispossessed of the land otherwise  than  in  due
course of law or if any person unauthorisedly  continues  in  possession  of
any land of the Bhumiswami to the use  of  such  person  has  ceased  to  be
entitled under any provision of this Code, the Bhumiswami or  his  successor
in interest apply to the Tehsildar for restoration of the possession –

……………

……………



(2)………………



(3)………………



(4)……………….



(5)……………….



(6)……………….



(7)……………….



(8)………………



(9)………………..”





15.   In the light of the aforesaid provisions, we find that in the  instant
case the land, which was declared surplus land, was allotted  by  the  State
in purported exercise of power under Section  35  of  the  said  Act  giving
Bhumiswami right to the appellants.  The said  allotment  was  made  in  the
year 1973.  Within two years from the date of the said allotment,  the  land
was purchased  by  the  respondent  by  sale  deed  dated  4.7.1975,  which,
according to the appellants, was without consideration  and  the  respondent
in connivance with the other persons managed to keep the appellants  out  of
possession.  Prima facie, therefore, the sale  deed  alleged  to  have  been
executed by the appellants in favour of the respondent on 4.7.1975  is  null
and void and the same does not  confer  any  right,  title  or  interest  in
favour of the respondent-Sattar Khan.



16.   The trial court and the first appellate  court,  therefore,  correctly
recorded a finding that the sale deed, said to have  been  executed  by  the
appellants in favour of the respondent, is null  and  void  and  is  without
consideration.  The  High  Court  while  reversing  the  judgment  has   not
considered these  provisions  contained  in  the  M.P.  Revenue  Code.   We,
therefore, allow this appeal and set aside the judgment and order passed  by
the High Court and restore the judgment of the trial  court.   Consequently,
the  suit  filed  by  the  respondent  is  dismissed.   Appeal  is   allowed
accordingly with no order as to costs.





                                                           …………………………………….J.
                                                              (Ranjan Gogoi)



                                                           …………………………………….J.
                                                                 (M.Y.Eqbal)

New Delhi
August 22, 2014

Sec.138 of N.I. Act - Stop Payment - Non-discloser of reply notice in the complaint - High court quashed the complaint on the above said two grounds - Apex court held that it is a settled law already decided in M.M.T.C. Ltd. and Modi Cements - stop payment also attracts as offence - non-discloser of reply notice in complaint is immaterial whether amount paid or not is to be proved by way of defence but not way of reply notice - High court erred totally and hence set aside the order of the High court =CRIMINAL APPEAL NO. 1808 OF 2014 [Arising out of Special Leave Petition (Crl.) No.9901 of 2011] Pulsive Technologies P. Ltd. … Appellant Vs. State of Gujarat & Ors. … Respondents = 2014 - Aug. Part - http://judis.nic.in/supremecourt/filename=41838

 Sec.138 of N.I. Act - Stop Payment - Non-discloser of reply notice in the complaint - High court quashed the complaint on the above said two grounds - Apex court held that it is a settled law already decided in M.M.T.C.  Ltd.  and  Modi Cements  - stop payment also attracts as offence - non-discloser of reply notice in complaint is immaterial whether amount paid or not is to be proved by way of defence but not way of reply notice - High court erred totally and hence set aside the order of the High court =

The High Court further held that the cheque  in  question  was  returned  on
account of “stop payment” instructions given  by  the  accused  vide  letter
dated 13/07/2006 in view of the fact that  the  complainant  had  failed  to
discharge its obligations as per the agreement  by  not  repairing/replacing
the  damaged  UPS  system.   The  High  Court  further  observed  that   the
complainant had not disclosed complete facts as required under provisos  (b)
and (c) of Section 138 of the NI Act.  The High  Court  concluded  that  the
complaint did not disclose offence contemplated under Section 138 of the  NI
Act.  The High Court, in the circumstances, quashed the complaint.

10.   The High Court, in our opinion,  fell  into  a  grave  error  when  it
proceeded to quash the complaint. Even “stop  payment”  instructions  issued
to the bank are held to make a person liable for  offence  punishable  under
Section 138 of the NI Act in case  cheque is dishonoured on that count.   In
Modi Cements  v.   Kuchil Kumar Nandi[1] this Court made it clear that  even
if a cheque is dishonoured because of “stop payment” instructions  given  to
the bank, Section 138 of  the  NI  Act  would  get  attracted.   This  Court
further observed that once the cheque is issued by the drawer a  presumption
under Section 139 must follow and merely because the drawer issues a  notice
to the drawee or to the bank  for  stoppage  of  the  payment  it  will  not
preclude an action under Section 138 of the NI Act  by  the  drawee  or  the
holder of the cheques in due course.

We find that the High Court has  relied  on  M.M.T.C.  Ltd.  and  Modi
Cements  and yet drawn a  wrong  conclusion  that  inasmuch  as  cheque  was
dishonoured because  of  “stop  payment”  instructions,  offence  punishable
under Section 138 of the NI Act is not made out.
The  High  Court  observed
that “stop payment” instructions were  given  because  the  complainant  had
failed  to   discharge   its   obligations   as   per   agreement   by   not
repairing/replacing the damaged UPS system.  
Whether complainant had  failed
to discharge its obligations or not could not have been decided by the  High
Court conclusively at this  stage.  
The  High  Court  was  dealing  with  a
petition filed under Section 482 of the Code  for  quashing  the  complaint.
On  factual  issue,  as  to  whether  the  complainant  had  discharged  its
obligations or not, the High Court could not have given  its  final  verdict
at this stage.  It is matter of evidence.
This is exactly what  this  Court said in M.M.T.C. Ltd.  
Though the High Court referred to M.M.T.C. Ltd.,  it failed to note the most vital caution sounded therein.

14.   The High Court also erred in quashing  the  complaint  on  the  ground
that the contents of the reply sent by the accused  were  not  disclosed  in
the complaint.  Whether any money is paid by the accused to the  complainant
is a matter of evidence. The accused has  ample  opportunity  to  probabilis
his defence.  On that count, in the facts of this case, complaint cannot  be
quashed.

15.   In  view  of  the  above,  we  set  aside  the  impugned  order  dated
08/09/2011 passed by the Gujarat High Court in  Criminal  Misc.  Application
No. 1757 of 2007 with Criminal Misc.  Application  No.  9158  of  2007.
2014 - Aug. Part - http://judis.nic.in/supremecourt/filename=41838

                                                       NON-REPORTABLE


                        IN THE SUPREME COURT OF INDIA

                       CRIMINAL APPELLATE JURISDICTION

                    CRIMINAL APPEAL NO. 1808     OF 2014
       [Arising out of Special Leave Petition (Crl.) No.9901 of 2011]


Pulsive Technologies P. Ltd.      …          Appellant

Vs.

State of Gujarat & Ors.                 …          Respondents

                                    WITH

                       CRIMINAL APPEAL NO.1807 OF 2014
[Arising out of Special Leave Petition (Crl.) No.9915 of 2011]


                               J U D G M E N T


(SMT.) RANJANA PRAKASH DESAI, J.


1.    Leave granted.


2.    These appeals are  directed  against  the  judgment  and  order  dated
08/09/2011  passed  by  the  High  Court  of  Gujarat  in   Criminal   Misc.
Application No.1757 of 2007 and Criminal Misc. Application No.9158  of  2007
whereby the High Court of Gujarat quashed the criminal  complaint  filed  by
the appellant being Criminal Case No.6076 of 2006 pending  on  the  file  of
the Chief Judicial Magistrate of  Vadodara  for  offences  punishable  under
Section 138 and 142 of the Negotiable Instruments Act (‘the NI Act’).

Brief facts of the appellant-Company’s case.
3.    The appellant in both the appeals is the original complainant.  It  is
a private limited company.   Contesting respondent no. 2 in  appeal  arising
out of  SLP  No.  9915  of  2011  is  the  accused  company  and  contesting
respondent nos. 2 to 4 in appeal arising out of SLP No.  9901  of  2011  are
its directors.

4.    In the course of its business, the accused received bulk  orders  from
Gujarat Informatics Limited (“GIL”), a Government  of  Gujarat  Company  for
supply of  desktop  computers,  printers,  UPS  and  other  products.    The
complainant being one of the approved vendors on the list of  the  GIL,  the
accused, placed  various  purchase  orders  with  the  complainant  and  the
complainant  sold  and  supplied  the   same   as   per   the   demand   and
specifications.        During the course of business, the accused made  part
payments regularly.  For the remaining outstanding legitimate  dues  of  the
complainant, the accused handed over a post-dated cheque  bearing  No.387176
dated 15/07/2006 for  Rs.11,80,670/-  drawn  on  HSBC  Bank,  Bangalore   in
favour of the complainant.

5.     The complainant presented the cheque  twice  for  collection  through
its bankers viz.  Bank of Baroda, Jetalpur Branch.  It was  returned  unpaid
on 3/10/2006 for the reason “Payment stopped by drawer”. The complainant  on
13/10/2006 sent a demand notice to the  accused asking   them  to  pay   the
cheque amount within a period of 15 days from the date  of  the  receipt  of
the notice.  The accused failed to pay the amount to the complainant.

6.    On 15/11/2006  the  complainant  filed  a  complaint   being  Criminal
Complaint No.6076/06  in the Court of Chief Judicial  Magistrate,  Vadodara,
Gujarat against the accused under Sections  138/142  of  the  NI  Act.   The
Chief Judicial  Magistrate,  Vadodara,  by  order  dated  15/11/2006  issued
summons to all the accused.

7.     The accused filed applications before the High  Court  under  Section
482 of the Code Criminal Procedure for quashing of the said complaint  case.
 The High Court by the impugned order dated 8/9/2011  allowed  the  petition
and quashed the said complaint.  Being  aggrieved  by  the  said  order  the
complainant has approached this Court.

8.     We have heard Mr. D.N. Ray, learned counsel for the  complainant  and
Mr. Giriraj Subramanium, learned counsel for the accused.  Counsel  for  the
complainant submitted that the High Court erred in coming to the  conclusion
that the complaint does not disclose offence punishable  under  Section  138
of the NI Act.  Counsel submitted that the High Court was wrong  in  holding
that “stop payment” instructions are not covered by Section 138  of  the  NI
Act. The High Court failed to notice authoritative  pronouncements  of  this
Court which state that  if  a  cheque  bounces  because  of  “stop  payment”
instructions it would constitute an offence under  Section  138  of  the  NI
Act.  Counsel urged that impugned  order  must,  therefore,  be  set  aside.
Counsel for the accused, on the other hand, supported the impugned order.

9.    The High Court held that provisions of Section 138 of the NI  Act  are
attracted where a cheque is returned by the bank on the  ground  that  there
is insufficient amount or that the  amount  of  cheque  exceeds  the  amount
arranged to be paid from that account by an agreement made  with  the  bank.
The High Court further held that the cheque  in  question  was  returned  on
account of “stop payment” instructions given  by  the  accused  vide  letter
dated 13/07/2006 in view of the fact that  the  complainant  had  failed  to
discharge its obligations as per the agreement  by  not  repairing/replacing
the  damaged  UPS  system.   The  High  Court  further  observed  that   the
complainant had not disclosed complete facts as required under provisos  (b)
and (c) of Section 138 of the NI Act.  The High  Court  concluded  that  the
complaint did not disclose offence contemplated under Section 138 of the  NI
Act.  The High Court, in the circumstances, quashed the complaint.

10.   The High Court, in our opinion,  fell  into  a  grave  error  when  it
proceeded to quash the complaint. Even “stop  payment”  instructions  issued
to the bank are held to make a person liable for  offence  punishable  under
Section 138 of the NI Act in case  cheque is dishonoured on that count.   In
Modi Cements  v.   Kuchil Kumar Nandi[1] this Court made it clear that  even
if a cheque is dishonoured because of “stop payment” instructions  given  to
the bank, Section 138 of  the  NI  Act  would  get  attracted.   This  Court
further observed that once the cheque is issued by the drawer a  presumption
under Section 139 must follow and merely because the drawer issues a  notice
to the drawee or to the bank  for  stoppage  of  the  payment  it  will  not
preclude an action under Section 138 of the NI Act  by  the  drawee  or  the
holder of the cheques in due course.

11.   Again in M.M.T.C. Ltd. and anr.   v.    Medchl  Chemicals  and  Pharma
(P) Ltd. and anr.[2] this Court reiterated the  same  view.   What  is  more
important is the fact that this Court declared that the complaint cannot  be
quashed on this ground.  Relevant observations of this Court read as under:

“… … …Even  when  the  cheque  is  dishonoured  by  reason  of  stop-payment
instructions by virtue of Section 139 the court  has  to  presume  that  the
cheque was received by the holder for the discharge, in whole  or  in  part,
of any debt or liability. Of course this is a  rebuttable  presumption.  The
accused can thus show that the “stop-payment” instructions were  not  issued
because of insufficiency or paucity of funds. If the accused shows  that  in
his account there were sufficient funds to clear the amount  of  the  cheque
at the time of presentation of the cheque for encashment at the drawer  bank
and that the stop-payment notice had been  issued  because  of  other  valid
causes including that there was no existing debt or liability  at  the  time
of presentation of cheque for encashment, then  offence  under  Section  138
would not be made out. The important thing is that the burden of so  proving
would be on the accused. Thus a court  cannot  quash  a  complaint  on  this
ground.”


12.   In Laxmi Dyechem    v.    State  of  Gujarat  and  ors[3]  this  Court
reiterated the above view.

13.   We find that the High Court has  relied  on  M.M.T.C.  Ltd.  and  Modi
Cements  and yet drawn a  wrong  conclusion  that  inasmuch  as  cheque  was
dishonoured because  of  “stop  payment”  instructions,  offence  punishable
under Section 138 of the NI Act is not made out.  The  High  Court  observed
that “stop payment” instructions were  given  because  the  complainant  had
failed  to   discharge   its   obligations   as   per   agreement   by   not
repairing/replacing the damaged UPS system.  Whether complainant had  failed
to discharge its obligations or not could not have been decided by the  High
Court conclusively at this  stage.   The  High  Court  was  dealing  with  a
petition filed under Section 482 of the Code  for  quashing  the  complaint.
On  factual  issue,  as  to  whether  the  complainant  had  discharged  its
obligations or not, the High Court could not have given  its  final  verdict
at this stage.  It is matter of evidence.  This is exactly what  this  Court
said in M.M.T.C. Ltd.   Though the High Court referred to M.M.T.C. Ltd.,  it
failed to note the most vital caution sounded therein.

14.   The High Court also erred in quashing  the  complaint  on  the  ground
that the contents of the reply sent by the accused  were  not  disclosed  in
the complaint.  Whether any money is paid by the accused to the  complainant
is a matter of evidence. The accused has  ample  opportunity  to  probabilis
his defence.  On that count, in the facts of this case, complaint cannot  be
quashed.

15.   In  view  of  the  above,  we  set  aside  the  impugned  order  dated
08/09/2011 passed by the Gujarat High Court in  Criminal  Misc.  Application
No. 1757 of 2007 with Criminal Misc.  Application  No.  9158  of  2007.   We
direct the Chief Judicial Metropolitan Magistrate, Vadodara  to  dispose  of
the Criminal Complaint No.6076 of 2006 as expeditiously as possible and,  in
any event, within a period of one year from the  date  of  receipt  of  this
order.

16.   The appeals are disposed of in the afore-stated terms.



                                                       ……………………………………………..J.
                                                     (RANJANA PRAKASH DESAI)



                                                       ……………………………………………..J.
                                (N.V. RAMANA)
NEW DELHI,
August 22, 2014.


-----------------------
[1]    (1998) 3 SCC 249
[2]    (2002)1 SCC 234
[3]    (2012) 13 SCC 375

-----------------------
9

Section 130(E) of the Customs Act, 1962 and Section 18(2) read with Section 28(2) of the Customs Act, 1962.- sec.14 , rule 5 - import of goods - custom duty paid - after the lapse of 5 years show cause notice was given to pay additional duty with penalty basing on the information on computer outputs of department as those goods costs more than the declared - challenged - Apex court held that In the absence of any material produced by the Revenue in proof of the alleged comparable imports at a higher value, the impugned order which eventually confirmed the original order of assessment by the Assistant Commissioner of Customs dated 31.3.2001 cannot be sustained for two reasons– (1) the mere existence of an alleged computer printout is not proof of the existence of comparable imports; (2) assuming such a printout exists and the contents thereof are true, the question still remains whether the transaction evidenced by the said computer printout are comparable to the transaction of the appellant. The appellant will have to be given reasonable opportunity to establish (if he can) that the transactions are not comparable.The impugned order and the original assessment order are therefore, set aside. However, it will be open to the respondent(revenue) to proceed against the appellants herein pursuant to the show cause notice dated 25.9.2000 in accordance with law. The appeals are allowed accordingly.= CIVIL APPEAL NOS. 433-434 OF 2006 M/s. Gira Enterprises & Anr. …Appellants Versus Commissioner of Customs, Ahmedabad …Respondent = 2014- Aug.Part - http://judis.nic.in/supremecourt/filename=41842

Section 130(E) of the  Customs Act, 1962 and Section 18(2) read with Section 28(2) of the  Customs Act, 1962.-  sec.14 , rule 5 -   import of goods - custom duty paid - after the lapse of 5 years show cause notice was given to pay additional duty with penalty basing on the information on computer outputs of department as those goods costs more than the declared - challenged - Apex court held that In the absence of any material produced by the  Revenue  in  proof  of the alleged comparable imports at a higher value, the impugned  order  which eventually confirmed the original  order  of  assessment  by  the  Assistant Commissioner of Customs dated 31.3.2001 cannot be sustained for two  reasons– (1) the mere existence of an alleged computer printout  is  not  proof  of the existence of comparable imports; (2) assuming  such  a  printout  exists and the contents thereof are true, the question still  remains  whether  the transaction evidenced by the said computer printout are  comparable  to  the transaction  of  the  appellant.   The  appellant  will  have  to  be  given reasonable opportunity to establish (if he can) that  the  transactions  are not comparable.The impugned order and the original assessment  order  are  therefore, set aside.  However, it will be open to the respondent(revenue)  to  proceed against the appellants herein  pursuant  to  the  show  cause  notice  dated 25.9.2000 in accordance with law. The appeals are allowed accordingly.=

Subsequently, a show cause notice dated 25.9.2000 came  to  be  issued
to the appellants by the  Commissioner  of  Customs,  Gujarat  at  Ahmedabad
calling upon the appellants to  show  cause  why  certain  action  indicated
therein cannot be taken against the appellants.   The  relevant  portion  of
the show cause notice is as follows:-
      “Therefore, M/s. Gira Enterprises, Ahmedabad are  hereby  called  upon
to show cause to the Commissioner of Customs, Ahmedabad as to why:

(I) the provisionally assessed Bills of Entry (as per Annexure  'A')  should
not be finalised after taking in value of US $ 1860.00 PMT CIF.

(ii) The differential duty of Rs.31,53,833/-(as  per  Annexure  'A')  should
not be recovered under Section 18(2) read with Section 28(2) of the  Customs
Act, 1962.

(iii)The goods which are liable for confiscation  under  Section  111(m)  of
the Customs Act, 1962 should not be confiscated and  why  fine  in  lieu  of
confiscation should not  be  imposed  as  goods  has  already  been  cleared
provisionally against Bond for test and value  verification.

(iv) Penalty should not be  imposed  on  M/s.  Gira  Enterprises,  Ahmedabad
under Section 114A/112(a) of the Customs Act, 1962.

(v) Interest under Section 28AB of the  Customs  Act,  1962  should  not  be
recovered.”


4.    It is also stated in the show cause notice that the goods imported  by
the appellants were subjected to a test in  the  Central  Excise  &  Customs
Laboratory, Baroda.  According to the show cause notice, the  chemical  name
of the goods was verified and it was found  to  be  “Cyanuric  Chloride”  as
known in the International market.  It is further stated in the  show  cause
notice that on the basis of certain information obtained through a  computer
print out from the Customs  House,  Mumbai,  the  Commissioner  of  Customs,
Gujarat noticed  that  a  large  number  of  Cyanuric  Chloride(100)  import
transactions (between the months of June 1994 to November 1994)  took  place
and the cost of the unit price in each one of those imports was US $  1950/-
PMT(CIF) as against the value declared by the appellants of US $ 500/- PMT.=

 Section 14 reads as follows:-
      “Valuation of goods for purposes of assessment. –

(1) For the purposes of [the Customs Tariff Act, 1975(51 of 1975)],  or  any
other law for the time being in  force  whereunder  a  duty  of  customs  is
chargeable on any goods by reference to  their  value,  the  value  of  such
goods shall be deemed to be the price  at  which  such  or  like  goods  are
ordinarily sold, or offered for sale, for delivery at the time and place  of
importation  of  exportation,  as  the  case  maybe,  in   the   course   of
international trade, where the seller and the buyer have no interest in  the
business of each other and the price is the sole consideration for the  sale
or offer for sale:

      [Provided that such price shall be calculated with  reference  to  the
rate of exchange as in force on the  date  on  which  a  bill  of  entry  is
presented under Section 46, or a shipping bill or bill  of  export,  as  the
case may be, is presented under Section 50;]

      1 *
      [1A Subject to the provisions of sub-section (1), the  price  referred
to in that sub-section in respect of imported goods shall be  determined  in
accordance with the rules made in this behalf.]

      2...

      3...”

13.   It can be seen from Section 14 that the value of  the  imported  goods
is “deemed to be the price at which  such  goods  are  ordinarily  sold,  or
offered for sale ……”.  The Section further stipulates  that  such  price  of
the imported goods is to be determined in accordance with the rules made  in
that behalf.

14.   The  Government  of  India  made  rules  known  as  Customs  Valuation
(Determination of the Price of Imported Goods) Rules,  1988.   Rule  3(i)[1]
stipulates that for the purpose of the rules,  the  value  of  the  imported
goods shall be the transaction value.  Rule  3(ii)[2]  provides  that  where
the value of the imported goods cannot be determined under  Rule  3(i)  then
the same is to be determined in  accordance  with  the  various  methods  of
determination (of the value of the  goods)  provided  under  Rules  5  to  8
sequentially.

15.   The expression “transaction value” is defined under the Rule  2(f)  of
the Customs Valuation(Determination of Price of Imported Goods) Rules,  1988
as follows:-
2(f) “transaction value” means the value determined in accordance with  Rule
4 of these rules.”

16.   Rule 4(1) stipulates as follows:-
“The transaction value of imported goods shall be the  price  actually  paid
or payable for the  goods  when  sold  for  export  to  India,  adjusted  in
accordance with the provisions of Rule 9.”


17.   Sub-rule (2)[3] stipulates that the transaction value of the  imported
goods shall be accepted subject to the various exceptions specified  in  the
said Section, the details of which many not be  necessary  for  the  present
purpose.

18.    In substance, Rule 5 stipulates the next  alternative  procedure  for
determining the value of the imported goods and it reads as follows:-
 5.  Transaction value of identical goods –

(1)(a)      Subject to the provisions of Rule 3 of these  rules,  the  value
of imported goods shall be the transaction value  of  identical  goods  sold
for export to India and imported at or about the  same  time  as  the  goods
being valued.

(b) In applying this rule, the transaction value of  identical  goods  in  a
sale at the same commercial level and in substantially the same quantity  as
the goods being valued shall be used to  determine  the  value  of  imported
goods.

(c)  Where no sale referred to in clause (b) of sub-rule (1) of  this  rule,
is found, the transaction value of  identical  goods  sold  at  a  different
commercial level or in  different  quantities  or  both,  adjusted  to  take
account of the  difference  attributable  to  commercial  level  or  to  the
quantity or both shall be used, provided  that  such  adjustments  shall  be
made on the basis of demonstrated evidence  which  clearly  establishes  the
reasonableness and accuracy of  the  adjustments,  whether  such  adjustment
leads to an increase or decrease in the value.

(2)         Where the costs and changes referred to in sub-rule(2)  of  Rule
9 of these rules are included in the transaction value of  identical  goods,
an adjustment shall be made, if there are significant  differences  in  such
costs and charges between the goods being valued and the identical goods  in
question arising from differences in distances and means of transport.

(3)    In applying  this  rule,  if  more  than  one  transaction  value  of
identical goods is found; the lowest such value shall be used  to  determine
the value of imported goods.”=

It is not necessary  that  in  every  case  of  import  the   importer
declares the price actually paid by him or payable by  him.  
Therefore,  if
in a given case the Revenue notices identical goods have  been  imported  by
other importers in comparable transactions at  a  different  rate  (normally
higher rate) then Revenue is enabled by Rules  5  to  reject  the  valuation
made by the importer and determine the “price actually paid or  payable”  by
the importer.

21.   In the case at  hand,  no  doubt  the  revenue  claims  to  have  some
information based on certain alleged imports made at the Bombay port at  the
relevant point of time that the import in question  took  place.  
According
to the revenue, those imports at Bombay were declared and valued at  a  much
higher rate than the value declared by  the  appellants  herein.  
Therefore,
the  valuation  of  the  goods  imported  by   the   appellant   was   found
unacceptable.  Hence, the procedure under Rule 5 was resorted to.

22.   However,  the  respondent(revenue)  did  not  supply  the  information
(alleged computer print out) which formed the basis of the  conclusion  that
the  appellants  herein  under-valued  the  goods  imported.
 In   such   a
situation, the appellants obviously cannot and did not have any  opportunity
of establishing that the claim of the revenue is unsustainable in  law.  
If
the information which formed  the  basis  for  the  Revenue  to  reject  the
appellant’s valuation is supplied to the appellants, the appellants  perhaps
will have  an  opportunity  to  dispute  the  comparability  of  the  import
transactions allegedly contained in the computer printout on various  counts
may not be possible to catalogue.

23.   The appellants, of course, admit that the goods imported by  them  are
known commercially as ‘Cyanuric Chloride’ as specified in  the  show  cause.
Whether Cyanuric Chloride was imported at the  relevant  point  of  time  by
others in comparable transactions, i.e., is “a sale at the  same  commercial
level and in substantially the  same  quantity”  etc.  is  a  matter  to  be
considered on the examination of the material relied upon  by  the  Revenue.
A reasonable opportunity must be given to the appellant to  demonstrate  (if
at all) that the transactions relied upon by the Revenue are not  comparable
transactions.

24.   In the absence of any material produced by the  Revenue  in  proof  of
the alleged comparable imports at a higher value, the impugned  order  which
eventually confirmed the original  order  of  assessment  by  the  Assistant
Commissioner of Customs dated 31.3.2001 cannot be sustained for two  reasons
–
(1) the mere existence of an alleged computer printout  is  not  proof  of
the existence of comparable imports; 
(2) assuming  such  a  printout  exists
and the contents thereof are true, the question still  remains  whether  the
transaction evidenced by the said computer printout are  comparable  to  the
transaction  of  the  appellant.   
The  appellant  will  have  to  be  given
reasonable opportunity to establish (if he can) that  the  transactions  are
not comparable.

25.   The impugned order and the original assessment  order  are  therefore,
set aside.  However, it will be open to the respondent(revenue)  to  proceed
against the appellants herein  pursuant  to  the  show  cause  notice  dated
25.9.2000 in accordance with law.

26.   The appeals are allowed accordingly.

2014- Aug.Part - http://judis.nic.in/supremecourt/filename=41842

                                                                Reportable
                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                      CIVIL APPEAL NOS. 433-434 OF 2006


M/s. Gira Enterprises & Anr.                      …Appellants

            Versus

Commissioner of Customs, Ahmedabad           …Respondent






                                  O R D E R


      These are statutory appeals filed under Section 130(E) of the  Customs
Act, 1962 from the  judgment  and  order  dated  23.8.2005,  passed  by  the
Customs, Excise and Service Tax Appellate  Tribunal,  West  Zonal  Bench  at
Mumbai in Appeal No. C/791 & 792/03/Mum.

2.    The appellants imported two  consignments  of  “2-4-6  Tricloro  1-3-5
Triazine” aggregating 74.10 MT from China under  two  Bills  of  Entry,  the
cost of which is declared by the appellants to be SG $ 750/- PMT  equivalent
to US $ 500/- PMT.   The  goods  were  provisionally  assessed  and  allowed
clearance on 17.9.1994.

3.    Subsequently, a show cause notice dated 25.9.2000 came  to  be  issued
to the appellants by the  Commissioner  of  Customs,  Gujarat  at  Ahmedabad
calling upon the appellants to  show  cause  why  certain  action  indicated
therein cannot be taken against the appellants.   The  relevant  portion  of
the show cause notice is as follows:-
      “Therefore, M/s. Gira Enterprises, Ahmedabad are  hereby  called  upon
to show cause to the Commissioner of Customs, Ahmedabad as to why:

(I) the provisionally assessed Bills of Entry (as per Annexure  'A')  should
not be finalised after taking in value of US $ 1860.00 PMT CIF.

(ii) The differential duty of Rs.31,53,833/-(as  per  Annexure  'A')  should
not be recovered under Section 18(2) read with Section 28(2) of the  Customs
Act, 1962.

(iii)The goods which are liable for confiscation  under  Section  111(m)  of
the Customs Act, 1962 should not be confiscated and  why  fine  in  lieu  of
confiscation should not  be  imposed  as  goods  has  already  been  cleared
provisionally against Bond for test and value  verification.

(iv) Penalty should not be  imposed  on  M/s.  Gira  Enterprises,  Ahmedabad
under Section 114A/112(a) of the Customs Act, 1962.

(v) Interest under Section 28AB of the  Customs  Act,  1962  should  not  be
recovered.”


4.    It is also stated in the show cause notice that the goods imported  by
the appellants were subjected to a test in  the  Central  Excise  &  Customs
Laboratory, Baroda.  According to the show cause notice, the  chemical  name
of the goods was verified and it was found  to  be  “Cyanuric  Chloride”  as
known in the International market.  It is further stated in the  show  cause
notice that on the basis of certain information obtained through a  computer
print out from the Customs  House,  Mumbai,  the  Commissioner  of  Customs,
Gujarat noticed  that  a  large  number  of  Cyanuric  Chloride(100)  import
transactions (between the months of June 1994 to November 1994)  took  place
and the cost of the unit price in each one of those imports was US $  1950/-
PMT(CIF) as against the value declared by the appellants of US $ 500/- PMT.

5.    The appellants filed a detailed reply dated  11.12.2000  wherein  they
disputed their liability to make any further payment  as  indicated  in  the
show cause notice.  The appellants also took a specific stand  that  a  copy
of the computer print out which formed the basis of show  cause  notice  had
not been supplied to the appellants.

6.     Eventually,  the  concerned  Assistant  Commissioner  finalised   the
assessment by valuing the imported goods at US $  1860/-  PMT  by  an  order
dated 31.3.2001.

7.    Aggrieved by the same, the appellants herein carried the matter in  an
appeal to the Commissioner of Customs(Appeals). By an order dated  8.8.2001,
the said appeal was allowed wherein the appellate  authority  recorded  “the
method of determination  of  the  assessable  value  as  per  Rule  5  lacks
specific evidence, therefore, the same is not legal and proper”.

8.    Revenue carried the matter  in  further  appeal  before  the  Customs,
Excise and Gold (Control) Appellate Tribunal.  By an order dated  15.2.2002,
the said Tribunal remitted the matter back to  the  Commissioner  (Appeals).
On such remittance, the Commissioner  (Appeals)  upheld  the  order  of  the
Assistant Commissioner confirming the enhancement of the value at US $  1860
PMT CIF.  Again, the matter was carried by the appellants  to  the  Customs,
Excise  and  Service  Tax  Tribunal  unsuccessfully.   By  an  order   dated
23.8.2005, which was impugned in the  instant  appeal,  the  appeal  of  the
appellants herein was dismissed by the Tribunal.

9.    It is argued on behalf  of  the  appellant  that  the  assessment  and
demand of the customs duty on the basis of the valuation of the goods  at  a
price much higher than what was declared by the appellant to  be  the  price
paid by the appellant is without any  basis  in  law,  without  any  legally
admissible evidence and opposed to the principles of natural justice as  the
only material relied upon by the Revenue i.e. copy of the  alleged  printout
was not supplied to the appellant.  Therefore, the appellant  had  no  means
of knowing as to whether any imports of comparable nature were made  at  the
relevant point of time.

10.   On the other hand it is argued by the Revenue that the impugned  order
calls for no interference.

11.   Section 12 of the Customs Act, 1962 mandates that  duties  of  customs
shall be levied at such rates as may be specified under the  Customs  Tariff
Act, 1975(51 of 1975), or any other law for the  time  being  in  force,  on
goods imported into, or  exported  from,  India.   Undisputedly,  the  goods
imported by the appellants are goods which are assessable  to  Customs  Duty
under Entry 2942 of the First Schedule of the Customs Tariff Act, 1975.   It
is also not in dispute that the duty is an ad valorem duty.  Section  14  of
the Customs Act stipulates the method and manner of  the  valuation  of  the
goods which are  exigible  to  duties  under  the  Customs  Tariff  Act  and
assessable to ad-valorem duty.

12.   Section 14 reads as follows:-
      “Valuation of goods for purposes of assessment. –

(1) For the purposes of [the Customs Tariff Act, 1975(51 of 1975)],  or  any
other law for the time being in  force  whereunder  a  duty  of  customs  is
chargeable on any goods by reference to  their  value,  the  value  of  such
goods shall be deemed to be the price  at  which  such  or  like  goods  are
ordinarily sold, or offered for sale, for delivery at the time and place  of
importation  of  exportation,  as  the  case  maybe,  in   the   course   of
international trade, where the seller and the buyer have no interest in  the
business of each other and the price is the sole consideration for the  sale
or offer for sale:

      [Provided that such price shall be calculated with  reference  to  the
rate of exchange as in force on the  date  on  which  a  bill  of  entry  is
presented under Section 46, or a shipping bill or bill  of  export,  as  the
case may be, is presented under Section 50;]

      1 *
      [1A Subject to the provisions of sub-section (1), the  price  referred
to in that sub-section in respect of imported goods shall be  determined  in
accordance with the rules made in this behalf.]

      2...

      3...”

13.   It can be seen from Section 14 that the value of  the  imported  goods
is “deemed to be the price at which  such  goods  are  ordinarily  sold,  or
offered for sale ……”.  The Section further stipulates  that  such  price  of
the imported goods is to be determined in accordance with the rules made  in
that behalf.

14.   The  Government  of  India  made  rules  known  as  Customs  Valuation
(Determination of the Price of Imported Goods) Rules,  1988.   Rule  3(i)[1]
stipulates that for the purpose of the rules,  the  value  of  the  imported
goods shall be the transaction value.  Rule  3(ii)[2]  provides  that  where
the value of the imported goods cannot be determined under  Rule  3(i)  then
the same is to be determined in  accordance  with  the  various  methods  of
determination (of the value of the  goods)  provided  under  Rules  5  to  8
sequentially.

15.   The expression “transaction value” is defined under the Rule  2(f)  of
the Customs Valuation(Determination of Price of Imported Goods) Rules,  1988
as follows:-
2(f) “transaction value” means the value determined in accordance with  Rule
4 of these rules.”

16.   Rule 4(1) stipulates as follows:-
“The transaction value of imported goods shall be the  price  actually  paid
or payable for the  goods  when  sold  for  export  to  India,  adjusted  in
accordance with the provisions of Rule 9.”


17.   Sub-rule (2)[3] stipulates that the transaction value of the  imported
goods shall be accepted subject to the various exceptions specified  in  the
said Section, the details of which many not be  necessary  for  the  present
purpose.

18.    In substance, Rule 5 stipulates the next  alternative  procedure  for
determining the value of the imported goods and it reads as follows:-
 5.  Transaction value of identical goods –

(1)(a)      Subject to the provisions of Rule 3 of these  rules,  the  value
of imported goods shall be the transaction value  of  identical  goods  sold
for export to India and imported at or about the  same  time  as  the  goods
being valued.

(b) In applying this rule, the transaction value of  identical  goods  in  a
sale at the same commercial level and in substantially the same quantity  as
the goods being valued shall be used to  determine  the  value  of  imported
goods.

(c)  Where no sale referred to in clause (b) of sub-rule (1) of  this  rule,
is found, the transaction value of  identical  goods  sold  at  a  different
commercial level or in  different  quantities  or  both,  adjusted  to  take
account of the  difference  attributable  to  commercial  level  or  to  the
quantity or both shall be used, provided  that  such  adjustments  shall  be
made on the basis of demonstrated evidence  which  clearly  establishes  the
reasonableness and accuracy of  the  adjustments,  whether  such  adjustment
leads to an increase or decrease in the value.

(2)         Where the costs and changes referred to in sub-rule(2)  of  Rule
9 of these rules are included in the transaction value of  identical  goods,
an adjustment shall be made, if there are significant  differences  in  such
costs and charges between the goods being valued and the identical goods  in
question arising from differences in distances and means of transport.

(3)    In applying  this  rule,  if  more  than  one  transaction  value  of
identical goods is found; the lowest such value shall be used  to  determine
the value of imported goods.”


19.   In substance, Rule 5 enables the Revenue to  determine  the  value  of
the imported  goods  on  the  basis  of  the  identical  imported  goods  of
comparable  import  transaction.  Such  a  procedure/course  of  action   is
authorized notwithstanding the mandate of Rule  4(2)  that  the  transaction
value shall be accepted. Obviously, such an alternative  mode  of  valuation
is authorized as Rule 4 declares that the transaction value of the  imported
goods shall be the “price actually paid or payable”.  Necessarily  the  rule
implies the need of determination of the price actually paid or payable.

20.   It is not necessary  that  in  every  case  of  import  the   importer
declares the price actually paid by him or payable by  him.   Therefore,  if
in a given case the Revenue notices identical goods have  been  imported  by
other importers in comparable transactions at  a  different  rate  (normally
higher rate) then Revenue is enabled by Rules  5  to  reject  the  valuation
made by the importer and determine the “price actually paid or  payable”  by
the importer.

21.   In the case at  hand,  no  doubt  the  revenue  claims  to  have  some
information based on certain alleged imports made at the Bombay port at  the
relevant point of time that the import in question  took  place.   According
to the revenue, those imports at Bombay were declared and valued at  a  much
higher rate than the value declared by  the  appellants  herein.  Therefore,
the  valuation  of  the  goods  imported  by   the   appellant   was   found
unacceptable.  Hence, the procedure under Rule 5 was resorted to.

22.   However,  the  respondent(revenue)  did  not  supply  the  information
(alleged computer print out) which formed the basis of the  conclusion  that
the  appellants  herein  under-valued  the  goods  imported.   In   such   a
situation, the appellants obviously cannot and did not have any  opportunity
of establishing that the claim of the revenue is unsustainable in  law.   If
the information which formed  the  basis  for  the  Revenue  to  reject  the
appellant’s valuation is supplied to the appellants, the appellants  perhaps
will have  an  opportunity  to  dispute  the  comparability  of  the  import
transactions allegedly contained in the computer printout on various  counts
may not be possible to catalogue.

23.   The appellants, of course, admit that the goods imported by  them  are
known commercially as ‘Cyanuric Chloride’ as specified in  the  show  cause.
Whether Cyanuric Chloride was imported at the  relevant  point  of  time  by
others in comparable transactions, i.e., is “a sale at the  same  commercial
level and in substantially the  same  quantity”  etc.  is  a  matter  to  be
considered on the examination of the material relied upon  by  the  Revenue.
A reasonable opportunity must be given to the appellant to  demonstrate  (if
at all) that the transactions relied upon by the Revenue are not  comparable
transactions.

24.   In the absence of any material produced by the  Revenue  in  proof  of
the alleged comparable imports at a higher value, the impugned  order  which
eventually confirmed the original  order  of  assessment  by  the  Assistant
Commissioner of Customs dated 31.3.2001 cannot be sustained for two  reasons
– (1) the mere existence of an alleged computer printout  is  not  proof  of
the existence of comparable imports; (2) assuming  such  a  printout  exists
and the contents thereof are true, the question still  remains  whether  the
transaction evidenced by the said computer printout are  comparable  to  the
transaction  of  the  appellant.   The  appellant  will  have  to  be  given
reasonable opportunity to establish (if he can) that  the  transactions  are
not comparable.

25.   The impugned order and the original assessment  order  are  therefore,
set aside.  However, it will be open to the respondent(revenue)  to  proceed
against the appellants herein  pursuant  to  the  show  cause  notice  dated
25.9.2000 in accordance with law.






26.   The appeals are allowed accordingly.

                                                               ………………………….J.
                                                                    (J.
Chelameswar)


                                                              ……………………..….J.
                                                               (A.K. Sikri)
New Delhi;
August 21, 2014

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[1]      3.  Determination of the method of valuation – For the purpose of
these rules-
      (i) the value of imported goods shall be the transaction value.
[2]
      [3]   (ii)  if the value cannot be determined under the provisions of
clause (i) above, the value shall be determined by proceeding sequentially
through Rules 5 to 8 of these Rules.
[4]      (2)  The transaction value of imported goods under sub-rule(1)
above shall be accepted:

      Provided that-
      (a)  there are no restrictions as to the disposition or use of the
goods by the buyer other than restrictions which --

      (i)  are imposed or required by law or by the public authorities in
India;
                 Or
      (ii)  limit the geographical area in which the goods may be resold;
or
      (iii) do not substantially affect the value of the goods;

      (b)  the sale or price is not subject to same condition or
consideration for which a value cannot be determined in respect of the
goods being valued.

      (c)  no part of the proceeds of any subsequent resale, disposal or
use of the goods by the buyer will accrue directly or indirectly to the
seller, unless an appropriate adjustment can be made in accordance with the
provisions of Rule 9 of these rules; and

      (d) the buyer and seller are not related, or where the buyer and
seller are related, that transaction value is acceptable for customs
purposes under the provisions of sub-rule(3) below.