TATA ENGINEERING AND LOCOMOTIVE COMPANY versus ASSISTANT COMMISSIONER OF COMMERCIAL TAXES & ANR.

TATA ENGINEERING AND LOCOMOTIVE COMPANY LTD.

ASSISTANT COMMISSIONER OF COMMERCIAL TAXES & ANR.

February 24, 1967

(M. HIDAYATULLAH, J. M. SHELAT AND G. K. MITTER, JJ.]

Constitution of India, Art. 226-Princip/es for exercise of High CoHrt's polver under-Existence of alternative rentedies when not bar. The appellant company manufactured trucks, bus cbasis etc. in Bihar State. Some of the goods so manufactured were sent to the stockyards maintained by the company in various State> outside Bihar. The goods in the said stockyards, according to the company, had not been appro~ priated to any contract and remained the property of the company. Therefore, in proceedings for the assessment of Sales Tax before the Assistant Commissioner of Commercial Taxes, Jamshedpur the comr ny contended that the sales effected from these stockyards were taxable neither under the Bihar Sales Tax Act., nor under the Central Sales Tax Act. Th~ contention was rejected by the Assistant Commissioner who demanded Rs. 1,73,84,273 as tax. The company thereupon filed peti-tion under Art. 226 of the Constitution questioning the jurisdiction of the Taxing Authority. The High Court refused to give relief because oadequate alternative rernedie" under the taxing statute were available and had not been exhausted and dismissed the petition in limine. By special leave the company appealed. HELD : The jurisdiction of the High Court under Art. 226 of the Constitution cannot bP. substitute for the ordinary_ remedies at Jaw. Nor is its exercise desirable if facts have to be found on evidence. But there are exceptions. One such exception is when action is being taken under an invalid law or arbitrarily without the sanction of law. In such case the High Court raay interfere to avoid hardship to party which· will be unavoidable if the quick and mo·re efficacious remedy envisaged by the article were not allowed to be invoked. As the appeals required paxment of tax at least in part the High Court ought to have taken 1unsdiction in this case at least to issue rule nisi to see what the Assis .. tan! Commissioner had to say. (755 E-0, 756 C-D]

Thansingh v. Supdt. of Taxes (1964] 6.S.C.R. 654 and Himmat/al v. State of M.P. [1954] S.C.R. 1122, referred to.

Clv1L APPELLATE JURISDICTION : Civil Appeal No. 1604 of 1966.

Appeal by special leave. from the judgment and order dated April 20, 1966 of the Patna High Court in C.W.J.C. No. 252 of 1966.'

N. A. Palkhiwala, S. P. Mehta, Ravinder Narain and 0. C. Mathur, for the appellant

Niren De, Addi. Solicitor-General and U. P. Singh, for the respondents.

The Judgment of the Court was delivered by

Hidayatullah, J The appellant is public limited Company whid1 manufactures the well-known Tata Mercedes-Benz trucks, bus chassis, their spare parts and other accessories al Jamshcdpur in the State of Bihar and they arc sold to the Govcrr._ncnt of India, the State Governments, State Transport Corporations and others. In the course of its business the appellant Company sells its pro-ducts, particularly the trucks and bus chassis, to dealers in various parts of India and the dealers resell them to consumers all over India. According to the appellant Company, its sales in the Indian market are of three kinds :

(a) Sales inside Bihar State;

( h) Sales in the course of inter-State trade and com-merce; and

(~) Sales effected from their stockyards located m States other than Bihar.

The present appeal concerns sales in the last category and the question arises in the followin3 circumstances.

The appellant Company tiled returns for the quarter ending on June 30, 1965, under the B1har Sales ·fox Act and the Central Sales Tax Act respectively. including in the former <a:cs to con-sumers in Bihar State and m the latter sales in the course of inter-Stale 1rade or commerce. and paid full tax due on such sales. The appellant Com!lany did not include sales from the stockyards, in any of its returns.

On November 12, 1965 the Assist~nt Commission~r of Com-

mercial Taxes, Jamshedpur sent notice (No. I 1234) inform-ing li1e appellant Company that the returns appeared to bz in-correct as all sales were not included and directed the appellant Company to include ail its sales in revised returns and all returns to be filed in future. The appellant Company demurred that sal.:s from their stocky:irds in other St:ites were neither sales in the State of Bihar, nor sales in the course of inter-Slate trade or commerce and were thus not taxable in Bihar. This plea was noi a"<.:cptcd and revised returns !or the quarters ending on June 30 and September 30, 1965 were ordered to be filed. The ap!"'llant Company filed amended returns under pro!cst and wi<hout prejudice to its contentions. At the same time the appclian: Companv disclosed the en; ire procedure of saks eJt-stockv:..rds and relied unon s. 4 (2) of the Central Sales Tax Ac! i~' exclude· such sales. The appellant Company also inquired whdher these sales were 10 be treated as sales in Bihar for the purrn,cs of the Bih:ir Sales Tax Act or as sales in the course oi in!cr-Statc tr~dc ancl commerce for purposes of the Central

Sales Tax Act, but no reply was given. The appellant Company furtlter asked for an opportunity to produce declarations from its customers, who are also registered dealers, with view to claim-ing rebate, but . this ·opportunity was denied. The appellant Company objected to the assessment for period of six months unoer tax legislation, which it claimed; was intended to operate yearly but to no effect. According to the revised returns filed under compulsion, the lireak-up of the sales was as follows : The total gross turnover was Rs. 33,99,23,595. The appellant Comean~ claimed to deduct (a) sales from ~tockyards at extra State pomts (Rs. 15,09,24,204); (b) sales m the course of exoorl out of India (Rs. 34,83,671); and (c) sales effected in Bihar on which Bihar Sales Tax was payable (Rs. 3,64,79,20.9). The balance Rs. 14,90,36,510, according to the appellant Com-pany, consisted of sales (Rs. 14,33,02,855) to registered dealers taxable at 2 % and sales of the balance to unregistered dealers taxable at 10%. The tax for the period April l, 1965 to Sep-tember 30, 1965 was computed at R,s. 34,05,028. The appellant Company stated to have paid against it Rs. 34,45,699 as tax in

the Government Treasury and denied any further liability.

The Assistant Commissioner after turning dnwn the requests for adjournments proceeded to assess the appellant Company. The gross turnover for the two quarters was taken to be Rs. 35,13,60,725. The difference (Rs. 1,14,37,129) arose because tax in other States was also added to the sale prices. Deducting the sales made in Bihar State (Rs.'3,64,79,209) and the sales in the course of export (Rs. 34,83,671) the balance (Rs. 31,13,97 ,844) was held taxable at different rates. Rs. 12,94,81,387 for which and forms were produced from registered dealers were taxed at 2 % and the balance (Rs. 16,23,61,334 plus local taxes Rs. 1,14,37,129 above-F mentioned) at 10%. The total tax was computed to be R5. 2,07,81,273 from which deducting the tax already paid, demand for the sum of Rs. 1,73,84,273 was made. The order of assessment was passed on March l, 1966 and the amount of arrears of tax was made payable on or before March 15, 1966. The appellant Company asked for time to make the payment and it was extended to March 21, 1966.The appellant Company filed petition under Art. 226 of the Constitution of India in the Patna High Court for directions or orders or writs, including writ in nature of certiorari calling for the records and quashing the orde1 of the Assistant Com-H missioner. By the petition the jurisdiction of the Assistant Com-missioner to make the assessment and the demand of tax in respect of stcckyard sales were questioned. Of the grounds urged, the following were questions of jurisdiction :

" (a) The assessment on the Petitioner for two quarters is illegal as the Central Sales Tax is yearly tax.

(b) Respondent No. 1 erred in assuming jurisdic-tion to tax the outside sales by wrong interpretation of evidence;, concrary to the overwhelming evidence on record.

( e) Respondent No. 1 failed to appreciate that in law sale took place only at the stockyard where the vehicle was appropriated to particular contract and that the sale did not occasion inter-State movement of the vehicle.

( f) Respondent No. 1 has relied on section 84 of the Contract Act even though the same was repealed in 1930 and thereby erred in applying wrong provision of law.

The petition came up for hearing before Narasimham C.J. and Ahmad J. on April 20, 1966 and v·as dismissed at the threshhold. The order of the High Court was :

"The petitioner has not exhausted the internal remedies provided in the Sales Tax Act by way of appeal, revision or reference and statement of case to this Court.

We are not satisfied that this is fit case for this Court to exercise its extraordinary jurisdiction at this stage. The petition is dismissed summarily,

Sd/- R L. Narasimham Sd/- Anwar Ahmed".

rc4ues1 for ccrtificacc co appeal to this Court was chcn mauc. The High Court pointed out that an appeal against the order of assessment was possible on payment of 20% of the assc"cu ta.~. As this came to Rs. 40,00,000 and odd only and Rs. 33, 97,000 hau alreauy been paid. the High Court held thac the ("ompany ought to appeal first si~ce the payment of tit~ balance (Rs. 6,00.000) was well within the capacity of the appclbnt Com· II pany and was not so onerous as to merit intericrence by w1y of extraordinary powers of the High Court. The application for ccr1ificatc was accordingly dismissed. The appellant Company.

however, obtained special leave from this Court and this appeal was filed.

The learned Additional Solicitor General, who appeared for

the Assistant Collllllissioner, raised preliminary objection that the appellant Company could not be heard as it had not exhausted the remedies available under the taidng statutes which gave right of appeal and revision and finally for mvoking the advisory juf!S-diction of the High Court. He also relied upon Tizaminglz v. Supdt. of Taxes(1) in support of the order of the High Court.

The preliminary objection really dcies no more than try to check in advance the points which the appellant Company is seek-c ing to raise in !his appeal. Whether one looks at the matter from the point of view of the appeal proper or from the point of view of the prelia;!inary objection raised before us, the question is the same. namely, whether the High Court ought in this case to have exercised jurisdiction and if it took jurisdiction whether any settled principle governing Art. 226 would have been departed from.

The power and jurisdiction of the High Court under Art. 226 of the Constitution has been the subject of exposition from this Court. That it is extraordinary and to be used sparingly goes without saying. In spite of the. very wide terms in which this jurisdiction is conferred, the High Courts have rightly recognised certain limitations on this power. The jurisdiction is not appel-lat.e and it is obviou5 tliai it cannot be substitute for the ordi-nary remedies at law. Nor is its exercise desirable if facts have to be iound on evidence. The High Court, therefore, leaves the party aggrieved t9 take recourse to the remedies available under the ordinary law if they are equally efficacious and declines to assume -jurisdiction to enable such remedies to be by-passed. To these there are certain exceptions. One such exception is where action is being taken under an invalid Jaw or arbitrarily without the sanction of Jaw. In such case, the High Court may interfere to avoid hardship to party which will be unav_oidable if the quick and more efficacious remedy envisaged by article 226 were not allowed to be invoked. In our judgment the present is an example of the exceptional situation above cont.emplated just as Himmatlal v. State of M.P.(') was :mother instance which came before this Court.

The power and jurisdiction of the Assistant Commissioner, Jamshedpur, were exercisable in respect of sales to consumers in Bihar State and to transactions of sales fu the course of inter-H State trade _and commerce. They could not be utilised to tax sales outside the State of Bihar. The appellant Company claimed (I) [1964] S. C. R. 654. (2) (1954] S. C. R. 11.22

t~·eir stockyards in

exemption in respect of sales efie~ted from t~·eir stockyards in the vanous States, no doubt fed from Bihar but run by the Col'l-pany locally. The Company asserted that the goods in the stock-yarus we1e still those of the appeUant Company and neither the property in them had passed to any one nor had they been appro-priated to contract of sale. The question was whether in law such sales could be regarded as in the course of inter-state trade or commerce or outside sales, subject of course to the claim of the Company being found on n:cord to be good. There is nothing to show that any further evidence beyond documents produced to illu~trate sample sales was nece~ary. Nor did the learned Additional Solicitor General suggest that this was going to be an issue of fact rather than of law. It would certainly have avo!dcd circuity of action and proved altogether more satisfac-tory if the High Court had considered whether the sample transac-tion as illustrated by the documents, disclosed transaction of sale outside the State of Bihar and not in the course of inter-State trade or ccmmcrce. On that de;iencted the payment of tax of the order of R~. I, 73,00,000 and odd for two quarters alone. We arc clearly uf opinion that the High Court ought to have taken jurisdiction in this case at least to issue rule nisi to see what the Assistant Commissioner had to say. The High Court could always decline to decide the case if disputed questions of fact 1equiring finding thereon arose, but so far as we can see, no such question was likely to arise.

We accordingly set aside the order of the High Court and remit the case for further consideration after issuing rule niri so that the Assistant Commissioner may file return to the claim put forward by the appellant Company. The appeal will be allowed but we make no order about costs.

Appeal allowed.