Madhumilan Syntex Ltd. & Ors vs Union Of India & Anr

The present appeal is filed by the appellants against an order passed by the High Court of Madhya Pradesh (Indore Bench) on March 12, 1999 rejecting in limine Miscellaneous Criminal Petition No. 4730 of 1998. The facts giving rise to the present appeal are that appellant No.1 Madhumilan Syntex Ltd. is a Public Limited Company registered under the Companies Act, 1956. Appellant Nos. 2 to 4 are its Directors. Appellant- Company deals in the production and business of yarn at Madhumilan Cinema Building, Ahata. The tax assessment of the Company is done by the Deputy Commissioner of Income Tax (Tax Assessment), Special Range No.1, Indore. It was the case of the respondents that for the Assessment Year 1989-90, Returns were submitted by the Company on December 29, 1989. On verification of the Returns, it was found that though an amount of Rs.1,29,348/- was deducted by the Company as Tax Deducted at Source ('TDS' for short), it was not credited by the Company in the account of the Central Government as required by Sections 194C and 200 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') read with Rule 30 of the Income Tax Rules, 1962 (hereinafter referred to as "the Rules"). It is, however, not in dispute that the amount of TDS was credited by the Company with interest later on. But there was delay on the part of the Company in depositing such amount. Income Tax Officer (TDS), Bhopal, therefore, issued a notice to the appellants on March 11, 1999 alleging therein that there was failure to credit TDS to the Central Government as required by Section 276B of the Act by them. The appellants had thus committed an offence punishable under Section 278B of the Act. A show-cause notice was, therefore, issued against the appellant- Company as also against appellant Nos. 2 to 4 (and one Smt. Chandraprabha Modi) being principal officers of the appellant-Company. The Income Tax Officer, TDS, Bhopal asked the appellants to show-cause as to why proceedings should not be initiated against them. The appellants were asked to submit their reply on or before March 18, 1991 failing which it would be presumed that they had nothing to say in the matter and action would be taken accordingly. It was also stated in the notice that the appellant Nos. 2 to 4 (and Smt. Chandraprabha Modi) were to be considered as 'principal officer' within the meaning of Section 2(35) of the Act.

The appellants filed applications under Section 245 of the Code of Criminal Procedure, 1973 (hereinafter referred to as 'the Code') for discharge from the case contending that they had not committed any offence and the provisions of the Act had no application to the case. It was alleged that proceedings were initiated mala fide. In several other similar cases, no prosecution was ordered and the action was arbitrary as also discriminatory. Moreover, there was 'reasonable cause' for delay in making payment and the case was covered by Section 278AA of the Act. The Directors further stated that they could not be treated as 'principal officers' under Section 2(35) of the Act and it was not shown that they were 'in charge' of and were 'responsible for' the conduct of business of the Company. No material was placed by the complainant as to how the Directors participated in the conduct of business of the Company and for that reason also, they should be discharged.

The trial Court, however, rejected the prayer of the appellants. According to the Court, the contention raised by the appellants required evidence as to whether a particular accused was or was not a 'principal officer' of the Company and it can be considered only at the trial and an appropriate decision could be taken. According to the Court over and above the Company, other accused persons were Directors and as they were treated as principal officers, the prayer for discharge could not be granted. The applications were accordingly rejected. The appellants being aggrieved by the above order of the trial Court, filed Revision Petition being Criminal Revision No. 358 of 1994 in the Court of the Sessions Judge, Indore under Section 397 read with Section 399 of the Code. The First Additional Sessions Judge, Indore (MP), vide his order dated July 10, 1998 rejected the revision filed by the appellants-applicants and confirmed the order passed by the trial Court.

The appellants moved the High Court of M.P. (Indore Bench), by filing Miscellaneous Criminal Petition under Section 482 of the Code on December 14, 1998. It appears that the petition was dismissed for default of appearance on February 2, 1999. An application for restoration was filed on March 12, 1999 which was allowed and the matter was restored to file but was heard on the same day, and by the impugned order, it was summarily rejected. The said order has been challenged by the appellants in this Court.

276B. Failure to pay the tax deducted at source. If a person fails to pay to the credit of the Central Government, the tax deducted at source by him as required by or under the provisions of Chapter XVII-B he shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine.

In view of the aforesaid discussion, the sanction to prosecute granted by the second respondent cannot be held illegal or unlawful nor the complaint can be held bad in law.

We are unable to agree with the above view of the High Court. Once a statute requires to pay tax and stipulates period within which such payment is to be made, the payment must be made within that period. If the payment is not made within that period, there is default and an appropriate action can be taken under the Act. Interpretation canvassed by the learned counsel would make the provision relating to prosecution nugatory.

Finally, the contention that a civil suit is filed by the complainant and is pending has also not impressed us. If a civil suit is pending, an appropriate order will be passed by the competent Court.

That, however, does not mean that if the accused have committed any offence, jurisdiction of criminal court would be ousted. Both the proceedings are separate, independent and one cannot abate or defeat the other.

Finally, the learned counsel submitted that an appropriate direction may be issued to the trial Court so that personal presence of respondent Nos. 2-4 may be dispensed with and they may be granted exemption from appearance. In our opinion, it would not be appropriate to issue such direction to the Court. We have, however, no doubt that if such a prayer is made by the appellants, the Court would consider the prayer in its proper perspective and will pass an appropriate order. If personal presence of appellant Nos. 2-4 is not necessary, the Court would grant exemption on such terms and conditions as it would think appropriate. For the foregoing reasons, the appeal deserves to be dismissed and is hereby dismissed.

Before parting with the matter, however, we may clarify that we have not entered into merits of the matter and have decided the question raised by the appellants as to maintainability of criminal complaint. We may not be understood to have expressed any opinion one way or the other on merits and as and when the matter will come up for trial, it will be decided strictly on its own merits without being inhibited by the observations made by us hereinabove. All contentions of all parties are kept open.