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Citation Codes
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Case Number
Attorney(S)
  • For the Appellant: A. Seshan, S. Ranganathan, T.V. Balakrishnan, Advocates.
Judges
  • Srinivasan, J.
Acts
  • Section 67(4) of the Estate Duty Act.4. W.P No. 224 of 1959
  • Sub-section (6) of S. 63
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Cites
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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • For the Appellant: A. Seshan, S. Ranganathan, T.V. Balakrishnan, Advocates.
Judges
  • Srinivasan, J.
Acts
  • Section 67(4) of the Estate Duty Act.4. W.P No. 224 of 1959
  • Sub-section (6) of S. 63
See more information ...
Smart Summary

Structured Summary of the Judgment

Factual and Procedural Background

The two writ petitions arise from estate duty proceedings in respect of the estate of the deceased Chidambaram Chettiar. By an order dated 29 November 1958 (served on 2 December 1958) the Deputy Controller of Estate Duty called upon the petitioners, as accountable persons, to pay estate duty. After crediting amounts already paid, the Deputy Controller demanded a balance (variously described in the record) and fixed 10 January 1959 as the earlier due date for payment of part of the duty. The petitioners sought postponement of collection to the extent the duty was disputed and the subject of an appeal to the Central Board of Revenue.

The Deputy Controller accepted the petitioners' right to exercise the option under Section 70(2) in relation to immovable property but refused to postpone collection of the disputed balance because the petitioners had not shown that payment could not be made without excessive sacrifice. The Central Board of Revenue also declined to postpone collection. The Deputy Controller thereafter required payment by 5 March 1959 and warned of resort to penal provisions.

Two writ petitions were filed. W.P. No. 215 of 1959 sought a writ of mandamus contending the Deputy Controller had no right to require payment of the disputed duty pending the Central Board's disposal of the appeal. W.P. No. 224 of 1959 sought to quash an order made on 5 March 1959 by the Deputy Controller levying a penalty of Rs. 11,000 under Section 67(4) of the Estate Duty Act, on the ground that time for payment was extended until 5 March 1959 and the petitioners were entitled to the whole of that day to make payment.

Legal Issues Presented

  1. Whether, pending an appeal to the Central Board of Revenue against an assessment, the Deputy Controller had jurisdiction to call upon accountable persons to pay the disputed part of the estate duty (i.e., whether filing an appeal automatically stayed collection).
  2. Whether the Deputy Controller's refusal to postpone collection under Section 70 of the Estate Duty Act was lawful and within jurisdiction where the accountable persons had not shown that the duty could not be raised without excessive sacrifice.
  3. Whether the order of 5 March 1959 imposing a penalty under Section 67(4) of the Act was valid, particularly where the Deputy Controller had previously indicated time "on or before the 5th March 1959" (i.e., whether the penalty could be levied on that same day or only after expiry of that day).

Arguments of the Parties

Petitioners' Arguments

  • The Deputy Controller's demand for payment of the disputed duty before the Central Board disposed of the appeal was illegal, ultra vires and beyond his jurisdiction; the petitioners inferred a bar on such collection from provisions of the Act (they relied notably on the wording of Section 63(6)).
  • In W.P. No. 224 of 1959 they argued that because the Deputy Controller had granted time for payment "on or before the 5th March 1959," the petitioners were entitled to the whole of the 5th March 1959 to make payment; accordingly, the order imposing the penalty dated 5 March 1959 was premature and made without jurisdiction. Counsel relied on Janakumara v. Periaswamy (AIR 1949 Mad 376) for the proposition that where a court fixes a date the person has the whole of that day to comply.
  • They also sought postponement of collection pending appeal and relied on the appeal process before the Central Board of Revenue.

Respondent's (Deputy Controller's) Arguments

  • The power to postpone collection lies only in Section 70 of the Act and the Controller may postpone payment only if satisfied that the estate duty leviable cannot be raised without excessive sacrifice; the petitioners did not make out that condition and failed to produce evidence of such difficulty.
  • Following service of the demand notice (10 January 1959) the petitioners were in default; unless time was validly extended in accordance with law the Controller could lawfully invoke Section 67(4) and impose the penalty for non-payment.
  • The Deputy Controller invited the petitioners to show difficulties in meeting the duty but they did not. The Controller also noted that the petitioners had realized Rs. 2 lakhs in cash from insurance companies, which suggested there was no excessive sacrifice involved in paying the duty.
  • Accordingly, there was no defect of jurisdiction in either refusing postponement or in levying the penalty where the statutory conditions for postponement were not met.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Janakumara v. Periaswamy, AIR 1949 Mad 376 Where a court fixes a date for fulfilment of a condition, the person subject to the obligation has the whole of that day to comply. The petitioners relied on this principle to argue that the Deputy Controller could validly impose a penalty only after the whole of 5 March 1959 had expired. The Court acknowledged the rule but declined to apply it to afford the petitioners immunity here because the Deputy Controller had repeatedly informed the petitioners that they should pay immediately, had expressly stated he would resort to penal provisions if payment was not made "in any case on or before the 5th March 1959," and had earlier made clear that the petitioners did not satisfy the statutory condition for postponement under Section 70.

Court's Reasoning and Analysis

The court proceeded in a stepwise manner, applying statutory language and the factual record as follows:

  1. Interpretation of Section 63(6): The court observed that Section 63(6) (as it stood) required the appellant to pay "so much of the estate duty as is not in dispute" notwithstanding the pendency of an appeal. From that wording the court concluded there is no automatic stay of collection of the disputed part on filing of an appeal; the provision contemplates payment of undisputed portions and leaves disputed parts open to challenge in the appeal but does not itself stay collection of disputed parts.
  2. Role of Section 70: The court emphasized that postponement is governed exclusively by Section 70, which vests a discretion in the Controller to postpone payment but only where the Controller is satisfied that the duty leviable in respect of any property "cannot without excessive sacrifice be raised at once" (the statutory condition). Section 70 makes no distinction between cases where an appeal has or has not been filed.
  3. Application to facts: The Deputy Controller invited the petitioners to place evidence before him to show their case fell within Section 70(1). The petitioners failed to produce such evidence. The Controller's counter-affidavit disclosed that the accountable persons had realized Rs. 2 lakhs in cash from insurance companies, which undercut any claim of inability to raise money without excessive sacrifice. On these factual findings the court concluded the petitioners had not shown entitlement to postponement under Section 70 and that the Controller had no discretion to postpone collection.
  4. Consequence for W.P. No. 215: Given the statutory framework and the petitioners' failure to satisfy the Section 70 condition, the court held that the order refusing postponement could not be impugned as illegal, ultra vires or beyond jurisdiction, and dismissed W.P. No. 215 of 1959.
  5. Analysis of penalty under Section 67(4): The court addressed the specific contention that because an order purportedly allowed time "on or before the 5th March 1959," the penalty levied on 5 March 1959 was premature. The court acknowledged the general principle (citing Janakumara) that when time is granted to a person he is ordinarily entitled to the whole of the terminal day; if an authority purports to grant time, imposing penal consequences before expiry of that day could violate natural justice.
  6. Factual qualification of the time extension: However, the court found significant factual distinctions: the Deputy Controller had explicitly informed the petitioners by letter dated 17 January 1959 that they should "pay proportionate duty on the moveables immediately" and again, on 24 February 1959, that "in the absence of any specific direction from the Board, I do not propose to postpone collection of duty any further" and warned that if duty was not paid "in any case on or before the 5th March 1959, I shall be constrained to resort to the penal provisions of the Act." Given these communications, the court held the phrase "on or before the 5th March 1959" did not create an entitlement to immunity from penal provisions until after that date; the petitioners could not reasonably claim they had been given a binding postponement excusing them from penal consequences until the end of 5 March.
  7. Final conclusion on penalty: Absent any established lack of jurisdiction, and in light of the petitioners' failure to satisfy Section 70 conditions together with the explicit warnings, the order imposing a penalty on 5 March 1959 under Section 67(4) was not vitiated. The court dismissed the second petition as well.

Holding and Implications

Holding: The court made the following dispositive rulings:

  • W.P. No. 215 of 1959 dismissed. The Deputy Controller's refusal to postpone collection of the disputed estate duty was lawful and within jurisdiction because the petitioners did not satisfy the statutory condition in Section 70 that the duty could not be raised without excessive sacrifice.
  • W.P. No. 224 of 1959 dismissed. The order of 5 March 1959 levying a penalty of Rs. 11,000 under Section 67(4) was not vitiated for being made on the terminal day; the circumstances and prior communications were such that the petitioners could not claim immunity until after that day.

Immediate consequences and costs:

  • The petitioners must bear the costs of the respondent.
  • Counsel's fee awarded: one set of Rs. 200.

Implications beyond the parties: The judgment applies the statutory scheme of the Estate Duty Act (particularly Sections 63(6), 67(4) and 70) to hold that filing an appeal does not automatically stay collection of disputed duty and that postponement of collection depends on satisfaction of the Section 70 threshold. The opinion does not state that it establishes a new binding precedent beyond its application to the facts; its dispositional effect is confined to the parties and their claims in these petitions.

End of summary (based exclusively on the provided opinion).

Show full summary ...

    M.C.T Muthiah And Another v. Deputy Controller Of Estate Duty, Southern Zone, Madras 6 .

    JUDGMENT

    1. The petitioners in these two writ petitions are the accountable persons. In respect of the estate of the deceased Chidambaram Chettiar, the Deputy Controller of Estate Duty by his order dated 29th November 1958, served Upon the petitioners on 2nd December 1958, called upon the petitioners 16 pay the not duty of Rs. 1,81,400-46 nP. After deducting the sum paid by the petitioners, he demanded the payment of the balance of Rs. 13,749-54 nP. on or before the 10th January 1959. The petitioners applied to the Deputy Controller for a postponement of the collection of the estate duty to the extent to which there was a dispute and which dispute was the subject-matter of an appeal pending before the Central Board of Revenue. The Deputy Controller, while conceding the right of the petitioners to exercise the option under S. 70(2) of the Act in respect of the duty on the immoveable property, declined to grant the request for postponement of the collection of the balance on the ground that the petitioners had not shown that the further duty could not be paid except without excessive sacrifice.

    2. He also rejected the claim that there could be any postponement of collection of the duty solely for the reason that the accountable persons had not agreed with the computation of the duty or that the matter was pending in appeal. The Central Board of Revenue also intimated to the petitioners that it saw no justification for postponement of the collection of the disputed duty on an application made by the petitioners to it. Thereafter, the Deputy Controller called upon the petitioners to pay the duty on or before the 5th March 1959, failing which he threatened resort to the penal provisions of the Act. W.P No. 215 of 1959 has been filed by the petitioners seeking the issue of a writ of mandamus alleging that the demand made by the Deputy Controller is illegal, ultra vires and in excess of his jurisdiction. The contention is that the Deputy Controller has no right to call upon the accountable persons to pay the duty before the Central Board had disposed of the appeal before it. This fetter upon the jurisdiction of the Deputy Controller is sought to be inferred by the petitioners from the provisions of the Act.

    3. On 5th March 1959 the Deputy Controller made an order in these terms:)

    “……duty of Rs. 1,29,749-54 was payable on or before 1st January 1959. The accountable persons paid a sum of Rs. 18,784-03. For the balance Rs. 1,10,985-51 time was allowed till 5th March 1959. As the amount has not so far been paid, I levy a penalty of Rs. 11,000 under Section 67(4) of the Estate Duty Act.………”

    4. W.P No. 224 of 1959 has been filed by the petitioners seeking to have the order quashed on the short ground that the Deputy Controller having granted time for payment of the duty till 5th March 1959, had no jurisdiction to make the order on 5th March 1959, and that the whole of that day, that is, 5th March 1959, was available to the petitioners for the purpose of making the payment. It is contended, therefore, that the order has been made without jurisdiction and is consequently liable to be quashed.

    5. On behalf of the Deputy Controller, an affidavit has been filed. The contention of the respondent is shortly that the power to postpone the collection of the duty is conferred by S. 70 of the Act and that unless the accountable persons could establish that the estate duty leviable in respect of the property cannot without excessive sacrifice be raised at once, and the Controller is satisfied in that regard, the Controller cannot allow postponement of the duty. It is claimed that no attempt was made by the accountable persons to satisfy the Deputy Controller for any difficulties attendant upon the payment and on this contention it is urged that there is no defect of jurisdiction on the part of the Deputy Controller.

    6. In the counter affidavit filed by the respondent in W.P No. 224 of 1959, it is alleged that on and after the making of the assessment and the issue of the demand notice calling upon the petitioners to pay duty on 10th January 1959, by reason of the non-compliance with that direction, the petitioners were in default and unless the time for payment was validly extended by the proper authority, it was open to the Deputy Controller to exercise his powers under S. 67(4) of the Act imposing the penalty. It is claimed that till the petitioners were called upon to pay the duty on or before 5th March 1959, this order was not made on the exercise of any power conferred on the Deputy Controller under the Act in the absence of compliance with the requirements of S. 70(1). It was not competent to the Deputy Controller to postpone the collection of the duty. It is urged accordingly that the order imposing the penalty under S. 67(4) of the Act was rightly made by reason of the failure to pay the duty on or before the 10th January 1959, and is not liable to be quashed as beyond jurisdiction.

    7. It seems to me that the contentions of the respondent must prevail. Under S. 63 as it stood, there was a provision for appeal against the order of the Controller assessing the estate duty payable, to the Central Board of Revenue. Sub-section (6) of that section stated,

    “Notwithstanding that an appeal has been filed before the Board, so much of the estate duty as is not in dispute shall be payable by the appellant.”

    8. It is principally on the wording of the sub-section that the petitioners rely in seeking to substantiate their contention that the Deputy Controller had no jurisdiction to proceed against the petitioners for the collection of the disputed duty pending the appeal. It seems to me that this pro-Vision cannot have that significance. Where a person appeals against an order of the Deputy Controller assessing the estate duty payable, even the whole order may be the subject-matter of the appeal and the dispute might relate to the entirety of the demand of the estate duty or the appellant might dispute only a part of the estate duty levied. Sub-section (6) of S. 63 as it stood, referred the appellant to pay the undisputed part of the estate duty notwithstanding the pendency of the appeal. There could clearly be no stay of the undisputed part of the estate duty. In so far as the disputed part of the estate duty is concerned, the position would accordingly be that there was an assessment by the Deputy Controller as authorised by the law but that the validity of that part of the assessment was sought to be canvassed in the appeal.

    9. There is no provision of the Act which suggests that there would be a stay of operation of the collection of the duty where an appeal was filed against the order imposing the duty. Normally, therefore, any such collection of the disputed part of the estate duty should depend upon the specific orders passed in that regard either by the assessing authority or by the Appellate Authority. The only provision that is found in the Act is Section 70 which deals with the postponement of the collection of duty. It makes no distinction between cases where an appeal has been filed and where an appeal has not been filed. The only circumstance under which the Controller may allow postponement of payment would be those which are laid down in S. 70(1) of the Act. From the wording of S. 63(6) alone, it is impossible to infer that there is an automatic stay of collection of the disputed part of the duty on the filing of an appeal.

    10. Coming now to S. 70, it is seen that a discretion is vested in the Controller to postpone the payment of the duty but that discretion can be brought into play only on fulfilling certain requirements embodied in that provision, and the specific condition laid down therein is that the Controller should be satisfied that the duty leviable in respect of any property cannot without excessive sacrifice the raised at once. It is seen from the counter affidavit filed by the Controller, that he invited the petitioners to place before him evidence to establish that their case fell within the scope of Section 70(1) of the Act. They failed to do so. The Controller also points out in his counter affidavit that a sum of Rs. Two lakhs in cash was realised by the accountable persons from the Insurance companies so that this is clearly not a case where any sacrifice is involved in the raising of the money required for the payment of the estate duty. The case is not one which comes within the four corners of Section 70(1) of the Act, and that being so, the Controller had in fact made no discretion which he could exercise in favour of the accountable persons by directing the postponement of the collection of the duty.

    11. It follows, therefore, that the order of the Controller refusing to stay his hands in respect of the collection of the duty cannot be rightly attacked as illegal, ultra vires and in excess of his jurisdiction. W.P No. 215 of 1959 is accordingly dismissed.

    12. Section 67(4) of the Act, as it stood before its amendment in 1958, read:

    “If the person accountable does not pay the amount of duty due from him under sub-section (1) or sub-section (3), within the period specified therein, he shall be liable to pay a penalty of Rs. 1,000, or a sum equal to twice the amount due, according as the Controller may elect, provided that the controller may in any particular case reduce the penalty.”

    13. The question is whether this section is applicable to the present case.

    14. The attack upon the order of the Controller is based on the following facts. The demand notice had been served on the petitioners on the 2nd December 1958, and the petitioners had been called upon to pay the duty on or before the 10th January 1959. They preferred an appeal to the Central Board of Revenue for a stay of the collection of the disputed duty pending the appeal. That request was refused. Their request to the Deputy Controller himself in that regard was answered by that officer by his letter dated 17th January 1959. The Deputy Controller declined to postpone the collection of the duty and stated:

    “In the circumstances I would advise the accountable persons to pay proportionate duty on the moveables immediately.”

    After the petitioner's request was turned down by the Central Board of Revenue, the officer wrote on the 24th February 1959 to the petitioners in these terms:

    “In the absence of any specific direction from the Board, I do not propose to postpone collection of duty any further. Please note that if the duty is not paid immediately, in any case on or before the 5th March 1959, I shall be constrained to resort to the penal provisions of the Act.”

    15. Thereafter, on the 5th March 1959, the Deputy Controller made an order under S. 67(4) of the Act levying a penalty of Rs. 11000 for failure to pay estate duty. It is contended on behalf of the petitioners that since the Deputy Controller had granted time for the payment on or before the 5th March 1959, it was not open to the officer to have made the order imposing the penalty on the 5th March 1959. It is claimed that they were entitled to the whole of the day 5th March 1959 and that the Deputy Controller could validly make an order imposing the penalty only after the expiry of that day. It is urged that even assuming that the Deputy Controller had no authority under any of the provisions of the Act to extend the time for payment, the petitioners are entitled to rely upon the terms of his order and withhold payment till the end of the day stipulated in that order.

    16. I have already indicated earlier that the only provision of the Act which confers any power upon the Deputy Controller to postpone the collection of the estate duty is contained in S. 70 of the Act. The conditions which would enable the Deputy Controller to exercise the discretion under that provision did not exist so that the Deputy Controller could not validly have made any order postponing the collection of the duty. It is true that if the Deputy Controller purported to grant time till a specified day, whether he had the authority to do so or not, he could not make an order imposing the penalty in advance of the day. Such an order would certainly be open to attack on the ground that it violates the principles of natural justice. If the petitioners had been given to understand that they could not be visited with any penal consequences till after a certain date had expired, they were entitled to rely upon the terms of the order granting time to them. Learned counsel for the petitioners relied upon Janakumara v. Periaswamy, AIR 1949 Mad 376, wherein it was held that where a Court fixes a date for the fulfilment of a certain condition the person on whom that obligation is imposed Will have the whole of that day for complying with that order. But the question however is whether in the terms of the order made by the controller, the petitioners in the present case can claim immunity from the penal provisions of the Act.

    17. In dealing with this aspect of the matter, I cannot ignore the circumstance that when the petitioners moved the Deputy Controller for postponing the collection of the duty, that officer clearly informed the petitioners that their case could fall only within the scope of S. 70 of the Act and that they had not established the conditions which would warrant the postponement of the collection. The letter of the Deputy Controller dated 17th January 1959, made this position perfectly clear and in that letter the Deputy Controller stated:

    “In the circumstances I would advise the accountable persons to pay proportionate duty on the moveables immediately.”

    18. This was again reiterated in the subsequent letter in these terms:

    “Please note that if the duty is not paid immediately, in any case on or before the 5th March 1959, I shall be constrained to resort to the penal provisions of the Act.”

    19. In both of these letters, the petitioners were directed to pay the duty immediately, as it had already fallen due by the 10th January 1959. In the light of these circumstances, I am unable to attach any importance to the further expression “on or before the 5th March 1959” at any rate, to the extent of implying that the Deputy Controller bad no jurisdiction to invoke the penal provisions till after the expiry of the last date, 5th March 1959, and unless the petitioners can establish any lack of jurisdiction, the order imposing the penalty is not vitiated for any reason.

    20. In the result, this petition also fails. The petitioners will pay the costs of the respondent.

    21. Counsel's fee-one set Rs. 200.

    BG/R/D.V.C

    22. Petitions dismissed.

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    Comments

    M.C.T Muthiah And Another v. Deputy Controller Of Estate Duty, Southern Zone, Madras 6 .
    (Apr 3, 1962)