Impact  of  GST  on  Kerala  Revenue

(By Liju V. Stephen, Advocate, High Court of Kerala)

Whether it is a State or a Nation, Fiscal Policies do matter. Finance is an essential pre-requisite for a good Government. In a Federal structure where two sets of Governments have functions to discharge, it is essential for the effective working of each Government that it be empowered to raise financial resources of its own. This necessitates an apportionment of taxing power between the Centre and States. In a Federation, therefore along with division of function there is also a division of Taxing Powers between the Centre and the State Governments and it touches the very heart of modern Federalism and it affects the working of a Federal Polity. In a Federal Constitution transgression of power by a Legislature should be avoided.

The State Government should have its own source of money to finance its activities and for which State should have liberty to generate the Revenue from the respective domain allotted by the Indian Constitution. The specific bifurcation of the State and Union List is with a purposive Legislative intent that there is no overlapping of power by the State and Union and there should be no encroachment in the respective field allotted to the Governments as envisaged under Article 246 of the Indian Constitution.

Our Constitution by Entry 82,83and 84 in the Union List of the Seventh Schedule has allotted Income Tax, Customs Duties and Excise, among others as the source of generating revenue for the Union Government, and by Entry 52 and 54 in the State List in the Seventh Schedule for levying of entry tax and sales and purchase tax among others within the domain of the State Governments.

By the 122nd Constitution Amendment Bill 2014, the Indian Parliament has proposed to incorporate Article 246A, 269A, 279A and also to amend Article 286,366 and the Seventh Schedule in the Indian Constitution to introduce "The Goods and Services Tax" (GST) and thereby to subsume the Central and State Indirect Taxes.

Under the Constitutional 122nd Amendment, Article 246A (2) is being incorporated by which exclusive power to make laws with regard to indirect Tax on “Goods and Service” are proposed to be bestowed on the Parliament and the power of the State Government by Article 246A (1) is made subject to 246A(2). At present under Entry 54 of the State List in the Seventh schedule it is the right of the State to Levy and Collect Tax on any Goods other than News Paper subject to Entry 92A of Union List. But by the proposed 122nd Amendment Bill of 2014, the States would be empowered to levy and collect their own Tax only on “Petroleum products and Human Consumed Liquor”. Moreover Entry 52 on Entry Tax in the State List in the Seventh Schedule is also proposed to be omitted. Hence the right of the State Government over any other “Goods” is proposed to be taken away and moreover the incidence of taxation is presumed to be the supply point. Thus if a manufacturer supplies goods to a dealer in Kerala and the incidence of taxation is the supply point, the transfer being an Inter State transaction it is only the Central Government or the respective Industrial State that can impose the whole tax. Moreover if there is no corresponding Entry proposed by the Authority of Law the respective State is precluded by Article 265 to levy and collect their own tax.

The Revenue Receipt of the State Government comprises mainly of Tax Revenue, Non Tax Revenue and State's share from the central taxes and grants from the Union Government. The Tax Revenue of the Government is the major source of revenue, and in it the major chunk is from the Sales Tax. Hence States like Kerala which are not Industrial States but consumer States would be terribly affected by the implementation of GST. Thus by the amendment being brought to Entry 54 and the omission of Entry 52; State Governments would have to mainly depend on the apportionment to be made by the Union Government for its revenue. It is evident that the Parliament has visualized such a scenario by the proposed implementation of GST, hence by Clause 19 of the 122nd Amendment Bill it is proposed to compensate the States for the Revenue loss caused to them up to a period of 5 years.

The question to be considered is what after the said 5 year support period after the implementation of GST in the State of Kerala. The State of Kerala is with the highest per Capita debt ratio in the country and with a soaring public debt of Rupees 87,063/- crores.

The proposed amendment to the Seventh Schedule limits the States Tax field to petroleum products and human consumed Liquor. Presently out of the Tax Revenue Receipt of State of Kerala the sales tax on human consumed liquor contributes 22%. But with the State's policy to ban liquor in a phased manner in the State keeping in mind of the avowed Constitutional Directive Principle under Article 47 and also considering the social impact of liquor in the State it is justifiable for the State to go on with the policy of ban on liquor. Resultantly the State of Kerala cannot expect or plan its future from the Revenue Receipt of Tax on Human consumed Liquor. And the other tax field proposed to the State is the tax on petroleum products, but considering the political impact on an unjustifiable hike in price from that of the neighboring States will prompt the State to limit the tax rate on petroleum products. Hence the two commodities in which State can levy its own tax may not be of much relevance or would not support the future Revenue structure for the State of Kerala.

The advantage claimed by the Union Government to implement the GST over the State Value Added Tax regime is that the consumers would get a reduced tax burden. But at the same time the Union Government should also consider and keep in mind the difficulties that are to be faced by the State Governments like Kerala, that has to perform their Governmental duties and also to carryout welfare legislative schemes. Hence unless the State like Kerala makes appropriate demand for a better share in the apportionment of Revenue from the Central Government on a progressive basis the State’s Revenue structure would be terribly affected and would be putting the people of the State at the mercy of the Union Government. And the Union Government should ensure that States like Kerala receives their share of GST proportional to the turnover of goods consumed by the State. This will ensure increase in revenue in proportion to the progressive consumption of goods in the course of time.

Order 18 Rule 4, C.P.C. -- Affidavit of Evidence -- 

Some Salient Points to be Noted in Drafting the Examination-in-Chief  by

Affidavit and the Legal effect of Introducing Certain Matters in such effect

-- Powers  of  Court

(By N. Subramaniam, Advocate, High Court of Kerala, Ernakulam)

1. In the Trial Courts examination-in-chief of parties is done by affidavit under Rule 4 of Order 18. Rule 4 was substituted by Act 46 of 197 (Section 27) and again by Act 22 of 2002 (Section 12) with effect from 1.7.2002.

2. Invariably, now-a-days in majority of chief affidavits, some matters which are of irrelevant evidence; irrelevant to the issues in question, some evidence which are beyond the scope of pleadings, some evidence for which there are no pleadings and some evidence which are not necessary to decide to issue involved in the dispute, are also included; ignoring the legal concept that only relevant matters touching the pleadings and issues and pertaining the relevant and admissible documents alone has to put in examination-in-chief.

3. A commissioner is appointed for examination of parties and witnesses, who have filed affidavit evidence. Some of the commissioners taken down the depositions of the parties and witnesses, as they are being deposed by them. Some of the Commissioners may not note objection raised by the opposite side.

4. It is noticed by the Court in large number of matters that, in view of the Court Commissioner having no power to decide any objection about the irrelevancy of the evidence, large number of irrelevant questions on inadmissible documents and irrelevant issues are asked to the witness. The Court Commissioner simpliciter, records all the objections raised by the parties through advocate and keeps on recording the evidence whether it is relevant or irrelevant. This process of recording evidence, in the absence of the Court deciding the issue of relevancy of the evidence in examination-in-chief and more particularly when deposition in examination-in-chief is ex facie irrelevant, beyond the pleadings and beyond the powers of Court to adjudicate upon, cross examination becomes very lengthy on the irrelevant issues causing tremendous loss of time and money to the litigants. It becomes very difficult for the Court also to segregate the irrelevant part of evidence or to segregate examination-in-chief and cross - examination on the irrelevant issues or which are beyond the pleadings or issues, the evidence being common. A party who does not choose to cross-examine the witness on the deposition made in the affidavit, always has an apprehension of being faced with an argument of waiver and/or evidence having remained uncontroverted.

5. In cases wherein the chief affidavit evidence, which are irrelevant, unnecessary matters, and questions which are not based on any pleadings etc. it has been laid down that such evidence is to be ignored. Opposite side need not cross examine such witness in respect of ignored parts.

6. Court can also exclude inadmissible evidence whether or not objected to by a party. The above legal aspect has been pointed out by Bombay High Court in AIR 2015 (NOC - Notes on Cases) Case No. 766 (Mrs. MahabanooBavroz Kotwal v. Piloo Fair Bomanji) decided on 10.6.2014. Full text of judgment is reported in 2015(3) ABR 151.

7. In the decision reported in 17 (1980) DLT 225 (Amarjit Kaur v. Kishan Chand) decided on 14.11.1979, it has been held “an erroneous omission to object to evidence, not admissible on relevant under the Evidence Act, does not make it admissible. It is the duty of Court to exclude all irrelevant or inadmissible by the parties. (Para 19).

AIR 1936 Lahore 114 (Nanak v. Mian).

AIR 1929 Lahore 583 (Lachhu v. Mela).

(2007) 10 SCC 21 (Kishore Kirtilal Mehta v. Kiritilal Mehta Medical Trust).

8. The above legal principles, if followed in drafting the affidavit for examination -in- chief, it can avoid wastage of time for all.

9. It is worthy to note and remember the following rulings rendered by courts in this regard.

a) 2013(6) Maharashtra Law Journal 802 (Bom. H.C.) (Rajendra Singh Chharasal Singh (deceased) v. Jitendra Singh Rajendra Sing Kushwaha) (para 13) which rules that part of evidence which is irrelevant to the issues framed by Court is to be ignored.

b) 2010(6) Bom. C.R. 379 (Bom. H.C) (Harakchand Gulabchand Dhoka v. Kasinath Narsingh Marathe).

c)  2007 (3) KLT 878 : 2007(3) KLJ 174 : ILR 2007 Kerala 293 (T.K. Gangan Menon v. Bright Credit and Real Estate).

Extracted para. 32 of judgment in Amir Trading Corporation case which runs as follows.

"32 The matter may be considered from another angle. Presence of a party during examination-in-chief is not imperative. If any objection is taken to any statement made in the affidavit, as for example, that a statement has been made beyond the pleadings, such as objection can always be taken before the Court in writing and in any event, the attention of the witness can always be drawn while cross examining him. The defendant would not be prejudiced in any manner whatsoever the examination-in-chief is taken on an affidavit and in the event, he desires to cross examine the said witness he would be permitted to do so in the open Court. There may be cases where a party may not feel the necessity of cross examining a witness, examined on behalf of the other side. The time of the Court would not be wasted in examining such witness in open Court.'

10. There is yet another aspect involved. If the party is giving evidence in chief, three contingencies can happen.

i. The opposite party may object to some questions asked in chief on some legal or technical ground and the court in order to give continuity to the examination may close the evidence.

ii. In some case, as in the case where evidence in chief is given and the opposite party is to be cross examined before the commissioner, and if objection is raised, he will note the objections.

iii. In some cases opposite party may not raise any objections.

11. In all these cases it is the duty of the Court to decide the objections raised and pass a judgment. It has been held that a judgment passed without deciding the objections is not legal or proper  (AIR 1978 SC 1393).

12. Even if the objection in writing is not filed, while cross examining the witness, the attention of the witness can be drawn to the objectionable portion of the affidavit. This is the second mode of raising an objection to any part of the affidavit.

13. The very object of amending Rule 4 of Order XVIII of the said Code is to ensure that there is a speedy trial. The object is to ensure that the time of the Court is not wasted in recording the lengthy examination-in-chief. Consistent with the said object, it is obvious that the objection raised to any part of the affidavit in lieu of examination-in-chief will have to be considered at the time of final hearing of the suit or proceeding. The party raising objection cannot insist upon the Court considering the said objection before cross examination of the witness starts. In a given case, rival party may not raise objection in writing. As stated earlier, the party can cross examine the witness by inviting attention of the witness to the statements which according to the rival party are objectionable. Even in such a case, at the time of final hearing, objection will have to be considered by the Court though there may not be any specific objection in writing. It is always the duty of the Court to decide as to how much evidentiary value should be given to a particular piece of evidence. If a portion of the affidavit is found to be not relevant or if it is found that the portion has no foundation in the pleadings, the Court can always discard itwhile deciding the suit.

14. Objection of party about alleged irrelevancy of the portion of evidence can be kept in abeyance till the matter is finally heard.

Bipin Shantilal Panchal v. State of Gujarat (2001 (1) KLT SN 86 (C.No.106) SC = AIR 2001 SC 1158) (paras 12 to 14).

15.  The Bombay High Court in an unreported judgment (W.P. No. 9033 of 2012 dated 5.11.2012) has ruled that the relevancy of the evidence and the weightage given to such evidence can be considered by Court at the time of final adjudication.

16. Once an affidavit in lieu of examination -in- chief is filed, it partakes character of examination-in-chief. There is no provision in Code to enable Court to order its deletion. In case statement is irrelevant or beyond scope of pleadings an objection can always be taken in writing and Court can discard such portion while finally deciding suit. Harakchand Dhoka v. Kasinath Narsingh Marathe (2004(3) Bom. C.R. 583 SC) (para 5)

17. In the Full Bench decision rendered in Hemendra Rasiklal Ghia v. Subodh Mody (2008) 6 Bom. C.R. 519 F.B.), has decided the issue at which stage, the objection to the admissibility and/or proof of document which may be produced or tendered should be raised, considered and decided by the Court and at which stage, an objection to the admissibility or relevancy of evidence contained in the affidavit filed under Order XVIII, Rule 4 of Civil Procedure Code should be considered and decided by the Court. It is held that if any objection is to be taken to any statement made in the affidavit, such an objection should always be taken before the Court in writing and an attention of the witness should always be drawn while cross examining him. It is held that a determination or decision thereon can be deferred to a later stage of a suit, however, final decision must be recorded before the court proceeds to judgment. It is also held that irrelevant evidence brought on record can always be excluded as the question of admissibility of evidence is a question of law. It is held that if the evidence is irrelevant, consent of parties cannot make it relevant. Convenient mode to objection in the first instance, is reserving question of law as to its admissibility until final judgment in the case. The objection to the admissibility or relevancy of the evidence contained in the affidavit can be admitted at any stage reserving its resolution until final judgment.

18. Division Bench of Bombay High Court in the decision reported in 2013 (1) Bom. C.R. 599(Ayushakti Ayurved Pvt. Ltd. v. Hindustan Uniliver) speaking through Hon. Justice Dr. D.Y. Chandrachud has held that “A commissioner has no power to decide the objection as to admissibility and has to merely record the objection. It is held that judicial experience of proceedings before Commissioners appointed by the trial Judges of this Court on the Original Side shows only results in enlarging the scope of cross examination before the Commissioner. Commissioners charge fees for every session of recording evidence or part thereof. It is held that the ambit of the cross examination can be restricted by dealing with the question of admissibility of documents before recording of evidence before the Commissioner begins. Division Bench also considered the fact that if a decision on admissibility is deferred to final hearing of the suit and evidence is recorded without reference to a document of which admissibility is in dispute, segregation of that part of the evidence which relates to the document in question becomes a serious bone of contention at the final hearing of the suit. Cross examinations are rarely compartmentalized. Segregation of the evidence may not in every case were not to cross examine a witness with reference to a document in relation to which an objection as to admissibility has been raised, it would run the risk of not having conducted the cross examination at all with reference to the document, should it eventually be held to be admissible in evidence. In other words if a document is produced and referred to in chief examination and if the opposite party is disputing the correctness of that document, it is the duty of opposite party to cross examine the deponent in chief examination regarding the disputed document.”

19. The learned Judge has also added the following. “It is noticed by the Court in large number of matters that in view of the Court Commissioner having no power to decide any objection about the irrelevancy of the evidence, large number of irrelevant questions on inadmissible documents and irrelevant issues are asked to the witness. The Court Commissioner simpliciter records all the objections raised by the parties through advocate and keeps on recording the evidence whether it is relevant or irrelevant. This process of recording evidence in the absence of the Court deciding the issue of relevancy of the evidence in examination-in-chief and more particularly when deposition in examination-in-chief is ex facie irrelevant, beyond the pleadings and beyond the powers of Court to adjudicate upon, cross examination becomes very lengthy on the irrelevant issues causing tremendous loss of time and money to the litigants. It becomes very difficult for the Court also to segregate the irrelevant part of evidence or to segregate examination-in-chief and cross - examination on the irrelevant issues or which are beyond the pleadings or issues, the evidence being common. A party who does not choose to cross-examine the witness on the deposition made in the affidavit, always has an apprehension of being faced with an argument of waiver and/or evidence having remained uncontroverted.”

20. Option is given to the party to file Chief Affidavit or to be examined in Court. (Govindji Padamshi v. Bhawanji Hansraj - 2006 (3) KLT 1009 = 2006 (3) KLJ 210 = ILR 2006 (3) Ker. 800).

21.  Karnataka High Court in the decision reported in 2005 (3) KLT SN 11 has ruled that Order 18 Rule 1 is mandatory (Drakshayi v. Gagavva).

This article is intended to enlighten the budding Advocates regarding drafting of evidence in examination in chief as ordained in Order 18 Rule 4.

Whether Document Executed before Filing of a Suit but Registered after Registration of the Suit in Court will be Affected by Principle of Lis Pendensu/S.52 of T.P. Act.

(By N. Subramaniam, Advocate, High Court of Kerala, Ernakulam)

Transfer of Property Act. S.52. Lis pendens. Document executed before filing of a suit but registered after registration of the suit in the court.

Question is whether execution of such a document is affected by principle of lis pendens?

Ans. Sale deed is not affected by lis pendens since registration of a document relates back to the date of the document.

(1921) 41 MLJ 399 (D.B.) (Venkitarama Reddy v. Rangiah Chetty) Judges Sadasiva Iyer andSpencer JJ.

(1925) 1 MLJ 496 (Akki Guru Basappa v. Veluvathi Setra Shaulappa), 1991 (1) KLT SN 2 (C.No.2) SC = (1991) 2 MLJ 52 (Hamda Ammal v. Avadiappa Pather), 2011(1) Law Weekly 949 (Perumal v. V. Balasubramanian), (2006) 10 SCC 96 (A Jitendra Nath v. Jubilee Hills Co-operative House Building Society), (2000) 9 SCC 214 = (2000) 3 MLJ 199 (Boramma v. Krishna Gouda), AIR 2010 SC 2994 = (2010) 8 SCC 612 = (2010) 8 MLJ 1098 (Ittanam & Ors. v. Cherichi @ Padmini).

The above decisions are followed in (2015) 5 MLJ 529 (Pandia Nadar v. Sivakama Sundari).

When  there  is  Already  an  Agreement  of  Sale,  Whether  the Execution  of  Another  Sale  Agreement  and  Sale  Deed  Thereto Will  Bind  the  Earlier  Agreement  Holder

(By N. Subramaniam, Advocate,  High Court of Kerala, Ernakulam)

Specific Relief Act.

Question : When there is already an agreement of sale, the execution of another sale agreement and sale deed, will it bind the plaintiff, the earlier agreement holder?

Ans. No. It will not bind the earlier agreement holder.

1995 (2) CTC 313 (Valiya Perumal Nadar v. Santhana, Chettiar), AIR 1999 SC 2213 = (1999) 3 SCC 722 (Kondiba Dagudu Kadam v. Savithribai Sopan Gujjar), AIR 2008 SC 1541 = (2008) 4 SCC 530 = (2008) 2 MLJ 1115 (Thiruvenkidam Pillai v. Navinit Animal), AIR 2007 SC 1332 = (2006) 13 SCC 608 = (2007) 3 MLJ 377 (Sanjay Varma v. Manikroy), (2010) 13 SCC 128 = (2011) 1 MLJ 723 (Harnarayan (Dead) by LRs v. Mamchand (Dead) by LRs), 2001(1) CTC 5 (Guruswamy Nadar v. P. Laxmi Ammal (Dead) and 13 others), 2008 (3) KLT Suppl. 1221 (SC) = AIR 2008 SC 2025 = (2008) 4 SCC 219 (Chokalinga Swamy (idol) through its hereditary Trustee R.N. Pillai v. Jnanaprakasam (Dead) by LRs.), 2008 (2) KLT Suppl. 13 (SC) = AIR 2008 SC 2560 = (2008) 5 SCC 976 (Guruswamy Nadar. v. P. Laxmi Ammal (dead) through LRs).