Gondia Bidi Leaves Contractors Association vs Union of India and others

M.B. Shah, C.J.

1.In this petition, the petitioners have prayed that the provisions of section 44AC and section 206C of the Income Tax Act, 1961, be struck down as null and void. It has also been prayed that the respondents-authorities be directed to issue the certificates to the members of the petitioner association contemplated by the proviso to sub-section (1) of section 206C of the Income Tax Act certifying that the members of the petitioner association are processors of tendu leaves and therefore are not liable to pay the tax u/s 44AC and section 206C of the Act. In the alternative, it is prayed that the respondents be directed to decide the representation submitted to them by the petitioners at annexure "B" to the petition. Annexure-B is a representation by the Gondia Bidi Leaves Contractors Association, Gondia, wherein it is submitted that the members of the petitioner association are manufacturers and therefore the proviso to section 206C would apply.

At the time of hearing of this matter, it is admitted that the question of validity of sections 44AC and 206C of the Income Tax Act is upheld by the Supreme Court in the case of Union of India and another etc. etc. Vs. A. Sanyasi Rao and other etc. etc., . The apex court held that, what is brought to tax, though levied with reference to the purchase price at an earlier point is none the less income liable to be taxed under the Income Tax Act. The court further held that in the light of the practical difficulties envisaged by the Revenue to locate the persons and to collect the tax due in certain trades, if the Legislature in its wisdom thought that it will facilitate the collection of the tax due from such specified traders on a "presumptive basis", there is nothing in the said legislative measure to offend article 14 of the Constitution. The court, therefore, negatived the contention that section 44AC read with section 206C is hit by article 14 of the Constitution and held that both the sections are valid.

In this view of the matter, the first prayer of the petitioners would not survive. With regard to the second prayer, learned counsel for the Revenue submitted that, as held by the Supreme Court in the case of Delhi Cold Storage Pvt. Ltd. Vs. Commissioner of Income Tax, New Delhi, , and the decision rendered by the Madhya Pradesh High Court in the case of CST v. Jugalkishore Badriprasad [1979] 43 STC 501 and the decision rendered by the Division Bench of this court in the case of CST v. Bombay Mercantile Corporation [1975] 35 STC 505 the processing of tendu leaves does not amount to manufacturing activity.

As against this, learned counsel for the petitioners, submitted that, in any set of circumstances, the petitioners'' representation to the aforesaid effect made at annexure-B should be decided by the Commissioner of Income Tax.

Considering the aforesaid submission, it is ordered that the petitioners'' representation at annexure "B" be decided by respondent No. 3 preferably within a period of one month from today in accordance with law.

In the result, the petition is disposed of and the rule is made partly absolute, in the above terms. No order as to costs. Interim relief stands vacated.

6.It is made clear that the petitioners'' representation, if rejected, it would not be open to them to file a fresh petition for the same cause of action. However, it would be open to the members of the petitioner association to take other appropriate alternative remedy under the Act, if so advised.