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Rajab Ali Pirani, Pa... v. The State Of A.P Thr...

Andhra Pradesh High Court

Feb 7, 1966

Judgment

Subsequent
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Structured Summary of the Opinion

Factual and Procedural Background

The appellant (a registered partnership firm engaged in manufacture and sale of agricultural implements) instituted a suit (O.S. 88/1/56) against the Government of Andhra Pradesh through the Chief Secretary before the III Additional Judge, City Civil Court, Secunderabad, seeking recovery of amounts alleged to have been wrongfully levied by the Sales Tax Department. The Sales Tax Officer had levied tax of Rs. 2,344 for 1950–51 and Rs. 5,208 for the subsequent year. Those assessments were made ex parte. Appeals and revisions by the appellant were unsuccessful. A writ petition under Article 226 was dismissed by the High Court on the ground that the plaintiff had an alternative remedy by way of a regular suit. Leave to appeal and a Special Leave Petition to the Supreme Court were dismissed; the Special Leave Petition was finally rejected on 3-10-1955 (as recorded in the opinion). The appellant then filed the civil suit which the trial court dismissed after framing nine issues, examining witnesses (including the Sales Tax Officer as D.W.1) and marking documents. The appellant appealed the dismissal; this opinion concerns that appeal.

Legal Issues Presented

Whether the suit was within the prescribed period of limitation — specifically, the application of Section 24 of the Hyderabad General Sales Tax Act and the effect (if any) of Section 14 of the Limitation Act in excluding time spent prosecuting prior proceedings (writ petitions) in the High Court.
Whether the appellant was entitled to exemption from sales tax under section 2(f) of item 29 of Schedule I (i.e., whether agricultural implements manufactured from "raw iron" or equivalent material such as scrap iron fell within the exemption), and whether the Sales Tax Officer's assessment (imposing tax on part of the turnover) was arbitrary or without jurisdiction.

Arguments of the Parties

Appellant's Arguments

The appellant manufactured agricultural implements from scrap iron and was therefore exempt from sales tax under section 2(f) of item 29 of Schedule I of the Act.
The assessments were arbitrary, wrong, baseless and ex parte; the assessing authorities had no jurisdiction to levy the tax in the manner they did.
The suit was within time: the appellant sought to compute limitation by excluding the period during which he prosecuted writ proceedings in the High Court and argued that the suit was filed within six months from the date of the last order (the Supreme Court rejection of the Special Leave Petition dated 3-10-1955, as relied upon by the appellant in the plaint/argument).

Defendant-Respondent's Arguments

The appellant was a dealer in articles manufactured out of iron and steel (not merely agricultural implements from scrap iron), so the exemption claim was not correct.
The tax for 1951–52 had not been paid and the appellant failed to furnish statements and produce account books; consequently the sales tax authorities assessed the appellant to the best of their judgment.
The suit was time-barred under Section 24 of the Hyderabad General Sales Tax Act.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Narayana v. Commissioner H.R. & C.E., A.P., I.L.R. 1962 A.P. 865	Section 14 of the Limitation Act applies where a plaintiff bona fide litigated his right under Art. 226; the term "Court of Appeal" in Section 14 may be construed broadly to include a court which can review decisions of an inferior court.	The court relied on this authority to support a liberal reading of Section 14 and to treat the High Court as a "Court of Appeal" for purposes of computing limitation.
Biradavolu Kalahastiah v. Tangirala Chengamma, 1958 A.L.T. 749	Holds that provisions of Section 14 are applicable and that time spent in High Court proceedings may be deductible under Section 14.	The opinion notes that the learned judge in that case held Section 14 applicable and used that view when considering deductibility of time spent in High Court proceedings.
Koppolu Venkatasami v. Uttarkar Sara Bai, 1943 2 M.L.J. 41	When a revision petition was admitted by a Judge of the High Court, it indicated the petition was fit for further consideration and prosecution of the civil revision should be deemed bona fide.	The court cited this decision to support the proposition that prosecution of a revision/writ may be bona fide and thus time spent can count for exclusion under Section 14.
Janki Pershad v. Ram Kripal, A.I.R. 1951 Patna 486	The words "or other causes of a like nature" in Section 14 should be liberally construed; the defect must be such as to make it impossible for the court to entertain the suit or application on merits.	The court relied on this articulation to justify a liberal construction of Section 14 and to examine whether failures of the High Court to grant relief because of alternative remedy can be treated as a cause "of a like nature" with defect of jurisdiction.
Radha Kishun v. Firm Srinivas Ram Kumar, A.I.R. 1944 Patna 225	Section 14 would be attracted only when there is refusal to interfere by the High Court due to defect of jurisdiction or cause of a like nature.	The court acknowledged this contrary view but stated it was inclined to follow the line of authority that Section 14 should be liberally construed.
Provincial Government of Madras (Now A.P) v. J.S. Basvappa, (Supreme Court)	Held that the period of limitation prescribed in Section 18 of the Madras General Sales Tax Act applies to suits for damages/compensation and does not apply to suits for refund of tax alleged to be illegally collected.	The court treated Section 18 of the Madras Act as in pari materia with Section 24 of the Hyderabad Act and, following Basvappa, concluded that the period of limitation for a suit for refund is three years from the date of levy; this supported the conclusion that the appellant's suit was within time.

Court's Reasoning and Analysis

The court's analysis proceeded in two main parts: limitation and the substantive exemption claim.

Limitation Analysis

The court first set out Section 24 of the Hyderabad General Sales Tax Act, which (as quoted in the opinion) provides that no suit shall be instituted against the Government or its officers in respect of any act done under the Act unless instituted within six months from the date of the act complained of.
The tax in question was levied on 13-2-1951 and the suit was instituted on 11-6-1955; on a strict reading, this was outside the six-month period prescribed by Section 24.
The appellant invoked Section 14 of the Limitation Act, which allows exclusion of time spent prosecuting another civil proceeding (such as an appeal or writ petition) in a court of appeal where that court, from defect of jurisdiction or similar causes, is unable to entertain the proceeding.
The court noted the prerequisites of Section 14: (a) prosecution with due diligence of another civil proceeding in a court of appeal; and (b) that the proceeding was prosecuted in good faith in a court unable to entertain it from a defect of jurisdiction or a like cause. The court observed that a High Court sitting in writ jurisdiction can be regarded as a "Court of Appeal" for these purposes, but questioned whether the High Court was unable to entertain the petition for the reasons listed in Section 14.
The court considered authorities endorsing a liberal construction of Section 14 (Narayana, Biradavolu Kalahastiah, Koppolu, Janki Pershad) — in particular the view that failure to secure relief on the ground of an alternative remedy should be treated as akin to defect of jurisdiction for the purposes of Section 14. The court acknowledged contrary authority (Radha Kishun) but preferred the liberal approach.
The court then accepted the Supreme Court decision in Provincial Government of Madras v. J.S. Basvappa that suits for refund of tax illegally collected are not governed by the special limitation (Section 18 of the Madras Act) that regulates suits for damages; because Section 18 of the Madras Act is in pari materia with Section 24 of the Hyderabad Act, the court concluded that the limitation applicable for a refund suit is three years from the date of levy.
On that basis, and coupled with the court's view that Section 14 is attracted (i.e., the time spent in High Court proceedings could be excluded), the court concluded that the suit was within time and answered the limitation question in favour of the appellant.

Substantive Exemption and Assessment

The main substantive question was whether the appellant was entitled to exemption under section 2(f) of item 29 of Schedule I (which exempts raw iron and steel and agricultural implements manufactured from them from the operation of the Act).
The court observed that "scrap iron" was not defined in the statute, and that if scrap iron were to be equated with raw iron, implements manufactured from it would be exempt — but the decisive question was what material was available on record to show that the appellant actually manufactured agricultural implements from scrap iron.
The appellant had not furnished information to the Sales Tax Authorities regarding manufacture or produced account books; the assessment was therefore based on the personal inspection of the assessing authority. The opinion reproduces substantial portions of the assessing officer's order describing the appellant's premises, the absence of purchase records and accounts, and the assessing officer's estimation of turnover and taxable turnover.
The assessing officer estimated total turnover at Rs. 4,50,000 for 1950–51 and treated 50% (Rs. 2,25,000) as taxable sales, the remainder being agricultural implements; tax was computed accordingly. The Sales Tax Officer, examined as D.W.1, stated that inspections and the appellant's non-cooperation justified the order.
The court acknowledged the appellant's contention that the 50% allocation to taxable sales was arbitrary, but emphasized the well-settled principle that the quantum of tax generally cannot be re-litigated in this Court unless the assessment is shown to be arbitrary and without jurisdiction.
Given the appellant's failure to produce reliable data or accounts, the court concluded that the assessing authority acted within its jurisdiction under Section 12 of the Hyderabad General Sales Tax Act in estimating turnover and imposing tax to the best of its judgment.
Accordingly, the court found no ground to interfere with the assessment and the trial court's refusal to intervene was held to be in conformity with the record.

Holding and Implications

Final Holding: APPEAL DISMISSED — the appeal was dismissed with costs (the trial court's dismissal of the appellant's suit was upheld).

Implications:

On limitation: the court ruled in favour of the appellant on the limitation issue, adopting a view that Section 14 of the Limitation Act can be liberally construed and, following the Supreme Court's decision in Basvappa, that the applicable period for a suit for refund is three years from the date of levy; consequently the suit was treated as within time on the reasoning given in the opinion.
On the substantive exemption claim: the court refused to grant relief. It upheld the Sales Tax Officer's assessment because the appellant failed to produce necessary books and particulars, and the assessing authority acted within jurisdiction in making an estimate based on inspection. The court held that mere disagreement with the quantum of assessment was insufficient to justify interference absent proof that the assessment was arbitrary or made without jurisdiction.
Practical effect: the assessment and the demand for tax as determined by the Sales Tax Officer (and affirmed by the trial court) remain valid as against the appellant; the appeal to set aside that assessment failed and the appellant remains liable as assessed (subject to the terms of the order and payment obligations set out in the assessing officer's demand notice as reproduced in the record).
On precedent: the opinion applied and reconciled existing decisions (both for a liberal construction of Section 14 and for the Basvappa principle on limitation for refund suits) but did not purport to announce a new legal doctrine beyond the reasoning drawn from those authorities.

This summary is strictly limited to information contained in the provided opinion. No facts, rulings, or implications beyond those explicitly stated in the opinion have been inferred or added.

Show all summary ...

1. The appellant instituted a suit against the Government of Andhra Pradesh, through the Chief Secretary (O.S 88/1/56) before the III Additional Judge, City Civil Court, Secunderabad for the recovery of certain amounts from the sales Tax Department. It was stated that the plaintiff was a registered partnership firm carrying on business in the manufacture and sale of agricultural implements. For the 1950–51, the Sales Tax Officer (C) Circle, Secunderabad had wrongfully levied a tax of Rs. 2344/- and for the subsequent year a sum of Rs. 5208/-. The assessments were exparte and though the appellant preferred an appeal before the Appellate Commissioner, it was dismissed without going into the merits of the case. A revision was filed and even there the appellant was unsuccessful. Later, he filed a writ petition under Art. 226 of the Constitution; but the High court without going into the merits of the case, dismissed the writ petition mainly on the ground that the plaintiff-appellant bad an alternative remedy by way of a regular suit. Later on, application for leave to appeal to Supreme Court was dismissed and a Special Leave Petition filed before the Supreme Court also me??? the same fate. It was finally rejected on 3-10-1955. The appellant was therefore obliged to file a suit as the assessment for the years mentioned was arbitrary, wrong and baseless. It was further urged that the authorities had no jurisdiction and the assessment was made exparte. The appellant being a dealer in agricultural implements from scrap iron, was exempt from the payment of the sales tax in accordance with section 2(f) of item 29 of the IInd schedule under the Act.

2. It was contended on behalf of the defendant-respondent that the appelant was a dealer in goods in articles manufactured out of iron and steel. His claim that he was only a dealer in agricultural implements from scrap iron ???ot correct. The Tax for the 1951–52 had not been paid by the appellant and accordingly as he bad failed to furnish the statements and produce account books, the sales tax authorities had assessed to the best of their judgment. It was further urged that the suit was time barred under Section 24 of the Hyderabad General Sales Tax Act which was the law applicable at that relevant period. A rejoinder was filed reiterating the position taken by the appellant in the plaint. On these pleadings the learned trial judge framed as many as nine issues and after examining the plaintiff-appellant and the Sales Tax Officer as D.W 1. and marking some document, dismissed the suit of the appellant with costs. The appeal is directed against this judgment.

3. The two grounds urged by the learned Counsel for the appellant Sri Kondapi before this Court are: that the appellant being a dealer in agricultural implements prepared out of scrap iron, is exempted from payment of sales tax and the imposition of the sales tax by the Officer was arbitrary, The second ground it that the suit was within time having been filed within six months from the date of the last order i.e the order of the Supreme Court rejecting the petition to special leave i.e 3-10-55.

4. So far as the question of limitation is concerned, under section 24 of the Hyderabad General Sales Tex Act, it is laid down that:

“No suit shall be instituted against the Govt. and no suit, prosecution or other proceeding shall be instituted against any Officer or servant of the Government in respect of any act done or purporting to be done under this Act, unless the suit, prosecution or other proceeding is instituted within six months from the date of the act complained of.”

5. The tax was admittedly levied on 13.2.1951 and the suit was instituted on 11-6-1955. Therefore it could not be, according to the section, within the prescribed limit of six months. The learned counsel for the appellant however urged that under Section 14 of the Limitation Act, the appellant is entitled to compute the period spent by him in proceeding in good faith in writ petition against the Order of the Sales Tax Authorities. Section 14 of the Limitation Act provides:

In computing the period of limitation prescribed for any suit, the time during which the plaintiff has been prosecuting with due diligence another civil proceeding, whether in a Court of First Instance or in a Court of Appeal, against the defendant, shall be excluded, where the proceeding is founded upon the same cause of action and is prosecuted in good faith in a court which, from defect of jurisdiction, or other causes of a like nature is unable to entertain it.”

6. The pre-requisites of the application of this section are that the plaintiff has been prosecuting with due diligence another civil proceeding in a court of appeal and is prosecuted in good faith in a Court which from defect of jurisdiction or other cause of a like nature is unable to entertain it. This court sitting in writ jurisdiction is certainly a Court of Appeal within the meaning of that section. But the question is whether the time spent in pursuing the matter in High Court can be computed for the purpose of appeal as it could not be held that his Court from defect of jurisdiction was unable to entertain the petition. The jurisdiction of this Court in writ, petition is certainly wide enough to cover cases of this nature. Strictly construing the section, therefore, it could not be held that the writ petition was dismissed from the defect of jurisdiction or other causes of a like nature. But, in the cases cited before me, it has been held that this section has to be liberally construed and though, the causes of a like nature have to be of the similar nature as defect of jurisdiction, failure to secure relief on the ground of having alternative relief, should be construed to be from defect of jurisdiction. In Narayana v. Commissioner H.R & C.E, A.P . I.L.R 1962 A.P 865. Umamaheswaram, J. held that:—

“The terms of Section 14 of the Limitation Act are applicable to a case where the plaintiff bonafide litigated his right under Art. 226 the Constitution in the High Court. The words “Court of Appeal” in Section 14 have to be construed in a broad sense as including a court which has power to bring under review the decision of an inferior court.”

7. Following the earlier decision in Biradavolu Kalahastiah v. Tangirala Chengamma . 1958 A.L.T 749 the learned Judge found that the provisions of Sec. 14 are applicable and that the time taken in the High Court of Andhra in proceeding with the writ application is deductible under Sec. 14 of the Limitation Act. In the said case, the learned Judge however did not advert to the fact whether the last limb of Sec. 14 was attracted or not; but in the previous case (Kalahastiah v. Chengamma) this aspect of the case also was considered and following a Bench decision of the Madras High Court in Koppolu Venkatasami v. Uttarkar Sara Bai . 1943 2 M.L.J 41. it was held that when a revision petition was admitted by a Judge of the High Court, it meant that it was fit one for further consideration by that Court and that the prosecution of the civil revision petition should be deemed to be bona fide. On a perusal of the judgment however, it appears that even then, this aspect was not fully considered. But in Janki Pershad v. Ram Kripal . A.I.R 1951 Patna 486. it was observed that:—

“The words ‘or other causes of a like nature’ in Sec. 14(2) should be liberally construed. They must be construed ejusdem generis with detect of jurisdiction, that is to say, the defect must be of such a character as to make it impossible for the court to entertain the suit or application and to decide it on merits.”

8. Decisions which have taken different view are also available; for example Bench of the Patna High Court in Radha Kishun v. Firm Srinivas Ram Kumar . A.I.R 1944 Patna 225. has hed that Section 14 of the Limitation Act would only be attracted when there is refusal to interfere by the High Court due to defect of jurisdiction or any cause of a like nature. I am inclined to follow the dictum that Sec, 14 requires liberal construction. The discussion is more or less of an academic nature inasmuch as it has been conceded that according to the decision of the Supreme Court in Provincial Government of Madras (Now A.P) v. J.S Basvappa it has been held that the period of limitation prescribed in Sec 18 of the Madras General Sales Tax Act, 1939 applies to suits for damages and compensation in respect of acts done under the Act and does not apply to suits for refund of tax alleged to be illegally collected. Section 18 of the Madras Act is in pari materia with Section 24 of the Hyderabad General Sales Tax Act, Therefore, the period of limitation will be three years from the date of the levy of the sales tax. In that view, the suit will be within time coupled with the fact that Section 14 of the Limitation Act will be attracted to it. Therefore-so far as the question of limitation is concerned, it has to be answered in favour of the appellant.

9. The next question for considerarion (which is the main question) is whether the appellant is liable to exemption of sales tax in view of section 2(f) of item 29 This item 29 of Schedule I exempts raw iron and steel and agricultural implements manufactured from the same, from the operation of the Act, that is, goods thus manufactured are exempted from the Sales Tax. The question is what is the material on record to show that the appellant was manufacturing agricultural implements from the scrap iron. What is scrap iron has not been defined anywhere; but if it is to be deemed to be the same stuff as raw iron mentioned in item 29 of Schedule I, agricultural implements manufactured from that stuff have to be exempted. Unfortunately, the appellant has not furnished any information to the Sales Tax Authorities in regard to the manufacturer his goods. The order of assessment is based on the personal inspection of the assessing authority. The lower Court has elaborately dealt with this aspect the case and reproduced a part of the order to substantiate the case of the Department that for want of account bocks and other relevant statements, the sales tax authorities are bound to levy tax according to the best of their judgment. The relevant passage is as under:

“M/s Peerani & Co. are the oldest and the leading iron merchants at Secunderabad, Although several extensions were granted, to the assessee he had not filed the return as required under rule II of the Act At last on 22nd January 1951, in response to a notice under Rule 13 of the Rules, he appeared before me with a few cash memos, muster rolls and note books said to contain the sales, were produced. These books contained total sales shown in cash memos. The assessee had no record of the purchases made by him. He had no account showing the wages paid to the workmen or other expenses incurred by him for manufacturing the various articles.

The assessee has three courtyards at Ranigunj containing materials and at each place, several workmen age doing work, Besides this he had workshops at Nallagutta. My enquiries reveal that he has branch of his own at Bombay, They also have a foundry in the Industrial Area under a different name. All the brothers manage the businesses, They also have business in Second Hand Motor Parts and Motors.

I visited their shops and inspected all the courtyards containing iron material and there are over fifty to sixty workmen working under them. The material could easily be estimated to be over two lakhs of rupees. They purchased the material from the military disposals and auctions all over India. The attitude of the assessee was very unhelpful in giving any information regarding business. The closed books of other dealers of same business at Ranigunj disclosed a turnover of about Rs. 4,00,000/- during the previous year. This dealer is far bigger than the other dealers. The total business could therefore be easily estimated at Rs. 4,50,000/- for assessment order filed by the party/estimated the sales at Rs. 4,00,000/- in the previous year. They have inspected the premises and estimated the sales. The assessee declared that he had no bank account at that time and it was found that he had accounts by the L.T Authorities.

The workshops were inspected several times and it was noticed that 50??? of the total estimated sales of Rs. 4, 50,000/- could be taken as taxable sales and the rest as agricultural implements. I therefore determine his total turnover for 1950–51 at Rs. 4,50,000/- and the tax turnover at Rs. 2, 25, 000/- on the above basis. The tax at the rate of 0-0-2 thereon would amount to Rs. 2,314/-. I order that the amount of Rs. 1918/- should be paid in one instalment and two instalments of Rs. 234/- each should be paid as indicated in the Demand Notice.”

10. The Sales Tax Officer has been examined to substantiate his case. He stated that he???pectcd the premises and made an order as the result of his own observations and that the appellant did not co-operate with him in either producing the account books or any statement?. Therefore it could not be urged that the assessment by the Department was liable to be reviewed, The learned counsel for the appellant contended that allowing 5??? of the total estimate towards agricultural implements was arbitrary-there being no basis for it; but as stated above, the appellant having failed to produce any account book or statements, the assessing authority had to fall back on his own inspection.

11. According to him he visi???ed the premises more than once and as a result thereof found that part of the raw material was being used for maunfacturing agricultural implements and part of it for other purposes. Therefore he was justified in levying tax on half the turnover for the purpose of sales tax. It is well settled that the quantum of tax cannot be the subject matter of the distpute before this Court. It is only when the assessment is arbitrary and without jurisdiction that the courts can interfere. In the instant case the appellants having failed to produce any reliable data, the assessing authority was within its jurisdiction in imposing the tax according to section 12 of the Hyderabad General Sales-tax Act.

12. I think the order of the lower Court therefore refusing to interfere with the finding of the sales tax authorities is in conformity with the data on record. In the result the appeal is dismissed with cost.

13. Appeal dismissed.