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State Of Bihar v. Arthur Butler And Co. Ltd. Opposite Party.
Structured Summary of the Provided Opinion
Factual and Procedural Background
The Board of Revenue referred two questions of law to the High Court under Section 25 of the Bihar Sales Tax Act, 1947. The referred questions asked (1) whether the assessee could claim a deduction of 30% over gross turnover under Rule 16 of the Bihar Sales Tax Rules in respect of articles supplied to several contractors when the assessee himself was not a contractor within the meaning of Section 2(b) of the Act; and (2) whether the assessee could claim a deduction of Rs. 1,20,492-11-0 for sales effected between 1 July 1947 and 30 September 1948 in execution of contracts entered into prior to 1 July 1947 but not prior to 1 October 1944, in view of an amendment made by Act VI of 1949.
Procedurally: The State of Bihar made a revision application to the Board of Revenue against an order of the Commissioner under Section 24(4). The Board dismissed that application. The State then applied under Section 25(1) to the Board requiring it to refer the two questions. The Board of Revenue refused, holding no question of law arose. The application under Section 25(1) was signed by the Commissioner of Sales Tax although the body of the application described the petitioner as the State of Bihar. The State of Bihar then applied to the High Court under Section 25(2). The High Court heard that application ex parte and on 26 July 1954 ordered the Board of Revenue to state a case and make the reference. The opposite party, Messrs Arthur Butler & Co. Limited, raised a preliminary objection that the reference was incompetent because, they contended, only a dealer or the Commissioner may make the application under Section 25(1) and, correspondingly, only they may appeal to the High Court under Section 25(2) against a Board refusal.
Legal Issues Presented
- Whether the assessee is entitled, on the facts and circumstances, to a deduction of 30% over gross turnover under Rule 16 of the Bihar Sales Tax Rules for articles supplied to several contractors when the assessee is not a contractor within the meaning of Section 2(b) of the Bihar Sales Tax Act, 1947.
- Whether the assessee is entitled, on the facts and circumstances, to a deduction of Rs. 1,20,492-11-0 for sales effected between 1 July 1947 and 30 September 1948 in execution of contracts entered into prior to 1 July 1947 (but not prior to 1 October 1944), in view of the amendment by Act VI of 1949.
- Whether the reference to the High Court was competent — specifically, whether the High Court had jurisdiction to call for and hear the reference under Section 25 where the application to the Board (and the subsequent application to the High Court) was made by the State of Bihar rather than by the Commissioner of Sales Tax or the dealer as required by Section 25.
Arguments of the Parties
Opposite Party (Messrs Arthur Butler & Co. Limited) — Preliminary Objection
- Contended that the reference to the High Court was incompetent because the application under Section 25(2) was made by the State of Bihar and not by the Commissioner of Sales Tax (or the dealer), contrary to the statutory scheme which permits only the dealer or the Commissioner to apply under Section 25(1) and, upon refusal by the Board, to apply to the High Court under Section 25(2).
- Asserted that because the Commissioner did not himself make the application to the High Court under Section 25(2), the High Court had no jurisdiction to call for a reference and was not bound to answer the questions of law posed by the Board of Revenue.
State / Government Advocate (on behalf of the State of Bihar)
- Argued that the Commissioner of Sales Tax was acting on behalf of the State of Bihar; any description of the applicant as the State rather than the Commissioner was a mere misdescription and a procedural irregularity that should not affect the High Court's jurisdiction to entertain the application under Section 25(3) or to call for a reference from the Board.
- Relied on Commissioner of Income-tax, West Bengal v. Diana Engineering Co. (AIR 1954 Cal 575) to contend that once the High Court is hearing the reference under Section 25(5) it was not open to the opposite party at that stage to contend that the reference was incompetent.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Trustees Corporation (India) Ltd. v. Commissioner of Income-tax, Bombay, 57 Ind App 152 : AIR 1930 PC 151 | That preliminary statutory requirements must be strictly complied with before a court (High Court) entertains questions under a statutory provision conferring special jurisdiction (illustrates stringency of requirements). | The court relied on this authority to support the principle that the High Court must ensure strict compliance with Section 25's preliminary conditions before assuming jurisdiction to call for or hear a reference. |
| D. Sao K. Lal v. State Of Bihar, AIR 1952 Pat 357 | Affirmed the same principle of strict compliance with statutory preconditions where special jurisdiction is conferred. | The court cited it as local precedent supporting the rule that the High Court should require full observance of preliminary statutory conditions under Section 25. |
| State Of Bihar v. T.R. Jain, 4 STC 252 : AIR 1953 Pat 176 | Affirmation of the principle that statutory conditions for invoking special jurisdiction must be complied with. | Referenced as further confirmation that the stringency principle applies in the local jurisprudence. |
| Messrs Ramji Soman Choudhary v. The State Of Bihar, AIR 1953 Pat 249 | Reiterated the requirement of strict compliance with statutory preconditions for special jurisdiction. | Cited to demonstrate consistent application of the principle by Patna High Court decisions. |
| State Of Bihar v. West Bokaro Ltd., AIR 1956 Pat 47 | Another decision to the same effect emphasizing strict observance of statutory conditions. | Used to show the settled position in recent local decisions that the High Court must insist on compliance with the statute's preconditions before entertaining a reference. |
| Commissioner of Income-tax, West Bengal v. Diana Engineering Co., AIR 1954 Cal 575 | Relied upon by the Government Advocate to argue that once the High Court is hearing a reference the opponent cannot later challenge the competence of the reference (an estoppel-type proposition in that context). | The court distinguished and found the decision inapplicable here because the present application was admitted ex parte without notice to the assessee; unlike the Income-tax context, no hearing or notice was given at admission. Thus the court did not apply the authority to bar the opposition party's jurisdictional objection. |
Court's Reasoning and Analysis
The court's analysis proceeds in the following steps (based on the text):
- Statutory framework: The court examined Section 25 of the Bihar Sales Tax Act (and quoted sub-sections (1), (2) and (3)), which sets out who may apply for a reference to the High Court, the procedure if the Board refuses, and the High Court's power to require the Board to state and refer a case.
- Strict compliance principle: The court emphasized that jurisdiction under Section 25 is a special jurisdiction circumscribed by the conditions in the section. The court stated the legal principle that when a statute confers special jurisdiction on a tribunal, the conditions and qualifications attached by the statute must be strictly complied with, and the tribunal cannot dispense with those essential conditions.
- Application of authorities: The court relied on Trustees Corporation (India) Ltd. v. Commissioner of Income-tax and a sequence of Patna High Court decisions (D. Sao K. Lal; State of Bihar v. T.R. Jain; Messrs Ramji Soman Choudhary; State of Bihar v. West Bokaro Ltd.) to support the proposition that the High Court should require strict adherence to the statutory prerequisites before entertaining a reference.
- Rejection of misdescription argument: The court considered but rejected the Government Advocate's contention that the Commissioner was merely acting on behalf of the State and that any misdescription of the applicant was a procedural irregularity which should not affect jurisdiction. The court held that such an argument could not overcome the statutory requirement of who is competent to invoke Section 25's procedure.
- Procedural fairness and ex parte admission: The court observed that the High Court's admission of the application under Section 25(2)(b) had been made ex parte on 26 July 1954 without giving notice to the assessee. Because no notice or hearing had been afforded at the time of admission, the court held that the opposite party could not be estopped from raising the jurisdictional point later.
- Distinguishing Diana Engineering: The court distinguished the Diana Engineering decision on the ground that, in the Income-tax context referred to by that case, the High Court's rules required notice and a hearing before ordering a statement of case. That procedural safeguard was absent in the present matter at the time of admission, so the estoppel principle relied on in Diana Engineering did not apply.
- Conclusion of analysis: Applying these principles and precedents, the court concluded that the High Court had no jurisdiction to call for the reference on 26 July 1954 because the preliminary statutory conditions of Section 25 had not been strictly complied with (specifically, the application was not made by the statutory actor required).
Holding and Implications
Holding: The court held that the reference made by the Board of Revenue was not competent and the High Court had no jurisdiction to hear the reference or to answer the questions of law raised in the reference.
Implications and immediate consequences:
- The Board of Revenue's reference to the High Court (made after the High Court's ex parte direction of 26 July 1954) is invalid for want of jurisdiction because the statutory prerequisites of Section 25 were not satisfied.
- The High Court cannot proceed to decide the referred questions of law on the basis of the existing statement of case, given the jurisdictional defect identified.
- There will be no order as to costs for the hearing of this application (the opinion records that there will be no order as to costs).
- The opinion applies established principles and precedents concerning strict compliance with statutory preconditions for special jurisdiction; it does not purport to create a novel legal principle or record that a new precedent has been established beyond those cited.
Order: Order accordingly (as recorded in the opinion).
1. In this case the Board of Revenue has referred the following questions of law for the opinion of the High Court under Section 25 of the Bihar Sales Tax Act, 1947:
“(1) Whether the assessee is entitled upon the facts and circumstances of the case, to a deduction of 30 per cent, over gross turnover under R. 16 of the Bihar Sales Tax Rules with respect to articles supplied to several contractors when the assessee himself is not a contractor executing a ‘contract’ within the meaning of Section 2(b) of the Bihar Sales Tax Act, 1947? and
(2) Whether the assessee is entitled upon the facts and circumstances of the case, to a deduction of Rs. 1,20,492-11-0 on account of sales transacted between the period 1st of July, 1947, to 30th September, 1948, in execution of contracts entered into prior to 1st of July, 1947, but not prior to 1st of October, 1944, having regard to the amendment made by Act VI of 1949?”
2. On behalf of the opposite party, Messrs Arthur Butler & Co. Limited, a preliminary objection is raised on the ground that the reference is incompetent, it was submitted that the State of Bihar made an application in revision to the Board of Revenue against the order of the Commissioner under S. 24(4). That application was dismissed by the Board of Revenue and thereupon the State of Bihar applied under S. 25 to the Board of Revenue requiring it to refer to High Court the two questions of law stated above.
3. The Board of Revenue refused the application holding that no question of law arose in the case. It should be noticed that this application under S. 25(1) was signed by the Commissioner of Sales Tax although the State of Bihar is described as the petitioner in the body of the application. Against the order of refusal the State of Bihar made an application to the High Court under Section 25(2) of the Bihar Sales Tax Act. The application was heard ex parte by the High Court, and on the 26th of July, 1954, a Division Bench of this High Court ordered the Board of Revenue to state a case and make a reference on the two questions of law. The point taken by Mr. Untwalia is that the High Court has no jurisdiction to call for a reference under S. 25(3) because the application under S. 25(2) was made not by the Commissioner of Sales Tax but on behalf of the State of Bihar. The submission put forward by Mr. Untwalia is that only the dealer or the Commissioner is competent to make an application to the Board of Revenue under S. 25(1), and in case the Board refused to make a reference only the dealer or the Commissioner may apply to the High Court against such refusal.
4. Counsel submitted that the Commissioner of Sales Tax did not make an application to the High Court under S. 25(2) in this case and, therefore, the reference made by the Board of Revenue is incompetent and the High Court is not bound to answer the questions of law upon which the Board of Revenue has stated a case. In our opinion the preliminary objection raised by Mr. Untwalia is well-founded and must prevail. It is necessary in this connection to quote the language of S. 25:
“Statement of case to High Court — (1) Within ninety days from the passing by the Board of Revenue of any order under sub-s. (4) of S. 24 affecting any liability of any dealer to pay tax under this Act, such dealer or the Commissioner may, by application in writing together with a fee of one hundred rupees, where such application is made by a dealer, require the Board to refer to the High Court any question of law arising out of such order.
(2) If, for reasons to be recorded in writing, the Board of Revenue refuses to make such reference, the applicant may, within forty-five days of such refusal, either—
(a) withdraw his application and if the applicant who does so, is a dealer, the fee paid by him shall be refunded, or
(b) apply to the High Court against such refusal.
(3) If upon the receipt of an application under cl. (b) of sub-s. (2), the High Court is not satisfied that such refusal was justified, it may require the Board of Revenue to state a case and refer it to the High Court and on receipt of such requisition the Board shall state and refer the case accordingly……”
5. S. 25(5) is also important. S. 25(5) states:
“The High Court upon the hearing of any such case shall decide the question of law raised thereby, and shall deliver its judgment thereon containing the grounds on which such decision is founded, and shall send to the Board of Revenue a copy of such judgment under the seal of the Court and the signature of the Registrar, and the Board shall dispose of the case accordingly.”
6. The submission put forward by the learned Government Advocate is that the Commissioner of Sales Tax was only acting on behalf of the State of Bihar and it is only a matter of procedural irregularity if the State of Bihar made the application instead of the Commissioner of Sales Tax. Counsel submitted that it was a case of misdescription of the party making the application, and such misdescription would not affect the jurisdiction of the High Court to entertain the application under S. 25(3) or to call for a reference from the Board of Revenue. We are unable to accept this argument as right.
7. The jurisdiction of the High Court under S. 25 is a special jurisdiction; it is circumscribed by the conditions and qualifications prescribed by the section itself. Unless the preliminary conditions prescribed by S. 25 are strictly complied with, it is clear that the High Court cannot acquire special jurisdiction to call for a reference or to deal with the reference after it has been made by the Board of Revenue. In a matter of this kind the principle is very clear. The principle is this — when a statute confers special jurisdiction upon a Tribunal the conditions and qualifications annexed to the grant of that special jurisdiction must be strictly complied with.
8. These conditions and qualifications are the essential foundation of its jurisdiction and it is not competent to a tribunal to dispense with what the Legislature has made the essential conditions of that jurisdiction. It follows that in the present case the High Court cannot acquire special jurisdiction to deal with the reference unless the preliminary conditions are strictly complied with. This view finds support from Trustees Corporation (India) Ltd. v. Commissioner of Income-tax, Bombay, 57 Ind App 152 : (AIR 1930 PC 151) (A), in which Lord Blanesburgh said:—
“Their Lordships are fully alive to the circumstances in which the High Court was considered to direct that these further questions should be referred to it for consideration, and the result in the present case of the order then made merely serves to confirm the view of the Board that the High Court, will, in future cases be well advised to require, before they seek to entertain any questions under Section 66 of the Income-tax Act that the preliminary requirements of the section are strictly complied with. The stringency of these requirements is clearly deliberate. It is the intention of the enactment that the High Court is not to be flooded with such applications. The object is salutary and in their Lordships' judgment the High Court will be well advised before they entertain any question under the section, always to see that the preliminary statutory conditions have been fully observed.”
9. That is also the principle laid down by a Division Bench of this Court in D. Sao K. Lal v. State Of Bihar*, AIR 1952 Pat 357 (B). The principle has been affirmed in a more recent case — State Of Bihar v. T.R Jain*, 4 STC 252 : (AIR 1953 Pat 176) (C), and Messrs Ramji Soman Choudhary… v. The State Of Bihar, AIR 1953 Pat 249 (D). There is also another decision to the same effect in State Of Bihar… v. West Bokaro Ltd.…Opposite Party., AIR 1956 Pat 47 (E). Applying the principle laid down in these cases we are satisfied that the High Court had no jurisdiction to call for a reference on the 26th July, 1954.
10. It was, however, argued by the learned Government Advocate that the High Court is now hearing the reference under S. 25(5) and it was not open, to the opposite party at this stage to contend that the reference is incompetent or that the High Court ought not to answer the questions of law raised by the Board of Revenue in the statement of the case. In support of this proposition the learned Government Advocate relied on commissioner of Income-tax, West Bengal v. Diana Engineering Co., AIR 1954 Cal 575 (F).
11. But we do not think that the principle of that decision applies to the present case. The reason is that at the time of admission of the application made under Section 25(2)(b) of the Sales Tax Act there was no hearing given to the assessee opposite party in this case. The order of admission was made by the Bench on the 26th of July, 1954, ex parte, and without grafting a hearing to the assessee. If notice had been, given to the assessee at the time of admission, it would have been open to the assessee to take the point that the application was incompetent since it was not made by the Commissioner of Sales Tax as-required by S. 25(2)(b).
12. It is true that under the newly framed rule of the-High Court, namely, R. 5 of Ch. XII(c), an application under S. 25(2)(b) is placed for admission before a Bench after service of notice is effected on the opposite party. But that rule was not in existence when the present application was made by the State of Bihar under S. 25(2)(b) before the High Court on, the 13th of November, 1953. That is the reason why no notice was given to the opposite party and no hearing was given to the opposite party at the time when the Bench called for a statement of the case.
13. The position, however, is different with regard to an application made under Section 66(2) of the Income-tax Act. In such a case the rule made by the High Court provides that notice should be given to the opposite party and a hearing should be granted to him before the High Court orders the Appellate Tribunal to make a statement of the case. We do not, therefore, consider that the decision reported in AIR 1954 Cal 575 (F) has any bearing on the present case. Wei do not consider that any question of estoppel arises against the opposite party.
14. In other words, the opposite party cannot be prevented from raising at this stage the question that the, application made under S. 25(2)(b) is incompetent because it was made not by the Commissioner of Sales: Tax but by the State of Bihar in violation of the statutory provisions contained in S. 25(2)(b). The argument of learned Government Advocate on this point must, therefore, fail.
15. For these reasons, we hold that the reference made by the Board of Revenue in this case is net competent and the High Court has no jurisdiction to hear the reference or to answer the questions of law raised in the reference.
16. There will be no order as to costs of the hearing of this application.
D.S.P
17. Order accordingly.
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