Heads or Tails – Which is More Legal – The Heading of a Section or its Contents?
THE CESTAT had an occasion to discuss this very Section 78 in INDUSTRIAL SECURITY AGENCY Vs CCE , ALLAHABAD - 2008-TIOL-960-CESTAT-DEL. Justice SN Jha , President observed, “ It may be kept in mind that Section 78 refers to penalty for suppressing value of taxable service. Though the heading of the Section cannot be read as substantive provision, it can be used as a guide to cull out the real meaning of the provision. The language of the heading, prima facie, suggests that penalty can be imposed where the person has suppressed any fact pertaining to the value of taxable service. Non-submission of the return per se, in my opinion, may not attract penalty under Section 78 and accordingly I am inclined to hold that the provisions of Section 78 are not attracted in the instant case and, therefore, no penalty thereunder could be imposed against the appellant.”
Section 78 was earlier for penalty for suppression of value, but when they amended the Section in 2004, they forgot to amend the Marginal Heading and this farce is continuing for the last six years.
DDT had covered this issue earlier but some points are perhaps worth repeating.
Let us take another real example – the marginal heading of Section 179 of the Income Tax Act reads as Liability of directors of private company in liquidation.
Now the Section reads as, “Notwithstanding ……..Where any tax due from a private company in respect of any income of any previous year or from any other company in respect of any income of any previous year during which such other company was a private company cannot be recovered, then, every person who was a director of the private company at any time during the relevant previous year shall be jointly and severally liable for the payment of such tax unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company.”
Please notice that there is absolutely no reference to liquidation in the Section which is mentioned in the heading. It was there some 35 years ago.
Interestingly the Section earlier read as “when any private company is wound up after the commencement of this Act, and any tax assessed on the company, whether before or in the course of or after its liquidation, in respect of any income of any previous year.”
And it was amended in 1975 by the Taxation Laws (Amendment) Act, 1975 specifically to fix the liability on the Directors even when there is no liquidation. But the heading of the Section merrily reads, Liability of directors of private company in liquidation for the past 35 years and will merrily continue.
The Amendment had enlarged the scope of this provision so as to impose personal liability on the directors of a private company in respect of any tax payable by the company even in cases where the company has not gone into liquidation.
But they forgot to amend the heading. Now will the heading prevail or will the contents of the Section prevail?
Let us now look at the converse. Look at Rule 23 of the Central Excise Rules, 2002, which reads as,
Power to stop and search.- Any Central Excise Officer, may search any conveyance carrying excisable goods in respect of which he has reason to believe that the goods are being carried with the intention of evading duty.
Please notice, the heading provides for stopping and searching a conveyance, but the contents of the Rule does not mention anything about stopping – it empowers only searching.
Does it mean that a Central Excise Officer can search only a stopped vehicle or if he wants to search a running vehicle, he has to jump into that running vehicle like a Bollywood hero, and then search it?
So now will the head wag the tail or the tail wag the head?
Fortunately, our Courts are very kind to Law Drafter's blunders – contrary to popular belief among tax officials.
The Supreme Court had clarified this issue nearly forty years ago when it held in CHANDROJI RAO v COMMISSIONER OF INCOME-TAX, M.P . NAGPUR - - “The marginal heading cannot control the interpretation of the words of the section particularly when the language of the section is clear and unambiguous.”
This judgement was delivered in 1970 and so the law makers can merrily ignore the Headings.
That still does not make the Central Excise officer's position any better as he is given the power to stop only by the Heading and not the Rule! The Rule is very unambiguous that he can search, but is not very sure about “stopping”.
Can't law-making be a little more serious affair?