H. N. G- FERNANDO, C.J.—Cojnmissioner oj Inland Revenue
1969 Present: H. N. G. Fernando, C.J., and Samerawickrame, J.
THE COMMISSIONER OF INLAND REVENUE, Appellant,and D. J. RANAWEERA, RespondentS. C. 685/64 (F)—D. C. Colombo, 333/AI
Income tax—Issue of certificate to District Court to recover lax by seizure and safe ofproperly—Issue of writ of execution to Fiscal—Application by assesses forstay of execution pending appeal to Commissioner of Inland Revenue—Powerof District Court to allow stay of execution—Scope—-Right of Commissioner to■appeal to Supreme Court from order allowing slay of execution—CivilProcedure Code, s. 701—Income Tax Ordinance, as. SI (2), SI (3).
Whore, in consequenco of the Commissioner of Inland Revenue issuing »certificate to a District Court in terms of section 84 (3) of the Income TaxOrdinance for the recovery of income tax duo from an assessee, the District■Court directs a writ of execution to issue to the Fiscal for the soizuro and sale of•tho proporties of the assessee, the District Court acts in its judicial capacity andnot ministerially if and when an application is made by the assessee to stay thewrit which has been issued by the Court in performance of tho ministerial dutywhich tho law casts on tho Court. Accordingly, an order of the Court allowingstay of execution is appealable at the instance of tho Commissioner.
Where stay of execution of tho writ is sought by the assessee on the groundthat an appeal to tho Commissioner of Inland Revenue is pending against the.assessment of the tax alleged to bo in default, neither section SI (2) nor any otherprovision of the Income Tax Ordinance precludes tho District Court fromstaying execution on condition that the asscsseoshould deposita sum of moneyso as to enable tho Commissioner to obtain payment of the tax in default in thoevont that tho determination of tho assessee’s appeal wholly or partly confirmstho existing assessment.
.AlPPEAL from a judgment of the District Court, Colombo.
P. Naguleswaran, Crown Counsel, for tho respondent-appellant.
iff. W. J aye war dene, Q.G., with S. >8. Basnayake, for the petitioner-respondent.
Cur. adv. vnlt.
June 16, 1969. H. N. G. Fernando, C.J.—
The Commissioner of Inland Revenue, who is the appellant in this case,issued a certificate to the District Court of Colombo in terms of s. 8-1 (3) oftho Income Tax Ordinance, stating that a sum of Rs. GS9/7GO was payableby the respondent as income tax in default . Thereupon the Court on 3rdSeptember 19G2 directed a writ of execution to issue to the Fiscal for theseizuro of tho properties of the respondent.
If. N. G. FERNANDO, C.J.—Commissioner of Inland Revenue
v. liana iveera
On 6th November 1962, Proctors appearing forth© respondent filed apetition stating that the respondent had filed an appeal against theassessment of tax and asking for a stay of execution until the appeal isdisposed of. The appeal there mentioned was an appeal to the Commis-sioner in terms of the relevant provision of the Ordinance. The Courton this petition stayed the execution of writ, but directed that notice ofthe respondent’s petition be issued to the Commissioner returnable on20th December 1962. The respondent however failed to have this noticeissued. Thus the order staying execution was in fact made withoutnotice to the Commissioner.
On the 10th Januar3' 1964 the Commissioner again appliod for theissue of writ, ivhich application was allowed, and the Fiscal thereafterreported to Court that properties to the value of Rs. 660,000 had beenseized.
On 24th April 1964, the respondent again filed a petition for the stayof execution and writ, and this application was allow-edon-11 th.Novembcr1964, the learned Judge directing ,f that execution proceedings be stayeduntil tho determination of the appeal filed on 16.S.62, on the petitionergiving security in a sum of Rs. 500,000 or on tho petitioner giving anunderstanding that he would not alienate, mortgage or encumber any ofthe properties referred to in the schedule to the certificate of Income Taxfiled of record without application to this Court with due notice to theCommissioner. The present appeal is by the Commissioner against thisorder.
Counsel for tho respondent has taken the objection that the orderappealed from is not a judicial order, and that accordingly no appeal liesagainst it. Counsel relied very much on the decision of this Court inRanaweera v. Commissioner of Inland Revenue1. In that case wTits hadissued from the District Court ujjon the filing of a certificate of collectionfor the recovery of estate duty in terms of a provision of the Estate DutyOrdinance which is substantially similar to the-'provision of s. 84 (3) of theIncome Tax Ordinance. These writs were stayed on an application madeby the assessee and notice of tho stay was issued to the Commissioner.The Commissioner filed no objection to the stay and the Court thereafterre-called tho writs. Subsequently the Commissioner did file objection andasked for the seizure and sale of properties of the assessee. After inquirythe District Judge dismissed the petitioner's earlier application for stayand directed the Fiscal to execute the writs.
On an appeal from the last-mentioned order of the District Judge, theassessee contended that the District Judge had no power to vacate hisown order staying the writs, and his contention was made on the basisthat the order of the District Judge on the application for stay is ajudicial act and could not be vacated by the Judge. In rejecting theassesseo’s appeal the Supreme Court did make certain observations to the
1 (1965) 67 N. L. it. 131.
296H. N. G. FERNANDO, C.J.—Commissioner of Inland Revenue
effect that when a District Judge entertains an application for the stay ofexecution of a writ issued under such a provision as s. S4 (3) of theIncome Tax Ordinance, the Court does not act judicially.
Relying upon these observations Counsel appearing for the respondentin ithe present appeal has argued that the order of the District J udge in thepresent case directing a stay of execution on the terms which I have setout above was one made in a purely ministerial capacity, and is nottherefore subject to appeal in this Court. The judgment in the case justcited as well as the judgment in a subsequent case reported in 6SN. L. B.p. 573 state quite clearly that the District Court does not exercise itsjudicial power when it issues a writ of execution upon a certificate beingfiled by the Commissioner for the recover of tax. But it docs not appearin either of those cases consideration was given to the quite differentquestion whether or not the District Court acts judicially if and when anapplication is made to stay a writ which has been issued by theCourt in performance of tlic ministerial duty which the law casts onthe Court.
– Section S4 (3) affords to the Commissioner the privilege of resorting tothe process of execution by means of what may be called a short-cut. Inthis way the Commissioner is entitled to have the process of executionapplied against an assessce, without the need for a judicial determinationthat a debt is due from the assessee. But there is little or nothing in thestatute which purports to alter the character of orders or proceedingswhich have to be made or taken in a Court at a stage subsequent to theissue of a writ of execution.
To take a simple though perhaps quite a theoretical example, anassessee against whose properties a writ of execution has issued mayin fact pay up thereafter the amount of the tax in default. In such anevent he would naturally wish for a stay of further execution proceedings ;and if he asks for the stay on the ground that jjayment was actually madeafter the issue of writ, there would be a need for the Court to determinewhether the payment had been made, and such a determination in theevent of a dispute on the point must surely be reached after judicialinquiry,’and I hold accordingly that such a determination is one madebj? the Court in its judicial capacity.
Section S4 (3) provides that sections 226 to 297 of the Civil ProcedureCode are applicable in relation to a seizure and sale under a writ issuedunder s. S4 (3), and there is no question that in the course of the applicationof these sections, the Court would have to act judicially just as much as itdoes in proceedings for the execution of its own decree.
In the instant case the respondent, in asking for a stay of the writ,invoked the ordinary and inherent jurisdiction of the District Court to-stay its own process of execution, and the particularground upon which thestay was granted was one which is commonly invoked by judgment-debtors
H. >T. G. FERN’A-NDO, C.J.—Commissioner of Inland He venue
in civil actions. Section 7G1 of the Civil Procedure Code expressly providesfor the stay of execution of an appealable decree, and the fact relied on bythe respondent in the present case, namely that an appeal to theCommissioner was pending against the assessment of the tax alleged to bein default, is fairly comparable to the ground on which execution isoccasionally stayed under s. 7G1 in ordinary civil proceedings.
Learned Crown Counsel has referred to s. 81 (2) of the Income TaxOrdinance which is to the following effect :—
“ Tax shall be paid notwithstanding any notice of objection orappeal unless the Commissioner orders that payment of the tax orany part thereof be held over pending the result of such objection orappeal. ”
Crown Counsel has argued in view of this express provision, that the~ Legislature has -by thisprovision committed-to the Commissioner the-function of deciding whether or not the recovery of tax in default shouldawait the determination of an appeal. I agree that in view of thisprovision a Court has no power to stay execution solely on the groundthat an assessment of tax is the subject of a pending appeal under therelevant taxing statute. But the order of the District Judge in the presentcase does not depend solely on this ground. The condition contemplatedin the order of the District Judge, that the respondent must deposit alarge sum in cash, is a condition upon which a Civil Court ordinarilystays execution of it own decrees, and there is nothing in the IncomeTax Ordinance which expressly or by implication precludes the DistrictCourt from staying execution on such a condition. This condition in myopinion will sufficiently and certainly enable the Commissioner toobtain payment of the tax in default, in the event that thedetermination of the respondent’s appeal wholly or partly confirms theexisting assessment. I hold that the Court does have power to allow astay of execution upon such a condition.
I note however, that the order of the learned District Judge contains analternative condition which might well defeat the purposes which thelearned Judge thought will be achieved therebj7. The condition that thepetitioner give an undertaking not to alienate his properties will probablycarry with it the sanction that a breach of the condition will be punishableas a contempt of Court; but this condition will not ensure with certaintythat the respondent’s properties will be available in satisfaction of the debtclaimed by the Commissioner. I hold that the District Court has nopower, upon such a condition to stay a writ which has issued under s. 84 (3)of the Income Tax Ordinance.
For these reasons the order of the learned District Judge is set aside.The record will be returned to the District Court, and it will be open to therespondent to deposit in cash to the credit of the case a sum of Rs. 600,000on or before 1st August 1969. If thi3 deposit is made, the District Court
Dharmadasa v. The Queen
will order that execution proceedings be stayed until the determinationb}' the Commissioner of Inland Revenue of the appeal filed by therespondent on 16th August 19G2. The deposit so made will beavailable for payment to the Commissioner of the whole or part of thesum determined upon such an appeal to be due as tax from therespondent.
If the deposit is not made on or before 1st August 19G9, the District-Judge will forthwith order the re-issue of the writ.
In view of the fact that the alternative condition set out in theorder of the learned District Judge was entirely unfavourable to theCommissioner, I order that the respondent must pay to the Commissionerthe costs of this appeal.
Sameuawickuame, J.—I agree.
Order set aside.
THE COMMISSIONER OF INLAND REVENUE, Appellant, and D. J. RANAWEERA, Respondent