Maintenance of mother under Indian Law

How important is a mother? No words can describe. No amount of thanks to the lady who brought us on this world is enough. Her care, her attention, her sacrifice to bring up children cannot be gauged by any means.

In spite of this, the elder abuse is very prevalent. Children are raised. They grow. So morally they must care for their parents. Those parents who help them face the life. If you can’t do so much, may be for your own reasons at least don’t harass them. If the children do not understand a straight language, the law has its own methods to teach them.

Unfortunately, an 86 years old lady walked into my office with her heavy heart. The son had inflicted numerous atrocities on the mother. What should be the quickest remedy was a big question after considering the background? The mother had been ousted from her own apartment which she legally owned. The mother approached an Indian Court. For two years she found herself without any progress in her petition. Two years of toiling in the lobbies of court. Two years of hardships, struggle at the age of 86 years. Was this apathy in the administration of justice? That is what we felt.

Repeated requests to expedite the matter were made to the court which took cognizance of the case. Nothing worked. They just found it unnecessary to acknowledge troubles of the 86 year old widow mother. So the mother was advised to approach the higher echelon of judiciary. A complaint ventilating a pain and a plea to expedite her case was lodged. This was heard. Directions were given. The matter expedited. What could not happen in two years finished in two months. This is because complaints were made to the Higher authorities reflecting inertia of lower authorities. The court awarded maintenance of Rs.8000/- from the date of application (with a payment due for 24 months) – this was a good judgment. Another complaint has been filed inter alia alleging trespass, criminal intimidation for life, insult, breach of public peace and security and like offenses against property and person. I hope that the matter will be shortly conducted and completed.

I am posting written argument part of this petition. May be some parents who need to understand the law or need some moral support will believe that you are not without remedy. I have just listed some case laws included in the draft Written Arguments, to ensure that you have a ready to use material, if you need.

Just take care and make no mistakes during oral testimony and cross examination. Are you thinking what can be the mistakes? Well that is subjective and I cannot predict them. But remember to shape up your case before the court so that it has reasons to support your version. Even a right cause goes dismissed, if not well prepared.

I have removed the names from the written submission, to ensure confidentiality. The English language in the written arguments has been moderated to tailor the local requirements.

So carry on, parents ! – be bold. If you struggled all the way to raise your children who proved unworthy, then go ahead and fight out. I know it is too much for your weak shoulders. But God is with you. .. So read on the written arguments, enriched with all the case laws (pertaining to the maintenance law in India). I wish you all the best.


In the Court at India

Criminal Case No. xx/xxxx

In the matter between:

Mother
..Applicant

Versus


Her sons
..Respondents

ADDITIONAL WRITTEN ARGUMENTS

That the applicant most respectfully showeth:

INTRODUCTION:

1. That the applicant is an 86 year old mother – a widow. She has brought out this case of maintenance u/s. 125 – Chapter IX of the Cr.P.C from the date of application. Before dealing with the facts of the case and resorting to appreciation of the evidence lead herein, it is pertinent to quote Honorable Bombay High Court in Re. Mahendra Kumar V/s. Gulab bai 2001-(107)-CRLJ -2111 -BOM where the importance of mother is stated in following words:

“.. the aged parents, a virtuous wife and infant child must be maintained even by committing a hundred misdeeds" Manu does not speak of solitary duty, it is moral duty of a person to maintain aged parents, virtuous wife and infant child. In discharge of this pious duty, Manu went to such an extent that he made hundred misdeeds pardonable.”

APPLICATION FOR MAINTENANCE & INTERIM MAINTENANCE:

2. The importance of maintaining old parents needs no introduction. In this case, an 86 years old mother has filed this application for maintenance against three sons who are duty bound under the eyes of law and in terms of provisions of Section 125 of the Cr. P. C. to maintain her. The application has been filed at Exhibit 1 on dtd. 27/10/2005. Along with this application another application for obtaining interim maintenance has also been filed at Exhibit 3 on 25/10/2005. The second opponent filed his reply on 11/05/2006, i.e. after a period of seven months from the date of application. This reply is placed at Exhibit 9. Similarly the first and the third opponent also filed their reply belatedly. Their replies have been placed at Exhibit 14. In short all the three opponents filed their reply after much latches.

DELAY TACTICS:

3. That the efforts which were necessary for obtaining interim maintenance were made. The opponents however kept delaying the case. The applicant has been time and again saying that the matter is getting delayed. Looking to 86 years of age of the applicant, the applicant had been time and again saying that if her case does not proceed further, she may never get justice. However, the opponents kept delaying with a mala fide intention. This widow of 86 years age had to run around for two long years in the corridors of the court to get justice. Ultimately an application dated 24/04/2007 (Exhibit 21), was filed by the applicant making a fervent plea to expedite the hearing of the case on day to day basis. The matter was sought to be prepone. Accordingly notices dtd. 25/04/2007 were sent to the opponents intimating the next date of listing. The copies of registered and telegraphic notices have inter alia been submitted to this court. Thereafter, with great difficulty, Opponent no. 2 came to contest the matter after a period of two long years. From this conduct, it is needless to state that the opponents have resorted to delaying tactics and lingering of the application.

DOCUMENTARY EVIDENCE REFLECTING “NEGLECT” AS PER SECTION 125 OF THE CR.P.C.:

4. That thereafter, by affidavit dtd. 10/05/2007, the applicant submitted eight annexure which are on record of the Honorable Court. Exhibit 27, Exhibit 28 and Exhibit 29 have been enclosed at Annexure 4, Annexure-7-Colly and Annexure-8-Colly respectively (along with affidavit dtd. 10/05/2007). It is evident from Exhibit 27 that the applicant in this maintenance application has filed a complaint case before this Honorable Court for offenses committed by Second Opponent (along with his wife and son). The complaint case specifically brings out a case of cruelties, torture inflicted by the second opponent on the 86 year old widow lady applicant. That at Exhibit – 28, the applicant has submitted copies of baseless complaints filed by the second opponent against the applicant on dtd. 01/02/2007 & 25/03/2007. The documents at Exhibit 27 and Exhibit 28 very clearly show that the 86 year old mother had to file a complaint case in this Court against the torture of her son – second opponent. The second opponent has also proved his rough behavior to-wards his mother by filing complaints which are a part of Exhibit 28–Colly. Both the complaints have been filed in 2007 in which obviously frivolous allegations have been leveled by opponent no. 2 to harass his 86 – year old mother. Opponent no. 2 has created stories which are obviously false and unbelievable. For example he complaints that his mother is threatening to kill him. How can an 86 year old lady suffering from so many diseases and who can’t even walk properly threaten to kill or employ criminals? To sum up, the material on record of this application shows that the second opponent has come up with false allegations to harass his own mother. His conduct of “neglect” as contemplated u/s. 125 of the code is clearly visible.

STATEMENTS & DEPOSITIONS BY APPLICANT WITNESSES:

5. That on 22/05/2007, the grandson of the applicant – Mr. J has filed his affidavit at Exhibit – 32. In the affidavit he has come out with a case by which his deposition can be summarized as: Mr.J says: (1). The second opponent has harassed the applicant to such an extent that the 86 year old applicant had to leave her own flat which is of her ownership; (2). The applicant is an ill lady suffering from various diseases, kidney problems, etc; (3). The daughter of the applicant – J2 is being maintained by third opponent; (4). The applicant does not have any income and survives at the mercy of outsiders.

6. That at Exhibit 33, Ms.H has filed her affidavit dtd. 22/05/2007. Ms.H is daughter of the applicant & a divorcee. The summary of her deposition is like this: Ms.H says: (1). Applicant is poor; (2). Applicant has to seek mercy for food and medicines; (3). After death of the applicant’s husband, the applicant became money-less; (4). The second opponent has harassed the applicant; (5). Second opponent has humiliated and insulted the applicant and driven the applicant out of her own flat whose owner is applicant.

CERTIFIED TRUE COPY OF DOCTORS’ REPORT FOR: (1). ILLNESS (2). MONTHLY EXPENDITURE REQUIRED BY APPLICANT:

7. That on 25/05/2007, the applicant has filed an affidavit in affirmation of the medical expenses and filed certified true copies of reports of doctors under Exhibit – 38. At Annexure – 1, certified true copy of the physician’s report has been filed. At Annexure – 2 (under Exhibit 38) the certified true copy of the Orthopedic doctor’s report has been filed. At Annexure – 3 Colly (Under Exhibit 38) – (pp 8-48) true copies of various latest medical bills of the applicant have been filed. It is needless to state that at the fag age of 86 years, the applicant needs various medical treatment in view of the fact that she is suffering from kidney problems and osteoporosis. Certified True copy of the latest report of doctor has been produced and placed at Exhibit 40.

To sum up, the reports of the doctors as well as various medical bills submitted as stated above clearly show that the applicant is in need of a maintenance of not less then about Rs. 14000/- (Rs. Fourteen Thousand) per month looking to the high standard of living,

FURTHER DELAY TACTICS BY OPPONENT NO. 2 & COSTS IMPOSED BY HONORABLE COURT TO STOP HIS LATCHES:

8. That the applicant has been time and again saying that the opponents particularly Opponent no. 2 is playing delay tactics. This is once again evident from the application of the applicant dtd. 25/05/2007, filed at Exhibit 37. The application was filed to stop the Opponent no. 2 to delay the case any further. For cross-examining the Applicant Witness Ms.H , the Opponent no. 2 asked for time. It was submitted on 22/05/2007 that papers were required for cross-examining Ms.H. Time of three days was granted. However, once again on 25/05/2007, same excuse was put forth. Therefore, the applicant had to file objections to the adjournment application. The applicant was present in the court with her witness. However, delay tactics were exhibited by Opponent no. 2. Therefore this Honorable Court had to impose a cost of Rs. 100/- on the Opponent no. 2 for delaying the case. It is pertinent to state that no papers were shown during the cross-examination of the Applicant witness although time was taken by Opponent no. 2 under an excuse to produce papers.

APPLICATION TO CLOSE RIGHTS OF FIRST & THIRD OPPONENTS:

9. That on 02/06/2007, an application on affidavit (at Exhibit 42) was filed by the Applicant for closing the rights of the first and the third respondent was filed. The first and third respondent were absenting from the proceedings in spite of serving them notices on 25/04/2007 & 29/05/2007 by the applicant by registered ad post and by telegram. Looking to the fact the right of the first and third respondent to enter into defense were applied to be closed. Relevant papers i.e. True copy of Telegraphic notices sent to the three Opponents were submitted by Affidavit of applicant dtd. 02/06/2007 at Exhibit 44.

FURTHER APPLICATION TO EXPEDITE THE CASE:

10. That thereafter once again application dtd. 18/06/2007 was filed to expedite the proceedings. The necessity to file this application had risen because of circumstances that appeared onwards 02/06/2007. On 02/06/2007, on behalf of the second opponent time was asked by saying that Second Opponent has gone out of town. The case was therefore adjourned to 15/06/2007. However, the second opponent was found in lobby of the court campus on 02nd itself when it was informed that he has gone out of town. Thereafter before 15/06/2007, the second opponent was attending a civil case (although in this court it was submitted that he has gone out of town). On 15/06/2007 once again the matter was adjourned to 26/06/2007 without any application to summon opponent witnesses. To stop the latches of second opponent once again an application on affidavit dtd. 18/06/2007 was filed so that the matter does not get postponed on 26/06/2007 for unwanted reasons.

CONTENTS OF ORAL EVIDENCE & ITS APPRECIATION:

Oral Evidence of Applicant and witnesses on her behalf:

APPLICANT’S ORAL TESTIMONY:

11. The 86 year old applicant – Mother was examined on 10/05/2007. In her examination-in-chief the applicant came out with a clear statement which can be summarized as following: 86 year old Mother says in oral testimony that:

1. Applicant has four sons (one died) & two daughters;

2. Applicant’s daughter J2 is mentally ill;

3. She (applicant) is 86 years old;

4. She (applicant) is illiterate – she can only sign;

5. Applicant has various diseases such as : (i). Operated thies; (ii). Kidney Problems; (iii). Catheter tube in Kidney; (iv). displacement of vertebra; (v).
Fractures in both hands caused by Opponent no. Applicant takes lot of medicines. Medical papers in this regard have been produced by the applicant;

6. Opponent no. 2 caused fracture in both the hands of Applicant by pushing her;

7. Applicant has no income;

8. The Opponent no. 2 has forcibly got into the flat belonging to applicant since four years and she has to stay with her grandson Mr.J (son of third respondent);

9. The Applicant has identified documents which show that she has lodged a complaint against her son (Opponent no. 2) with the police department and with this court.

10. That the applicant states that Opponent no. 2 pays income tax. He has a passport. He is independent & self-sufficient.

11. On her cross-examination, the applicant has specifically denied of having income, bank balance or other sufficient means to maintain her. To the contrary she has stated in the cross-examination that she is living a dependent life on mercy of others. She further states that she has nothing more then one or two thousand rupees in her account.

APPRECIATION OF THE EVIDENCE OF APPLICANT:

12. The applicant’s oral evidence along with the documentary evidence she has placed before the court clearly indicates her old, helpless age, having no income. She has produced various medical papers that show her diseases which she has explained. The applicant has also placed doctor’s report showing that she requires physiotherapy, kidney treatment and other medical treatment. Thus the applicant has been able to show that she is in need of medical treatment. Looking to the high cost of living, ill health and other factors in consideration of her last life, she has fully justified the maintenance of about Rs. 15000/- to 16000/-.

13. That the applicant has also produced documents on the record of the court which indicate that she was tortured and harassed by her son i.e. the second opponent. The applicant also produces documentary evidence to show that she has filed police complaint and complaint with the court for criminal intimidation, criminal trespass etc. before this court. The applicant has also produced documents to show that her son (Opponent no. 2) has also filed police complaints against her. Perusal of complaints shows that they have been filed in 2007. The applicant also shows that the Opponent no. 2 has filed a civil suit no. 381/2007 (shows that the civil suit was filed off late in 2007). These rounds of serious complaints by an 86 year old mother and after-thought concocted false complaints by Opponent no.2 against his own mother clearly shows that the son has neglected to maintain her.

14. That it is also necessary to state that during the testimony of the Opponent no. 2, he has clearly pointed out after his mother left her own flat, he has never gone to bring her home. The Opponent no. 2 has admitted that he has made police complaints against his mother on 31/01/2007; 01/02/2007 & 16/03/2007. Opponent no. 2 also admits that his mother has filed a police complaint against him. These statements both by the applicant and the opponent no. 2 show that he ill treated his mother to such an extent that she was forced to leave her own flat. The criminal complaint on record of this court depicts the facts at length. It is needless to state that the Opponent no. 2 forced the old lady to leave her own flat by resorting to criminal intimidation for death, threats, torture and negligence. The opponent no. 2 by his conduct made it impossible for the applicant to live in her own flat. This speaks volumes of the “neglect” part envisaged in the Cr.P.C. Section 125.

15. It is pertinent to quote Mahendrakumar S/o Ramrao, Gaikwad, Petitioner V. Gulabbai And Others, Respondents, 2001 (107)-Cr.L.J 2111 Bom wherein the courts have held that the refusal or neglect may be express or implied. The court in the Mahendrakumar’s case (supra) held:

“..20. The neglect or refusal may be express or implied and in the circumstances of a particular case, it becomes a matter of inference to be drawn by the Court from the conduct of the non-claimant. In order to buttress this view, one can lay hand on Mt. Dhan Kaur v. Niranjan Singh, 1960 Cri LJ 1494 : (AIR 1960 Punj 595). It has been held that neglect or refusal may be express or implied and, in the circumstances of a particular case, it may be inferred by the Court from conduct of party from whom maintenance is claimed…”

In this case, the Bombay High Court also referred to the Allahabad High Court’s views expressed in Re. Mithlesh Kumari v. Bindhawasani (1990 Cr.L.J. 830) where the Allahabad High Court stated that the neglect may be express or implied. It was stated that the neglect should be inferred from words or conduct.

In the present case, the second opponent has done everything to harass his aged mother. It is needless to state the conduct of second opponent speaks volumes and shows that he has grossly neglected to maintain his 86 year old mother by inflicting torture, harassment and atrocities on her.

APPRECIATION OF THE EVIDENCE OF COMPLAINANT WITNESS MS.H:

16. That on behalf of the applicant two witnesses had been examined. The first witness was the daughter of applicant. Second witness was the grandson of the applicant. The daughter of the applicant Smt. Ms.H is sister of Opponent no. 2. She made her deposition on 22/05/2007. In her deposition – oral testimony Smt. Ms.H has come out with following case. Ms.H says in her testimony:

a. The applicant is an 86 year old lady. She is sick. She (applicant) has problems of urine, kidney, Blood Pressure etc.

b. The applicant has to stay with her grandson (Shri Mr.J) – son of the third opponent i.e. Shri Ashok bhai.

c. Applicant has no source of income;

d. The Opponent no. 2 had threatened to kill the applicant;

e. The deponent / Ms.H says that she stays in the flat at X Society in one part. She says that the applicant does not stay in her flat since 10 months. When the applicant comes, the Opponent no. 2 does not open the doors.

f. The deponent says that the Opponent no. 2 has broken the lock of the room where the applicant had put her luggage and mis-appropriated the applicant’s luggage by replacing applicant’s luggage with his own.

g. The Opponent no. 2 and his son threatened the applicant that if applicant will put any luggage in lock and key they will break her limbs and kill her.

h. That the flat at X Society belongs to the applicant and is of her sole ownership and the Opponent no. 2 is staying there forcibly.

i. The necessity to sell the flat has arisen because the applicant does not have money to maintain herself.

j. Deponent stays without light and water in the part of flat occupied by her.

The above deposition of Ms.H clearly indicates that Opponent no. 2 has been ill-treating & harassing his mother-applicant and given threats to kill her. Opponent no. 2 threw off luggage of his mother from the flat belonging to the ownership of his mother (applicant). Opponent no. 2 does not pay a single penny to his mother. He does not care for his mother. Opponent no. 2 has pushed his mother out of the flat belonging to her.

APPRECIATION OF THE EVIDENCE OF COMPLAINANT WITNESS MR.J:

17. That another witness who has also been examined on behalf of the applicant is Shri Mr.J Mr.A . Mr.J is the son of the third respondent. In spite of this, he has given his statement on oath in his oral testimony. Mr.J says (in his Oral testimony):

a. He is staying in Rajkot since 1994 in his Grandma’s flat;

b. Even he had to leave the flat due to torture of his uncle, Opponent no. 2;

c. Mr.J says that the flat at X Society belongs to her and it is of her ownership;

d. He says that the applicant does not stay in the flat at X society due to torture and harassment inflicted by the Opponent no. 2, his wife - Heenaben and son Bhramha;

e. Applicant’s daughter who is mentally ill is being maintained by him and his father Mr.A (third opponent);

f. The applicant stays with deponent;

g. The Opponent no. 2 does never comes to inquire about applicant.

h. The deponent and some relatives bear the medicine expenses of the applicant to the extent they can bear;

i. Opponent no. 2 does not give any financial assistance to the applicant;

j. The hardships of applicant – grandma increased after the grandfather of deponent died;

k. The second opponent has bad habits such as eating tobacco, smoking cigarette and drinking alcoholic drinks;

l. PW-2 (Ms.H ) – stays in the flat at X Society where she has no facility of electricity and water. These facilities have been stopped by Opponent no. 2.

The above testimony indicates very-very clearly that the Opponent no. 2 has totally neglected and failed to maintain his mother. Opponent no. 2 does not give any financial assistance to his mother and he is the one who has driven out his mother from the flat whose owner is the mother. It goes without saying that instead of caring, the opponent no. 2 has inflicted harassment and hardships on the applicant.

EVIDENCE OF THE OPPONENT NO. 2

18. That the opponent no. 2 stepped into his defense by giving out his testimony before the court. In his testimony, Opponent no. 2 has admitted following:

a. Applicant has left the X Society Flat. She stays at Y Apartment;

b. Applicant told him to leave the flat at X Society;

c. He filed police complaint against his mother and sister;

d. Opponent no. 2 admits that he has filed a civil suit against his mother as late as in April 2007;

e. His mother (applicant) had given him education, brought him up and in this way the applicant mother discharged her duties;

f. The Opponent no. 2 admitted that he has no evidence to show that his mother was doing any business;

g. The Opponent no. 2 further admitted that he does not have any evidence to show that his mother has any Fixed Deposits, Bank Accounts, Debentures;

h. Opponent no. 2 has admitted in cross examination that the flat where he is staying belongs to his mother;

i. Opponent no.2 has also admitted that the applicant mother has not gifted neither rented the flat to him;

j. The Opponent no. 2 also admits that on 31/01/2007, 01/02/2007 & 16/03/2007 he has filed police complaint against his mother. He admits that in his complaint he has leveled allegation against his 86 year mother that she will get him killed;

k. The Opponent no. 2 also admits that has taken education upto inter arts. He admits that he is conversant with as many as four languages viz. English, Hindi, Gujarati & Oriya.

l. Opponent no. 2 admits that he was working with his father and he was doing the business of mines;

m. He further admits that procedure of selling the land quarry / mine was done by him (although the owner was Mr.A – third respondent);

n. He (Opponent no. 2) has done automobiles business;

o. His wife according to him was a partner in a family business;

p. He was running shop from 1986-91.

q. Opponent no. 2 admits that he has no idea as to how his own real sister is staying in the room without water and electricity;

r. Opponent no. 2 admits that in 1994 he has registered a firm called System Tech India. He further admits that the firm was doing the business of Defense Tools Supply. The firm had carried out a turn-over of about two and half lac rupees. He says that he does not keep any account of his firm. He has transferred the firm in the name of some one else in year 2000;

s. The Opponent admits that both his sons are employed. One is employed with a mutual fund.

19. That it is pertinent to point out that the second opponent has made the above admittance. The above admittance clearly shows that the second opponent is a man of experience, he is intelligent, knows four languages and he has been doing the business of mines, automobiles, defense tool supply etc. He admits that he has been doing a turn over of two and half lac rupees, but to conceal material facts, he says that he has kept no accounts thereof. He also says that he has never kept any bank account (although he was doing so many business!) Not only that, the second opponent has also admitted that his mother has criminal filed complaints against him and he has filed as many as three complaints off late in year 2007 against his mother making allegation that his 86 year old mother will kill him.

20. That here it is also pertinent to point out that the Opponent no. 2 has also admitted that he stays in the flat belonging to the applicant and that the applicant had asked him to leave the flat. He further admits that he has never bothered to see how his mother is staying in X Appartments.

21. On one hand the second opponent contends that he has no income whatsoever. He does not have bank account. But in very same testimony he also says that he had registered a firm, he has transferred the firm. He says that he was doing supply of defense tools. How can defense supplies take place without bank account?

22. That in the entire testimony of the opponent no. 2, he has been saying that he does not earn anything. On being cross-examined he admitted that he had experience in as many as three business i.e. Automobiles, Mining and Defense Supplies, he holds passport, he has registered a firm which has done a turnover to the tune of 2.5 lacs. The testimony of the Opponent no. 2 clearly shows that he has tried his best to conceal his sources of income which could have been known only to him and not to his 86 year old mother who is illiterate.

23. That for defending himself the opponent no. 2 states that the applicant has filed the application for maintenance for driving him (Opponent no.2) out of the flat whose owner is the mother. By this admittance, he clearly indicates that he is forcibly staying in the flat belonging to his mother, against her wishes. He also says that his mother lives with her grandson (third respondent’s son). By this admittance, gives an inference that something so intense happened that made the applicant-mother leave the flat who is the owner.

UNDERSTAND THE ADMITTANCE OF DEFENSE WITNESSES:

24. That with a hope to support his version, the Opponent no. 2 called one Mr. H purportedly deposing as a President of the X Society. Mr. H admitted following:

a. That this defense witness has highlighted the importance of mother. Role of mother. He says that mother should be well treated. She should not be harassed. A lady of 86 years needs food, clothing, shelter and it is necessary that proper care of such an old person of 86 years should be taken.

b. The Opponent no. 2 is staying in the flat at No. 00 of X Society. He admits that the flat is in the name of applicant (mother).

c. This defense witness says that he is aware about the fact that applicant has filed a police complaint against the Opponent no. 2;

d. The defense witness further stated that he has never seen the bank statement of applicant. He knows nothing about the financial position of the applicant.

e. The defense witness also admitted that he has never done a single penny financial transaction with Opponent no. 2. He is not aware whether Opponent no. 2 has any money or not;

f. The defense witness for Opponent no. 2 admits that he has a business at Bangalore. For about 6 months he stays at Bangalore. During these months he does not know what business Opponent no. 2 is doing.


25. That looking to the above admissions of the defense witness, it is apparent that he has come with a clear version professing his total ignorance about the financial ability of Opponent no. 2. This witness has stated very clearly that the flat belongs to the applicant and she is the owner of the flat. The deponent happens to be the President of the Society and therefore knows that the flat is of the ownership of applicant. He also states that the Opponent no. 2 is staying in the flat of the applicant. The witness says that he knows nothing about the financial position of the applicant. He further tells that he has only heard about the police complaint from Bangalore and he was never present personally.

26. That the above testimony supports the version of the applicant. Mr. H states that Opponent no. 2 is not working. But in cross examination he also states that he does not know what Opponent no. 2 is doing when deponent is out of town for six months. He also states that deponent does not know about the financial aspects of the Opponent no. 2. In rest of his testimony, he says that all that he is deposing is what he has heard from others.


27. That another defense testimony is by Mrs. M. (DW-3). She has taken following version in her testimony:

a. This defense witness during testimony also gives the importance of a mother. She says that a lady of 86 years is very old, weak and naturally infirm. It is necessary to take care of such a lady. She also says that an old person needs food, clothing, shelter, medicines and such amenities should be provided to her.

b. The DW-3 has stated that she is doing service.

c. DW-3 says that she knows Opponent no. 2 since five years. She admits that she does not know whether Opponent no. 2 is working or not.

d. The defense witness says that she is lending small amount of money to Opponent no. 2. The word used is “Dhiraan”. This means to lend on interest. After this she claims that she not take interest and neither keeps any accounts of money lend. However, she states that all the money she lends is always returned.

e. She says that the 86 year old applicant threatened to kill her. But she also says that no corresponding complaint was ever made by her to police;

f. The witness says that she is not aware about what complaint has been filed by the applicant in the court.

28. That it is very clear that the statements made by this defense witness are totally contradicting themselves. Following are the contradictions which seriously impeach the credibility of this witness:

a. DW-3 says that the applicant threw off the luggage of second opponent and there was a big noise, many people gathered. However, very next statement she says that she was not present when this happened & people who were present informed her.

b. DW-3 says that 86 year old applicant threatened to kill her and break her limbs. This was a patently false statement. How can a lady who barely walks with great difficulty (suffering from Osteoporosis & kidney problems) threaten to kill the deponent? When asked whether she complained to police, she said she did not complain. Deponent is an educated service class professional woman. If she is threatened to kill, it is strange why she did not complain? On the other hand, in the same testimony she says that she has no personal problems with the applicant. These statements are totally conflicting.

c. That DW-3 states that she is lending money “Dhiraan” is the word used. This means to lend on interest. On other hand she says she does not take interest. When questioned about accounts, she says that she does not keep any accounts. But when asked whether all the money is returned, she says “YES”. These statements are also totally contradicting one other. It is unnatural to say that person lending money by way of “WLZF6” will not take interest. Even presumed that the money is lent interest free, without keeping accounts how anybody can reach a clear answer that everything lent is returned.

This sort of story can have only two meaning. Either the story is false. Or that the lending is done on such a large scale base that the accounts are concealed purposely. This can be said looking to the statement of DW – 3 that she is doing financial transactions with the Opponent no. 2 since five years along with her husband.

In any case, nothing is proved regarding the earning capacity of the Opponent no. 2 merely by saying that she is lending Rs. 500/- to Opponent no. 2 which he is returning. Merely if DW- 3 says that Opponent no. 2 is poor, he does not become poor & nothing gets proved in the eyes of law.

The version of this witness can be strongly impeached and rendered untrustworthy because she has said obvious lies which nobody will believe like saying that the old lady threatened to kill her and at the same time saying that she has no problems with the old lady. Secondly her statement that she & her husband have financial transactions since 5 years with Opponent no. 2 show that she is an interested witness.

NET CONCLUSION:

29. That looking to the testimony of the complainant and her witnesses as well as the testimony of the Opponent no. 2 and his witnesses, it is clear that the opponent has not been able to bring out any case. On the contrary, his own witness has deposed that the flat belongs to the applicant. His witnesses have given testimony which are totally incredible and conflict with their own statements they made.

POINTS OF LAW:

30. The law of Section 125 is a social legislation. It is meant to give fast, effective and economical remedy to the destitute wife, children and parents.

31. Looking to the above position of law, the questions that need to be addressed are:

a. Whether there is a “neglect” or refusal on the part of the respondent (sons in this case)?
b. How much maintenance is to be awarded?
c. From what date the maintenance should be awarded?

32. The above questions need to be answered in the present context. The first question is obvious that looking to the testimony of the parties and the documentary evidence, there is hardly any need to elaborate that the old lady of 86 years has not only been neglected but as far as Opponent no. 2 is concerned he has spared no stones to harass his old mother. The refusal to maintain or neglect can be implied as stated in Mahendra Kumar’s case (supra).

33. That as far as the quantum of the maintenance is concerned, it is pertinent to point out that the applicant is an old lady of 86 years. She has very less expectancy of life. One thing is certain that she will not live very long. Looking to this fact and also looking to the numerous ailments she has, it is essential that the old lady should be given a maintenance of not less then Rs. 15000/- per month looking to the quantum of her expenditure on medicines, standard of living and such factors. Her expectancy of live may perhaps prolong few years, if she has sufficient medicines for the balance short time that she has to live in this world.

34. That it is pertinent to point out that the Opponent no. 2 has kicked out the applicant from the flat belonging to applicant. The applicant has to live on mercy of others. For the purpose of escaping from the liability to maintain his mother, the opponent no. 2 has come out with blatant statements. He says that he has no income whatsoever. He does not earn a penny. He has no bank account. However, various other statements he has made in his own testimony clearly suggest that he is telling a lie to conceal his income. For example saying that I never had any bank account. On the other hand at the same time saying that he was making supplies to defense. It is needless to state that he is concealing material facts.

35. That under the above circumstances, the question is what should be done? Since the respondent is simply avoiding any answer or taking a tight concealing view that he has nothing to give, what should be done? That here it will be necessary to take the judicial views.

36. That in Re. Ali Hossain, Petitioner V. Baby Farida Khatoon, Respondent 1998-(104)-CRLJ -2762 -CAL

“It is true that the ld. Magistrate did not attempt to record any specific finding as to how much the husband earns but this omission cannot be faulted particularly when the best person to enlighten the Magistrate on this point withheld the relevant data and it was not within the knowledge of the wife as to how much the husband does actually earn in case his real occupation is that of a regular rickshaw-puller and a casual labourer as claimed by him. The ld. Magistrate was certainly justified, in the facts and circumstances of this case, to take it for granted that the husband had the sufficient means to maintain his wife and children.”

That it is pertinent to point out that in the above case, an ordinary rikshaw-puller was asked to pay a maintenance of Rs. 700/- per month that too 10 years back – somewhere in 1997. It is needless to state that the Opponent no. 2 has particularly come up with a case in his testimony which clearly point out that he is very experienced man doing may businesses. But the financial data have been concealed with a mala fide intention by the Opponent no. 2. The financial data is within the exclusive knowledge of the Opponent no. 2 and 86 year old lady has no means to know about these matters.

37. That again in Re. Durga Singh Lodhi, Petitioner V. Prembai And Others, Respondents 1990-(096)-CRLJ -2065 –MP the court held:


“.. an able bodied young man must be presumed to be capable of earning sufficient money so as to be able to reasonably maintain his wife and child and he cannot be heard to say that he is not in a position to earn enough to be able to maintain them according to the family standard. It is for such able bodied person to show to the Court cogent grounds for holding that he is unable, for reasons beyond his control to earn enough to discharge his legal obligation of maintaining his wife and child…”

“..The presumption should be that such an able bodied and healthy person has capacity to earn. The presumption should be that such an able bodied healthy person is possessed of sufficient means and it is for him to show that by accident, disease or the conditions of labour market or otherwise, he is not capable of earning anything…”

38. That in Re. Raibari Behera, Petitioner V. Mangraj Behera, Opposite Party, 1983-(089)-CRLJ -0125 –ORI, the courts interpreting the context of sufficient means stated:

“.. The word "means" does not signify only means like estate or definite employment, but also includes capacity to earn money. If a man is healthy and able-bodied, he must be taken to have means to support his wife and children and he cannot take the plea of not having sufficient means. A person has sufficient means if he has capacity to earn. Notwithstanding the fact that a husband is an insolvent or a professional beggar or a minor or a monk, he must support his wife so long he is able-bodied and can eke out his livelihood (See the case of Basanta Kumari Mohanty v. Sarat Kumar Mohanty (1982 Cri LJ 485) (supra)). The word "means" does not imply only visible means. It includes a capacity to earn. A person who is fit to earn his livelihood cannot be relieved of his liability under the section even if he is young and unemployed, as has been laid down by this Court in Smt. B. Veragam v. Manoranjan Samanta Kumar, ILR (1963) Cut 415 : (1963) 29 Cut LT 584. Judicial decisions are unanimous that the expression "means" occurring in Section 488 of the Code (old) (corresponding to Section 125 of the present Code) does not signify only visible means, such as real property or definite employment and that if a man is healthy and able-bodied, he must be held to possess the means to support his wife and children and he cannot be relieved of his obligation on the ground that he is unemployed. The opposite party, having sufficient means, has neglected and refused to maintain the petitioner…”

That here it is pertinent to point out that the Opponent no. 2 has forcibly trespassed the flat, kicked out his mother after torturing her. The flat is in a posh locality and costs somewhere between 16-18 lacs. The Opponent no. 2 should be imposed with the maintenance taking this factor into consideration.

39. That now the last question is the date from which the maintenance should be awarded. It is pertinent to state that the maintenance should be awarded from the date of application i.e. 25/10/2005. This view should be taken considering following:

a. That the Opponents have caused all the delay in the matter as narrated hereinabove;

b. That the aged old 86 year old mother has not been paid a single penny of interim maintenance, hence now the maintenance should be paid from the date of application;

c. That the applicant is in need of funds for her health treatment. She should not be penalized for the delay caused in the matter due to latches by the Opponent no. 2 especially in view of the fact that no interim maintenance has been paid although asked for.

40. The following judicial views should be taken into consideration for the purpose of ordering maintenance from the date of application.

a. In Re. Kanhu Charan Jena, Petitioner V. Smt. Nirmala Jena, Respondent 2001-(107)-CRLJ -0879 –ORI, the court held:

“Ordinarily, if maintenance is granted, direction is usually given for payment of maintenance from the date of the application. Where, however, some interim maintenance is paid, subsequently the Court may direct that maintenance as decided in the final order may be paid from the date of the final order.”

b. In Re. Makhdum Ali, Petitioner V. Mst. Nargis Bano And Another, Respondents 1983-(089)-CRLJ -0111 -DEL

“If the husband has behaved badly the Magistrate should award maintenance not from the date of the order but from the date of the application. In my opinion there ought to be compelling reasons before the wife is deprived of maintenance from the date of the application. No such reasons have been given by any of the two courts…”

c. The Honorable Apex court in Re. Smt. Savitri, Petitioner V. Govind Singh Rawat, Respondent 1986-(092)-CRLJ -0041 –SC showed the importance of interim maintenance in light of the legislative intention of the provisions of the maintenance.

d. In Re. Ganesan, Petitioner V. Madheswari And Others, Respondents 1999-(105)-CRLJ -0914 –MAD, the court held:

“... When the Court ultimately decides that she is entitled to be maintained after conducting enquiry, then the said decision must necessarily be based upon the material showing that the wife is unable to maintain for herself from the date of the application. Once such a conclusion is arrived at, then, in my view, normally the learned Magistrate has to pass order directing the maintenance from the date of application. Of course, even for such an order the reasons are to be given, in order to show that the discretion has been properly exercised…”

e. In Nachhattar Singh, Petitioner. V. Harjinder Kaur And Another, Respondents, 1995-(101)-CRLJ -2726 -P&H it was held:

"A destitute wife or child needing succur is entitled to get it from the date she or it approaches the Court unless there are circumstances which do not justify such a course. No such circumstances has been pointed out here. The wife has been found to be entitled to maintenance on the neglect or refusal of the husband. She complained of that fact when she made the application. Thus she is entitled to maintenance from the date of the application."

f. In Re. Gnanaselvi And Others, Petitioners V. Illavarasan, Respondent 1999-(105)-CRLJ -1008 –MAD, it has been held:

“.. Ordinarily the order of maintainence should be granted from the date of application and only in exceptional circumstances to be stated, should the same be granted from the date of order..”

Taking into the above points into consideration, it is humbly prayed to award maintenance in terms of the prayers of the applicant’s application from the date of application.

FOR THIS ACT OF KINDNESS AND JUSTICE, THE APPLICANT AS IN DUTY BOUND SHALL FOR EVER PRAY.

RAJKOT
-----------------------------------------
/07/2007 MOTHER

The Outsourcing - Business in a Profession of Law

Non-core activities take up a substantial time of an organization with no additional advantages. Therefore, various business processes not core to the organizational line of activity are being outsourced. This improves the focus on the core activities and improvises them. With an initial focus on outsourcing sales, marketing, pay-roll, now the shift is on the outsourcing of the knowledge based activities. These include finance and accounting, medical transcription, Research and Analysis, Intellectual Property Research and host of “Legal Services”.

OBJECTIVES OF OUTSOURCING LEGAL WORK:

Well – the prime objective is to achieve superior quality services at lower costs and least involvement. But the question is what if the work quality or confidentiality is compromised. Okay, try “Head Hunting”. You would want a right man doing the right job. Head-hunting is searching for a right man to fit a right job. It is a good idea to ensure that you rely on a vendor (person either being a company or a group of individuals providing you with the services you need) having quality commitment at right (if not the least) cost having sufficient resources to do your job well. When you are concerned with the legal tasks, data confidentiality is yet another factor you got to be concerned about. How secure is the vendor’s site? If you are working on a larger project, you would also want to have somebody doing your job with some prior experience because you do not like to be an experimental material. Another vendor attribute is his financial stability, his responsiveness and the transparency of his work. When you are outsourcing your work abroad, you may want to consider other factors like job pay, political stability, country policy, talent pool, and experience and very importantly the honesty of vendor.
So the first and foremost objective is – “improving the quality of work, reducing costs by planting right man doing the right job with pre-determined vendor attributes.”

Steps to outsourcing Legal Work:

First of all identify and segregate your core and non-core activities. Out of non-core activities pick up those activities you feel burden you while adding nothing extra to your work. You know your internal processes and the operations. But the vendor doing your job does not know about it. Can you summarize your internal processes..like (a). First this (b). Then that, and (3). So on…

Think of the basics of the management – planning, organizing, staffing, leading and controlling.

First of all you planned what you want to outsource.

Then you organized your activities as core and non-core activities.

You picked up a vendor after identifying some attributes which you defined looking to your work.

So now go ahead and tell your vendor what you expect out of him. You got to tell your vendor what do you expect him to do and how should the job be done. To make this successful you may want to plan out your work with predetermined goals.

After taking all this trouble, you need to know how well the vendor faired to fulfill your expectations. To know this, you need to set-up predetermined quality levels for the output you wait for. Every time the vendor returns you with the work, the quality mechanism must scan the work done.

If you have been able to do so much, all that you need to care is to ensure that your employees and organizational constituents accept the outsourcing arrangement finding the outsourcing decision as a contributory factor to increase their productivity. A business without trust is no business at all.

Do this over and over, you will find your-self more enriched with experience and more competent to tailor your requirements according to the objects of your work.

Don’t forget that you are a lawyer and remember to stuff in all the agreed commitments into your outsourcing contract.

The new changes in law fields

SOLO LAWYERS – BACK COMES YOUR TIME:

Size counts. The economies of scale have long been canvassed. But who would like to get into a mass production system in a sector like “Legal Practice”. Every case and every position of law differs and has its unique aspects. I find that clients increasingly want personal attention. Legal issues are akin to medical ailments. Although the fundamentals are all the same, each one is unique.

This very factor has become important to ensure that if as a client I go to a lawyer, I want all his attention. I do not want to feel that I am just one amongst a huge lot of clients he serves and the solutions he provides are simple stereotypes.

The flexibility which a small solo lawyer can provide are seldom provided by large scale law firms who fit more appropriately to a large corporate client surrounded by a similar structure of hierarchy management.

I found the following posts on Greatest American Lawyer by JD Hull quiet interesting:



Is The Greatest American Lawyer Onto Something?
First, let me explain something.
I'm not only a full-time practicing lawyer but, in some respects, I'm a professional stereotype. From time to time, this combination may have stifled my ability to think clearly, logically or creatively. After college and law school, I worked a couple of times for the U.S. Congress. Then I was an associate and a partner in both the D.C. and Pennsylvania offices of a larger law firm than I am in now. Another way to describe the path: take your liberal arts degree and those happy old verities you learned to law school, suffer through it, take two years "off" after law school (clerkship, government, teaching), join a "good" firm, happily do research and other things a galley slave or bootlick would object to, and make partner. Now you are in, say, your mid-thirties, looking at 40, and you start asking yourself the eternal questions that normally occur to a 20-year-old. Who am I? What is reality? Just what goes on in Amsterdam's coffee shops? And should I join the Peace Corps?
Instead, I co-founded my own "law boutique", when that was a relatively new idea, focusing at first on complex litigation, energy and environmental law. And not knowing any better, we did exactly what people said we could not do: retain and service the same size and caliber of clients I represented in my old firm. It wasn't that we refused to "bottom feed"; we just didn't even know how to be a lawyers for most individuals and companies. Used to fancy problems, we wanted to keep solving them for higher-end clients. We liked that and knew how.
Still, since we formed our firm in the mid-1990s, I have clung to a conventional notion which mirrors my conventional path. Repeatedly, I've told anyone who would listen that--even though the Internet and related technologies were making it easier for smaller law firms to compete with mega-firms, and even if your lawyers and staff were the best--large privately-held and Fortune 500 clients would never, ever accept and regularly retain: (1) a law firm of one, two or three people, no matter how talented; or (2) a "virtual firm"--one without at least one if not two or three brick-and-mortar offices in strategic places across the country or world.
But now I am not so sure. One reason is some very thoughtful and provocative recent posts from The Greatest American Lawyer who, lately, has been on fire. And GAL is making me think that the Internet, new technologies, advances in the art of outsourcing and other forces rippling through the global markets may mean this: more and more, talent--not size--matters. GAL's posts are, here, here, here and here. I don't agree with every premise or word. But I am stunned others (including me) haven't openly asked these questions. Read GAL's posts. Try a new theory, if just for fun. Ask yourself why, for example, a talented lone lawyer with the right organizational skills and access to real talent can't compete with a Freshfields, Jones Day or Baker & McKenzie with their offices, clout, specialities, talent and depth all over the world.

Central Excise Act - Valuation under Section 4a

The cardinal issue involved in the present matter is : Why quantity discounts should NOT be taxed u/s. 4a of the Central Excise Act?

1.HOW THE DISPUTE ABOUT VALUATION HAS ARISEN?

DIFFERENCE OF OPINION BETWEEN DIFFERENT TRIBUNALS:


HOW THE DISPUTE AROSE?

The Vinayaka Mosquito Coil’s (VMC) case 2004 (174) ELT 107 held that during valuation, free supplies in respect of the commodities covered under section (u/s) 4a, are not to be included during valuation of the commodities.

Similar view came forth in Re. Surya Food and Agro’s (SFA) case 2003 156 ELT 488 (Tri- Delhi) and the ratio herein was also followed in the VMC’s case. Also see: Sony India Ltd., V/s. CC. (2004 (167) ELT 385(S.C.) )

The above position of law which was taking a concrete shape has been upset by recent decision in Re. Indica Laboratories P.Ltd. (ILPL) V/s. CCE pronounced on 21/05/2007. The ILPL decision in turn is in lines with (1). Intel Industries P. Ltd. V/s. CCE, Calicut {2004 (163) ELT 219 – Bang}; (2). Nestle India Ltd. V/s. CCE, Goa {2004 (163) ELT 249}; (3). CCE Mumbai V/s. Godrej Industries Ltd. {2006 (200) ELT 348 (Tri- Mumbai)}.


WHY THE DECISION IN ILPL, INTEL, NESTLE AND GODREJ IS NOT BINDING ON ASSESSEE?

Looking to the decision on either side i.e. SFC and VMC’s case on one side and the views taken in ILPL, Intel, Nestle and Godrej on the other side, one thing is clear that the tribunals are divided on their opinion. That is, there is no uniformity of the opinion on the question of law : Whether the quantity discount should be taxed u/s. 4a or not. Therefore, the decision in Intel, Godrej and Nestle’s case is not conclusive and binding. This issue remains open for challenge before the High Court and the Supreme Court.

2. WHY QUANTITY DISCOUNTS SHOULD NOT BE TAXED?

WHAT IS THE GROUND POSITION OF LAW?


The Supreme Court has dismissed the department’s appeal in the VMC’s case filed by the department in Appeal No. 7917 OF 2004. VMC case was favoring assessee and held that quantity discounts should not be taxed u/s. 4a. The bench consisting of Justice Ruma Pal and Justice CK Thakkar has dismissed the petition in limine. Here, it is pertinent to point out that the dismissal of the petition certainly indicates that the department could not bring any sort of point of law in the matter which requires interference by the Apex court (because the point of law for allowing the trade discount by whatever name called is well settled). The decision of the Bangalore Tribunal and the Karnataka High Court were not disturbed by the Supreme Court (Apex Court).

What does this mean? Does it mean that the VMCs case gets the approval of the Apex Court. Well, dismissal of the petition in limine does not mean that the Supreme Court has entered into merits of the case. See VM Salgaocar & Bros Pvt. Ltd. V/s. Commissioner of Income Tax (AIR 2000 SC 1623). Therefore, right now it will not be appropriate to take the view that the VMC case has been backed up by the Supreme Court.

The question of not taxing the quantity discounts u/s. 4a is a question of law.

Therefore, it can be safely construed that the dispute is open and the department does not have any upper hand against the assessee. On the contrary, since the VMC’s case has been dismissed in limine by the Supreme Court, the decision although not on merits, favors the point of law as explained by the Tribunal Bangalore and Karnataka High Court in the VMC’s case (in view of the fact that the Apex Court did not disturb it). The question as to why the quantity discounts should not be taxed is elaborated hereunder the “grounds of law”.

GROUNDS OF LAW:

HOW AND FROM WHERE SECTION 4A CAME INTO EXISTENCE?

CONCEPT OF “VALUE”:

We have to go back to the basics of “Central Excise” in order to understand why the quantity discounts cannot be taxed & how section 4a came into existence. Not taxing Quantity Discounts is a matter of principle of law which cannot be disturbed even after introduction of Section 4a. The Ahmedabad Tribunal has acted against the settled law. It is pertinent to state that Section 4a is not a new or novel method of taxation. It is only another way of calculating “Value” of the goods. The method as given u/s. 4a has been introduced by the parliament by Clause 80 of Finance Bill, 1997. The very objective was to minimize the tax disputes and make the calculation of “Value” more easy and dispute-free (looking to the fact that India is going Global).

The excise duty is on the manufacture of the goods. Under Excise Law, there are only two methods of taxing goods. First method is called Specific Rates. “Specific rate” means excise tax on the quantity produced (e.g. k.g., meter, liter etc.). Few items e.g. cigarette, marble are taxed this way.

Another method by which tax is imposed is by specifying Ad Valorem Rates. This means taxing on “Value”. The term “Value” is very important for our purpose because our argument of quantity discounts allowable u/s. 4a is resting on the concept of “Value” (which is common to both Section 4 and Section 4a).

Section 4a was introduced after Section 4. Section 4a has been drafted with a Non-obstense clause before it. This means, once a notification specifies Goods to be valued in terms of RSP (Retail Sale Price) then the valuation as per method of Section 4 should not be done. Therefore, before going to Section 4a (and quantity discount argument) it is important to understand the objective behind Section 4 and then see why Section 4a was introduced?

Section 4 of the Excise Act, as it stands now has its roots in the amendment, of Central Excise Act in 1973. The Government amended the Excise Act. Government restructured Section 4 by this amendment. Government introduced Notification no. 176/75 to implement amendments. This is how New Section 4 as it is to-day came into existence.

The question which needs to be asked is: Why the government amended the Section 4 and repealed the Old Section 4 in 1973.

The answer is: In AK Roy V/s. Voltas Limited (1977 ELT – J/177), the Supreme Court inter-alia gave a judgment by which Supreme Court said: (1). Since constitutionality and statutorily the scope of Central Excise is confined to manufacture, as such, the value for assessment cannot be stretched to areas beyond manufacture. (2). The “Value” should be confined to (a). Manufacturing cost & (b). Manufacturing profits only. (3). Value should not include any ingredient pertaining to post-manufacturing activities, post manufacturing costs and profit. This means, packing, marketing, commissions etc. could not be taxed & included in the definition of “value”.

Due to this landmark decision, the Old section 4 suffered serious damage. Therefore, government came out with new law. Section 4 (as it generally stands to-day) was introduced in 1973. This amendment law enacted by Parliament specifically overturned the judgment of Supreme Court as given in the case of Voltas Ltd.

Section 4 therefore, introduced the concept for calculating “Value” based on “Normal Price”. Provisions regarding durable & returnable packing, discounts etc. were specifically made. “Normal Price” means duty levied on the goods based on “Normal” wholesale price at the factory gate. “Normal Price” may not be the same as invoice price. In spite of being different from invoice price, “Normal Price” due to then prevailing law, had to be accepted for determining the assessable value. “Normal Price” method therefore led to controversies.

With a view to minimize controversies, two changes were again made by the Government. They were:

a. Section 4a was introduced in 1997 by which the “value” was based on MRP, if certain conditions are fulfilled. The MRP cannot be questioned by department since nothing in Law permitted the department to challenge MRP. The Assessees may fix any MRP they like (See ITC LIMITED’s case in AIR 2005 S.C. 1370) &
b. Section 4 was amended by Finance Act 2000 by which “Transaction Value” replaced the “Normal Price”.

It is clearly seen that Section 4a was introduced in addition to Section 4 in year 1997. Section 4a introduced the method of calculating ad valorem rate based on MRP / RSP (Retail Sale Price) as declared by the assessee on the packed commodity.

Three years later Section 4 was also amended by introducing Section 94 in Finance Act, 2000 (No.10/2000). The basic change that has taken place is: Now the department has to accept the price which the assessee declares on his invoice if the buyer is not related and price is the sole consideration of sale.

Section 4 amendment in year 2000 appears to be in line with Section 4a as introduced in year 1997 because under Section 4a, MRP has to be accepted by the department (See ITC, supra). As far as Section 4a is concerned MRP becomes base for the “Assessable value”. Thus “Assessable Value” is the transaction which takes place on MRP. By this way u/s. 4a the government in practical terms fixed the “transaction value” which is the declared MRP/RSP. Similarly now for Section 4, “Assessable value” is the “Transaction Value”. The Transaction Value has to be accepted and the concept of “Normal Price” is amended.

Let us understand this, a little better. Government with an objective of making valuation mechanism simple, user-friendly and also commercially acceptable introduced the concept of “Transaction Value” from 1st July, 2000. Section 4 of Central Excise Act, based on concept of 'normal price', was replaced by a new section based on 'transaction value' for assessment.

The new section 4 (as amended in year 2000) essentially seeks to accept different transaction values which may be charged by the assessee to different customers, for assessment purposes so long as these are based upon purely commercial consideration where buyer and the seller have no relationship and price is the sole consideration for sale. Thus, it enables valuation of goods for excise purposes on value charged as per commercial practices rather than looking for a notionally determined value.

This again is similar to MRP based valuation. Because in MRP based valuation, if there are more then one MRP for different regions, then different MRP for respective region will be used for arriving at the tax. Similarly (u/s. 4) if there are more then one transaction value then different transaction value (as per invoice) has to be taken as a base for calculating tax.

As far as Section 4 is concerned : Discount of any type or description given on any normal price payable for any transaction will not form part of the transaction value for the goods, e.g. quantity discount for goods purchased or cash discount for the prompt payment etc. will therefore not form part of the transaction value. However, it is important to establish that the discount has actually been passed on to the buyer of the goods. The differential discounts extended as per commercial considerations on different transactions to unrelated buyers if extended can not be objected to and different actual prices paid or payable for various transactions are to be accepted. Where the assessee claims that the discount of any description for a transaction is not readily known but would be known only subsequently – as for example, year end discount – the assessment for such transactions may be made on a provisional basis. However, the assessee has to disclose the intention of allowing such discount to the department and make a request for provisional assessment.

The question is why is the trade discount (in whatever form i.e. cash discount, turnover discount, quantity discount) is allowed as deduction?

The controversy begun with the Voltas Case. The Apex Court ruling favored the assessee. The law was changed. After that came the Bombay Tyre’s International Ltd’s case. (BTIL).

The Supreme Court in Bombay Tyre’s case (1983-(014)-ELT -1896 –SC), held that the assessable value included sales, publicity, marketing and all charges incurred upto the factory gate (not discount). This view has been upheld in the Madras Rubber Factory – (MRF case) Government Of India V. Madras Rubber Factory Ltd. 1995-(077)-ELT -0433 -SC. (It does not include “Discounts” since discounts do not add to the value in any way).

In BTIL, while discussing Section 4, Supreme Court stated that in Section 4 there was an Explanation which declared that no abatement or deduction would be allowed except in respect of trade discount and the duty payable at the time of the removal of the article from the factory (See Para 14 – BTIL, Supra). This explanation was with reference to Section 4.

While explaining Section 4, the Apex court in BTIL’s case stated: “The "value" of the excisable article has to be computed with reference to the price charged by the manufacturer, the computation being made in accordance with the terms of s. 4.”

Although in BTIL’s case the Apex Court dissented from the Voltas Case as far as the concept of “Value” is concerned. However, the Apex Court while explaining its stand in the Voltas Case observed – “Those observation were made when the Court was examining the meaning of the expression "wholesale cash price". What the Court intended to say was that the entire cost of the article to the manufacturer (which would include various items of expense composing the value of the article) plus his profit on the manufactured article (which would have to take into account the deduction of 22% allowed as discount) would constitute the real value had to be arrived at after off-loading the discount of 22%, which in fact represented the wholesale dealer's profit. A careful reading of the judgment will show that there was no issue inviting the Court's decision on the point now raised in these cases by the assesses” (See Para 21, Supra). The view of the Supreme Court in evaluating the deduction of trade discounts was uniform and in both the cases i.e. Voltas and BTIL.

Therefore, in BTIL’s case the court stated that for arriving at the “Value” of the goods the “discount” factor has to be off-loaded.

Similarly while discussing about “related persons”, the Apex Court stated: “It is true, we think, that the new S. 4(1) contains inherently within it the power to determine the true value of the excisable article, after taking into account any concession shown to a special or favoured buyer because of extra-commercial considerations, in order that the price be ascertained only on the basis that it is a transaction at arms length..” (See Para 42, BTIL, Supra)

Section 4 contained specific provision relating to the trade discounts. Referring to this the Supreme Court stated – “The new s. 4 also contains sub-section (4)(d)(ii) which declares that the expression "value" in relation to any excisable goods, does not include the amount of the duty of excise, sales tax and other taxes, if any, payable on such goods and, subject to such rules as may be made, the trade discount (such discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale.” (See Para 47, BTIL, Supra).

Now, the price of an article is related to its value (using this term in a general sense), and into that value now poured several component, including those which have enriched its value and given to the article its marketability in the trade. Therefore, the expenses incurred on account of the several factors which have contributed to its value upto the date of sale, which apparently would be the date of delivery, are liable to be included. (See Para 49, BTIL, Supra).

The rationale that the Supreme Court adopted in BTIL and MRF’s case was whether the expense adds any value to the goods. If it adds value then the expense should be included in calculating assessable value. Contrary, if the expense does not add a value e.g. trade discounts, then it cannot be included in ascertaining Assessable Value.

After BTIL’s case, the issue about discounts was elaborately discussed in Re. MRF’s case. While referring to the BTIL’s case in Re. MRF’s at Para 45, under Part IV of Judgment the Supreme Court referred – “In the clarificatory Order in Bombay Tyre International (dated 14/15th November, 1983) this court has held : "discounts allowed in the Trade by whatever name such discount as described should be allowed to be deducted from the sale price having regard to the nature of the goods, if established under agreements or under terms of sale or by established practice, the allowance and the nature of the discount being known at or prior to the removal of the goods. Such Trade Discount shall not be disallowed only because they are not payable at the time of each invoice or deducted from the invoice price".

The idea is that discounts have to be allowed, if it is in tandem with the normal practice. On this grounds 1% Turnover discount (Para 55, MRF’s case, Supra) Year Ending Discount, Prompt Payment discount (See Para 59-61,MRF, Supra) were allowed.

On the above principle i.e. if the expense adds to the “Value” of the goods, the expense should be included in transaction value other-wise not. In lines with this principle, the Apex Court also allowed “Interest on receivable” as a permissible deductions, although the law did not specify about it.

Also see Collr. Of C. Ex., Chandigarh V. Punjab Chemicals & Pharmaceuticals 1999-(107)-ELT -0057 –TRIB, Commissioner of Central Excise, Chennai v. Hindustan Lever Ltd. 2002-(142)-ELT -0513 -SC (Definition of quantity discount as given by the Supreme Court)


INTRODUCTION OF SECTION 4A IN THE CENTRAL EX. ACT:


In Section 4, Assessable value is reached at by adding various components to the transaction value (as per the principle elaborated above). That is marketing and selling expenses, packing expenses (if separately charged) are added up to reach at Transaction value. All factors which add to the “Value” of the product are added to the Transaction Value. Factors such as Trade Discount, Interest on receivables are however not added to the transaction value because they do not add “Value” as contemplated by the Supreme Court.

It is manifest that whenever there arised a question of adding up various expenses to reach at the “Assessable Value”, there were plethora of disputes as to what should be included in assessable value and what should be excluded from the Assessable Value.

In Order to minimize the disputes, the Central Government post liberalization has tried to be more assessee friendly and put across assessment procedures which aim to be transparent and fair. e.g.: reducing the Central Excise Rules from 234 to 72, permitting fortnightly payment, reducing documentation etc. With this avowed objective of making the valuation system more hassle-free, Section 4A was introduced.

SCHEME OF SECTION 4a:

Value based on Retail Sale Price - Section 4A of CEA (inserted w.e.f. 14.5.1997) empowers Central Government to specify goods on which duty will be payable based on 'retail sale price'. The provisions are as follows:

a. The goods should be covered under provisions of Standards of Weights and Measures Act.

b. Central Government can permit reasonable abatement (deductions) from the 'retail sale price'. While allowing such abatement, Central government shall take into account excise duty, sales tax and other taxes payable on the goods.

c. If more than one 'retail sale price' is printed on the same packing, the maximum of such retail price will be considered.

d. The 'retail sale price' should be the maximum price at which excisable goods in packaged forms are sold to ultimate consumer. It includes all taxes, freight, transport charges, commission payable to dealers and all charges towards advertisement, delivery, packing, forwarding charges etc.
e. Central Government has to issue a notification in Official gazette specifying the commodities for which the provision is applicable and the abatements permissible.

After initial introduction of Section 4a, the following explanation was added by the Amendment act. This described the meaning of RPS in a form of an inclusive definition:

“Explanation 1.— For the purposes of this section, “retail sale price” means the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer and includes all taxes local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing, forwarding and the like, as the case may be, and the price is the sole consideration for such sale.”

From the first glance of the above definition of the “retail sale price”, it is apparent that this definition is an “inclusive definition” within the meaning of law.

What is an inclusive definition and how should it be interpreted?

This question was answered by the Apex Court in Re. V. M. Salgaocar & Bros. P. Ltd. Etc. V. Commissioner Of Income-tax Etc. And Commissioner Of Income-tax, Karnat (2000-(038)-RLT -0619 –SC). The Supreme Court said:

“The word "includes" is often used in interpretation clauses in order to enlarge the meaning of the words or phrases occurring in the body of the statute. It is a cardinal rule of interpretation that if, by an inclusive definition, the meaning of the word is to be enlarged, it would receive a strict interpretation. It is also a cardinal rule of construction of a fiscal statute that, even if two views are possible, the view which is favourable to the assessee must be accepted while construing the provisions of a taxing statute.”

The Supreme Court therefore held three things in Re. Salgaocar’s case (Supra): (1). When inclusive definition is used, the word / definition is to be enlarged; (2). But the interpretation would be strict. (therefore it will only include that meaning / words which lie in line with the words used in the definition); (3). When two interpretation are possible, the one beneficial to the assessee should be adopted.

Now let us analyze the “Inclusive Definition” used by the Central Excise Act to define “RPS”. RPS according to law will include: (1). taxes local or otherwise, (2). freight, transport charges, (3). commission payable to dealers, and (4). all charges towards advertisement, delivery, packing, forwarding.

The definition covers four types of charges which are already included in the RPS. They cover: taxes, transport, commission and marketing / advertising expense (and the like).

The definition also clarifies that the transaction should be between the unrelated parties i.e. price should be the sole consideration of sale.

The Legislature / parliament included the above definition to ensure that the doubts about the RPS are removed. Therefore, as per law, RPS will include four factors. They are: Taxes, Transport, Commission & Marketing / Ad. Expense. Since the definition is inclusive, obviously all that falls within the ambit of these four heads gets covered by the definition. It is pertinent to examine the term “Quantity Discount” in comparison with the above mentioned four criteria adopted in the inclusive definition before identifying whether “Quantity Discount” comes within the ambit of RSP.

The Apex Court in Re: Commissioner of C. Ex., Chandigarh v. I. P. F. Vikram India Ltd. 2002-(144)-ELT -0004 –SC held:

“Quantity discount, to put it simply, works thus : a dealer receives from the assessee a stated extra quantity if he buys a certain other quantity. That this will happen is known and agreed at the time the transaction is entered into. It is, therefore, a trade discount and the authorities below have correctly allowed it as such.”

Therefore, quantity discount does not fall under any of the categories included in the inclusive definition of “RPS” given under Explanation introduced by the Amendment Act. This is because quantity discount has nothing to do with transport costs, taxation, commission or advertisement.

Against the above, the scheme of Section 4a also says that abatement shall be given taking into consideration the quantum of other prevailing taxes. Needless to state after analyzing the definition of “RPS”, that quantity discounts do not form part of RPS. The flat abatement given by the act in terms of the notifications is for the purpose of removal of tax factor from the “Value” of goods.

Under law RPS is used as a measure of tax.. Since quantity discounts do not form a part of RPS, they cannot be taxed. The mere fact that RPS is mentioned on package does not make the goods taxable as per Sec. 4a. The taxation should be backed up by Notification. Even if the goods are covered by Std. Weights and Measures Act, they cannot be taxed only because they are so covered in absence of a notification to that effect under the Central Excise Act. That is why voluntary affixing MRP will not attract valuation u/s. 4a. Therefore, taxation is not incidental upon printing MRP on packages. It is incidental in terms of Section 4a notification.

In the case of Collector of Estate Duty v. M/s. Kanakasabai & Ors. [1973 (3) SCR 747], the Supreme Court has held that “it is a well accepted Rule of Construction that if a taxing provision is ambiguous and is reasonably capable of more than one interpretation, that interpretation which is beneficial to the subject must be adopted. It is impermissible for the Court to read into a taxing provision any word which are not there or exclude words which are there.”

The point is: we cannot add the word “Quantity discount” when nothing in the explanation and neither in the law mandates to include it for the purpose of taxation. Doing so would be to abdicate the settled practice and the settled interpretation of “Value”. It is needless to state the the Tribunal Ahmedabad should not have given interpretation to Section 4a which was de hors the legislative intention.

The Madras High Court in Re. Siv Industries Ltd. V. Commissioner Of C. Ex., Coimbatore. {2001-(129)-ELT -0048 –MAD} quoted a passage from Judgment rendered by Supreme Court in Re. Deputy Chief Controller of Imports and Exports v. K. T. Kosalram [(1970) 3 SCC 82].
“…What particular meaning should be attached to words and phrases in a given instrument is usually to be gathered from the context, the nature of the subject-matter, the purpose or the intention of the author and the effect of giving to them one or the other permissible meaning on the object to be achieved. Words are after all used merely as a vehicle to convey the idea of the speaker or the writer and the words have naturally, therefore, to be so construed as to fit in with the idea which emerges on a consideration of the entire context”.
It is necessary to observe that Section 4a was introduced in the back-ground of Section 4. The explanation introduced by the Legislature to Section 4a to define RPS in fact brought out the similarities between the two Sections i.e. Section 4 and 4a.

Section 4 speaks about “Price to be the sole consideration of sale”. Same is the case with Section 4a. Section 4 (after judicial interpretation in MRF and BTIL case) included the marketing costs, transportation costs, packaging costs etc. to reach at the “Transaction Value”. Same is done in case of RPS based valuation where the explanation to the definition states that RPS will include marketing costs, transportation costs etc.

The fundamental difference betwee Section 4 and Section 4a is that the computation u/s. 4a is done in reverse Order. What we did under Section 4 was to take “Transaction Value” and add to the transaction value various factors like marketing, packaging, transportation etc. to reach at Transaction Value.

Under Section 4a, exactly opposite is done when a single price (called MRP / RPS) is fixed up. MRP will include all the charges on account of commissions, marketing etc. (as per Explanation given under Section). From this Retail Price predetermined abatement is reduced to arrive at “Assessable Value”.

If for example, some consideration (influencing thing) influences the assessable value but does not form a part of the MRP and has been left out, then that can be added up just like it is done in the case of Section 4 valuation. For example, see departmental Circular No. 697/13/2003-CXdtd. 27th February, 2003 which deals with the issue of valuation of empty bottles. Here the department pointed out that if the MRP is not the sole consideration of sale then cash consideration should be added up to reach at the assessable value.
This interpretation of adding values is very much the same as per section 4 of the act. Therefore, only way by which Section 4 and Section 4a differ is at the first phase of reaching at the “assessable value”. In section 4 we add up various factors influencing value and drop those factors such as Quantity discounts etc. which do not influence the value and by this way we reach at the Assessable value. In section 4a, we have one consolidated value called MRP / RPS. If some external considerations are found influencing the value then they should be added to MRP / RSP. By natural corollary, since quantity discounts do not influence value in any way, they have to be dropped during assessment. After reaching at the value we deduct specified abatements. That means under this scheme, a portion of the MRP is sliced of to make allowance for average margins, transport cost, local taxes, element of excise duty and the balance of MRP is treated as value for excise purposes. Since quantity discounts are not included, we therefore cannot impose cental excise duty on quantity discounts.
In either case, the quantity discounts are not counted for the purpose of reaching at the “Assessable Value” because Trade / Quantity Discount does not add to the value in any way and solely depends upon the trade practices and the commercial considerations.

In Bata India Ltd. V. C. C. E., Calcutta-i. 2000-(041)-RLT -0426 –CEGAT Equivalent: 2001-(128)-ELT -0524 –TRIB, it was held:

“Merely because the price mentioned under Rule 57CC does not expressly provide for deduction of the trade discount and only refers to the exclusion of sales tax and other taxes, does not mean that the discount given by the assessee has to form part of the price. Inasmuch as the total consideration received by the assessee is only after allowing the trade discount to their customers, the stand taken by the Revenue would amount to addition of trade discount to the price received by the appellants from their customers, which cannot be permitted at any cost.”

Therefore, merely because Section 4a is silent about “Trade Discounts”/ “Quantity Discounts” will not mean that some interpretation should be hypothetically construed to tax even those goods which are given by way of “Quantity Discounts”
In the MRF case, the Supreme court worked out at the formula of getting to the assessable value u/s. 4. The Apex Court stated (Read Para 5 with Para 67):
“The selling price which is a cum-duty price would be the sum total of the assessable value, the permissible deductions and the excise duty. Putting this as a mathematical formula the selling price (cum-duty price) is equal to assessable value plus permissible deductions plus excise duty. Cum-duty Paid Selling Price = Assessable Value + Excise duty + Permissible deductions. Again Excise duty is computed as a ratio of the assessable value where duty is ad valorem. For the purposes of ascertaining of the assessable value, if three of the components namely the cum-duty selling price, the quantum of permissible deductions and the rate of excise duty are known, the proper and appropriate method of determining the assessable value would be the following formula :-
Assessable value = cum-duty selling price - permissible deductions - (1 + Rate of excise duty)” (Para 67)
Definition of term “Value” was explained by the Supreme Court in following words:
"Value" does not include the amount of duty of excise, sales tax and other taxes, if any, payable on such goods.
"Value" does not also include, subject to such rules as may be made, trade discount allowed in accordance with the normal practice of the wholesale trade at the time of removal of such goods. To qualify as a trade discount, the discount should not be refundable on any account whatsoever. (Para 5).
Now let us once again understand the explanation to Section 4a. Above referred explanation clearly provides for abatement to be fixed by the government after taking into account the taxes payable. This is precisely what Supreme Court pointed out in the MRF case. But the court, as it was considering the issue of discounts also pointed out that trade discounts have to be allowed (only condition is that the discount should have been actually passed on).
Question: Section 4a does not provide for quantity discounts and neither amended Section 4 provides for quantity discounts? Still how can we reach at a conclusion that quantity discounts are allowed?
From the exhaustive interpretation given by the Supreme Court and looking to the elaborate discussion above, we can certainly come to a legal conclusion that the quantity discounts have to be allowed and no excise can be levied on the goods given as quantity discount. The law intends to tax the goods manufactured. The measure of tax is contained in the valuation rules specified u/s. 4 and 4a (they are methods of computing value; S. 4a is not a new scheme for valuation). The “Assessable Value” as explained will include factors which add to the value of goods (whether added to transaction value u/s. 4 or included in “RPS” u/s. 4a). “Trade Discounts” do not add to value in either case. Therefore, they cannot be taxed.
Even as far as section 4 goes, the amendment was incorporated in the section effective from 01/07/2000. After this amendment the provisions in earlier section 4 in respect of packing charges, durable and returnable packing, class of buyer and trade discount are absent in new section 4 (after year 2000 amendment).
But, merely because the Statute is silent, the very fabric or intention of the statute cannot be abdicated. Merely because new Section 4 does not mention about quantity discount, it does not mean that quantity discounts have to be included in the term “Value” and consequently taxed. (Same will hold true for Section 4a of the Act because both only point out different computations. They are not new methods of taxation).
Since there were doubts prevailing after year 2000 amendment to Section 4 within the department itself, the department clarified this matter in Circular no. F.No. 354/81/2000-TRU , Dt. 30/06/2000 inter alia which it was clarified that pursuant to the interpretation of the Supreme Court, the trade discounts (including quantity discounts) would be allowed.
It is therefore necessary to understand that the legislative intention has not been changed since the Central Excise act has been amended from the time to time and the interpretation of the legislative intention to tax the production has not been altered and the MRF’s case and the BTIL’s explanations hold good even-today (since the Apex court has settled the law on this point by exhaustively interpreting the law).

DEPARTMENTAL CIRCULARS – Was it right for Ahmedabad Tribunal to rely on department’s circular for interpreting statute and by placing such reliance was the tribunal correct in distingusing SFC’s case from ILPL’s case?:
In ILPL case (Supra), the Tribunal (Ahmedabad) discussed the effect of Section 4a. While doing so Tribunal came to a conclusion that quantity discounts should be taxed. For the purpose of justifying the logic for taxing the quantity discount, the Tribunal sought to differentiate and used the Department Circular no. 673/64/2002-CX dtd. 28/10/2002 relied in the SFC’s case (Supra).
After quoting the above referred circular, the Tribunal explained that looking to the circular the multi-pack can have free item piece and individual package within multi-pack should not bear MRP. After saying this, the tribunal concluded that if criterion (as specified in circular) is satisfied then the MRP on the multi-pack will be taken into consideration for taxing purposes.
The tribunal held that since in the ILPL’s case the MRP is printed on the medicines given by way of “Quantity discounts”, therefore no benefit of Circular will be given to the ILPL (based on the interpretation of the circular). Tribunal did not consider the fact that assessee has no option but to print MRP in terms of the prevailing law relating to DPCO. Secondly, the Tribunal, Ahmedabad also did not consider that taxation u/s. 4a is not incidental upon printing MRP but it is incidental upon notification (as explained earlier). Therefore, there is no logic in saying that because MRP is printed on goods given as “quantity discount”, they will not be allowed. Assessee naturally cannot be expected to clear goods without printing MRP because doing that will be illegal.
Now, coming back to “circulars” the question is: how far can circulars be used to interpret the statute?
Whether “quantity discounts” are to be taxed or not while interpreting Section 4a qua Section 4; scope of Section 4a, was a matter of interpretation of law based on (1). Language of law; (2). The intention of legislature to enact the law; (3). Prevailing interpretations and explanations given by the Supreme Court / High Courts on this point.
Unfortunately, Ahmedabad tribunal decided to use a circular of department and by relying on departmental circular Tribunal reached at a conclusion and held that the quantity discounts should be taxed. Was this approach correct?
The answer lies in identifying the legislative / statutory force behind the circular. That is, if the circular has the force of legislature (just like a law enacted from the floor of parliament has), then circulars are binding to the assessee and the courts may use them to interpret law. In that case the circulars will govern the decision of the courts. On the other hand, if circulars do not have a binding effect, they they cannot form basis of interpretation of law.
The law on this point is totally settled. The circulars have no legislative force. They are not binding on assessee and lead no succor to interpret the law. Circulars do not bind courts. Let us see what the courts say on this point.
In Izharul Haque V. Joint Director General Of Foreign Trade. 2001-(132)-ELT -0539 –CAL, it was held:
“It has also been held further that the impugned clarification and/or notice has no statutory force and by the impugned circular right under the licences cannot be taken away. In the Supreme Court's decision 1993 (66) E.L.T. 13 cited by Mr. Mehta it has been held amongst others that the departmental clarifications and circulars cannot be given effect to in derogation of the provisions of the Act and also the previous notification.”
In Cce, Jaipur V. P. G. Foils Ltd. 1999-(083)-ECR -0558 -TRIB it was held:
“Further in my opinion, it is not correct to say that the Trade Notices issued by the Collectorate have a statutory force. In any eventuality, the Tribunal is not bound by them or the the Board’s Circular could differ on good and sufficient grounds in accordance with its interpretation of law and procedure and in the light of the High Court or Supreme Court judgments and precedents.”
In CBDT V/s. Oberoi Hotels 1998-(004)-SCC -0552 –SC), the Supreme Court explained about the circular while quoting the binding effect of circular on revenue explained by it in Keshavji Ravji and Co. V/s. CIT (1990 2 SCC 231) in following words (quoted at SCC pp. 250-51 (Supra), paras 32-35)
"32. This contention and the proposition on which it rests, namely, that all circulars issued by the Board have a binding legal quality incurs, quite obviously, the criticism of being too broadly stated. The Board cannot pre-empt a judicial interpretation of the scope and ambit of a provision of the “Act” by issuing circulars on the subject. This is too obvious a proposition to require any argument for it. A circular cannot even impose on the taxpayer a burden higher than what the Act itself on a true interpretation envisages. The task of interpretation of the laws is the exclusive domain of the courts. However, - this is what Sri Ramachandran really has in mind - circulars beneficial to the assessees and which tone down the rigour of the law issued in exercise of the statutory power under Section 119 of the Act or under corresponding provisions of the predecessor Act are binding on the authorities in the administration of the Act. The Tribunal, much less the High Court, is an authority under the Act. The circulars do not bind them. But the benefits of such circulars to the assessees have been held to be permissible even though the circulars might have departed from the strict tenor of the statutory provision and mitigated the rigour of the law. But that is not the same thing as saying that such circulars would either have a binding effect in the interpretation of the provision itself or that the Tribunal and the High Court are supposed to interpret the law in the light of the circular. There is, however, support of certain judicial observations for the view that such circulars constitute external aids to construction.”
33. In State Bank of Travancore v. CIT ((1986) 2 SCC 11 : 1986 SCC (Tax) 289 : (1986) 158 ITR 102) however, this Court referring to certain circulars of the Board said : (SCC p. 51, para 43 : ITR p. 139)
'... The earlier circulars being executive in character cannot alter the provisions of the Act. These were in the nature of concessions and could always be prospectively withdrawn. However, on what lines the rights of the parties should be adjusted in consonance with justice in view of these circulars is not a subject-matter to be adjudicated by us and as rightly contended by counsel for the Revenue, the circulars cannot detract from the Act.'”
Reading the above, it can be very well understood that Supreme Court stated following:
1. The Board cannot pre-empt (block/obstruct) judicial interpretation of the scope and ambit of a provision of the “Act” by issuing circulars on the subject;
2. Circulars do not bind the courts;
3. A circular cannot even impose on the taxpayer a burden higher than what the Act itself on a true interpretation envisages;
4. If benefits are given by circular then the assessee can get the benefits even if the circular lies beyond the Law.
The Ahmedabad Tribunal did not consider the above points while relying on the referred circular and interpreting law in light of the circular having no statutory force.
Apart from the above, for better understand about the discounts, following is summarized (from the judicial views) about discounts:
Admissible and inadmissible discounts.
Ø Discounts known at or prior to the removal of the goods are allowable if the discounts are actually given. Trade discounts not given uniformly can be rejected considering the circumstances of transaction.
Ø There is no reason to suppose that a trade discount is always in the form of money. A quantity discount is an accepted form of trade discount and is allowable on goods sold in wholesale, is deductible like cash discount.
Ø Turnover discount given depending upon the purchases made by each dealer is an admissible discount.
Ø Prompt payment discount is a trade discount and allowable as deduction.
Ø Free samples of medicines given to the physician constitute an admissible discount.
Ø TAC/Warranty discount is in the nature of benefit given to the customers by way of compensation for loss suffered by them on the previous sale. As it is not in accordance with the normal practice of the wholesale trade at the time of removal of goods in respect whereof the claim is made, the discount is inadmissible.
Ø Year end discount or Campaign discount are in the nature of bonus or incentive given much after the removal of goods is complete and are, therefore, not deductible.========================================