Messrs Dharam Chand ... v. The Excise & Taxatio..., Punjab & Haryana High Court, Judgment, Law, casemine.com

Citation Codes

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citation codes

Case Number

Civil Writ No. 5 of 1952

Judges

Falshaw
Kapur, JJ.

Acts

SECTION 4 A PUNJAB GENERAL SALES TAX ACT 1948
Section 11 is the assessment section. Section 12
East Punjab Sales Tax Act
SEA CUSTOMS ACT

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Smart Summary

Factual and Procedural Background

The petition was brought by the firm Dharam Chand-Kishore Chand of New Delhi seeking writ relief against the State of the Punjab and the Excise and Taxation Commissioner, Jullundur. The petition sought quashing of an order dated 5 December 1951 and a writ of prohibition to prevent the respondents from proceeding with the realization of sales tax from the petitioners.

The petitioners allege that they entered into a contract to supply firewood to the Royal Indian Army Service Corps for the period 1 April 1949 to 31 March 1950. During that period the East Punjab Sales Tax Act (also referred to in the opinion as the Punjab General Sales Tax Act, 1948) was in force. The petitioners applied to the assessing authority (the Excise and Taxation Officer, Ambala) claiming they were not liable to pay sales tax; this application was refused. They asked the Taxation Officer to move the Commissioner under section 18 of the Act to determine the question; when that was refused they made an application on 25 August 1951. The matter was admitted by Mr. Harivansh Lal Khanna (then Taxation Commissioner) but on the successor Mr. Varma's view the petition was dismissed by a memorandum stating the transactions were not covered by the proviso to sub-section (1) of section 4 of the Punjab General Sales Tax Act, 1948 and were therefore taxable.

The petitioners contended that no other appropriate remedy was available and sought certiorari under Article 226 of the Constitution. The High Court (Kapur, J., with Falshaw, J. agreeing) considered statutory provisions of the Sales Tax Act, relevant appellate and revisionary routes under the Act, and authorities on the availability of writ relief where a statute provides an exclusive remedy. The petition was dismissed; the rule was discharged with costs and counsel's fee assessed at Rs. 100.

Legal Issues Presented

Whether the High Court should exercise its jurisdiction under Article 226 to quash the Commissioner's determination and to issue a writ of prohibition preventing the realization of sales tax, where the Sales Tax Act provides a statutory machinery for determination, revision and, ultimately, a statement of the case to the High Court.
Whether the petitioners were entitled to an opportunity to be heard under section 18 of the Act when the Commissioner determined whether a transaction was a sale or contract for the purposes of the Act.
Whether the existence of the statutory procedures (including sections 18, 21 and 22) excludes interference by the High Court by way of writ where the statutory machinery has not been exhausted.

Arguments of the Parties

Petitioners' (Appellants') Arguments

The petitioners asserted they entered into a pre-existing contract (supply of firewood for 1 April 1949 to 31 March 1950) and, on that basis, should not be liable for sales tax under the proviso to section 4(1) of the Sales Tax Act.
They claimed the assessing authority refused their application that they were not liable to sales tax, and that the Taxation Officer refused to move the Commissioner under section 18; their subsequent application (25 August 1951) was dismissed by the Commissioner (Mr. Varma) without giving them an opportunity to be heard.
Because they were not given a hearing and because they sought to prevent realization of the tax, they contended no adequate alternative remedy existed and therefore sought writ relief (certiorari/prohibition) from the High Court.

The opinion does not contain a detailed account of the respondents' legal arguments presented in opposition to the petition.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
U.G. Rekhi v. The Income-Tax Officer, 52 P.L.R. 267 (Division Bench of this Court)	High Court will not interfere under Article 226 to short-circuit the statutory machinery where an alternative statutory remedy exists.	The court relied on this decision to support the proposition that an application for a writ to bypass the procedure provided by the Sales Tax Act is not allowable.
Besant v. Advocate General of Madras, I.L.R. 43 Mad. 146 (P.C.)	Certiorari is to be granted only where no other suitable remedy exists (English rule as explained by Lord Phillimore).	The court invoked this principle to reinforce that writ relief should not be granted where the statute provides alternative remedies.
Raleigh Investment Co. Ltd. v. The Governor General in Council, A.I.R. 1947 P.C. 78	Where an Act creates a particular machinery for determining taxation (assessment) and fixes obligations (such as payment based on assessment), jurisdiction to question the assessment should ordinarily be through that machinery; civil court jurisdiction to question such assessments is inconsistent with the statutory scheme.	The court applied the Privy Council's reasoning by analogy to the Sales Tax Act: the statutory machinery (assessment, revision, reference) ought to be used rather than seeking to bypass it by writ.
Secretary of State for India v. Mask and Co., I.L.R. 1940 Mad. 599 (P.C.)	Civil courts' jurisdiction is excluded where the matter has been committed to the statutory machinery (in that case, under the Sea Customs Act).	The court cited this authority to support the conclusion that where a statute provides a dedicated procedure, courts should not entertain collateral proceedings to upset decisions made under that Act.

Court's Reasoning and Analysis

The court reviewed the factual chronology and the relevant statutory provisions of the Sales Tax Act relied upon by the parties, including definitions in section 2 (contract; goods), the liability provision in section 4(1) with its proviso disallowing tax on sales involved in execution of contracts entered into before commencement of the Act, the amendment to section 5(2)(a)(iii) (added by Act XXXV of 1949), and the procedural and remedial provisions: section 10 (payment and returns), section 11 (assessment), section 12 (refunds), section 18 (Commissioner's power to determine questions whether a transaction is a sale or contract or whether tax is payable), section 19 (exclusion of civil court jurisdiction in taxation matters), section 20 (appeal against assessments subject to payment of tax) and section 21 (revision by the Commissioner and call for records by the Financial Commissioner), and section 22 (statement of the case to the High Court and power to issue mandamus where the Financial Commissioner refuses to make a reference).

The court accepted that the petitioner's counsel (Mr. Sibal) asserted he was not given an opportunity to be heard under section 18. The court observed, however, that the Act itself provided an alternative and more appropriate route: an application in revision to the Financial Commissioner under section 21 and, if unsatisfied, a statutory provision (section 22) for stating the case to the High Court. The court emphasized established authority that the High Court should not, by means of writ proceedings under Article 226, short-circuit the remedy put in place by statute.

The court relied on earlier decisions—U.G. Rekhi; Besant; the Privy Council's decision in Raleigh Investment Co.; and Mask & Co.—to articulate the legal principle that certiorari and other writs are not to be used where a statutory scheme provides its own remedies and that the jurisdiction of ordinary courts to interfere may be excluded by such statutory provisions. Applying these authorities and the statutory framework, the court concluded that the petitioners had not established a case warranting interference under Article 226 because they had not availed themselves of the statutory remedies provided by the Sales Tax Act.

Holding and Implications

HOLDING: The petition was DISMISSED.

Direct effect on the parties:

The rule was discharged and the petition dismissed by the High Court (Kapur, J.; Falshaw, J. concurring).
Costs were awarded: the petition was dismissed with costs, and counsel's fee was assessed at Rs. 100.

Implications:

The decision requires the petitioners to pursue the remedies provided under the Sales Tax Act (revision to the Financial Commissioner under section 21 and, where appropriate, a statement of the case to the High Court under section 22) rather than obtaining immediate relief by writ.
The opinion does not purport to lay down a new principle of law beyond applying existing authorities; it enforces the established proposition that writs should not be used to short-circuit statutory remedies. The opinion itself does not discuss broader policy consequences beyond its application to the present parties.

Disposition recorded in the opinion: "Petition dismissed." (Kapur, J.; Falshaw, J. agreed.)

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Messrs Dharam Chand Kishore Chand Pori & Brothers, New Delhi v. The Excise & Taxation Commissioner, Jullundur, And Another

Kapur, J.:— This is a petition brought by firm Dharam Chand-Kishore Chand of New Delhi asking for an appropriate writ against the State of the Punjab and the Excise and Taxation Commissioner Jullundur, for quashing the order passed by the latter dated the 5th December, 1951 and for the issue of a writ of prohibition against the respondents not to proceed with the realization of the sales tax from the petitioners.

2. The allegations of the petitioners are that they entered into a contract for the supply of firewood to the Royal Indian Army Service Corps on the 19th of March 1949. This supply was to be made for one year from 1st of April 1949 to the 31st of March 1950. During the period of their contract the East Punjab Sales Tax Act was in force. The petitioners applied to the assessing authority, the Excise and Taxation Officer, Ambala, that they were not liable to payment of sales tax but this application was refused. They then applied to the Taxation Officer to move the Excise and Taxation Commissioner under section 18 of the Act to determine this question but he refused and they consequently made an application on the 25th August, 1951. The petition was admitted by Mr. Harivansh Lal Khanna who was then the Taxation Commissioner, but the matter came up before Mr. Varma who succeeded Mr. Khanna on the former's retirement. Mr. Varma, it is alleged, without giving any opportunity to the petitioners dismissed their petition and this is enclosure E. This order was in the form of a memorandum and stated as follows:—

“Memorandum.

The transactions alluded to by you in the application are NOT covered by the proviso to sub-section (1) of section 4 of the Punjab General Sales Tax Act, 1948 and they are, therefore, taxable under the said Act.”

3. The petitioners submit that there is no other appropriate remedy available to them and they ask for a writ of certiorari against the respondents. It is necessary to refer to certain provisions of the Act for the determination of the matter in controversy. The Act received the assent of the Governor on the 15th November, 1948 and it is Act No XLVI of 1948. It was published in the Government Gazette on the 20th November, 1948. It was to come into force as from the 1st of May 1949.

4. The relevant provisions of the Act are—

“2. (c) ‘contract’ means any agreement for carrying out for cash or deferred payment or other valuable consideration—

(i) the construction, fitting out, improvement or repair of any building, road, bridge or other immovable property; or

(ii) the installation or repair of any machinery affixed to a building or other immovable property; or

(iii) the overhaul or repair of any motor vehicle.”

“2. (e) ‘goods’ means all kinds of movable property other than actionable claims, stocks, shares or securities, and includes all materials, articles and commodities, whether or not to be used in the construction, fitting out, improvement or repair of immovable property.”

“4. (1) Subject to the provisions of sections 5 and 6, every dealer ‘except one dealing exclusively in goods declared tax-free under section 6, whose gross turnover during the year immediately preceding the commencement of this Act exceeded the taxable quantum shall be liable to pay tax under this Act on all sales effected after the coming into force of this Act:

Provided that the tax shall not be payable on sales involved in the execution of a contract which is shown to the satisfaction of the assessing authority to have been entered into before the commencement of this Act.”

“5. (2) In this Act the expression ‘taxable’ turnover means that part of a dealer's gross turnover during any period which remains after deducting therefrom—

(a) his turnover during that period on—

(iii) sales to any railway or water transport administration and to the Ministry of Industry and Supply of the Government of India.”

5. This provision was added by Act XXXV of 1949 which was published in the Gazette on the 9th November, 1949 and therefore it was not in the original Act. Section 10 deals with the payment of tax and returns. Section 11 is the assessment section. Section 12 deals with refunds. Section 18 deals with the power of the Commissioner to determine disputes and is as follows—

“18. If any question arises (otherwise thin in a proceeding before a Court) whether or not for the purposes of this Act—

(b) any transaction is a sale or contract, or

(d) any tax is payable in respect of any particular sale or contract, the Commissioner shall determine such question:

Provided that any such determination shall not affect the liability of any dealer under this Act in respect of any contract entered into or sales effected prior to such determination unless the Commissioner is satisfied that the dealer has been wilfully evading or attempting to evade payment of tax in respect of any sale of, or contract for supply of, any goods to which such determination relates.”

6. Section 19 excludes the jurisdiction of the Civil Court to go into the matter of taxation. Section 20 provides for an appeal against assessments but no appeal is entertainable unless the amount of tax is paid in the first instance. Section 21 is a section providing for revision and is as follows—

“Section 21. (1) The Commissioner may, of his own motion or on application made to him, call for the record of any proceedings, which are pending before or have been disposed of by, any assessing or appellate authority appointed under this Act, for the purpose of satisfying himself as to the legality or propriety of such proceedings or of any order made therein and may pass such orders in relation thereto as he may think fit.

(2) The Provincial Government may, by notification, confer upon any officer the powers of the Commissioner under sub-section (1), to be exercised subject to such conditions, and in respect of such areas as may be specified in the notification.

(3) The Financial Commissioner may, at any time, call for the record of any case decided under the preceding sub-sections and if, in his opinion, the final order contains an erroneous decision on an important question of law, he may pass such order on the case as he may think fit.

(4) No order shall be made under this section which adversely affects the rights of an assessee or other person upon whom an obligation is imposed by or under this Act, without giving such assessee or other person a reasonable opportunity of being heard.”

7. Under section 22 provision is made for the statement of the case to the High Court and power is given to the High Court to issue a mandamus in case the Financial Commissioner refuses to make a reference and the various provisions of this section (22) prescribe the procedure to be followed in the High Court.

8. The case which Mr. Sibal has put forward is that he was not given an opportunity to be heard when he applied under section 18. That may be so but it was open to him to go in revision to the Financial Commissioner and if he was not satisfied with the decision of the Financial Commissioner he could have had the case stated under section 22 of the Act. In cases such as these it has been held an application for writ so as to short-circuit the procedure provided by the Act is not allowable. It was held by a Division Bench of this Court in U.G Rekhi v. The Income-Tax Officer . 52 P.L.R 267., in circumstances almost similar to the ones which exist in the present case that the High Court will not interfere under Article 226. Reliance there was placed on a judgment of their Lordships of the Privy Council in Besant v. Advocate General of Madras . I.L.R 43 Mad. 146 P.C., where Lord Phillimore observed—

“Certiorari according to the English rule is only to be granted where no other suitable remedy exists.”

9. As I have said before a more appropriate remedy is provided for by the Act itself but, the petitioners have not availed themselves of it. In a case under the Income-Tax Act where similar provisions for appeal and reference to the High Court exist their Lordships of the Privy Council in Raleigh Investment Co. Ltd. v. The Governor General in Council . A.I.R 1947 P.C 78. observed—

“The scheme of the Act is to set up a particular machinery by the use of which alone total income assessable for income-tax is to be ascertained. The income-tax exigible is determined by reference to the total income so ascertained and only by reference to such total income. Under the Act (S. 45) there arises a duty to pay the amount of tax demanded on the basis of that assessment of total income. Jurisdiction to question the assessment otherwise than by use of the machinery expressly provided by the Act would appear to be inconsistent with the statutory obligation to pay arising by virtue of the assessment. The only doubt, indeed, in their Lordships' mind, is whether an express provision was necessary in order to exclude jurisdiction in a civil Court to set aside or modify an assessment.”

10. Their Lordships also said—

“For if the assessment is determined to be right in law the jurisdiction of the civil Court to entertain the suit is excluded. The assessment is on the appellant's construction made under the Act. If, on the other hand, the assessment is determined to be wrong, the jurisdiction of the civil Court to entertain the suit arises. The result of an enquiry into the merits of the assessment is, on the appellant's construction, to determine whether jurisdiction existed to embark on the inquiry at all. Jurisdiction is made to depend not on subject-matter but on the correctness of the suitor's contention as respects subject-matter. The language of the section is inapt to justify any such capricious method of determining jurisdiction.”

11. In Secretary of State for India v. Mask and Co. . I.L.R 1940 Mad. 599 P.C. their Lordships of the Privy Council held that the jurisdiction of Civil Courts is excluded where the matter is decided under the Sea Customs Act. Applying these cases I am of the opinion that no case has been made out for interference by this Court under Article 226. I would therefore dismiss this petition and discharge the rule with costs. Counsel's fee Rs. 100.

12. Falshaw, J.:— I agree.

13. Petition dismissed.

Messrs Dharam Chand ... v. The Excise & Taxatio...