Behari Ram and Another vs Emperor

Manohar Lall, J.—The petitioner, Behari Ram and Gursaran Ram, owners of a sugar factory at Pachauri in Bihar, have been convicted u/s 8, Sugar Excise Duty Act 14 of 1934 and also under Article 8 of the Sugar Excise Duty Order of the same year and sentenced to pay fines aggregating to the total sum of Rs. 1000 under the following circumstances:

On 9th January 1937, the one Inspector visited the premises of the petitioners at Pachauri and found 26 persons working while sugar was being manufactured with the aid of power, but the attendance register showed that only 18 persons were employed, 16 of whom were shown in attendance; he also found that no daily account was kept as required by Article 4 of the Sugar Excise Duty Order. As a result of what he saw and ascertained, the Cane Inspector was satisfied that the petitioners were trying to evade payment of sugar duty and were also not maintaining correct accounts.

He accordingly submitted a report to this effect on 15th January 1937. On 29th January 1937, the Superintendent of Excise in turn submitted his report to the Collector recommending that a joint assessment may be made upon the petitioners and some other partners to pay as duty a sum of Rs. 300 for the months of December and January and a sum of Rs. 300 as penalty for all the irregularities discovered, viz. failure to keep accounts and to submit monthly returns.

The Collector of Patna accordingly made a summary assessment on the same day and called upon the petitioners.

to pay collectively Rs. 300 as duty estimated at a minimum and Rs. 300 as penalty for evading the payment of the same and to credit this amount into the treasury at Fatna by 15th February 1987.

by an order which he signed on 6th February 1937. By the same order he called upon the petitioners to show cause by 15th February 1937 why they should not be criminally prosecuted on charges against Section 8, Sugar Excise Duty Act, 1934, and Article 8 of the Sugar Excise Duty Order, 1934.

I am informed that the Collector sanctioned the prosecution of the petitioners on 20th February 1937, but the petitioners say that they had no knowledge of the order of prosecution. On 1st March 1937, the amount of duty and penalty was paid into the treasury by the petitioners and four Jays later that is on 5th March 1937, a regular complaint was lodged by the Superintendent of Excise for the prosecution of these petitioners on the main allegations that:

The accused persons are owning and managing a factory at Pachauri in which they manufacture sugar but they do not pay duty to Government nor they maintain daily account as required by Article 4 of the Sugar Ezcise Duty Order nor they submit monthly account as required by Article 5 of the said Order.

The defence of the petitioners was that they did not own and manage a factory but a mill and therefore the provisions of the Sugar Excise Duty Act and the Sugar Excise Order are not applicable in their case. The Courts below have concurrently found that the mill at Pachauri is a factory within the meaning of Section 2(a) of the Sugar Excise Duty Act and, I do not see any error in law or in fact which would justify me in disturbing this finding. It was also contended on behalf of the petitioners in the course of trial that the sugar manufactured in the petitioners'' factory is not "sugar" as defined by Section (2)(c) of the Sugar Excise Duty Act. Here again there is con. current finding of fact of both the Courts, which I accept, that the sugar manufactured in the factory of the petitioners is "sugar" as defined by Section 2(c) of the Sugar Excise Duty Act. I also accept the concurrent finding of the Courts below that the petitioners are the owners of the factory.

The question which really falls to be determined in this case is whether upon the facts found it is established that the petitioners were evading payment of duty which is an offence punishable u/s 8, Sugar Excise Duty Act. This case was tried as a summons case and therefore no charge was framed. Although it is not incumbent upon a Magistrate to frame a charge against an accused in a case which is being tried as a summons case, I think it would have been proper if the learned Magistrate had actually framed a charge or had summarized the ingredients of the offence (and read them over to the accused before the trial began) which the accused were required to meet in the case. The prosecution is under an Act which is of a very recent date and the litigants as well as the lawyers are not quite familiar with its provisions.

In the whole of the record I do not find any trace of the ingredients of the offence with which the petitioners were charged u/s 8. I called upon the learned advocate who appeared for the Crown to indicate to me what the allegations of fact of the prosecution were which constituted the offence u/s 8 and he stated that the allegations were as follows:

(1) that the petitioners did not pay excise duty which was payable by them for December 1936 and for January 1937; and.

(2) that they failed to submit a return every month. I have therefore to consider if these ingredients are established in this case. I should have pointed out that this mill started work from 3rd December 1936.

In order to see whether the petitioners evaded payment of duty in the manner suggested, it is necessary to consider the provisions under which the duty payable by the owner of a factory is assessed. By Article 5 of the Sugar Excise Duty Order, 1934, the owner of factory is required to submit to the Collector a monthly return in Form B within five days after the close of each month and on receipt thereof the Collector shall, after satisfying himself in the manner provided in Article 6, assess the duty payable on the sugar removed from the factory or used within its premises.

It is also provided therein that if the owner of a factory fails to submit a return, the Collector may make an assessment on such information as may be available to him; the amount assessed shall then be communicated to the owner of the factory who is required to pay it into the treasury by the end of the month following that for which the return was required to be made. In this case, as I have already stated, the factory started working on 3rd December 1936. Therefore, the petitioners were required to submit a return between 1st to 5th January 1937, for the month of December 1936, and similarly the return for the month of January 1937 was required to be made between 1st to 5th February 1937. As no return was furnished before the duty became payable, it had to be assessed by the Collector and he assessed it on 6th February 1937, by a summary order as stated already. Having assessed it, it became payable by the end of February 1937. The scheme of the Act appears to contemplate that an assessment should be made for the duty payable on each month's return or transactions and does not appear to contemplate a combined assessment for a number of months.

For instance in the present case, if the assessment on 6th February 1937 is taken in part to refer to the assessment of the duty payable for December 1936, the amount assessed was payable "by the end of the month following that for which the return was required to be made." The return was required to be made for December 1936, and therefore the amount assessed was impossible to be paid by the end of the month following December 1936, that is, by the end of January 1937, because the order for assessment itself was made on 6th February 1937. I would therefore construe the order of assessment by the Collector as an assessment of the duty payable for the month of January 1937.

The learned advocate for the Crown suggested that inasmuch as the duty assessed by the Collector was not paid on 28th February 1937, but on 1st March 1937, the petitioners must be held ''to have evaded payment of this duty. ''Apart from the fact that a late payment of duty is not evading payment of duty, I find on consulting the calendar that 28th February 1937 was a Sunday and therefore payment made on 1st March 1937 was in order and indeed it is not open to the Crown to take up this position when they accepted the payment made on 1st March 1937. Is the omission to file a return every month as provided by Article 5 of the Order evading payment of duty? The omission to file a return in Form B in my opinion cannot be held to be an evasion to pay the duty. The prosecution has to establish other facts from which an inference could be drawn that the petitioners failed to file the return with the object of evading payment of the duty. I repeat here that the factory started work only in December 1936, and the duty had been assessed on the petitioners immediately after the expiry of five days from the close of January 1937, and they paid up the duty assessed on them within the time fixed by law. When I turn to the judgment of the trial Court, the only finding which is contained therein on the matter now under consideration is

from the evidence of the Excise Officials it is established that they were evading payment of duty which is punishable u/s 8, Sugar Excise Duty Act.

No facts are stated to establish the offence u/s 8 Similarly I have looked for in vain in the judgment of the learned Sessions Judge for any facts which would justify me in holding that the conviction u/s 8, Sugar Excise Duty Act, was correct. At p. 11, upon a careful reading of the judgment of the learned Sessions Judge, it appears that the learned Sessions Judge bad in view that evasion of some sort occurred before the notice was issued by the Collector on 6th February 1937. It would have been open to the Courts of fact to draw an inference against the petitioners if they had found any facts and stated them in the judgment as constituting the offence of evasion of payment of duty, but as already indicated, more than once I do not find any statement of facts from which such an inference can be drawn and I refuse to investigate for myself in revision by burrowing into the record to find out any such fact which may be lurking here and there considering that the prosecution is under a newly constituted Act and that the prosecution has been most careless in conducting the case.

It was next suggested that the petitioners failed to submit a return every month as required by Article 5 of the Sugar Excise Duty Order and therefore they are guilty of the offence u/s 8, Sugar Excise Duty Act. In my opinion, upon the facts found it is clear that the petitioners, having failed to submit a return to the Collector in Form B, are guilty of the offence of failing to supply information which they were required to do by Article 5 of the Sugar Excise Duty Order of 1934.

It was also suggested that the petitioners failed to keep correct daily accounts in Form A as required by Article 4 of the Sugar Excise Duty Order, but in my opinion, failure to keep correct daily accounts is not failure to supply any information as is contemplated by Section 8, Sugar Excise Duty Act. In the result, I hold that the petitioners may be held to be guilty u/s 8, Sugar Excise Duty Act only because they have admittedly failed to submit to the Collector the monthly return on Form B for the two months of December 1936 and January 1937.

The petitioners have also been convicted under Article 8 of the Sugar Excise Duty Order, 1934 "for failure to keep correct daily accounts" as required by Article 4 thereof. It was argued by the learned advocate for the petitioners that the failure to keep any account is not a failure to keep a correct daily account within the meaning of the Section but I am unable to agree with this contention.

In my opinion failure to keep any account is an offence punishable under Article 8 The object of this provision is to force the owners of a factory to keep a correct daily account. Unless an account is kept, it is impossible to say that it is correct or incorrect. The provisions of the Act would become nugatory if the owners of a factory kept no account at all and the result would be not only harassment to the public by summary assessment which may be unduly high but it would also impose upon the public authorities enormous labour of finding out from dubious sources and by adopting onerous measures the amount of sugar which is being manufactured and used in or removed from a particular factory.

The petitioners therefore have committed an offence under Article 8 of the Sugar Excise Duty Order of 1934 for failure to keep correct daily accounts. But it was argued by the learned advocate for the petitioners that inasmuch as the Collector had composed the offences which are the subject of the present prosecution, the conviction ought to be set aside. Reliance was placed upon Article 15 of the Sugar Excise Duty Order which runs as follows:

The Collector may accept from any person who is reasonably suspected of having committed an offence under the Act or under this Order a sum of money not exceeding one thousand rupees in lieu of punishment for breach of any of the provisions of this Order.

The language of this quotation makes it clear that the Collector has the power to accept a sum of money only in lieu of punishment for breach of any of the provisions of the Order, but not of the Act. The question then is whether when the Collector called upon the petitioners to pay collectively a penalty of Rs. 300 for evading payment of the duty which he assessed, was he not then accepting Rs. 300 in lieu of punishment for breach of provision of Arts, 4 and 5 of the Excise Duty Order? The penalty exacted by the Collector by the order dated 6th February 1937 was a penalty imposed by him upon the duty assessed u/s 9. There is no provision in the Order or the Act which justifies the imposition of the penalty under Article 15 unless the duty payable after assessment is not paid within the time fixed [see Section 4(1) of the Act]. The imposition of the penalty of Rs. 300 therefore by the Collector can only be justified if it is taken to have been imposed by him "in lieu of punishment for breach of the provisions of Article 4 of this Order."

In my opinion therefore the prosecution and conviction of the petitioners for breach of the provision of Article 4 of the Order was unjustified and the petitioners must be acquitted of the offences under Article 8 of the Sugar Excise Duty Order, 1934 founded upon their failure to keep a correct daily account in Form A, but the conviction of the petitioners must be maintained u/s 8, Sugar Excise Duty Act for their failure to submit a monthly return in Form B as provided by Article 5, they having failed to supply information required by a rule made under the Act.

Under the circumstances the sentences of fines will be reduced to Rs. 50 for each accused. The petitioners will be entitled to refund of the balance of the fines if paid.