Shivakantjha.org - Triplet 1 - The shadow of Ratan Melting on Azadi Bachao!
The shadow of Ratan Melting on Azadi Bachao!
By Shiva Kant Jha
November 14, 2008
WHAT Azadi Bachao Andolan & Anr (2003-TIOL-13-SC-IT) decided was discussed by me in an article: “What Azadi Bachao syas about Treaty-Shopping or Round Tripping?”. And my article on “Ratan Melting - A landmark decision to the extent it goes!?” sufficiently anticipates, and suggests, the heart of the matter of this first triplet. I believe as a student of law, to submit with great respect to all, that Azadi Bachao can no longer stand comfortably with the recent decision of the Constitution Bench in Commissioner of Central Excise, Bolpur vs M/s Ratan Melting & Wire Industries [2008-TIOL-194-SC-CX-CB]. Some of my reasons are these; more when time comes:
(i) Azadi went wrong in holding that the “only restriction on the power of the Central Board of Direct Taxes is to prevent it from interfering with the course of assessment of any particular assessee or the discretion of the Commissioner of Income-tax (Appeals).” The Apex Court missed that there could be other statutory and constitutional limitations also. In Hindustan Aeronautics (2002-TIOL-154-SC-IT ), the Supreme Court ruled that, when the Supreme Court or the High Court has declared the law on a question, it will not be open to a court to direct that a circular should be given effect to even if they go counter to the law declared. In Indian Oil case, one of the Judges relied on Azadi Bachao, (to which she was herself a party), and observed that Hindustan Aeronautics did not represent the correct law as it was ''contrary to the stream of authority cannot be taken to have laid down good law in view of the subsequent decision of the Constitution Bench in. Dhiren Chemical Industries”. But Justice P. Venkatarama Reddi, thought it appropriate to state that the “opinion expressed in the case of Hindustan Aeronautics seems to project a correct view, though that decision cannot prevail over the Constitution Bench decision in Dhiren Chemical Industries.” In Arviva Industries (I) Ltd (2007-TIOL-12-SC-CX) the Bench of the two Judges held that the Apex court decision in the case of Hindustan Aeronautics Ltd was not good law. But Ratan settles the law, in a magisterial tone (reminding one of the tone adopted by Chief Justice Marshall in Marbury v. Madison, a classic decision by the U.S. Supreme Court) that the circulars cannot go counter to the law declared under Art. 141 of the Constitution, and the provisions of the statute. Thus Azadi Bachao seems to be founded on erroneous notions as to the reach and ambit of the circular-making power.
(ii) Azadi relied on certain observations in Dhiren Chemicals which stand explained in Ratan. In effect, it can be said that in Azadi the Court mistook the observations in Dhiren : hence went wrong in its legal perspective, and adopted an erroneous view as to the Board’s competence in issuing circulars.
(iii) The Court was so much persuaded by the obiter dicta in several earlier decisions of the Court that it did not consider (a) whether the impugned circular promotes the purpose of the Income-tax Act, 1961, and (b) whether it is possible for the Executive to transgress the statute or judicially settled law in view of the settled constitutional principles. The Court assumed that promotion of the influx of foreign fund could be the legitimate objective of the Act. It did not consider that gathering foreign fund was extraneous to the object of the Income-tax Act, 1961. Hence the core issues were not faced.
(iv) The aforementioned judicial assumptions were, I believe with utmost good faith, largely responsible for Azadi’s
(a) severe criticism of Justice Reddy’s Judgment in McDowell with which all the other four Judges had agreed; and
(b) reliance on three long paragraphs of a book by an interested person written whilst the matter was subjudice.
(v) As the vires of Section 119 and 90 had not been questioned in Azadi: hence this issue as to the vires of such sections may have to be agitated in a separate writ proceeding.
(v) In Azadi Bachao, the D.B. of two Judges felt that the maxim judicis est jus dicere, non dare pithily expounded the duty of the court. It felt that its duty was to decide what the law is, and to apply it; not to make it. This narrow perception of judicial role had an obvious bearing on the actual decision of the Court. Similar role perception in Assistant Commissioner of Income-tax v. Velliappa Textiles & Ors [2003-TIOL-12-SC-IT] was disapproved by the Constitution Bench in Standard Chartered Bank (2005-TIOL-79-SC-FERA-CB). In Standard Chartered case, Justice B.N. Srikrishna, who was the author of the judgment in Azadi Bachao, in his dissenting Judgment acknowledged this in these telling words:
“The interpretation suggested by the learned counsel arguing against the majority view taken in Velliappa, which has appealed to our learned brothers Balakrishnan, Dharmadhikari and Arun Kumar, JJ., would result in the Court carrying out a legislative exercise thinly disguised as a judicial act.”
Whilst as a lawyer I believe that Azadi is inconsistent with the prevailing view of the Court, I tried, as a party, to plead in Writ Petition © No. 334 of 2005 [ PIL] for reconsideration of Azadi, but a D.B. of three Judges of the Court did not consider dismissed the Petition per its order dated 28/11/2007 holding that “the decision of this Court which has attained finality” could not be subjected to challenge at the instance of one of the parties to the decision”.
Now who will question the correctness of Azadi . The party worst hit is our Government itself. After all, it made an about turn on the core issues in Ratan. But will our Government ever think to protect public revenue vis-à-vis the drepidators? It has refused to hear the cri de Coeur the Supreme Court made in Azadi to consider executive and/or legislative actions against those who misused tax treaties under the structure of deception. Only time will say.
Mimansa Principles and our Supreme Court
It is good that our Supreme Court has recognized the value of the Mimansa Rules of Interpretation [Our Supreme Court in M/s Ispat Industries Ltd vs Commissioner of Customs [2006-TIOL-127-SC-CUS], M/s Craft Interiors Pvt. Ltd vs. Commissioner of Central Excise [2006-TIOL-142-SC-CX]. It is great that our apex Court has now upheld the application of the Mimansa Rules of Interpretation for exploring the meaning of legal provisions. Whilst the issues before the Court in these cases could have been decided with reference to the conventional principles, as referred in Madras v. Gannon Dunkerley (2002-TIOL-493-SC-CT-LB), Maumsell v. Olins [(1975) A.C. 373] and others, I would wholly agree with the Court that in certain situations the MRI can be the best guide. But Mimansa is an astic darshan; it is not an arid rationality reminding of Hamlet’s reply to Polonius “words, words, words”. I hope this fresh breeze of thought would help enriching our jurisprudence.
Lord Evershed had mentioned in the Preface of some earlier edition of Maxwell that the principles of construction were so diverse and plastic that the counsels on both the sides find sufficient ammunitions to wage a forensic battles. The popular texts on interpretation, often used in our courts, do not show even the insight and depth of the linguistic analysis which I.A. Richards and C.K. Ogden shown in The Meaning of Meaning, not say of the Mimansa. I hope soon our Supreme Court would show greater creative leadership in invoking appropriate principles of the MRI for the guidance in bringing out the correct import of the legal texts and decisions. I suggest a profound Mimansa principle for judicial consideration by the judges and the lawyers. The Sanskrit text of this (and its interpretation) may be read at page 131 of my Judicial Role in Globalised Economy (2005). I render it in English thus:
There may be seven ways to read a book:
First and second, concentrate on the threads
which unite the beginning and the end;
Third is what is said again and again;
Fourth is what is new therein,
Fifth is the targeted consequence
Sixth is to identify what is mere peripherals’
And the last is the logic which supports, or counters.
If the Apex Court, in Azadi, would have read McDowell & Co Ltd. vs. CTO [2002-TIOL-40-SC-CT] in the light of such principles, it would have seen no reason to dub the said decision by the Constitution Bench a mere “hiccup” and “temporary turbulence”.
What is obvious is not always known
Dr. Samuel Johnson had said: “…what is obvious is not always known….”. None can enter the Supreme Court, or address the Court without reading umpteen times the text on the emblem of the Court: Yato Dharmashstato Jayah upholding the lions on whose summit is Dharmachakra! These words were uttered not by a jurist or a judge, but by an ordinary housewife, Gandhari, who blessed her son Duryodhana, before he left for the Mahabharat War, telling him the inexorable rule that victory goes with Dharma [vide the Mahabharata Stripurva Chapt. 14. slokas 1-13 ]. She was reminded of this sovereign principle by Vyasa when she wished to curse the Pandavas at the end of the War.
Dharma, as Medhatithi says, means duties. The nature of dharma , as understood in Indian thought, is best expounded in the Bhagavad-gita. Vyasa aptly said in the Mahabharat : where Krishna is present, victory is there: yatah Krishstato jayah” as Krishna is Himself Dharma. Krishna taught us the grammar of kartavy-karma. Dharma varies from context to context both in time and space. It always involves working with prudence for lokamanga alone. Dharma is our grundnorm on which our Constitution itself is founded. The Court’s emblem is a brilliant sensuous shining forth of that idea. Lord Nelson’s famous call to the fleet at the battle of Trafalgar (“England expects every man to do his duty”) harks back to the Git. It is high time for us to variate on this: “India expects every man to his duty”.
One fallacy must be warded off. Success in litigation, or anywhere else, does not mean always that Truth is on its side. Such a misgiving is often sought to be created by a gloss on our national motto Satyameva Jayate (Truth alone triumphs), which mantra has travelled from the Mundaka Upanishad to its present resting place at the base of our national emblem. Queer are the ways of humans!