TaxTMI 
TaxTMI 
1994 (2) TMI 325
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....m to export the liquor outside the State of Kerala if a bond for such payment is executed. It reads thus, No liquor or intoxicating drug shall be exported unless its export is permitted by the Government or any officer authorised by the Government in this behalf and unless: (a) the duties, taxes, fees and such other sums as are due to the Government under this Act, in respect of such liquor or intoxicating drug, have been paid, or (b) a bond for such payment on its exportation or re-exportation has been executed. The bond is required to be executed in a form provided by the rules made under the Abkari Act, called the Distillery and Warehouse Rules. The form (Form VI) reads thus. Know all men by these presents that I/We...(hereinafter called the bounden/boundens) and...(hereinafter called the surety) are bounden to the Governor of Kerala (hereinafter called the Government) in the sum of Rs...(rupees...) to be paid to the Government for which payment we bind ourselves and our legal representatives. Dated this the...day of...corresponding to the day of.... (signed) Whereas the b....
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....the Kerala High Court. The appeal filed by the State of Kerala before the Division Bench of the Kerala High Court was dismissed by the judgment under appeal. The Division Bench held that the instrument in question was not a bond but an agreement because the obligation mentioned in it was incurred under Section 7 of the Abkari Act and not an obligation created under it. 4. Sub-Clause (i) of Clause (9) of Section 2 of the Kerala Stamp Act reads thus : (a) 'bond' includes - (i) any instrument whereby a person obliges himself to pay money to another, on condition that the obligation shall be void if a specified act is performed, or is not performed, as the case may be. 5. Learned Counsel for the appellant contended that under instrument in question the respondents obliged themselves to pay the sum of money set out therein, the obligation to be void on the happening of events specified therein. There was, in his submission, no warrant for holding that the obligation of the respondents arose under the Abkari Act and that, therefore, the instrument in question created no new obligation so that it was not a bond. Learned Counsel for the responden....
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....gh Court considered was this instrument a bond. The Special Bench noted that the Stamp Act described a bond as an instrument whereby a person obliged himself to deliver money. These words, in its view, indicated that the obligation to pay money should arise under the terms of the instrument itself. In other words the obligation should be created by the instrument. In the case before the Special bench, the liability to pay sales tax existed under the provision of the Sales Tax Act itself and the mere recital in the document that Adukiya would discharge the liability did not create a new liability under and by the instrument. The instrument was, therefore, held not to be a bond. In Patel Stone Trading Co., Nagpur v. Ramsing AIR1975Bom79 , a learned single judge of the Bombay High Court considered an instrument in which the defendant acknowledged liability in a stated amounts and expressly promised to repay the same. The learned Judge held that the document was executed for the purposes of creating an obligation whereby the defendant agreed to pay to the plaintiff the stated amount and interest thereon. This being the dominant purpose and intention of the instrument, it was a bond. En....
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....tion, therefore, the respondents avail themselves of the advantage of clearing from their distillery for export outside the State of Kerala liquor without paying excise duty thereon. They do so upon the condition that the liquor shall be delivered into the custody of the Excise Officer in charge of the importer and excise duty shall be paid to that Excise Officer on all or any portion of the liquor which is not so delivered. As required by the Abkari Act, the respondents oblige themselves in the event of breach of the condition, to pay to the State of Kerala the sum of money mentioned in the instrument in question, being the amount of the excise duty. Under the instrument in question the respondents clearly oblige or bind themselves to pay to the State of Kerala a specified sum of money and can be sued thereon. The instrument in question is, therefore, an instrument whereby a person obliges himself to pay money to another, the obligation to become void if a specified act is performed. It is a bond within the meaning of the Kerala Stamp Act. 9. It was submitted in the alternative by learned Counsel for the respondents that, even though the instrument in question may be a bond, it....
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....ort by the manufacturers of Indian made Foreign Liquor in Form VI was a bond within meaning of Article 13 of the Kerala Stamp Act 1939 (hereinafter referred to as 'the Act') or an agreement as defined in Article 5 of the Schedule of the Act. 15. The manufacture, sale and supply of Indian made Foreign Liquor in the State of Kerala is governed by the Kerala Abkari Act. Under it a distiller is permitted to export liquor manufactured by it outside the State after obtaining permission from the excise authorities. Since such liquor is consumed in another State the Government in exercise of its power under Section 17 of the Act issued notification levying concessional duty of Rs. 0.50 per proof litre. But if the quantity exported did not reach the destination or there was wastage etc. then the liability to pay normal duty arose. To ensure such payment the distiller is required to execute a bond under Clause (b) of Sub-section (1) of Section 7 of the Abkari Act which reads as under : No liquor or intoxicated drug shall be exported unless its export is permitted by the Government or any officer authorised by the government in this behalf and unless :  ....
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....allenged again by the distiller in the High Court. Both the Division Bench and the learned Single Judge held the agreement executed in Form VI could be a bond for purposes of Stamp Act only if the obligation was created by or under the instrument, and not if it was in respect of pre-existing right. The High Court was of opinion that since the bond executed by the distillers was an obligation incurred under Section 7 of the Abkari Act it was not an obligation created under the bond. It is the correctness of this view that has been assailed by the State. 17. 'Bond' dictionary means a certificate or evidence of debt. In Oxford Dictionary it is defined as, 'binding engagement, agreement, deed by which person binds himself to pay another; government's or public company's documentary promise to repay borrowed money. Stroud's Judicial Dictionary defines it as, 'an obligation by deed.' Black's Law Dictionary defines it as, 'a certificate or evidence of a debt on which the issuing company or governmental body promises to pay the bondholders a specified amount of interest for a specified length of time, and to repay the loan on the expiration date. ....
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....ified act is performed, or is not performed, as the case may be; (b) any instrument attested by a witness and not payable to order or bearer, whereby a person obliges himself to pay money to another; and (c) any instrument so attested, whereby a person obliges himself to deliver grain or other agricultural produce to another; Both Section 2 of the Kerala Act and Section 2 of the Indian Stamp Act are identical. The purpose of extracting the definition is to demonstrate that whereas Clause (a) of the Indian Stamp Act or the Kerala Act deals with conditional obligation Clauses (b) and (c) are concerned with simple obligation. In Gisborne & Co. v. Subalbowri 8 Cal. 234 it was observed that, 'the definition of a bond in Section 2(5) of the Act is precisely what we understand by a bond in England and it is an obligation of a different character from a covenant to do a particular act'. This observation was made on Section 5(2) as it stood in the original Stamp Act and was similar to what it is 5(2)(a) now in the Act. In Chimnaji v. Ranu (1880) I.L.R. 4 Bom 19 where the defendant promised to repay with interest the sum borrowed and promised in addit....
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....rument itself. It must be in consequence of it. 21. Various High Courts had occasion to consider this entry and the consistent view appears to be that the bond for purposes of the Stamp Act should be understood and concerned in special sense and not in ordinary sense. It has been held an instrument which for purposes of levy of stamp duty must create an obligation to pay for the first time. It must not be in recognition of any pre-existing right. As far back as 1895, in Hira Lal Sircar v. Queen Empress, 22 ILR Cal. 757 it was held that the word 'oblige' indicates that a document can be a bond only when it creates an obligation to pay money as is the case with those documents which are known as bonds but is not the case with the acknowledgments of advances, or of the purchase and receipt of goods, the obligation to pay for which is not created by instrument, but arises from the promises to repay advances and to pay for goods, which the law always implies when money is borrowed or goods are purchased. In M.D. Gupta v. Board of Revenue, 1969 ALJ 333 it was held that where an obligation to pay was a pre-existing one the document executed subsequently giving the nature of the....
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....he commission of a breach of some other obligation. This clause will not apply where the obligation accrues on the non-performance of some stated act, because on the language of Clause (a), on the non-performance of the specified act the obligation to pay money is to become void, not become enforceable. The sequence of events stipulated in Clause (a) cannot be reversed in order to bring an instrument within its purview. In Board of Revenue v. Shellwell T. Agencies (1984) K.L.T. 955 a full Bench of the Kerala High Court held that an instrument could be termed as a bond only if an obligation to pay on its basis was created for the first time. Same view was taken by Kerala High Court in Mathai Mathew v. Thampi (1989) 1 K.L.T. 138. 22. The bond under the Abkari Act is executed by a manufacturer for payment of exportation duty as required under Sub-section (1) of Section 7 of the Abkari Act. It is the liability to pay under the Statute which is reduced in form of a bond of as provided under Rules 47 and 50 of the Distillery and Warehouse Rules (referred as rules) framed under Section 29 of the Act. Even if no bond would have been executed the manufacturer would have been liable to....
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.... undertaken to pay on later date does not arise as between a debtor and creditor but in lieu of liability which already exists in law. An instrument or document does not become bond under Stamp Act because it is so described but only when an obligation to pay arises in consequence of it. Mere use of the word 'bond' in Section 7 of the Abkari Act does not render it a bond for purposes of stamp duty. The agreement in Form VI has been reproduced earlier. The distiller executing this agreement avails of the facility of exporting the liquor without payment of duty. But it undertakes to pay the amount if the duty on liquor sent to another State is not paid to it. The obligation to pay under the instrument, thus, arises not as a creditor or debtor in the commercial sense or special sense but for failure of duty enjoined by law. 23. The meaning of ordinary and special bond is explained by Rule 51. A special bond is executed for specified occasion or particular consignment of spirit removed from distillery under Rule 50 without payment of duty on condition that duty shall be paid on the prescribed rate in case of failure to account for the satisfaction of the Commission. The spec....