LAW FOR ALL : October 2016

Friday, October 28, 2016

surcharge has been levied under Section 5A of the said Act on the gross sales tax payable, without deducting the entry tax as required under Section 4 of the OET Act.= It is well settled that the objective of framing rules is to fill up the gaps in a statutory enactment so as to make the statutory provisions operative. Rules also clarify the provisions of an Act under which the same are framed. Section 4 of the OST Act is a charging Section attracting liability to pay Sales Tax “on sales and purchases effected”. Section 5 of the OST Act provides for rate of Sales Tax. Section 5A of the OST Act levies surcharge on the dealer which is nothing but an additional tax. Therefore, on a plain reading of the provisions under the OST Act as well as under the OET Act, a dealer is not entitled for reduction of the amount of entry tax from the amount of tax payable before the levy of surcharge under Section 5A of the OST Act. A harmonious reading of Rule 18 of the Rules as well as Sections 4, 5, 5-A of the OST Act reveals no conflict or inconsistency. The Rules are to be construed to have been made for furtherance of the cause for which the Statute is enacted and not for the purpose of bringing inconsistencies. 21) Section 5A of the OST Act is a self-contained provision and the surcharge, as already seen above, is leviable at the specified per centum of tax payable under the OST Act. Tax payable under the OST Act is independent of the provisions of OET Act. The assessment or quantification or computation of surcharge shall have to be made in accordance with the provisions of the OST Act. 22) Thus, on a conjoint reading of Section 5 of the OST Act, Section 4 of the OET Act and Rule 18 of the Rules, we are of the considered opinion that the amount of surcharge under Section 5A of the OST Act is to be levied before deducting the amount of entry tax paid by a dealer. 23) In view of the forgoing discussion, the impugned judgment and order dated 05.01.2007 passed by the High Court cannot be sustained and is liable to be set aside. In the result, all the appeals are allowed; however, the parties shall bear their own cost.

REPORTABLE

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

1 CIVIL APPEAL NOs. 5913-5920 OF 2008

Commissioner of Commercial Taxes & Ors. .... Appellant(s)

Versus

M/s Bajaj Auto Ltd. & Anr. .... Respondent(s)

WITH

CIVIL APPEAL NOs. 5921 OF 2008

J U D G M E N T

R.K. Agrawal, J.

1) Challenge in the above said appeals is to the legality of the common
judgment and order dated 05.01.2007 rendered by a Division Bench of the
High Court of Orissa at Cuttack in Writ Petition (C) being No. 233 of 2002
and connected matters wherein the High Court allowed the petitions filed by
the respondents herein.
2) Civil Appeal No. 5913 of 2008 is being treated as the leading case,
hence, the facts of the said appeal are given below:-
The respondents are engaged in the sale and purchase of Motor Vehicles and
are registered dealers under the Orissa Sales Tax Act, 1947 (in short ‘the
OST Act’) as well as under the Central Sales Tax Act. The respondents had
been paying entry tax on the goods when they were bought into the State of
Orissa under Section 3(3) of the Orissa Entry Tax Act, 1999 (in short ‘the
OET Act’). However, they were paying surcharge on the balance amount after
deduction of the entry tax paid on the motor vehicles.
The Finance Department, Government of Orissa, by letter dated 20.11.2001,
stated that the surcharge under the OST Act shall be calculated on the
payable amount of tax due on the taxable turnover (Section 5 & 5A) instead
of on the reduced Sales Tax amount after setting off of entry tax.
On 30.03.2002, the Sales Tax Officer, Sambalpur-I Circle, passed an order
under Section 12(4) of the OST Act wherein surcharge was levied under
Section 5A of the OST Act on the gross sales tax payable by the respondent-
Company.
Being aggrieved by the demand notice dated 30.03.2002 as well as the letter
dated 20.11.2001 issued by the Finance Department of the Government of
Orissa, the respondent-Company filed a writ petition being No. 233 of 2002
along with a set of other writ petitions filed by the respondents herein
before the High Court of Orissa at Cuttack.
The Division Bench of the High Court, vide common judgment and order dated
05.01.2007, allowed the appeals filed by the respondents herein.
(f) Being aggrieved by the judgment and order dated 05.01.2007, the
appellants have preferred these appeals before this Court by way of special
leave.
3) Learned senior counsel for the appellants have taken the stand that
there is nothing in the provisions of the OET Act or the Rules made
thereunder which would alter the mode of computation prescribed in Section
5A of the OST Act. Section 4 of the OET Act provides for reduction of the
liability of a dealer under the Sales Tax Act to the extent of entry tax
paid under the OET Act. This provision only appertains to reduction of
entry tax. It has nothing to do with the computation of the surcharge
under the OST Act. In any event, in terms of Section 4 of the OET Act,
reduction of entry tax paid by the dealers is from the liability under the
Sales Tax Act. In substance, it means that the total liability under the
Sales Tax Act having been determined would then be reduced by the extent of
entry tax paid.
4) Learned senior counsel further submitted that the illustration given
under Rule 18 of the Odisha Entry Tax Rule, 1999 (in short ‘the Rules’)
neither curtails nor expands the ambit of the provisions of the Act for
which he relied upon a decision of this Court in Shambhu Nath Mehra vs. The
State of Ajmer AIR 1956 SC 404, wherein it was held as under:-

“11. We recognise that an illustration does not exhaust the full content of
the section which it illustrates but equally it can neither curtail nor
expand its ambit;….”

5) Learned senior counsel further relied upon Lalit Mohan Pandey vs.
Pooran Singh and Others (2004) 6 SCC 626, wherein this Court has held as
under:-

“75. The illustration appended to the Rules does not envisage such a
situation. Illustrations although are of relevance and have some value in
the construction of the text of the sections but they cannot have the
effect of modifying the language of the statute and they cannot either
curtail or expand the ambit of the statute.”

6) Learned senior counsel further submitted that the levy of tax
includes surcharge for which he relied upon the following judgments of this
Court in:-
(i) In The Commissioner of Income Tax, Kerala vs. K. Srinivasan (1972) 4
SCC 526, this Court has held as under:-

“10. The meaning of the word “surcharge” as given in the Webster’s New
International Dictionary includes among others “to charge (one) too much or
in addition …” also “additional tax”.”

(ii) In The Madurai District Central Co-operative Bank Ltd. vs. The Third
Income Tax Officer, Madurai (1975) 2 SCC 454, it was held as under:-

“18. In CIT Kerala v. K. Srinivasan on which the appellant relies, this
Court has traced the history of the concept of “surcharge” in the tax laws
of our country. After considering the report of the Committee on Indian
Constitutional Reforms, the provisions of the Government of India Act,
1935, the provisions of Articles 269, 270 and 271 of the Constitution and
the various Finance Acts, this Court held, differing from the High Court,
that the word “income tax” in Section 2(2) of the Finance Act, 1964
includes surcharges and the additional surcharge.”

(iii) In M/s Hoechst Pharmaceuticals Ltd. and Others vs. State of Bihar and
Others (1983) 4 SCC 45, it was held as under:-

“28. It cannot be doubted that a surcharge partakes of the nature of sales
tax and therefore it was within the competence of the State legislature to
enact sub-section (1) of Section 5 of the Act for the purpose of levying
surcharge on certain class of dealers in addition to the tax payable by
them…..

79. ….A surcharge in its true nature and character is nothing but a higher
rate of tax to raise revenue for general purposes….”

(iv) In M/s Ashok Service Centre and Others vs. State of Orissa (1983) 2
SCC 82, this Court has held as under:-

“17….The Act only levied some extra sales tax in addition to what had been
levied by the principal Act. The nature of the taxes levied under the Act
and under the principal Act was the same and the legislature expressly made
the provisions of the principal Act mutatis mutandis applicable to the levy
under the Act…..”

(v) In Sarojini Tea Co. (P) Ltd. vs. Collector of Dibrugarh, Assam and
Another (1992) 2 SCC 156, it was held as under:-

“16. From the aforesaid decisions, it is amply clear that the expression
‘surcharge’ in the context of taxation means an additional imposition which
results in enhancement of the tax and the nature of the additional
imposition is the same as the tax on which it is imposed as surcharge. A
surcharge on land revenue is an enhancement of the land revenue to the
extent of the imposition of surcharge. The nature of such imposition is the
same viz., land revenue on which it is a surcharge.”

7) On the other hand, learned senior counsel for the respondents
submitted that in view of the clarification issued by the office of
Commercial Tax through e-mail to one of the dealers in motor vehicles,
viz., TELCO, Bhubaneswar, the appellants were stopped from demanding
surcharge on the entire amount of tax payable under the OST Act before
deducting the amount payable under the OET Act. According to him, the
clarification issued by the Commercial Tax Department to TELCO,
Bhubaneswar, was in accordance with the illustration appended to Rule 18 of
the Rules which did not take into consideration the amount of surcharge
payable before deducting the entry tax paid while computing the amount of
sales tax payable. He, thus, submitted that the amount of surcharge is to
be levied only on the balance amount of sales tax payable on the sale price
of the motor vehicle after deducting the entry tax paid. According to him,
if two constructions are possible then the one which preserves the
workability and efficacy has to be preferred for which he relied upon a
decision of this Court in State of Tamil Nadu vs. M.K. Kandaswami and
Others (1975) 4 SCC 745, wherein it has been held as under:-

“26. It may be remembered that Section 7-A is at once a charging as well as
a remedial provision. Its main object is to plug leakage and prevent
evasion of tax. In interpreting such a provision, a construction which
would defeat its purpose and, in effect, obliterate it from the statute
book, should be eschewed. If more than one construction is possible, that
which preserves its workability, and efficacy is to be preferred to the one
which would render it otiose or sterile. The view taken by the High Court
is repugnant to this cardinal canon of interpretation.”

8) Learned senior counsel also relied upon a decision of this Court in
Associated Cement Companies Ltd. vs. State of Bihar and Others (2004) 7 SCC
642, wherein this Court has held that a dealer is entitled to reduction in
tax to the extent of tax paid under the Bihar Entry Tax Act while working
out the tax payable by it under the Bihar Sales Tax Act.
9) Heard learned counsel for the parties and perused the records.
10) The sole question for consideration is whether the ‘Surcharge’ under
Section 5A of the OST Act is to be computed on the gross amount of sales
tax or on the net amount of sales tax after setting of or deducting the
amount of entry tax?
11) Under Section 5 of the OST Act, Sales Tax is payable by a dealer on
the taxable turnover at a prescribed rate. Under Section 5A, it is provided
inter alia for payment of surcharge. Section 5A of the OST Act (as it stood
at the relevant time) reads as under:

“5A Surcharge: (1) Every dealer whose gross turnover during any year
exceeds rupees ten lakhs shall, in addition to the tax payable by him under
this Act, also pay a surcharge at the rate of ten per centum of the total
amount of tax payable by him:…..”
12) It would also be relevant to reproduce Section 4 of the OET Act (as
it stood at the relevant time) which reads as under:-
“(4) Reduction in Tax Liability:

(1) where an importer of motor vehicle liable to pay tax under sub-section
(3) of Section 3 being a Dealer in motor vehicles becomes liable to pay tax
under the Sales Tax Act by virtue of sale of such motor vehicles then his
liability under the Sales Tax Act shall be reduced to the extent of tax
paid under this Act.

Explanation: For the purpose of this sub section the chassis and the
vehicle with body built on the chassis shall be treated as one and the same
goods.

(2) When an importer or manufacturer of goods specified in Part-III of
the schedule except motor vehicles pays tax under sub-section (1) of
section 3 or section 26 of this Act, being a Dealer under the Sales Tax Act
becomes liable to pay tax under the said Act by virtue of Sale of such
goods, then his liability under the Sales Tax Act shall be reduced to the
extent of tax paid under this Act.
(3) The reduction in tax liability of an importer as provided in sub-
section (1) or of an importer or manufacturer as provided in sub-section
(2) shall not be allowed, unless the entry tax paid and tax payable under
the Sales Tax Act are shown separately in the cash memo or the bill or
invoice issued by him for the sale by virtue of which such liability
accrues.”

13) Rule 18 of the Odisha Entry Tax Rule, 1999 is reproduced hereunder:

“18. Set off of Entry Tax against Sales Tax: (1) When the importer of a
motor vehicle liable to pay tax under sub-section (2) of section 3 of this
Act being a dealer in motor vehicles becomes liable to pay tax under the
Sales Tax Act by virtue of sale of such motor vehicle, his tax liability
under the Sales Tax Act shall be reduced to the extent of the tax paid
under these rules.

Illustration: Assuming Entry Tax Rate and Sales Tax Rate to be 10%

|1) |Purchase Value of Motor Vehicle | Rs. |
| | |2,00,000/- |
|2) |Entry Tax Payable @ 10% | Rs. |
| | |20,000/- |
| |Total:- | Rs. 2,20,000/-|
|3) |Sale Price of the Motor Vehicle | Rs. |
| | |2,20,000/- |
|4) |(a) Sales Tax due @ 10% | Rs. |
| | |22,000/- |
| |Deduct Entry Tax paid | Rs. |
| | |20,000/- |
| |Sales Tax payable | Rs. |
| | |2,000/- |
| |Total:- | Rs. 2,22,000/-|

Note: If the sales tax payable on such motor vehicle is less than the entry
tax paid, then the sales tax payable will be nil.

(2) When an importer of goods specified in Part III of the Schedule to
the Act other than motor vehicle, liable to pay tax under this Act is also
a dealer liable to pay tax under the Sales Tax Act, then the Sales Tax
payable on the sale of goods shall be reduced to the extent of entry tax
paid in the same manner as illustrated under the sub-rule(1).”

In view of the statutory provision contained in Rule 18 of the Rules, the
tax payable under the said Act was to be determined after deduction
therefrom the entry tax paid by a dealer importing vehicle into the State
of Orissa.
14) Since the determination of surcharge payable under the OET Act was
relatable and/or linked to the tax payable under the OST Act, a
clarification was sought for by one of the dealers in motor vehicles,
namely, TELCO which is similarly situated as the Respondent No.1-company
from the office of Commercial Tax, in view of the provision contained in
Rule 18 of the Rules, which is as under:-

“Surcharge is payable on the amount of tax that becomes payable by a dealer
after set off of entry tax paid at the time of purchase of such goods.”

15) In accordance with the clarification issued to TELCO, Bhubaneswar, as
aforesaid, which was also circulated to other dealers of motor vehicles,
including the Respondent No.1-Company, surcharge was calculated and paid
which was quantified after deducting therefrom the amount of entry tax paid
by the Respondent No.1-Company while importing a motor vehicle into the
State of Orissa.
16) On 20.11.2001, the Government of Orissa, in the Finance Department,
wrote a letter to the Commissioner of Commercial Taxes, Orissa relating to
the computation of tax payable on the motor vehicle for the purpose of levy
of surcharge on an interpretation of the provisions of the OET Act, the OST
Act and the Rules which is as under:-

“GOVERNMENT OF ORISSA
FINANCE DEPARTMENT

No. CTB-23/2001. 55863/F
From:
Shri K.C. Parija,
Deputy Secretary to Government
To
The Commissioner of Commercial Taxes,
Orissa, Cuttack
Sub: Computation of tax payable on Motor Vehicle for the purpose of levy
of surcharge.

Ref: C.C.T.’s letter No. 15264/CT, dt. 12.7.2000
Bhubaneswar, the 19th November, 2001.

Sir,
In inviting a reference to the aforesaid letter, I am directed to say
that surcharge under Orissa Sales Tax Act, 1947, shall be calculated on the
payable amount of tax due on the taxable turnover (Section 5 & 5A) instead
of on the reduced Sales Tax amount after setting off of entry tax. The
position may kindly be clarified to the Field Officers and if such faulty
procedure of charging surcharge is adopted by any of the Circle Officers,
same should be discontinued forthwith and corrective measure as per the
provisions of the statue may be taken up to make good the loss.
2. It may further be noted that the illustration in rule -18 of
Orissa Entry Tax Rule, 1999 or provision of any other Finance Department
notification have limited implication for that purpose only and they have
no overriding effect on the statutory provisions of the OST Act.

Yours faithfully

Sd/-
(K.C. Parija)
DEPUTY SECRETARY TO GOVERNMENT

OFFICE OF THE COMMISSIONER OF COMMERCIAL TAXES: ORISSA: CUTTACK
Dated: 20.11.01
Memo No. 24808/CT
III(I) 207/2000

Copy forwarded to all ACCTs/All CTOs/All Addl. CTOs of Assessment
Units for information and necessary action. The CTOs are requested to
circulate the above clarification of Finance Deptt. to all the Addl. CTOs
of their respective circles.
Dd/-
Addl. Commissioner of Commercial
Taxes (Gen) Orissa, Cuttack”

In the said letter, it was inter alia intimated that surcharge shall be
calculated on the payable amount of tax due on the taxable turnover
(section 5 and 5A) instead of on the reduced sales tax amount after setting
off of Entry Tax.
17) On 30.03.2002, the Sales Tax Officer, Sambalpur-I Circle, Sambalpur
passed an order under section 12(4) of the OST Act wherein surcharge has
been levied under Section 5A of the said Act on the gross sales tax
payable, without deducting the entry tax as required under Section 4 of the
OET Act. As a result of this, excess surcharge to the tune of Rs.
21,25,117.37/- has been levied by the Sales Tax Officer.
18) It is well settled that an illustration given under the Rules does
not exhaust the full content of the section which it illustrates but
equally it can neither curtails nor expands its ambit. Further, surcharge
is nothing but an additional tax and is payable on the sale of goods in the
manner laid down for levy of surcharge. In view of the provisions
contained in the OET Act, a dealer is not entitled for reduction of the
amount of entry tax from the amount of tax payable before the levy of
surcharge under Section 5A of the OST Act.
19) On a plain reading of the provisions of the OST Act as well as the
OET Act and the Rules, it can be seen that Section 5A of the OST Act
creates a charge and imposes liability on every dealer under the OST Act to
pay surcharge @ 10% on the amount of tax payable by him under the OST Act.
Section 4(1) of the OET Act, in the same way, prescribes for reduction of
the tax amount payable by the dealer to the extent of entry tax already
paid for the same article for which sales tax is payable. The Section,
does not specifically contemplate anything, which would indicate that the
provisions of the OET Act or the Rules have to be taken into consideration
while assessing the sales tax or surcharge. In essence, the provisions
made in the Rules lay down the modality of ‘set off’. It is important to
mention here that OST Act was enacted in the year 1947 whereas OET Act was
enacted in 1999. The provision of set off has been made in the OET Act and
the Rules framed thereunder and not in the OST Act. The heading of Section
4 of the OET Act gives a broad idea regarding the provision of set off by
way of “reduction in tax liability”. Sub-Sections 1 and 2 of Section 4 of
the OET Act provide for reduction of liability under the OST Act.
20) It is well settled that the objective of framing rules is to fill up
the gaps in a statutory enactment so as to make the statutory provisions
operative. Rules also clarify the provisions of an Act under which the
same are framed. Section 4 of the OST Act is a charging Section attracting
liability to pay Sales Tax “on sales and purchases effected”. Section 5 of
the OST Act provides for rate of Sales Tax. Section 5A of the OST Act
levies surcharge on the dealer which is nothing but an additional tax.
Therefore, on a plain reading of the provisions under the OST Act as well
as under the OET Act, a dealer is not entitled for reduction of the amount
of entry tax from the amount of tax payable before the levy of surcharge
under Section 5A of the OST Act. A harmonious reading of Rule 18 of the
Rules as well as Sections 4, 5, 5-A of the OST Act reveals no conflict or
inconsistency. The Rules are to be construed to have been made for
furtherance of the cause for which the Statute is enacted and not for the
purpose of bringing inconsistencies.
21) Section 5A of the OST Act is a self-contained provision and the
surcharge, as already seen above, is leviable at the specified per centum
of tax payable under the OST Act. Tax payable under the OST Act is
independent of the provisions of OET Act. The assessment or quantification
or computation of surcharge shall have to be made in accordance with the
provisions of the OST Act.

22) Thus, on a conjoint reading of Section 5 of the OST Act, Section 4 of
the OET Act and Rule 18 of the Rules, we are of the considered opinion that
the amount of surcharge under Section 5A of the OST Act is to be levied
before deducting the amount of entry tax paid by a dealer.

23) In view of the forgoing discussion, the impugned judgment and order
dated 05.01.2007 passed by the High Court cannot be sustained and is liable
to be set aside. In the result, all the appeals are allowed; however, the
parties shall bear their own cost.

...…………….………………………J.
(SHIVA KIRTI SINGH)

.…....…………………………………J.
(R.K. AGRAWAL)

NEW DELHI;
OCTOBER 28, 2016.
-----------------------
18

“Indirect Taxation”=Section 3-B undoubtedly commences with a non-obstante clause, but the provision has to be read harmoniously with sub-section (6) to Section 4-B. Any other interpretation would make sub-section (6) a dead letter, for if we accept the plea of the Revenue whenever there is violation or failure to abide with the “intendment”, Section 3-B would be invoked and applied, not sub-section(6) to Section 4-B. Section 3-B would apply when a false and wrong certificate or declaration is made. Sub-section (6) on the other hand, deals with cases where the dealer is unable to comply with the intendment, i.e., for some reason he is unable to sell the goods within the State, export them or sell them in the course of inter-State trade or commerce. Intendment of the said nature has not been treated as false or wrong declaration as consequences have been prescribed in sub-section (6). It is essential to be stated that consistency and certainty in tax matters is necessary. In cases relating to “Indirect Taxation”, this principle is even more important. Clarity in this regard is a necessity and the interpretative vision should be same.

REPORTABLE

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 10430 OF 2016
(@ S.L.P. (Civil) No. 28962 of 2013)

Commissioner of Commercial Tax, U.P. …Appellant

Versus

M/s Oswal Greentech Limited …Respondent

J U D G M E N T

Dipak Misra, J.

Leave granted.
2. The respondent, a dealer registered under Section 8-A of the U.P.
Trade Tax Act, 1948 (for brevity, “the Act”), is a holder of a recognition
certificate as per provisions contained in Section 4-B of the Act. The
respondent used to make purchases of raw material at the concessional rate
of tax against Form III-B obtained by it from the office of the Trade Tax
Officer. As per conditions prescribed under Section 4-B(2) of the Act, the
notified goods manufactured out of the raw material produced at the
concessional rate of tax against Form III-B is required to be sold by such
manufacturer in the State or in the course of inter-State trade and
commerce or in the course of export out of India. It is also provided in
the said Section that if a recognition certificate holder sells goods
manufactured by it out of the raw material purchased at the concessional
rate of tax against Form III-B in a manner otherwise than prescribed under
Section 4-B(2), the said dealer shall be liable to penal action equal to
three times of the tax, thus saved by the said dealer on purchase made
against Form III-B.
3. At the time of scrutiny, the assessing authority noticed that the
respondent had made purchases of natural gas against Form III-B at the
concessional rate of tax, and after manufacture of the notified goods, that
is, fertilizers, out of the said purchases of natural gas purchased against
Form III-B, some of the finished goods were transferred outside the State
of Uttar Pradesh. The Revenue issued show cause notice to the respondent
for the assessment year 2005-06 and after considering the explanation
offered, imposed penalty of Rs.10,46.98,335/- vide order dated 28.03.2009.
Being aggrieved, the respondent preferred an appeal under Section 9 of the
Act before the Joint Commissioner (Appeals)-1, Commercial Tax, Bareilly
being Appeal No. 798 of 2009, and the appellate authority vide its order
dated 12.11.2009 dismissed the appeal and confirmed the order of the
assessing authority dated 28.03.2009 passed under Section 3-B of the Act.
4. The dismissal of appeal constrained the respondent to file a second
appeal (Appeal No. 237 of 2009) before the Tribunal, Trade Tax, U.P. (for
short, “tribunal”). Since there was difference of opinion in the Division
Bench of the tribunal, the case was referred to the Chairman of the
tribunal who nominated another Judicial Member for his opinion. The
learned Judicial Member gave his opinion in favour of the respondent. On
the basis of the opinion expressed by the nominated Judicial Member, the
appeal stood allowed as a consequence of which the order imposing penalty
was annulled.
5. Being aggrieved by the order of the tribunal, the Revenue filed Trade
Tax Revision No. 579 of 2011 under Section 11 of the Act before the High
Court. The question of law that arose for consideration before the High
Court was as follows:-
“Whether under the facts and circumstances of the case, the Commercial Tax
Tribunal were legally justified in granting the exemption on purchase of
raw material against Form III-B whereas the dealer has made a stock
transfer of finished goods which is not permissible under law?”

6. The learned Single Judge took note of the fact that the tribunal had
relied on a Division Bench decision of the High Court in Camphor and Allied
Products Ltd. v. State of U.P. & Ors.[1] and on that basis had come to the
conclusion that the assessee had purchased the material and used it in
manufacture and there was no violation of Section 3-B of the Act and
accordingly concurred with the view of the tribunal as a result of which
the revision stood dismissed.
7. We have heard Mr. Pawanshree Agrawal and Mr. Rajeev Dubey, learned
counsel for the appellant and Mr. Punit Dutt Tyagi for the respondent.
8. It is profitable to refer to the findings recorded by the assessing
officer. It has been held by him that under Section 3-B and 4-B(2) of the
Act, the finished product manufactured from the raw material purchased at a
concessional rate can only be sold in U.P. or in the course of inter-State
trade and commerce or can be exported out of country, but stock transfer is
not permissible. According to the assessing officer, the trader had
purchased natural gas at a concessional rate against Form III-B i.e. 20%
minus 15% = 5%, availing the benefit at the rate of 15% and paying tax at
the rate of 5%. The production of urea has been done by using the natural
gas obtained at a concessional rate and the manufactured product, that is,
urea has been sent by way of stock transfer outside the State in clear
violation of Section 3-B and 4-B(2) of the Act. It has been further opined
by him that the assessee had acted contrary to the provision of law by
purchasing raw material at a concessional rate and thereafter sending the
finished goods as stock transfer outside the State which does not come
under the term ‘sale’ and no revenue is generated by the State. Proceeding
further, the assessing officer has held thus:-
“The trader without acting under the provisions of the Section 3B and 4B(2)
of the Uttar Pradesh Trade Tax Act, had caused loss of revenue to the
State. The State had lost revenue at the rate of 15% on the purchase of
raw material used in the produced goods sent as stock transfer, which could
have received had these were not purchased against Form 3B. Because the
tax has been paid at the rate of 5% against form 3B. Had the trader not
declared false declaration against Form 3B, and had acted as per the
provision of Section 4B(2), then the State Government could have got 20% as
Tax and 1% as development tax totaling 21%. The local purchase of natural
gas could have been made without form 3B. But the trader had not acted
under the provisions of Section 3B. The trader had not also acted u/s 4B
(2) which he had declared to act when taking the forms 3B. Hence, the raw
material purchased at a concessional rate were utilized in the
manufacturing of the notified finished product (Urea), but instead of
making any sale (within and outside the State) and without exporting those
outside the country, had made stock transfers, thereby had violated Section
4B(2) of the Act. By making false declaration u/s 3B of the Act, the
trader had only deposited tax on the purchase of raw material (Natural
Gas) at the rate of 5% only and availed the benefit of 15%. On the other
hand without taking any action u/s 4B (2) of the Act, had made stock
transfer outside the State, as a result of which had saved tax @ 7.5% apart
from the development tax on Urea. As such the trader was able to evade tax
@ 22.5% in an illegal manner and thereby had caused double loss of revenue
to the State.”

9. The appellate authority, as the order would reflect, has expressed
the view that the assessee, after availing the benefit at the concessional
rate, has violated the provisions contained in Section 4B(2) of the Act and
has been making stock transfers quite often. The appellate authority has
opined that the principle stated in the authorities in Camphor and Allied
Products Ltd. (supra), Bareilly v. State of U.P.[2], CTT v. Manoharlal
Heeralal Pvt. Ltd.[3] are different and not applicable to the facts of the
case.
10. The opinion of the tribunal, as expressed by the judicial member,
which is the final view of the tribunal, is that the trader was authorized
to purchase the natural gas for the manufacture of urea and it is
undisputed that it had manufactured urea by utilizing the natural gas
purchased against the issue of Form III-B. He has proceeded to state that
no action can be taken under Section 3-B on the ground that the products
utilizing the natural gas purchased against the issue of Form III-B were
sent through stock transfer without selling those directly, because Section
4-B of the Act cannot be extended to determine the responsibility under
Section 3-B. The judicial member has arrived at the said conclusion on the
foundation that Section 4-B has nothing to do with the fact that how the
notified goods are to be disposed of because the provision of Section 3-B
is not applicable in case the raw material is used for production of the
notified goods mentioned in the recognition certificate. The learned
member has expressed the view that the decisions in Camphor and Allied
Products Ltd. (supra) and Bareilly (supra) are fully applicable and the
case of the assessee is covered by the principles stated therein. He also
took note of the fact that the decisions in Camphor and Allied Products
Ltd. (supra), Bareilly (supra) and Manoharlal Heeralal (supra) have not
been assailed before the Supreme Court and, therefore, they are binding
precedents in the field. Eventually, the learned member came to hold thus:-

“In the present case it is established that the trader had utilized natural
gas purchased against the Form 3B in the production of the ‘Urea’. As
such, in my opinion, proceeding u/s 3B should not have been initiated
against the trader. The order which has been passed by the assessing
officer u/s 3B of the Act and which has been confirmed by the first
appellate court, are not justified.”

11. To appreciate the controversy in proper perspective and to scrutinize
the analysis of the departmental authorities on one hand and the tribunal
and the High Court on the other, it is necessary to scan the statutory
scheme and its real import. Section 3-B of the Act reads as follows:-

"Section 3-B. Liability on issuing false certificate, etc.-Notwithstanding
anything to the contrary contained elsewhere in this Act, and without
prejudice to the provisions of Sections 14 and 15-A, a person, who issues a
false or wrong certificate or declaration, prescribed under any provision
of this Act or the Rules framed thereunder, to another person by reason of
which a tax leviable under this Act on the transaction of purchase or sale
made with or by such other person ceases to be leviable or becomes leviable
at a concessional rate, shall be liable to pay on such transaction an
amount which would have been payable as tax on such transaction had such
certificate or declaration not been issued :

Provided that before taking any action under this section, the person
concerned shall be given an opportunity of being heard.

Explanation.-Where a person issuing a certificate or declaration discloses
therein his intention to use the goods purchased by him for such purpose as
will make the tax not leviable or leviable at a concessional rate but uses
the same for a purpose other than such purpose, the certificate or
declaration shall, for the purpose of this section, be deemed to be wrong."
[Emphasis supplied]

12. Section 4-B(2) and 4-B(6) of the Act which are relevant to the
controversy at hand and further on which the Revenue has laid immense
emphasis are extracted hereunder:-

“(2) Where a dealer requires any goods, referred to in sub-section (1) for
use in the manufacture by him, in the State of any notified goods, or in
the packing of such notified goods manufactured or processed by him, and
such notified goods are intended to be sold by him in the State or in the
course of inter-State trade or commerce or in the course of export out of
India, he may apply to the assessing authority in such form and manner and
within such period as may be prescribed, for the grant of a recognition
certificate in respect thereof, and if the applicant satisfies such
requirements including requirement of depositing late fee and conditions as
may be prescribed, the assessing authority shall grant to him in respect of
such goods a recognition certificate in such form and subject to such
conditions, as may be prescribed.

Explanation.-For the purposes of this sub-section,-(a) goods required for
use in the manufacture shall mean raw materials, processing materials,
machinery, plant, equipment, consumable stores, spare parts, accessories,
components, sub-assemblies, fuels or lubricants ; and

(b) ‘notified goods’ means such goods as may, from time to time, be
notified by the State Government in that behalf.

xxxx xxxxx

(6) Where a dealer in whose favour a recognition certificate has been
granted under sub-section (2) has purchased any goods after payment of tax
at concessional rate under this section, or as the case may be, without
payment of tax and the goods manufactured out of such raw materials or
processing materials or manufactured goods after being packed with such
packing material are sold or disposed of otherwise than by way of sale in
the State or in the course of inter-State trade or commerce or in the
course of export out of the territory of India, such dealer shall be liable
to pay an amount equal to the difference between the amount of tax on the
sale or purchase of such goods payable under this section and the amount of
tax calculated at the rate of four per cent, on the sale or purchase of
such goods."

13. It is submitted by Mr. Agrawal, learned counsel for the appellant
that recognition certificate is granted where a dealer uses the goods (raw
material) in the manufacture of notified goods by him in the State or in
the course of inter-State trade and commerce or in the course of export
outside India and the fulfillment of aforesaid two conditions is a pre-
requisite for claiming exemption, but in the case at hand, the assessee
though has purchased the goods at concessional rate by furnishing Form III-
B under Rule 25-B(1) has engaged itself in stock transfer and, therefore,
the penal provisions gets fully attracted. Relying on sub-section (6) of
Section 4-B, it is urged by him as no differential tax has been paid by the
assessee, certificate in Form III-B continues to be a false or a wrong
certificate as regards the purchase of natural gas and used in the
manufacture of urea, hence the penalty has been correctly levied. It is
his further submission that decision in Camphor and Allied Products Ltd.
(supra) is not applicable to the facts of the present case, for in the said
case the camphor manufactured by the assessee was transferred by way of
stock transfer outside the State of U.P. on which the differential tax was
paid in accordance with Section 4-B(6) of the Act, but in the present case,
no differential tax has been paid by the respondent, and such violation as
a natural corollary leads to the inevitable conclusion that the certificate
in Form III-B continues to be a false or wrong certificate. Lastly, it is
contended by him that the Division Bench of the High Court has not
correctly laid down the law in Camphor and Allied Products Ltd. (supra)
inasmuch as it has confined its consideration to the first part of
condition enshrined under Section 4-B(2) of the Act, whether the raw
material has been used in the manufacture or not, but has not considered
the second part, that is, the goods had been sold intra-State or inter-
State or exported out of India.
14. Mr. Tyagi, learned counsel for the assessee, per contra, would
contend that the respondent-assessee is engaged in the manufacture and sale
of fertilizer and as per the recognition certificate, it is entitled to
procure natural gas at a concessional rate and the respondent has procured
natural gas from two sources (1) from GAIL at a concessional rate against
Form III-B and (2) from outside the State from BPCL/GAIL at normal tax.
Learned counsel would submit that the respondent has disposed of urea by
local sale and has also transferred the stock to various States which have
been pursuant to and in compliance of Movement Orders issued by the
Government of India from time to time. He has referred to directions
issued by the Ministry of Chemicals & Fertilizers under the Fertilizer
(Movement Control) Order, 1973. It is urged by him that as per the
Fertilizer (Movement Control) Order, 1973 unless the Government of India
authorizes a manufacturer to make stock transfer of a particular quantity
of urea in a particular month, no urea can be transferred/sold from one
State to another. Learned counsel would put forth that the State never
disputed the stock transfers made under Fertilizer (Movement Control)
Order, 1973. Learned counsel would further propone that show cause notice
was issued under Section 3-B for alleged violation of Form III-B and it
cannot change the foundation to raise a fresh plea under Section 4-B(6) of
the Act. It is further urged by Mr. Tyagi that the pronouncement in
Camphor and Allied Products Ltd. (supra) is absolutely correct and, in
fact, it has been holding the field for considerable length of time as far
as the State of U.P. is concerned. To substantiate the contentions he has
raised, he has placed reliance on CCE v. Gas Authority of India Ltd.[4] and
SACI Allied Products Ltd. v. CCE, Meerut[5]. Though Mr. Tyagi has
contended with regard to limitation in exercise of revisional jurisdiction
and the bar on the part of revenue to accept the judgment on the same
question in the case of one assessee and question its correctness in the
case of another assessee and in support of the same has cited certain
authorities, we need not enter into the said arena, for what we are going
to hold.
15. In Camphor and Allied Products Ltd. (supra) the High Court took note
of the fact that the RFO and furnace oil was purchased against Form III-B
and the same was used in the manufacture of camphor and other goods
mentioned in the recognition certificate granted under Section 4-B of the
Act. It took note of the two earlier decisions in Commissioner of Trade
Tax v. Spox India and Allied Industries[6] and Arora Steel Udyog (P) Ltd. v
Commissioner of Trade Tax, U.P.[7] and quoted a passage from the latter
authority, which is to the following effect:-
"It is well-settled that proceedings under Section 3-B shall be initiated
only when the assessee issues a false or wrong certificate or declaration
provided under any of the provisions under the Act or Rules framed
thereunder. This view has been constantly taken by this Court in Sahni
Engineering Works v. Commissioner of Sales Tax 1994 UPTC 70, Commissioner
of Sales Tax v. B.K. & Co. Engineering Works, Agra 1995 UPTC 502 and S.G.
Industries v. State of Uttar Pradesh [1998] 108 STC 328; 1997 UPTC 616 of
this Court. Therefore, unless it was shown that the form III-B issued by
the revisionist were false or wrong, or the declarations made therein was
false or wrong, no proceedings under Section 3-B of the Act could have been
initiated. It is also not the case of the department that the assessee did
not use the goods purchased by him for the purpose for which exemption
certificate was granted to him. Therefore, the assessee cannot be deemed to
have issued a wrong certificate."

It also took note of the decision relied upon by the Revenue in Puri
Industries v. Commissioner of Sales Tax[8], which took a different view and
thereafter came to hold as follows:-
“28. The petitioner purchased RFO/furnace oil against form III-B for
manufacture of its final product, namely, camphor and other allied
products. Section 3-B clearly shows that it is the user of the goods which
is relevant for the purpose for which form III-B was given and not how the
finished product or manufactured goods are sold. Admittedly form III-B was
issued for use in manufacture of camphor and other allied products and
RFO/furnace oil for which the recognition certificate was granted. Hence in
our opinion the petitioner cannot be deemed to have issued any wrong or
false certificate and tax cannot be legally charged under Section 3-B of
the Act.

xxxxx xxxxx

31. In the present case RFO and furnace oil have admittedly been used in
the manufacture of camphor and allied products for which recognition
certificate was granted. Hence it cannot be deemed that the petitioner has
issued any wrong or false certificate. It is evident from the facts that
the petitioner has not issued any wrong or false certificate or declaration
in form III-B inasmuch as both RFO and furnace oil have been used for the
same purpose, namely, in the process of manufacture of goods, i.e.,
camphor, and another allied products.”

16. We have already analysed the statutory scheme and what has been dwelt
with by the High Court in Camphor and Allied Products Ltd. (supra) and what
has been pressed into service by Mr. Tyagi. Presently, text and context in
detail. Section 4-B(2) is applicable to the dealer who manufactures
notified goods in the State or engaged in packaging of such notified goods
manufactured or processed by him. The said dealer can apply to the
assessing authority in such form, manner and within the time prescribed for
grant of the recognition certificate. The assessing authority can grant
the recognition certificate to the dealer in respect of goods used in the
manufacture of the notified goods or packing of the notified Goods.
Explanation to the sub-section defines the word “Goods” which means raw
materials, processing material, machinery, spare parts and also fuels. The
expression “Notified Goods” means such goods as notified by the State
government from time to time.
17. Sub-section (2) to Section 4-B also requires that the notified goods
should be “intended” to be sold by the dealer within the State or in the
course of inter-State trade or commerce or in the course of exports out of
India. The expression “intended” is significant and important. It refers
to the intention of the dealer after the goods are manufactured and packed.
The expression “in the course inter-State trade or commerce” is quite
broad and wide. An issue may arise as to whether the stock transfer
outside the State in terms of directions issued by the Central Government
can be considered as sale or transaction in the course of inter-State trade
or commerce. In the case at hand, we would not decide the said issue or
question, for it was not raised or argued before the authorities and can be
examined in an appropriate case when raised and considered. Be it noted,
sub-section (6) is a specific provision which deals with the case of the
dealer who has been issued the recognition certificate and has purchased
goods without payment of tax or at concessional rates, but has sold the
manufactured goods or packaged goods otherwise than by way of sale in the
State, or in the course of inter-State trade or commerce or export out of
India. The provision specifically deals with cases where the dealer
manufactures or packs the notified goods and has taken benefit of
lower/concessional or nil rate of tax on the raw material but is unable to
fulfill the intendment, i.e., he has not been able to sell the notified
goods by way of sale within the State or in course of inter-State state or
commerce or by way of export. In such cases, the dealer is liable to pay
the amount of difference on the amount of sale or purchase of such goods on
which concession or nil rate of tax was paid on account of issue of the
requirement certificate and the amount of tax calculated @ 4%. The sub-
section is a particular and a specific section which deals with and
specifies the consequences when the dealer is unable to meet and comply
with intendment. The sub-section (6) would, thus, be applicable.

18. Section 3-B undoubtedly commences with a non-obstante clause, but the
provision has to be read harmoniously with sub-section (6) to Section 4-B.
Any other interpretation would make sub-section (6) a dead letter, for if
we accept the plea of the Revenue whenever there is violation or failure to
abide with the “intendment”, Section 3-B would be invoked and applied, not
sub-section(6) to Section 4-B. Section 3-B would apply when a false and
wrong certificate or declaration is made. Sub-section (6) on the other
hand, deals with cases where the dealer is unable to comply with the
intendment, i.e., for some reason he is unable to sell the goods within the
State, export them or sell them in the course of inter-State trade or
commerce. Intendment of the said nature has not been treated as false or
wrong declaration as consequences have been prescribed in sub-section (6).
It is essential to be stated that consistency and certainty in tax matters
is necessary. In cases relating to “Indirect Taxation”, this principle is
even more important. Clarity in this regard is a necessity and the
interpretative vision should be same.

19. In view of the aforesaid analysis, we find the view expressed by the
tribunal which has been concurred by the High Court is absolutely
defensible and does not warrant any interference. Resultantly, the appeal,
being devoid of merit, stands dismissed. There shall be no order as to
costs.

…….……….............J.
(DIPAK MISRA)

….……………………..J.
(SHIVA KIRTI SINGH)
New Delhi,
October 28, 2016
-----------------------
[1] (2005 ) 139 STC 380 (All)
[2] 2004 UPTC 331
[3] 2006 NTN, Vol. 29 page 223
[4] 2008 (232) ELT 7 (SC)
[5] 2005 (183) ELT 225 (SC)
[6] 1998 UPTC 631
[7] 1999 UPTC 277
[8] 1988 UPTC 1197

in Benson vs. State of Kerala – Criminal Appeal No.958 of 2016 (since disposed of on 03.10.2016) and the accompanying appeals, arising from the conviction of the appellant from his prosecution on the offences proved, this Court in the singular facts as involved and having regard to the duration of his incarceration and the remission earned by him, extended the benefit of such discretion and directed that the sentences awarded to him in those cases would run concurrently. It was noticeably recorded that the offences in the cases under scrutiny had been committed on the same day. The benefit of the discretion was accorded to the appellant therein referring as well to the observation in V.K. Bansal (supra) that it is difficult to lay down any straight jacket approach in the matter and that a direction that the subsequent sentence would run concurrently or not, would essentially depend on the nature of the offence or offences and the overall fact situation. Understandably, the appellant was required to serve the default sentence as awarded with the direction that if the fine imposed had not been deposited, the default sentence or sentences would run consecutively.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NOS. 988-989 OF 2016
[ARISING OUT OF S.L.P. (CRL.) NOS.6226-27 OF 2016)

SHYAM PAL .…APPELLANT
VERSUS

DAYAWATI BESOYA & ANR. ....RESPONDENTS

J U D G M E N T

AMITAVA ROY, J.

The instant appeals call in question the judgment and order dated
08.02.2016 passed by the High Court of Delhi in Criminal Revision Petition
No.403 of 2015, sustaining the conviction of the appellant under Section
138 of the Negotiable Instruments Act, 1988 (hereafter referred to as the
“Act”) as recorded by the Trial Court and affirmed in appeal by the
District and Sessions Judge, Saket Court, New Delhi. The High Court while
maintaining the substantive sentence of simple imprisonment for 10 months
and fine of Rs.6,50,000/- as compensation as awarded by the Trial Court,
however has reduced the default sentence from six months simple
imprisonment to that of three months. The order dated 22.02.2016 rendered
by the High Court declining the prayer for modification of the above
decision by directing the release of the appellant, he having already
served the sentence in all being in custody from 25.02.2015 has been
assailed in the present appeals as well.

(2) We have heard Mr. Jayant K. Sud, learned counsel for the appellant.
None appeared for the respondents.

(3) The recorded facts divulge that the respondent No.1 had filed two
complaints, both under Section 138 of the Act against the appellant in the
Court of the Chief Metropolitan Magistrate (South East), Patiala House
Court, New Delhi which were registered as C.C. No.407 of 2011 and C.C.
No.430 of 2011 alleging that on 31.07.2008 the appellant had visited the
residence of the complainant and had requested for a loan of Rs.5 lacs to
meet his personal needs which he promised to return on 13.11.2009. On this,
as the complaint reads, the respondent/complainant reminded him that she
had already lent a sum of Rs.5 lacs to him on 01.05.2008 and that she had
no funds to accede to his request for the second installment. However,
having regard to the friendly relations, the respondent/complainant on the
persuasion of the appellant, did advance a further amount of Rs.5 lacs to
him as loan on that date, by somehow arranging the same.

(4) According to the respondent/complainant in connection with the loans
advanced, the appellant had issued two cheques bearing Nos.97357 and 97358
for Rs.5 lacs each and drawn on State Bank of Bikaner and Jaipur, Arnar
Colony, New Delhi. Both these cheques when presented at the appropriate
time, were dishonored with the remarks “funds insufficient”. Thereafter,
the respondent/complainant issued legal notices and as the same though
served, remained unresponded, complaints were filed.

(5) As eventually the arguments in the present appeals have centered
around the sentence alone, we do not wish to burden the present rendering
with avoidable facts.

(6) The Trial Court after a full dress adjudication, in the two
proceedings, returned a finding that the signatures on the cheques were not
disputed by the appellant and indeed were issued in discharge of legally
recoverable debts subsisting against him and acting on the presumption
available under Section 139 of the Act convicted him of the offence under
Section 138 of the Act. Consequently, he was awarded simple imprisonment
for 10 months and fine of Rs.6,50,000/- as compensation in both the cases.
In case of default of payment of compensation, the appellant was ordered to
suffer simple imprisonment of six months in each case. This was by
judgments and orders dated 21.01.2014.

(7) The appellant having unsuccessfully appealed against his conviction
and sentence before District and Sessions Judge (South East), Saket Court,
New Delhi, in both the cases, approached the High Court in revision.

(8) To reiterate, the appellant preferred two revision petitions before
the High Court corresponding to his convictions in the two complaint cases,
being Criminal Revision Petition No.403 of 2015 (pertaining to the present
appeals) and Criminal Revision Petition No.404 of 2015. By separate orders
dated 08.02.2016, both these revision petitions were disposed of by
maintaining the conviction but moderating the default sentence from simple
imprisonment of six months to that of three months. In both the petitions
as well, by separate orders dated 22.02.2016, the High Court declined to
release the appellant by acting on his plea that he meanwhile had served
the substantive as well as default sentence, if construed to have run
concurrently. It is a matter of record, that the special leave petition
filed against the orders dated 08.02.2016 and 22.02.2016 rendered by the
High Court in Criminal Revision Petition No.404 of 2015 has since been
dismissed by this Court and, therefore, the conviction and sentence awarded
to the appellant in the corresponding complaint case has attained finality.

(9) The learned counsel for the appellant has urged that as both the
complaints filed by the respondents have arisen out of successive
transactions in a series between the same parties and had been tried
together on the basis of same set of evidence, the sentences awarded ought
to run concurrently, the High Court had failed to appreciate the same. It
has been submitted that the appellant is in custody since 25.02.2015 and if
the two substantive sentences are construed to run concurrently, he has
served not only the substantive sentences but also the sentence in default
of fine as on date. That the appellant comes from a poor financial
background, as well as is the sole bread earner of the family and that if
the two sentences are to run consecutively, he would suffer grave
injustice, has been emphasized. No argument, noticeably has been advanced,
as abandoned before the High Court as well, impeaching the conviction.

(10) We have extended our required consideration to few facts and the
submissions made.

The materials on record leave no manner of doubt that the complaints filed
by the respondents stem from two identical transactions between the same
parties whereunder the respondent had advanced loan of Rs.5 lacs each to
the appellant on two different dates against which the latter had issued
cheques to discharge his debt and that the cheques had been dishonored. The
facts pleaded and proved do unassailably demonstrate that the loans
advanced had been in the course of a series of transactions between the
same parties on same terms and conditions. Significantly in both the cases,
following the conviction of the appellant under Section 138 of the Act, the
same sentences as well have been awarded. There is thus an overwhelming
identicalness in the features of both the cases permitting, the two
transactions, though undertaken at different points of time, to be deemed
as a singular transaction or two segments of one transaction. This
deduction understandably is in the singular facts of the case.

(11) The Custody Certificate dated 06.05.2016 issued by the Deputy
Superintendent of Prison, Central Jail No.5, Tihar, New Delhi appended to
the appeal petition mentions that the appellant on being convicted in the
complaint cases referred to hereinabove under Section 138 of the Act is
serving out the sentences awarded and that the period of his custody is as
hereunder:

(1) 25.02.2015 to 13.12.2015 (As convict in CC No.430/11)

(2) 14.12.2015 till date i.e. 06.05.2016 (As convict in CC No.407/11)

That meanwhile the appellant had been on interim bail for 10 days from
05.10.2015 to 14.10.2015 as granted by the High Court has also been stated.

(12) The law on the orientation of two sentences awarded to an offender
following his conviction successively, to define the cumulative duration
thereof is envisaged in Section 427 of the Code of Criminal Procedure, 1973
(for short “Code”) in following terms:

“427. Sentence on offender already sentenced for another offence. - (1)
When a person already undergoing a sentence of imprisonment is sentenced on
a subsequent conviction to imprisonment or imprisonment for life, such
imprisonment or imprisonment for life shall commence at the expiration of
the imprisonment to which he has been previously sentenced, unless the
Court directs that the subsequent sentence shall run concurrently with such
previous sentence:

Provided that where a person who has been sentenced to imprisonment by an
order under section 122 in default of furnishing security is, whilst
undergoing such sentence, sentenced to imprisonment for an offence
committed prior to the making of such order, the latter sentence shall
commence immediately.

(2) When a person already undergoing a sentence of imprisonment for life
is sentenced on a subsequent conviction to imprisonment for a term or
imprisonment for life, the subsequent sentence shall run concurrently with
such previous sentence.”

(13) Though this provision has fallen for scrutiny of this Court umpteen
times, we can profitably refer to one of the recent pronouncements in V.K.
Bansal vs. State of Haryana and Another (2013) 7 SCC 211 where it was held
that though it is manifest from Section 427(1), that the Court has the
power and discretion to issue a direction that a subsequent sentence shall
run concurrently with the previous sentences, the very nature of the power
so conferred, predicates that the discretion, would have to be exercised
along judicial lines or not in a mechanical or pedantic manner. It was
underlined that there is no cut and dried formula for the Court to follow,
in the exercise of such power and that the justifiability or otherwise of
the same, would depend on the nature of the offence or offences committed
and the attendant facts and circumstances. It was however postulated, that
the legal position favours the exercise of the discretion to the benefit of
the prisoners in cases where the prosecution is based on a single
transaction, no matter even if different complaints in relation thereto
might have been filed. The caveat as well was that such a concession cannot
be extended to transactions which are distinctly different, separate and
independent of each other and amongst others where the parties are not the
same.

(14) The imperative essentiality of a single transaction as the decisive
factor to enable the Court to direct the subsequent sentence to run
concurrently with the previous one was thus underscored. It was expounded
as well that the direction for concurrent running of sentence would be
limited to the substantive sentence alone.

(15) In a more recent decision of this Court in Benson vs. State of Kerala
– Criminal Appeal No.958 of 2016 (since disposed of on 03.10.2016) and the
accompanying appeals, arising from the conviction of the appellant from his
prosecution on the offences proved, this Court in the singular facts as
involved and having regard to the duration of his incarceration and the
remission earned by him, extended the benefit of such discretion and
directed that the sentences awarded to him in those cases would run
concurrently. It was noticeably recorded that the offences in the cases
under scrutiny had been committed on the same day. The benefit of the
discretion was accorded to the appellant therein referring as well to the
observation in V.K. Bansal (supra) that it is difficult to lay down any
straight jacket approach in the matter and that a direction that the
subsequent sentence would run concurrently or not, would essentially depend
on the nature of the offence or offences and the overall fact situation.
Understandably, the appellant was required to serve the default sentence as
awarded with the direction that if the fine imposed had not been deposited,
the default sentence or sentences would run consecutively.

(16) Reverting to the facts as obtained in the present appeal, we are of
the comprehension, on an appreciation thereof as well as the duration of
the appellant's custody, as is evidenced by the certificate to that effect,
that the appellant is entitled to the benefit of the discretion contained
in Section 427 of the Code. In arriving at this conclusion we have, as
required, reflected on the nature of the transactions between the parties
thereto, the offences involved, the sentences awarded and the period of
detention of the appellant as on date.

(17) It is thus ordered that the substantive sentences of 10 months simple
imprisonment awarded to the appellant in the two complaint cases referred
to hereinabove would run concurrently. Needless to say, the appellant would
have to serve the default sentences, if the fine by way of compensation, as
imposed, has not been paid by him. The appeals are thus allowed to this
extent. The appellant would be entitled to all consequential reliefs with
regard to his release from custody as available in law based on this
determination.

…...........................................J.
(DIPAK MISRA)

…...........................................J.
(AMITAVA ROY)
NEW DELHI;
OCTOBER 28, 2016.

This Court in Hari Shanker Jain v. Sonia Gandhi, 2001 (8) SCC 233 at page 244 upheld the decision of a Full Bench of the Rajasthan High Court wherein it was decided that the jurisdiction of the High Court to try an election petition is not by way of constituting a special jurisdiction and conferring it upon the High Court. It is an extension of the original jurisdiction of the High Court to hear and decide the election disputes. It is clear from the above judgments of this Court that the inherent power of the High Court is not taken away when the election disputes are adjudicated. Section 53 (2) is a power conferred on the Returning Officer to declare a candidate elected when the number of candidates is equal to the number of seats to be filled. The power of the High Court is not fettered by Section 53 (2). The High Court has taken into consideration an anomalous situation that would arise by a candidate belonging to one party being declared elected after having crossed the floor. We are in agreement with the High Court and we do not intend to interfere with the discretion exercised by the High Court.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No. 2649 of 2016

SRI MAIREMBAM PRITHVIRAJ @ PRITHVIRAJ SINGH

.... Appellant(s)
Versus

SHRI PUKHREM SHARATCHANDRA SINGH

….Respondent(s)

With

CIVIL APPEAL No. 2829 of 2016

PUKHREM SHARATCHANDRA SINGH

.... Appellant(s)
Versus

SRI MAIREMBAM PRITHVIRAJ @ PRITHVIRAJ SINGH
….Respondent(s)

J U D G M E N T

L. NAGESWARA RAO, J.

CIVIL APPEAL No. 2649 of 2016
The Appellant has filed this appeal aggrieved by the judgment of the
High Court of Manipur at Imphal by which his election to the Manipur
Legislative Assembly from Moirang Assembly constituency was declared as
void.
A Notification was issued for election to the 10th Manipur Legislative
Assembly on 04.01.2012. The Appellant belonging to the Nationalist
Congress Party (NCP) and the Respondent who was sponsored by the Indian
National Congress (INC) filed their nominations within the time prescribed.
There was no other nomination filed. The Respondent objected to the
nomination of the Appellant at the time of scrutiny on the ground that a
false declaration relating to educational qualification was made by the
Appellant. The Returning Officer directed the Appellant to submit
documents in proof of his educational qualification as declared in the
affidavit filed under Form 26. The Appellant failed to produce any
document to prove his educational qualification in spite of which the
Returning Officer accepted the nomination of the Appellant. Polling took
place on 28.01.2012 and the counting of votes was held on 06.03.2012. The
result was declared on the same day. The Appellant secured 14,521 votes
and the Respondent secured 13,363 votes. The Appellant was declared
elected as MLA, Moirang Constituency.

The Respondent challenged the election of the Appellant by filing an
election petition in the Guwahati High Court seeking a declaration that the
Appellant’s election was null and void, that the Respondent should be
declared as duly elected and that a criminal proceeding should be directed
to be initiated against the Appellant under Section 125-A and 127 of the
Representation of the People Act, 1951 (hereinafter referred to as ‘the
Act’). Apart from the ground of improper acceptance of nomination, the
Respondent also alleged corrupt practices against the Appellant.

The Appellant denied the allegation of false declaration. According to the
Appellant, the declaration made by him that he passed Master of Business
Administration (MBA) in 2004 from Mysore University was a clerical error.
The Respondent abandoned the allegation of corrupt practices and other
electoral malpractices during the trial of the election petition in the
High Court. The High Court framed six issues which are as follows:

“Whether the Returning Officer of 27th Moirang AC has illegally accepted
the nomination paper of the respondent or not?
Whether the election of the respondent had been materially affected by the
acceptance of the nomination paper of the respondent by the R.O. of 27th
Moirang A/C or not?
Whether the respondent had filed false affidavit in respect of the highest
education qualification in the Form, in which the respondent had mentioned
“MBA Mysore University” or whether it was merely a clerical error?
Whether the petition lacks material facts or not?
Whether the election petition is liable to be dismissed for not putting the
words “attested to be true copy of the petition” on each and every page of
the petition by the petitioner himself or not; or on any of the defects
raised by the respondent in his written statement?
Whether the petitioner is entitled to the relief claimed in the writ
petition?”

Issue No. 5 pertains to attestation of the petition not being made
properly. The objection raised by the Appellant to the maintainability of
the election petition was that only the front page of the election petition
had the words “Attested to be true copy.” Issue No. 5 was answered in
favour of the Respondent. The High Court considered the main controversy
pertaining to the filing of false affidavit regarding the educational
qualification by the Appellant in a detailed manner. There is no doubt
that the Appellant filed Form 26 in which he mentioned his educational
qualification as MBA from Mysore University in 2004. After careful
consideration of the material on record and various judgments cited by the
parties, the High Court concluded that the declaration made by the
Appellant in Form 26 about his educational qualification as MBA from Mysore
University was false. The plea of the Appellant that the defect in Form
26 was due to a clerical error was rejected. The contention of the
Appellant that providing wrong information about the educational
qualification was not a defect of substantial character was also rejected.
The Appellant contended that the Respondent failed to plead and prove that
the result was ‘materially affected’ as required under Section 100 (1) (d)
of the Act. The High Court did not accept the said contention on the
ground that there were only two candidates in the fray in which case it was
not necessary to prove that the result of election of the returned
candidate was materially affected. The High Court further held if it is
found that the Appellant’s nomination was improperly accepted, the result
of his election stood automatically affected materially. The High Court
on the basis of the above reasons declared the election of the Appellant as
void. The Appellant has filed this appeal challenging the same.

We have heard Mr. V. Giri, learned Senior Counsel for the Appellant and Ms.
Meenakshi Arora, learned Senior Counsel for the Respondent. Mr. Giri
submitted that the declaration pertaining to the educational qualification
of the Appellant was merely a clerical error and cannot be termed as a
false declaration. In any event, the declaration of educational
qualification is not a defect of substantial nature warranting rejection of
his nomination. Mr. Giri also submitted that the election petition was
filed under Section 100 (1) (d) (i) and (iv) of the Act. He stated that
there is neither pleading nor proof in the election petition that the
improper acceptance of the Appellant’s nomination had materially affected
the result. According to Mr. Giri, the Appellant’s election cannot be set
aside on the ground of improper acceptance of his nomination without the
requirement of Section 100 (1) (d) of the Act being satisfied. He
referred to Durai Muthuswami v. N. Nachiappan and Ors. reported in 1973 (2)
SCC 45 and submitted that the said judgment should be restricted to the
facts of that case. He also attempted to distinguish the said judgment as
not applicable to the facts of this case by submitting that it was a case
of disqualification under Section 9-A of the Act. He further submitted
that the said case was one filed under Section 100 (1) (a) of the Act. He
contended that there is no need for pleading or proving that the result was
materially affected if the election is challenged under Section 100 (1) (a)
to (c) whereas it is compulsory in a petition filed under Section 100 (1)
(d).

Ms. Meenakshi Arora, learned Senior Counsel, argued that the Respondent
pleaded in the election petition that the result of the election was
materially affected by the improper acceptance of the nomination of the
Appellant. She took us through the pleadings and evidence, both oral and
documentary, to contend that the declaration of educational qualification
by the Appellant was not a mistake. She submitted that the same
declaration was made by the Appellant even when he contested the earlier
election to the Legislative Assembly in 2008. She also highlighted the
contradictory stands relating to the declaration taken by the Appellant.
She submitted that it was not necessary to show that the result of the
election was materially affected when there were only two contesting
candidates for one seat. She relied upon the judgment in Durai Muthuswami
(supra) which according to her, was approved in Jagjit Singh v. Dharam Pal
Singh, reported in 1995 Supp (1) SCC 422. She further relied upon Union
of India v. Association for Democratic Reforms, reported in 2002 (5) SCC
294, People’s Union for Civil Liberties (PUCL) v. Union of India, reported
in 2003 (4) SCC 399, Kisan Shankar Kathore v. Arun Dattatray Sawant
reported in 2014 (14) SCC 162 and Resurgence India v. Election Commission
of India and Anr. reported in 2014 (14) SCC 189 in support of her
submission that a voter has a right to know about the educational
qualification of the candidate and any false or mis-declaration would
result in rejection of the nomination of the candidate. Ms. Meenakshi Arora
also cited Hari Krishna Lal v. Babu Lal Marandi reported in 2003 (8) SCC
613 to contend that the false declaration relating to the educational
qualification of a candidate is a defect of substantial character.

Two issues fall for our consideration in this appeal which are:
Whether a false declaration relating to the educational qualification is a
defect of substantial character warranting rejection of a nomination?
Whether it is necessary to plead and prove that the result was materially
affected when the nomination of the returned candidate was found to have
been improperly accepted, moreso, when there are only two candidates
contesting the election?
Chapter I of Part V of the Act deals with the nomination of candidates.
Section 33 of the Act provides for presentation of nomination paper and
requirements of a valid nomination. A nomination paper complete in the
prescribed form, signed by a candidate and by an elector of the
constituency as proposer should be delivered to the Returning Officer
within the prescribed period. Section 33-A which was inserted by Act 72
of 2002 with effect from 24.08.2002 contemplates that a candidate has to
provide additional information, apart from the information provided by him
under Section 33 (1). The information mentioned in Section 33-A relates to
the criminal antecedents of a candidate. Section 36 deals with scrutiny of
nomination. Section 36(4) which is relevant for adjudication of this case
is as follows:
“36. Scrutiny of nomination. – (4) The Returning Officer shall not reject
any nomination paper on the ground of any defect which is not of a
substantial character.”

Rule 4 (A) of the Conduct of Election Rules, 1961 which was inserted with
effect from 03.09.2002 reads as under:
“[4A. Form of affidavit to be filed at the time of delivering nomination
paper.—The candidate or his proposer, as the case may be, shall, at the
time of delivering to the returning officer the nomination paper under
subsection (1) of section 33 of the Act, also deliver to him an affidavit
sworn by the candidate before a Magistrate of the first class or a Notary
in Form 26.]”

A candidate has to file an affidavit along with his nomination paper as
prescribed in Form 26 in which one of the columns pertains to the
educational qualification. Grounds for declaring the election to be void
are provided in Section 100 of the Act which is as under:
“100. Grounds for declaring election to be void.—
[(1) Subject to the provisions of sub-section (2) if 3 [the High Court] is
of opinion—
(a) that on the date of his election a returned candidate was not
qualified, or was disqualified, to be chosen to fill the seat under the
Constitution or this Act 9 [or the Government of Union Territories Act,
1963 (20 of 1963)]; or
(b) that any corrupt practice has been committed by a returned candidate or
his election agent or by any other person with the consent of a returned
candidate or his election agent; or
(c) that any nomination has been improperly rejected; or
(d) that the result of the election, in so far as it concerns a returned
candidate, has been materially affected—
(i) by the improper acceptance or any nomination, or
(ii) by any corrupt practice committed in the interests of the returned
candidate 1 [by an agent other than his election agent], or
(iii) by the improper reception, refusal or rejection of any vote or the
reception of any vote which is void, or
(iv) by any non—compliance with the provisions of the Constitution or of
this Act or of any rules or orders made under this Act,
[the High Court] shall declare the election of the returned candidate to be
void.]
[(2)] If in the opinion of 2 [the High Court], a returned candidate has
been guilty by an agent, other than his election agent, of any corrupt
practice 4 *** but 2 [the High Court] is satisfied—
(a) that no such corrupt practice was committed at the election by the
candidate or his election agent, and every such corrupt practice was
committed contrary to the orders, and 5 [without the consent], of the
candidate or his election agent;
6 * * * * *
(c) that the candidate and his election agent took all reasonable means
for preventing the commission of corrupt 7 *** practices at the election;
and
(d) that in all other respects the election was free from any corrupt 7
*** practice on the part of the candidate or any of his agents,
then 2 [the High Court] may decide that the election of the returned
candidate is not void.”

Section 125-A prescribes penalty for filing false affidavit which is
reproduced as under:
“[125A. Penalty for filing false affidavit, etc.—
A candidate who himself or through his proposer, with intent to be elected
in an election,—
fails to furnish information relating to sub-section (1) of section 33A; or

give false information which he knows or has reason to believe to be false;
or
conceals any information, in his nomination paper delivered under sub-
section (1) of section 33 or in his affidavit which is required to be
delivered under sub-section (2) of section 33A, as the case may be, shall,
notwithstanding anything contained in any other law for the time being in
force, be punishable with imprisonment for a term which may extend to six
months, or with fine, or with both.]”

Sir Winston Churchill underlining the importance of a voter in a democratic
form of Government stated as follows:
“At the bottom of all tributes paid to democracy is the little
man, walking into a little booth, with a little pencil, making a little
cross on a little bit of paper — no amount of rhetoric or voluminous
discussion can possibly diminish the overwhelming importance of the
point.”

In Union of India v. Association for Democratic Reforms (supra) this Court
held that the voter has a fundamental right to information about the
contesting candidates. The voter has the choice to decide whether he
should cast a vote in favour of a person involved in a criminal case. He
also has a right to decide whether holding of an educational qualification
or holding of property is relevant for electing a person to be his
representative. Pursuant to the judgment in Union of India v. Association
for Democratic Reforms (supra) Section 33-A was inserted in the
Representation of the People Act providing for right to additional
information by an Ordinance. The challenge to the said Ordinance was
dealt with by this Court in People’s Union for Civil Liberties (PUCL) v.
Union of India (supra) in which it was held as follows:
“78. What emerges from the above discussion can be summarised thus:

(D) The contention that as there is no specific fundamental right conferred
on a voter by any statutory provision to know the antecedents of a
candidate, the directions given by this Court are against the statutory
provisions is, on the face of it, without any substance. In an election
petition challenging the validity of an election of a particular candidate,
the statutory provisions would govern respective rights of the parties.
However, voters' fundamental right to know the antecedents of a candidate
is independent of statutory rights under the election law. A voter is first
citizen of this country and apart from statutory rights, he is having
fundamental rights conferred by the Constitution. Members of a democratic
society should be sufficiently informed so that they may cast their votes
intelligently in favour of persons who are to govern them. Right to vote
would be meaningless unless the citizens are well informed about the
antecedents of a candidate. There can be little doubt that exposure to
public gaze and scrutiny is one of the surest means to cleanse our
democratic governing system and to have competent legislatures.”

It is relevant to mention that the Election Commission of India issued a
press note on 28.06.2002 in which there was a reference to the judgment of
this Court in Union of India v. Association for Democratic Reforms in which
it was held that information on five aspects has to be provided to the
voter. One of the five aspects pertains to the educational qualification
of the candidates. An order was issued by the Election Commission of India
on 28.06.2002 directing that full and complete information relating to the
five aspects which were mentioned in the judgment has to be furnished.
Providing incomplete information or suppression of material information on
any of the five aspects was to be treated as a defect of substantial
character by the Returning Officers.

In Resurgence India v. Election Commission of India and Anr. (supra) this
Court held that every candidate is obligated to file an affidavit with
relevant information with regard to their criminal antecedents, assets and
liabilities and educational qualification. The fundamental right under
Article 19 (1) (a) of the voter was reiterated in the said judgment and it
was held that filing of affidavit with blank particulars would render the
affidavit as nugatory. In Kisan Shankar Kathore v. Arun Dattatray Sawant
reported in 2014 (14) SCC page 162 this Court considered the question as to
whether it was incumbent upon the Appellant to have disclose the
information sought for in the nomination form and whether the non-
disclosure thereof render the nomination invalid and void. It was held
that non-furnishing of the required information would amount to
suppression/non-disclosure.

It is clear from the law laid down by this Court as stated above that every
voter has a fundamental right to know about the educational qualification
of a candidate. It is also clear from the provisions of the Act, Rules
and Form 26 that there is a duty cast on the candidates to give correct
information about their educational qualifications. It is not in dispute
that the Appellant did not study MBA in the Mysore University. It is the
case of the Appellant that reference to MBA from Mysore University was a
clerical error. It was contended by the Appellant that he always thought
of doing MBA by correspondence course from Mysore University. But,
actually he did not do the course. The question which has to be decided is
whether the declaration given by him in Form 26 would amount to a defect of
substantial nature warranting rejection of his nomination. Section 36 (4)
of the Act mandates that the Returning Officer shall not reject a
nomination paper on the ground of any defect which is not of a substantial
character. The declaration made by the Appellant in Form 26, filed in 2012
is not a clerical error as contended by him. The Appellant contested
election to the same constituency in 2008 and in the affidavit filed by him
in Form 26 he declared that he passed MBA from Mysore University in 2004.
In the affidavit filed by him in this election petition by way of
examination-in-chief, the Appellant stated that his nomination paper and
the enclosed affidavit were prepared and filed by his counsel Chakpam
Bimolchandra Singh on the instructions of his agent Ph. Shamu Singh. He
also stated that his counsel filled the prescribed affidavit in his own
hand-writing. The Appellant also stated that he signed the affidavit
without reading the contents and he came to know about the error only when
the Respondent raised his objection to the nomination. The Appellant
further stated that he was working in Projeon, Infosys Company and IBM till
2007 and because of his job many local friends and elders thought that he
was an MBA degree-holder. His election agent also thought that he was
holding an MBA degree due to which he instructed the Advocate Chakpam
Bimolchandra Singh to fill up column 9 of the affidavit by stating that the
Appellant is an MBA degree-holder. In his cross-examination, the
Appellant gave evasive replies to the questions relating to his educational
qualification. He stated that he does not remember whether he had
undergone MBA from Mysore University and he does not remember whether he
possesses MBA degree. Chakpam Bimolchandra Singh who was examined as DW-3
in his cross-examination denied having filled up the entries in Form 26.
He stated that he entered the educational qualifications of the Appellant
on the basis of instructions given by the election agent Shamu Singh. He
also stated that he was not present before the Oath Commissioner when the
Appellant signed the affidavit.

The contention of the Appellant that the declaration relating to his
educational qualification in the affidavit is a clerical error cannot be
accepted. It is not an error committed once. Since 2008, the Appellant
was making the statement that he has an MBA degree. The information
provided by him in the affidavit filed in Form 26 would amount to a false
declaration. The said false declaration cannot be said to be a defect
which is not substantial. He was given an opportunity by the Returning
Officer to produce the relevant document in support of his declaration. At
least at that point of time he should have informed the Returning Officer
that an error crept into the declaration. He did not do so. The false
declaration relating to his educational qualification cannot be stated to
be not of a substantial character. It is no more res integra that every
candidate has to disclose his educational qualification to subserve the
right to information of the voter. Having made a false declaration
relating to his educational qualification, the Appellant cannot be
permitted to contend that the declaration is not of a substantial
character. For the reasons stated supra, we uphold the findings recorded
by the High Court that the false declaration relating to the educational
qualification made by the Appellant is substantial in nature.

Having answered the first question against the Appellant, we proceed now to
deal with the next point. Section 100 (1) (a) to (c) deals with
disqualification, corrupt practices and improper rejection of nominations
respectively which are grounds for setting aside the election. The sine
qua non for setting aside an election under Section 100 (1) (d) is that the
result of the election, in so far as it concerns a returned candidate, has
been materially affected. The contention of Mr. Giri, learned Senior
Counsel for the Appellant is that even if it is held that the nomination of
the appellant was improperly accepted, his election cannot be set aside in
the absence of any pleading or proof that the result was materially
affected by the improper acceptance of the nomination. He relied upon
Magani Lal Mandal v. Bishnu Deo Bhandari, reported in 2012 (3) SCC page 314
to contend that every defect cannot be a ground for setting aside an
election under Section 100 (1) (d) without further proof that it had
materially affected the result of the returned candidate. He also referred
to Shambhu Prasad Sharma v. Charandas Mahant and Ors. reported in 2012 (11)
SCC page 390 in which it was held as follows:

“20. Coming to the allegation that other candidates had also not submitted
affidavits in proper format, rendering the acceptance of their nomination
papers improper, we need to point out that the appellant was required to
not only allege material facts relevant to such improper acceptance, but
further assert that the election of the returned candidate had been
materially affected by such acceptance. There is no such assertion in the
election petition. Mere improper acceptance assuming that any such improper
acceptance was supported by assertion of material facts by the appellant-
petitioner, would not disclose a cause of action to call for trial of the
election petition on merit unless the same is alleged to have materially
affected the result of the returned candidate.”

There is no dispute that an election cannot be set aside on the ground of
improper acceptance of any nomination without a pleading and proof that the
result of the returned candidate was materially affected. The point to be
considered is whether the law as laid down by this Court relating to the
pleading and proof of the fact of the result of the returned candidate
being materially affected applies to a case where the nomination of the
returned candidate is declared to have been improperly accepted. A
situation similar to the facts of this case arose for consideration of this
Court in Durai Muthuswami’s case. It is necessary to deal with this case
in detail as the Counsel for the Appellant submitted that the said judgment
is not applicable to the facts of the present case and that finding in the
said case have to be treated as obiter.

The facts, in brief, of the case of Durai Muthuswami are that the
Petitioner in the election petition contested in the election to the Tamil
Nadu Legislative Assembly from Sankarapuram constituency. He challenged
the election of the First Respondent on the grounds of improper acceptance
of nomination of the returned candidate, rejection of 101 postal ballot
papers, ineligible persons permitted to vote, voting in the name of dead
persons and double voting. The High Court dismissed the election petition
by holding that the Petitioner failed to allege and prove that the result
of the election was materially affected by the improper acceptance of the
nomination of the First Respondent as required by Section 100 (1) (d) of
the Act. The Civil Appeal filed by the Petitioner therein was allowed by
this Court in Durai Muthuswami (supra) in which it was held as follows:
“3. Before dealing with the question whether the learned Judge was right
in holding that he could not go into the question whether the 1st
respondent's nomination has been improperly accepted because there was no
allegation in the election petition that the election had been materially
affected as a result of such improper acceptance, we may look into the
relevant provisions of law. Under Section 81 of the Representation of the
People Act, 1951 an election petition calling in question any election may
be presented on one or more of the grounds specified in sub-section (1) of
Section 100 and Section 101. It is not necessary to refer to the rest of
the section. Under Section 83(1) (a), insofar as it is necessary for the
purpose of this case, an election petition shall contain a concise
statement of the material facts on which the petitioner relies. Under
Section 100(1) if the High Court is of opinion—
(a) that on the date of his election a returned candidate was not
qualified, or was disqualified, to be chosen to fill the seat under the
Constitution or this Act ….
(b)-(c) * * *
(d) that the result of the election, insofar as it concerns a returned
candidate, has been materially affected—
(i) by the improper acceptance of any nomination, or
(ii)-(iii) * * *
the High Court shall declare the election of the returned candidate to be
void. Therefore, what Section 100 requires is that the High Court before it
declares the election of a returned candidate is void should be of opinion
that the result of the election insofar as it concerns a returned candidate
has been materially affected by the improper acceptance of any nomination.
Under Section 83 all that was necessary was a concise statement of the
material facts on which the petitioner relies. That the appellant in this
case has done. He has also stated that the election is void because of the
improper acceptance of the 1st respondent's nomination and the facts given
showed that the 1st respondent was suffering from a disqualification which
will fall under Section 9-A. That was why it was called improper
acceptance. We do not consider that in the circumstances of this case it
was necessary for the petitioner to have also further alleged that the
result of the election insofar as it concerns the returned candidate has
been materially affected by the improper acceptance of the 1st respondent's
nomination. That is the obvious conclusion to be drawn from the
circumstances of this case. There was only one seat to be filled and there
were only two contesting candidates. If the allegation that the 1st
respondent's nomination has been improperly accepted is accepted the
conclusion that would follow is that the appellant would have been elected
as he was the only candidate validly nominated. There can be, therefore, no
dispute that the result of the election insofar as it concerns the returned
candidate has been materially affected by the improper acceptance of his
nomination because but for such improper acceptance he would not have been
able to stand for the election or be declared to be elected. The petitioner
had also alleged that the election was void because of the improper
acceptance of the 1st respondent's nomination. In the case of election to a
single-member constituency if there are more than two candidates and the
nomination of one of the defeated candidates had been improperly accepted
the question might arise as to whether the result of the election of the
returned candidate had been materially affected by such improper reception.
In such a case the question would arise as to what would have happened to
the votes which had been cast in favour of the defeated candidate whose
nomination had been improperly accepted if it had not been accepted. In
that case it would be necessary for the person challenging the election not
merely to allege but also to prove that the result of the election had been
materially affected by the improper acceptance of the nomination of the
other defeated candidate. Unless he succeeds in proving that if the votes
cast in favour of the candidate whose nomination had been improperly
accepted would have gone in the petitioner's favour and he would have got a
majority he cannot succeed in his election petition. Section 100(1)(d)(i)
deals with such a contingency. It is not intended to provide a convenient
technical plea in a case like this where there can be no dispute at all
about the election being materially affected by the acceptance of the
improper nomination. “Materially affected” is not a formula that has got to
be specified but it is an essential requirement that is contemplated in
this section. Law does not contemplate a mere repetition of a formula. The
learned Judge has failed to notice the distinction between a ground on
which an election can be declared to be void and the allegations that are
necessary in an election petition in respect of such a ground. The
petitioner had stated the ground on which the 1st respondent's election
should be declared to be void. He had also given the material facts as
required under Section 83(1)(a). We are, therefore, of opinion that the
learned Judge erred in holding that it was not competent for him to go into
the question whether the 1st respondent's nomination had been improperly
accepted.” (Underlining ours)

It is clear from the above judgment that there is a difference between the
improper acceptance of a nomination of a returned candidate and the
improper acceptance of nomination of any other candidate. There is also a
difference between cases where there are only two candidates in the fray
and a situation where there are more than two candidates contesting the
election. If the nomination of a candidate other than the returned
candidate is found to have been improperly accepted, it is essential that
the election Petitioner has to plead and prove that the votes polled in
favour of such candidate would have been polled in his favour. On the
other hand, if the improper acceptance of nomination is of the returned
candidate, there is no necessity of proof that the election has been
materially affected as the returned candidate would not have been able to
contest the election if his nomination was not accepted. It is not
necessary for the Respondent to prove that result of the election in so far
as it concerns the returned candidate has been materially affected by the
improper acceptance of his nomination as there were only two candidates
contesting the election and if the Appellant’s nomination is declared to
have been improperly accepted, his election would have to be set aside
without any further enquiry and the only candidate left in the fray is
entitled to be declared elected. The judgment of this Court in Durai
Muthuswami (supra) was referred to in Jagjit Singh v. Dharam Pal Singh,
1995 Supp (1) SCC 422 page 429 in which it was held as follows:

“21. The trial Judge has held that since there is no averment in the
petition that the result of the election was materially affected by
improper rejection or acceptance of votes, it is devoid of cause of action.
We are unable to agree that the absence of such an averment in the facts of
this case is fatal. As pointed out by this Court, there may be cases where
the obvious conclusion to be drawn from the circumstances is that the
result of the election has been materially affected and that Section
100(1)(d) of the Act is not intended to provide a convenient technical plea
in a case where there can be no dispute at all about the result of the
election being materially affected by the alleged infirmity. (See: Durai
Muthuswami v. N. Nachiappan [(1973) 2 SCC 45 : (1974) 1 SCR 40] .) In the
present case, the appellant in the election petition has stated that he has
lost by a margin of 80 votes only. From the various averments in the
election petition it was evident that the number of valid votes of the
appellant which are alleged to have been improperly rejected is much more
than 80. From the averments contained in the election petition it is thus
obvious if the appellant succeeds in establishing his case as set out in
the election petition the result of this election, insofar as it concerns
the returned candidate, would be materially affected.”

It was held by this Court in Vashist Narain Sharma v. Dev Chandra, reported
in 1955 (1) SCR 509 as under:
“9. The learned counsel for the respondents concedes that the burden of
proving that the improper acceptance of a nomination has materially
affected the result of the election lies upon the petitioner but he argues
that the question can arise in one of three ways:
(1) where the candidate whose nomination was improperly accepted had
secured less votes than the difference between the returned candidate and
the candidate securing the next highest number of votes,
(2) where the person referred to above secured more votes, and
(3) where the person whose nomination has been improperly accepted is the
returned candidate himself.
It is agreed that in the first case the result of the election is not
materially affected because if all the wasted votes are added to the votes
of the candidate securing the highest votes, it will make no difference to
the result and the returned candidate will retain the seat. In the other
two cases it is contended that the result is materially affected. So far as
the third case is concerned it may be readily conceded that such would be
the conclusion. But we are not prepared to hold that the mere fact that the
wasted votes are greater than the margin of votes between the returned
candidate and the candidate securing the next highest number of votes must
lead to the necessary inference that the result of the election has been
materially affected. That is a matter which has to be proved and the onus
of proving it lies upon the petitioner. It will not do merely to say that
all or a majority of the wasted votes might have gone to the next highest
candidate. The casting of votes at an election depends upon a variety of
factors and it is not possible for any one to predicate how many or which
proportion of the votes will go to one or the other of the candidates.
While it must be recognised that the petitioner in such a case is
confronted with a difficult situation, it is not possible to relieve him of
the duty imposed upon him by Section 100(1)(c) and hold without evidence
that the duty has been discharged. Should the petitioner fail to adduce
satisfactory evidence to enable the Court to find in his favour on this
point, the inevitable result would be that the Tribunal would not interfere
in his favour and would allow the election to stand.” (Underlining ours).

This Court in Kisan Shankar Kathore v. Arun Dattatray Sawant (supra) dealt
with a situation similar to that of this case. In that case, the election
of the returned candidate was successfully challenged on the ground of non-
disclosure of material information. The appeal filed by the returned
candidate was dismissed by this Court by observing as follows:
“Once it is found that it was a case of improper acceptance, as there was
misinformation or suppression of material information, one can state that
question of rejection in such a case was only deferred to a later date.
When the Court gives such a finding, which would have resulted in
rejection, the effect would be same, namely, such a candidate was not
entitled to contest and the election is void.”

Mere finding that there has been an improper acceptance of the nomination
is not sufficient for a declaration that the election is void under Section
100 (1) (d). There has to be further pleading and proof that the result of
the election of the returned candidate was materially affected. But,
there would be no necessity of any proof in the event of the nomination of
a returned candidate being declared as having been improperly accepted,
especially in a case where there are only two candidates in the fray. If
the returned candidate’s nomination is declared to have been improperly
accepted it would mean that he could not have contested the election and
that the result of the election of the returned candidate was materially
affected need not be proved further. We do not find substance in the
submission of Mr. Giri that the judgment in Durai Muthuswami (supra) is not
applicable to the facts of this case. The submission that Durai Muthuswami
is a case of disqualification under Section 9-A of the Act and, so, it is
not applicable to the facts of this case is also not correct. As stated
supra, the election petition in that case was rejected on the ground of non-
compliance of Section 100 (1) (d). The said judgment squarely applies to
this case on all fours. We also do not find force in the submission that
the Act has to be strictly construed and that the election cannot be
declared to be void under Section 100 (1) (d) without pleading and proof
that the result of the election was materially affected. There is no
requirement to prove that the result of the election of the returned
candidate is materially affected once his nomination is declared to have
been improperly accepted.

For the aforementioned reasons, the Civil Appeal is dismissed. No costs.

Civil Appeal No. 2829 of 2016

This appeal is filed by the Petitioner in the election petition
challenging that part of the judgment dated 29.02.2016 of the High Court
Manipur at Imphal, by which the relief that he should be declared to be
elected was rejected. The Appellant contested the election as a candidate
of the Nationalist Congress Party (NCP). Respondent No.1 was declared to
have been elected on 28.01.2012. The election of the First Respondent was
set aside by the High Court in the election petition filed by the
Appellant. The Appellant also sought for a relief that he should be
declared to have been elected. Such relief was rejected by the High Court.
Hence, this appeal.

After the result of the election was declared on 28.01.2012, the Appellant
resigned from NCP and joined Bhartiya Janta Party (BJP). To a question
posed by the Court during the recording of his evidence, the Appellant
stated that he tendered resignation from NCP in the latter part of 2013,
that he joined BJP and he continued to be a member of the BJP. In January,
2016, the Appellant filed an application for amendment to the election
petition. He intended to insert additional submissions relating to his
expulsion from NCP on 23.12.2013 and the representation made by him to the
President NCP Manipur to cancel the expulsion order. He also wanted to
bring on record the fact that his enrolment to the membership of BJP was
rejected on 18.01.2016. He further stated in the application that the
order of expulsion by the NCP was revoked by an order dated 21.01.2016.

The arguments in the election petition filed by the Appellant were
concluded on 25.02.2016. The High Court recorded a finding in the impugned
judgment that all the pending miscellaneous applications were disposed of
with the consent of both sides and the election petition was to be
adjudicated on the basis of existing material on record. As the
miscellaneous application filed by the Appellant was not considered, the
High Court decided the matter on the basis of the material on record which
clearly showed that the Appellant resigned from NCP and joined BJP. After
a careful consideration of the material on record, the High Court refused
to grant the declaration as sought by the Appellant. The High Court held
that having joined BJP, the Appellant was not entitled for a declaration as
he contested the election in 2012 on behalf of NCP. The High Court
highlighted the fact that the Appellant will be an MLA belonging to BJP, if
declared elected after having contested the election on behalf of the NCP.
Taking into account the spirit of law as expressed in paragraph no. 2 of
the 10th Schedule of the Constitution of India the High Court did not grant
the relief sought by the Appellant that he should be declared elected.

Ms. Meenakshi Arora, learned Senior Counsel appearing for the Appellant
submitted that the 10th Schedule to the Constitution is not applicable to
adjudication of an election petition. She relied upon Section 53 (2) of
the Act to contend that the Appellant should be declared as duly elected as
he was the only person remaining in the fray after the election of
respondent/returned candidate was declared void. Section 101 of the Act
provides for declaration of the Petitioner to have been duly elected if the
High Court is of the opinion that the Petitioner received majority of the
valid votes.

According to Section 80 (A) of the Act, the High Court will have the
jurisdiction to try an election petition. It is well settled law that the
High Court hearing an election petition is not an ‘authority’ and that it
remains the High Court while trying an election petition under the Act.
(See T. Deen Dayal v. High Court of A.P., 1997 (7) SCC 535 at page 540.
This Court in Hari Shanker Jain v. Sonia Gandhi, 2001 (8) SCC 233 at page
244 upheld the decision of a Full Bench of the Rajasthan High Court wherein
it was decided that the jurisdiction of the High Court to try an election
petition is not by way of constituting a special jurisdiction and
conferring it upon the High Court. It is an extension of the original
jurisdiction of the High Court to hear and decide the election disputes.
It is clear from the above judgments of this Court that the inherent power
of the High Court is not taken away when the election disputes are
adjudicated. Section 53 (2) is a power conferred on the Returning Officer
to declare a candidate elected when the number of candidates is equal to
the number of seats to be filled. The power of the High Court is not
fettered by Section 53 (2). The High Court has taken into consideration an
anomalous situation that would arise by a candidate belonging to one party
being declared elected after having crossed the floor. We are in agreement
with the High Court and we do not intend to interfere with the discretion
exercised by the High Court.

For the aforesaid reasons, the Civil Appeal is dismissed. No order as to
costs.

.…............................J.
[ANIL R. DAVE]

................................J.
[L. NAGESWARA RAO]

New Delhi,
October 28, 2016

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