Union of India & Ors Vs. Play World
Electronics Pvt. Ltd. & Anr [1989] INSC 163 (2 May 1989)
Mukharji,
Sabyasachi (J) Mukharji, Sabyasachi (J) Rangnathan, S.
CITATION:
1990 AIR 202 1989 SCR (2)1023 1989 SCC (3) 181 JT 1989 (3) 11 1989 SCALE
(1)1186
ACT:
Central
Excises and Salt Act, 1944: Sections 4(1)(a), 4(4)(c)/ Central Excise Rules,
1944: Rule 9B.
Assessee--Manufacturing
wireless receiving sets, tape recorders, tape players under brand name
'Bush'--Selling products exclusively to the Company (Bush India Ltd.) and its authorised
wholesale dealers-price charged--Whether represents correct assessable value
for excise duty.
Company
Law--Tax evasion or perpetration of a fraud--Duty of Court to lift corporate
veil.
Taxation--Tax
planning within the framework of law is legitimate--Colourable devices cannot
be part of tax planning.
Words
and phrases: 'Related person '--Meaning of.
HEAD NOTE:
The
respondent company was engaged in the manufacture of wireless receiving sets,
tape recorders, tape players. These products were assessable under Tariff Items
33A and 37AA of the Central Excise Tariff. In the classification list and price
lists filed by the respondent assessee company these goods were shown as
unbranded goods. Sub sequentiy it was found that the respondent-assessee
company was manufacturing their products in the brand name of "Bush"
and were selling the same exclusively to M/s Bush India Ltd. or its authorised
wholesale dealers only. The appellants-Revenue alleged that there was wilful
suppression of facts by the respondent company with intention to evade excise
duty because this fact was not mentioned by the company in the price list or
classification list, filed.
A show
Cause Notice was issued requiring the respondent company to show cause as to why,
(i) M/s Bush India Limited should not be treated as .a 'related person' and a favoured
buyer of the respondent company for the purpose of determination of wholesale
cash price, (ii) the concessional rate of duty under notification No. 358/77-CE
should 1024 not be denied to the respondent and, (iii) the differential duty in
respect of the goods cleared should not be recovered.
Instead
of executing the surety bond the respondentassessee company filed a writ
petition in the High Court praying for quashing of the Show Cause Notice and
for a mandamus to allow it to clear the goods on the basis of the price at
which the goods were sold by it to Bush India Limited allowing the benefit of
the relevant notification.
The
High Court following its earlier decision held that for the purpose of payment
of excise duty the market value of the goods of the respondent-assessee company
was the price charged by it from M/s Bush India Ltd., and not the market value
at which price M/s Bush India Ltd. sold the goods. It further held that there
was no misdeclaration of the value by the assessee company, and it accordingly
quashed the Show Cause Notice and the Demand Notice for recovery.
In
this appeal by the Revenue it was contended that in the facts and circumstances
of the case the High Court committed an error in not realising that M/s Bush
India Ltd.
was a
related person and as such the price charged by the respondent company from M/s
Bush India could not represent the correct assessable value for the purpose of
excise duty.
Dismissing
the appeal,
HELD:
1. Tax planning may be legitimate provided it is within the' framework of the
law. But colourable devices cannot be part of tax planning and it is wrong to
encourage or entertain the belief that it is honourable to avoid the payment of
tax by dubious methods. It is the obligation of every citizen to pay the taxes
honestly without resorting to subterfuges. In order to create the atmosphere of
tax compliance, taxes must be reasonably collected and when collected, should
be utilised in proper expenditure and not wasted. It is too much to expect the
legislature to intervene and take care of every device and scheme to avoid
taxation and it is up to the court sometimes to take stock to determine the
nature of the new sophisticated legal devices to avoid tax and to expose the
devices for what they really are and to refuse to give judicial benediction.
[1034A-B,
D] 2. One must find out the true nature of the transaction.
Even
though the corporation might be a legal personality distinct from its members,
the court is entitled to lift the mask of corporate entity if the conception is
used for tax evasion, or to circumvent tax obligation perpetrate a fraud.
[1034E,
1033G] 1025
3. It
is unsafe to make bad laws out of hard facts and one should avoid subverting
the rule of law. In the instant case, facts have not been found with such an
approach by the lower authorities, and the High Court had no alternative on the
facts as found but to quash the Show Cause and Demand Notices. It appears that
the brand name "Bush" was affixed to the goods produced by the
respondent. For the purpose of excise duty, the market value of such goods was
the price charged from M/s Bush India Ltd. and not the market value at which
price M/s Bush India sold the same. [1034E, 1033C, E] Juggi Lal Kamlapat v.
Commissioner of Income-tax, U.P., [1969] 1 SCR 988; Mc Dowell and Co. Ltd. v.
Commercial Tax Officer, [1985] 154 ITR 148; Commissioner of Wealth Tax v. Arvind
Narottam, [1988] 4 SCC 114; Sherdeley v. Sherdeley, [1987] 2 All E.R. 54 and
Greenberg v. IRC. [1971] 47 TC 240 (HL) referred to.
Union of India v. Bombay Tyre
International, [1984] 1 SCR 347; Union
of India & Ors., v. Atic Industries Ltd., [1984] 3 SCR 930; Union of India & Ors. v. Cibatul Limited, [1985] Supp.
3 SCR 95; Joint Secretary to the Government of India & Ors. v. Food Specialities
Ltd., [1985] Supp. 3 SCR 165 and M/s Sidhosons & Ors. v. Union of India & Ors, [1987] 1 SCC 25 relied on.
CIVIL
APPELLATE JURISDICTION: Civil Appeal No. 859(NM) of 1988.
From
the Judgment and Order dated 12.1.1987 in the High Court of Delhi at New Delhi in C.W. No. 355 of 1985.
A. Subba
Rao, P. Parmeshwaran and Mrs. Sushma Suri for the Petitioners.
M. Chandrasekharan, N.M. Popli and V.J. Francis for the Respondent.
The
Judgment of the Court was delivered by SABYASACHI MUKHARJI, J. This is an
appeal by special leave from the judgment and order of ,the High Court. of Delhi dated 12th January, 1988.
The
respondent company manufactured wireless receiving sets, tape recorders, tape
players which were assessable under Tariff Items' 1026 33A and 37AA of the
Central Excise Tariff and it had filed classification list and price lists in
respect of the said goods. On verification of the said lists, it was found that
goods were unbranded and on investigation it was alleged to have come to the
notice of the Department that the respondent company was engaged in the
manufacture Of wireless receiving sets and tape recorders in the brand name of
"Bush". From the documents filed by the respondent, according to the
appellants, it was revealed that the respondent manufactured their entire
products in the brand name of "Bush" from the very beginning and were
selling the same exclusively to M/s Bush India Limited or its authorised
wholesale dealers only. This fact was nowhere mentioned by the respondent in
its price list or its classification lists and this, according to the
appellants, amounted to wilful suppression of facts with the intention to evade
payment of central excise duty. Certain enquiries were made and to safeguard
the interest of revenue the respondent was requested time and again to observe
the provisions of rule 9B of the Central Excise Rules, 1944 and execute B-13
surety bond. However, it is stated that respondent evaded the execution of the
said bond which was, according to the appellants, done deliberately.
Thereafter, on 4th January, 1985, a Show Cause Notice was issued for the period
1st April, 1983 to 30th November, 1984 requiring the respondent to show cause
as to why M/s Bush India Limited should not be treated as a related person and
a favoured buyer of the respondent company for the purpose of determination of
wholesale cash price and as to why the concessional rate of duty under
notification No. 358/77-CE should not be denied to the respondent and as to why
the differential duty in respect of the goods cleared during the period should
not be recovered. While the adjudication on the basis of the Show Cause Notice
was pending, the respondent company was again requested to execute the surety
bond in July, 1984. Respondent company thereafter filed a writ petition in the
High Court of Delhi under Article 226 of the Constitution praying for quashing
of the Show Cause Notice and the communication dated 11th July, 1984 and for
mandamus to allow it to clear the goods on the basis of the price at which the
goods were sold by it allowing the benefit of the relevant notification. The
High Court by the order dated 12th January, 1987 held that the value of the
goods manufactured by the respondent company was the price charged by it from
M/s Bush India Ltd. and not the market value at which M/s Bush India Ltd. sold
the goods to its wholesalers. In the premises, it was held that there was no misdeclaration
of the value and the Show Cause Notices were quashed. In passing the impugned
order, the High Court followed its decision in C.W. 197/85.
It is,
therefore, necessary to refer to the said decision of the High Court. The said
decision challenged 1027 the notice dated 31st December, 1984 and a demand notice of the same
date. It was contended on behalf of the petitioner in that case, who is the
respondent in the instant appeal that the said respondent merely manufacture
the aforesaid items for Bush India and after manufacturing those,-it sells
those to M/s Bush India Ltd. It was contended that for the purpose of finding
out the price for payment of excise duty, only the price which was charged by
the respondent from Bush India Limited could be taken into account and the
price at which M/s Bush India Ltd. further sold those goods in the market was
not the price which was to be taken for the excise duty. It was contended that
Bush India Ltd. was not a related person of the respondent within the meaning
of Section 4(4)(c) of the Central Excises & Salt Act, 1944 (hereinafter
referred to as 'the Act') and reliance was placed on the decision of this Court
in Union of India v. Bombay Tyre
International, [1984] 1 SCR 347. On the merits of the case, reliance was also
placed on certain decisions of this Court as well as the decision of the Delhi
High Court. The High Court found that the case of the respondent was directly
covered by all these decisions. In the premises, the High Court quashed the
said Show Cause Notices and the demand notice. The question, therefore, is
whether the High Court was right in the view it took.
Unfortunately,
in the instant case, apart from the facts recorded hereinbefore, there is no
other fact. Learned Counsel appearing for the revenue, Shri A. Subba Rao
contended before us that the High Court was in error in not realising that in
the facts and the circumstances of this case, it was an arranged affair and
really M/s Bush India Ltd. was a related person and as such the price charged
from it could not represent the correct assessable value for the purpose of
excise duty.
As
noted hereinbefore, the events in this case happened from 1985 onwards. In the
premises, the amended provisions of Section 4 of the Act, as amended by the
Amendment Act of 1973, would be applicable. Section 3 of the said Act enjoins
that there shall be levied and collected in such manner as might be prescribed
duties of excise on all excisable goods other than salt which are produced and
manufactured in India. Section 4(1)(a) of the Act provides:
"4.
(1) Where under this Act, the duty of excise is chargeable on any excisable
goods with reference to value, such value shall, subject to the other
provisions of this section, be deemed to be--(a) the normal price thereof, that
is to 1028 say, the price at which such goods are ordinarily sold by the assessee
to a buyer in the course of wholesale trade for delivery at the time and place
of removal, where the buyer is not a related person and the price is the sole
consideration for the sale:
Provided
that--(i) where, in accordance with the normal practice of the wholesale 'trade
in such goods, such goods are sold by the assessee at different prices to
different classes of buyers (not being related persons) each such price shall,
subject to the existence of the other circumstances specified in clause (a), be
deemed to be the normal price of such goods in relation to each class of buyers
;" Proviso (iii) to section 4(1)(a) of the Act enjoins that:
"where
the assessee so arranges that the goods are generally not sold by him in the
course of wholesale trade except to or through a related person, the normal
price of the goods sold by the assessee to or through such related person shall
be deemed to be the price at which they are ordinarily sold by the related
person in the course of wholesale trade at the time of removal, to dealers (not
being related persons) or where such goods are not sold to such dealers, to
dealers (being related persons) who sell such goods in retail." According
to clause (c) of sub-section (4) of section 4 of the Act, "related
person" means a person who is so associated with the assessee that they
have interest, directly or indirectly, in the business of each other and
includes a holding company, a subsidiary company, a relative and a distributor
of the assessee, and any sub-distributor of such distributor. The Explanation
to Section 4(4)(c) further provides that in this clause "holding
company", "subsidiary company" and "relative" have the
same meanings as in the Companies Act, 1956( 1 of 1956). It is in this context
that the validity or otherwise of the High Court's view has to be judged.
In
Union of India v. Bombay Tyre International, (supra), this Court had to examine
this question. This Court examined the scheme of Section 4(1)(a) before the Amendment
Act, 1973 and also the position after the amendment. It was contended in that
case before this Court that the definition of the expression "related
person" was 1029 arbitrary and it included within its ambit a distributor
of the assessee. This Court however held that in the definition of
"related person" being a relative and a distributor could be
legitimately read down and its validity upheld. The definition of related
person should be so read, this court emphasised, that the words "a
relative and a distributor of the assessee" should be understood to mean a
distributor who was a relative of the assessee. The Explanation to s.
4(4)(c)
provides that the expression "relative" has the same meaning as in
the Companies Act, 1956. The definition of "related person", as being
"a person who is so associated with the assessee that they have interest,
directly or indirectly, in the business of each other and includes a holding
company, a subsidiary company ..... ", shows a sufficiently restricted
basis for employing the legal fiction. This Court reiterated that it is
well-settled that in a suitable case the court could lift the corporate veil
where the companies share the relationship of a holding company and a
subsidiary company and also to pay regard to the economic realities behind the
legal facade. The true position, it was explained by the aforesaid decision,
under the said Act is--the price at which the excisable goods are ordinarily
sold by the assessee to a buyer in the course of wholesale trade for delivery
at the time and place of removal as defined in sub-section (4)(b) of section 4
of the Act is the basis for determination of excisable value provided, of
course, the buyer is not a related person within the meaning of sub-section
(4)(c) of section 4 and the price is the sole consideration for the sale. This
aspect was further examined by this Court in Union of India & Ors. v. Atic
Industries Ltd., [1984] 3 SCR 930. This Court referred to the decision of
Bombay Tyre International (supra) and also referred to the first part of the
definition of "related person" in clause (c) of section 4(4) which
defines "related person" to mean "a person who is so associated
with the assessee that they have interest directly or indirectly in the
business of each other". It was not enough, it was held, that the person
alleged to be a related person had an interest, direct or indirect in the
business of the assessee. To attract the applicability of the first part of the
definition, the assessee and, the person alleged to be a related person must
have interest direct or indirect in the business of each other. Each of them
must have a direct or indirect interest in the business of the other. The
quality and degree of interest which each has in the business of the other may
be different; the interest of one in the business of the other may be direct
while the interest of the latter in the business of the former may be indirect.
That would not make any difference so long as each has got some interest,
direct or indirect in the business of the other. In that case, this Court found
that Atul Products Ltd. has interest in the business of M/s Atic Industries
Ltd. since it held 50% of 1030 the share capital of that assessee and had
interest as shareholder in the business carried on by the assessee. But this
Court was of the view that it could not be said that the assessee, a limited
company, had any interest, direct or indirect in the business carried on by one
of its shareholders, namely, Atul Products Ltd., even though the shareholding
of such shareholder might be 50%. Secondly, it was noted that Atul Products
Ltd. was a wholesale buyer of the dyes manufactured by the assessee but even
then, since the transactions between them were as principal to principal, it
was difficult to appreciate how the assessee could be said by virtue of that
circumstances to have any interest, direct or indirect, in the business of Atul
Products Ltd. The assessee, it was observed, was not concerned whether Atul
Products sold or did not sell the dyes purchased by it from the assessee nor
was it concerned whether Atul Products Ltd.
sold
such dyes at a profit or at a loss. In those circumstances, the first part of
the definition of related persons in clause (c) of sub-section (4) of section 4
of the amended Act was, therefore, clearly not satisfied both in relation to Atul
Products Ltd. as also in relation to Crescent Dves and Chemicals Ltd., a
subsidiary company of Atic Industries Ltd., and neither of them could be said
to be a "related person" vis-a-vis the assessee within the meaning of
the definition of that term in clause (c) of sub-section (4) of section 4 of
the amended Act. In those circumstances, the assessable value, it was held, of
the dyes manufactured by the assessee could not be determined with reference to
the selling price charged by Atul Products Ltd. and Crescent Dyes and Chemicals
Ltd. to their purchasers but must be determined on the basis of the wholesale
case price charged by the assessee to Atul Products Ltd. and Crescent Dyes and
Chemicals Ltd. In that case, the assessee at all material times sold the large
bulk of dyes manufactured by it in wholesale to Atul Products and Imperial
Chemical Industries (India) Pvt. Ltd. which subsequently came to be known as
Crescent Dyes & Chemicals Ltd. at a uniform price applicable alike to both
these wholesale buyers and these wholesale buyers sold these dyes to dealers
and consumers at a higher price which inter alia included the expenses incurred
by them as also their profit. It was noted that the transactions between the assessee
.on the one hand and Atul Products Ltd. and Crescent Dyes and Chemicals Ltd. on
the other were as principal to principal and the wholesale price charged by the
assessee to Atul Products Ltd. and Crescent Dyes and Chemicals was the sole
consideration for the sale and no extra-commercial consideration entered in the
determination of such price. For appreciating how the wholesale price could be
the basis of the determination of the assessable value, a reference may be made
to the decision of this Court in Union of India & Ors. v. Cibatul Limited,
[1985] Supp. 3 SCR 95. In 1031 that case, the respondent Cibatul Ltd. entered
into two agreements with Ciba Geigy of India Ltd. for manufacturing resins by
the seller. The joint manufacturing programme indicated that the resins were to
be manufactured in accordance with the restrictions and specifications
constituting the buyer's standard and supplied at prices to be agreed upon from
time to time. The buyer was entitled to test a sample of each batch of the
goods and after its approval the goods were to be released for sale to the
buyer. The products were to bear certain trademarks being the property of the
foreign company--Ciba Geigy of Basle. Tripartite agreements were also executed
between the buyer, the seller and the foreign company, recognising the buyer as
the registered or licensed user of the trade-marks, authorising the seller to
affix the trade-marks on the products manufactured "as an agent for and on
behalf of the buyer and not of his own account" and the right of the buyer
being reserved to revoke the authority given to the seller to affix the
trade-marks. The respondent in that case filed declaration for the purposes of
levy of excise under the said Act showing the wholesale prices of different
classes .of goods sold by it during the period May, 1972 to May, 1975. The
declaration included the wholesale prices of the different resins manufactured
under the two aforesaid agreements. The Assistant Collector of Custom revised
those prices upwards on the basis that the wholesale price should be the price
for which the buyer sold the product in the market. According to the Assistant
Collector the buyer was the manufacturer of goods and not the seller. The
Collector of Central Excise allowed the appeals of the respondent and accepted
the plea that the wholesale price disclosed by the seller was the proper basis
for determining the excise duty. The Appellate orders were, however, revised by
the Central Govt. under sub-section (2) of s. 36 of the Act and the orders made
by the Assistant Collector were restored. According to the Central Govt. the
buyer was the person engaged in the production of the goods and the seller
merely manufactured them on behalf of.the buyer and that under the agreements
the seller was required to affix the trade-marks of the buyer on the
manufactured goods and that indicated that the goods belonged to the buyer.
There is a ring of similarity between the facts of that case and the facts of
the instant appeal before us. The orders of the Central Govt. were challenged
under Article 226 of the Constitution. The High Court held that the goods were
manufactured by the seller as its own goods, and therefore, the wholesale price
charged by the seller must form the true basis for the levy of excise duty.
On
appeal. this Court held that the High Court was right in concluding that the
wholesale price of the goods manufactured by the seller was the wholesale price
at which it sold those goods to the buyer, and it was 1032 not the wholesale
price at which the buyer sold those goods to others. The relevant provisions of
the agreements and the other material on the record showed that the
manufacturing programme was drawn up jointly by the buyer and the seller and
not merely by the buyer, and that the buyer was obliged to purchase the
manufactured product from the seller only if it conformed to the buyer's
standard. For this purpose, the buyer was entitled to test a sample of each
batch of the manufactured product and it was only on approval by him that the
product was released for sale by the seller to the buyer. It was apparent that
the seller could not be said to manufacture the goods in those facts, it was
held, on behalf of the buyer. It was further found that it was clear from the record
that the trade-marks of the buyer were to be affixed on those goods only which
were found to conform to the specifications or standard stipulated by the
buyer. All goods not approved by the buyer could not bear those trademarks and
were disposed of by the sellers without the advantage of those trade-marks.
This
question was again examined by this Court in Joint Secretary to.the Govt. of
India & Ors. v. Food Specialities Ltd., [1985] Supp. 3 SCR 165. There the
respondent used to manufacture certain goods for sale in India by M/s Nestle's
Products India Ltd. (for short Nestle's) under certain trade marks in respect
of which the latter was registered as the sole registered user in India. The
goods were supplied to Nestle's at wholesale price on rail at Moga or free on
lorry at factory. The respondent disputed the value of the goods determined by
the excise authorities for the purpose of the levy under the said Act and
ultimately the respondent filed writ petitions in the High Court. The High
Court allowed the writ petitions holding that the value of the trade marks
could not form a component of the value of the goods for the purpose of
assessment of excise duty. In appeal to this Court, the appellant contended
that the value of the goods sold by the respondent to Nestle's should, for the
purpose of levy of excise duty, include the value of the trade marks under
which the goods were sold in the market and that the value of such trade marks
should be added to the wholesale price for which the goods were sold by the
respondent to Nestle's. Dismissing the appeal, it was held that the value of Nestle's
trade marks could not be added to the wholesale price charged by the respondent
to Nestle's for the purpose of computing the value of the goods manufactured by
the respondent in the assessment to excise duty. In that case, it was held that
what were sold and supplied by the respondent were goods manufactured by it
with the trade marks affixed to them and it was the wholesale cash price of
goods that must determine the value for the purpose of assessment of excise
duty. It 1033 was immaterial that the trade marks belonged to Nestle's.
What
was material was that Nestle's had authorised the respondent to affix the trade
marks on the goods manufactured by it and it was the goods with the trade marks
affixed to them that were sold by the respondent to Nestle's.
There
could, therefore, be no doubt, it was held, that the wholesale price at which
the goods with the trade marks affixed to them were sold by the respondent to Nestle's
as stipulated under the agreements would be the value of the goods for the
purpose of excise duty. That was the price at which the respondent sold the
goods to Nestle's in the course of wholesale trade.
Similarly
in the instant case, it appears that the brand name "Bush" was
affixed to the goods produced by the respondent. In M/s Sidhosons and Others v.
Union of India and others, [1987] 1 SCC 25, it was held that the excise duty
was payable on the market value fetched by the goods, in the wholesale market
at the factory gate manufactured by the manufacturers, i.e., the price charged
by the manufacturers to the buyer under the agreement. It could not be assessed
on the basis of the market value obtained by the buyers who also add to the
value of the manufactured goods the value of their own property in the goodwill
of the 'brand name'.
In
view of the facts that have emerged in this case, the High Court came to the
conclusion that the market value of the goods of the respondent herein was the
price charged from M/s Bush India Ltd. and not the market value at which price
M/s Bush India Ltd. sold to its whole-sellers for the purpose of payment of
excise duty. The High Court, therefore, quashed the Show Cause Notice and the
Demand Notice.
Shri
A. Subba Rao on behalf of the Revenue tried to contend before us that the facts
of this case revealed that it was a device to under-charge. The respondent
herein was brought in to divide the sale price of M/s Bush India Ltd. to be the
basis of the assessable value. It is true that the facts of this case do
warrant a great deal of suspicion. But it is not possible to hold otherwise
than what has been held by the High Court in this case. It is true, as Shri Rao
drew our attention, that even though the Corporation might be a legal
personality distinct from its members, the Court is entitled to lift the mask
of corporate entity if the conception is used for tax evasion, or to circumvent
tax obligation or to perpetrate a fraud. In this connection, reference may be
made to the observations of this Court in Juggi Lal Kamlapat v. Commissioner of
Income-tax, U.P., [1969] 1 SCR 988. In the background of the facts 1034 found
we, however, need not get ourselves bogged with the controversy as to judicial
approach to tax avoidance devices as tax pointed out in McDowell and Co. Ltd.
v. Commercial Tax Officer, [1985] 154 ITR 148, where this Court tried to
discourage colourable devices. It is true that tax planning may be legitimate
provided it is within the framework of the law. Colourable devices cannot be
part of tax planning and it is wrong to encourage or entertain the belief that
it is honourable to avoid the payment of tax by dubious methods.
It is
the obligation of every citizen to pay the taxes honestly without resorting to
subterfuges. It is also true that in order to create, the atmosphere of tax
compliance, taxes must be reasonably collected and when collected, should be utilised
in proper expenditure and not wasted.
(See
the observations in Commissioner of Wealth Tax v. Arvind Narottam, [1988] 4 SCC
113), It is not necessary, in the facts of this case to notice the change in
the trend of judicial approach in England: (Sherdeley v. Sherdeley, [1987] 2 AER 54). While it is true, as
observed by Chinnappa Reddy, J. in McDowell and Co. Ltd. v. Commercial Tax
Officer, (supra) too much to expect the legislature to intervene and take care
of every device and scheme to avoid taxation and it is up to the court
sometimes to take stock to determine the nature of the new and sophisticated legal
devices to avoid tax and to expose the devices for what they really are and to
refuse to give judicial' benediction, it is necessary to remember as observed
by Lord Reid in Greenberg v. IRC, [1971] 47 TC 240(HL) that one must find out
the true nature of the transaction. It is unsafe to make bad laws out of hard
facts and one should avoid subverting the rule of law. Unfortunately, in the
instant case, facts have not been found with such an approach by the lower
authorities and the High Court had no alternative on the facts as found but to
quash the Show Cause and the Demand Notices.
In
that view of the matter, the appeal fails and is accordingly dismissed. But
there will be no order as to costs. We dismiss this appeal with reluctance. Our
reluctance is not to be ascribed to any hesitation to accept the inference
flowing from the facts found but reluctance is due to the fact that the facts
were not properly found.
T.N.A.
Appeal dismissed.
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