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Case Number

Civil Miscellaneous Writ No. 152 of 1954

Attorney(S)

S.S. Dhavan
T.N. Sapru
Advocates.

Judges

Chowdhry, J.

Acts

section 21 of the U.P Sales Tax Act, 1948.2.
clauses (c) and (d) of rule 6 of the Rules
SALE OF GOODS ACT
section 2(c) of the Sales Tax Act.
Provinces Sales Tax Act, 1948,
Indian Companies Act of 1913
U.P Sales Tax Act, 1948.
U.P Act VIII of 1954,
Rule 6 of the Rules

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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

The petitioner is a company incorporated under the Indian Companies Act of 1913 with its registered office in Bombay and branch offices at Calcutta, Madras and Delhi, but none in Uttar Pradesh. It sells toilet goods, patent medicines and general merchandise and contended that it had no place of business nor any agent in U.P. The company's commercial practice involved receiving payments in Calcutta and dispatching goods to purchasers in U.P., with railway receipts processed in Calcutta.

The Sales Tax Officer, Banaras, issued an assessment order dated 16th March, 1952 (assessment for year 1948-49). The petitioner did not submit a return, protested its non-liability, and received a notice of assessment and demand for Rs. 7,812. The petitioner earlier had been assessed for 1949-50 by an order dated 9th March, 1953, which was set aside on appeal by the Judge, Sales Tax (Appeals), Allahabad, on 4th December, 1953, holding that the petitioner was not a dealer under the Act.

After certificate proceedings were initiated by the Collector of Banaras for realization of Rs. 7,812, the petitioner filed the present petition on 11th June, 1954, under Article 226 of the Constitution seeking:

Quashing of the Sales Tax Officer's assessment order dated 16th March, 1952;
Quashing of the Collector of Banaras's order initiating certificate proceedings;
Direction to opposite parties 1 to 3 to withdraw certificate proceedings and restraint on realisation of Rs. 7,812 by writ of mandamus.

An interim injunction was granted restraining opposite parties 1 to 3 from realising the sum. The petition was opposed by respondents 1 to 3; there was no appearance for respondent 4 (the Certificate Officer, Alipur).

Legal Issues Presented

Whether the petitioner company is a "dealer" within the meaning of section 2(c) of the U.P. Sales Tax Act, 1948, for the assessment year 1948–49.
Whether the Sales Tax Officer, Banaras, had jurisdiction and power to assess the petitioner under Rule 6 (clauses (c) and (d)) of the Rules framed under the U.P. Sales Tax Act, 1948, in the absence of a declaration by the dealer or a determination by the Commissioner.
Whether the petitioner was precluded from seeking relief under Article 226 of the Constitution because it had not availed the statutory appeal remedy under section 9 of the Act.
Whether the tax sought to be realised was a tax without authority of law and thereby infringed the petitioner's fundamental right under Article 19(1)(g) of the Constitution.

Arguments of the Parties

Petitioner's Arguments

The petitioner contended that it had no place of business or agent in U.P. and consequently was not a "dealer" under section 2(c) of the U.P. Sales Tax Act, 1948.
It asserted that the assessment was without jurisdiction because (a) it was not a dealer, and (b) no declaration had been made by it under Rule 6(c), nor had the Commissioner designated an assessing Sales Tax Officer under Rule 6(d).
The petitioner argued that the tax sought was without authority of law and thus violated its Article 19(1)(g) right to carry on business.
The petitioner explained its failure to appeal under section 9 by reference to delay in receipt of the Sales Tax Officer's reply, but the court found that explanation not persuasive for the purpose of excuse from filing an appeal.

Opposite Parties' / Standing Counsel's Arguments

Preliminary objection: the petitioner should not be permitted to invoke Article 226 because it had an alternative statutory remedy of appeal under section 9 and did not avail itself of that remedy.
Substantive position: the Sales Tax Officer contended that the petitioner supplied goods in U.P. and therefore fell within the definition of "dealer" (the standing counsel argued that the words "in the United Provinces" applied only to "supplying goods").
It was also argued that certain precedents (cited in the petitioner's response) should not apply; specific cases were cited by the standing counsel to support procedural and factual positions.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Himmatlal Harilal Mehta v. State of Madhya Pradesh [1954] 5 S.T.C 115; 1954 S.C.A 654	That the availability of an alternative remedy does not preclude relief under Article 226 where the tax sought to be realised is without authority of law and threatens fundamental rights.	The court relied on this decision to hold that the petitioner's failure to appeal under section 9 did not bar Article 226 relief because the assessment sought to be enforced was a tax without authority of law.
Wiswanath Ramkrishna Pandit v. Second Additional District Judge A.I.R 1951 Nag. 6	Procedural authority cited by respondents' counsel (context: alternative remedies / jurisdiction).	The court stated it was unnecessary to refer to this decision for the present case.
Kandhari Oil Mills v. Excise and Taxation Commissioner [1953] 4 S.T.C 367; A.I.R 1953 Punj. 245	Procedural authority cited by respondents' counsel (context: alternative remedies / jurisdiction).	The court stated it was unnecessary to refer to this decision for the present case.
Naubat Rai v. Union of India A.I.R 1953 Punj. 137	Authority for the proposition that High Court will not exercise Article 226 jurisdiction where facts are in dispute.	The court held this precedent inapplicable because, in this case, the material facts relevant to jurisdiction were not in dispute.

Court's Reasoning and Analysis

The court first considered the preliminary objection about the availability of an alternative statutory remedy. Applying the Supreme Court decision in Himmatlal Harilal Mehta, it held that where a tax sought to be realised is without authority of law and threatens a fundamental right, the existence of an alternative remedy of appeal does not bar invocation of Article 226. The court rejected the standing counsel's objection that the petitioner could not seek certiorari because it had not appealed.

On the merits, the court addressed the two principal grounds advanced by the petitioner:

Whether the petitioner was a "dealer" under section 2(c) of the U.P. Sales Tax Act, 1948. The court quoted the definition (including the Explanation regarding agents of persons resident outside U.P.) and observed that the statutory language refers to "carrying on the business of buying or selling and supplying goods in the United Provinces." The court distinguished between a mere sale and "carrying on the business" of sale. It found that whether property in goods passed inside or outside U.P. under the Sale of Goods Act was irrelevant to the statutory question. The court concluded that physical presence of the person or an agent within U.P. for the purpose of carrying on the business of sale is necessary to be a "dealer." The petitioner's uncontroverted averments that it had no place of business and no agent in U.P. therefore established that it was not a dealer under the Act.
Whether the Sales Tax Officer had power to assess the petitioner under Rule 6 (clauses (c) and (d)) of the Rules framed under the Act. The court explained that for dealers whose principal place of business is outside U.P., clause (c) requires that the dealer declare the Sales Tax Officer having jurisdiction over the place in U.P., who would then be the assessing authority; clause (d) gives the Commissioner the power to determine the assessing officer where there is doubt. The petitioner averred that no declaration was made and no determination by the Commissioner occurred; those averments were not traversed in the counter affidavit. Consequently, the Sales Tax Officer at Banaras lacked power to assess the petitioner.

Combining these conclusions, the court held that (1) the petitioner was not a dealer under the Act, and (2) the Banaras Sales Tax Officer had no power to assess the petitioner. Therefore, the assessment order dated 16th March, 1952, was without jurisdiction and amounted to a tax without authority of law, infringing Article 19(1)(g).

The court also addressed an argument that no relief was claimed against the Certificate Officer (respondent No. 4), observing that relief against respondents 1 and 2 would be adequate to protect the petitioner and that no separate relief against respondent No. 4 was necessary.

Holding and Implications

Holding: The application was allowed. The court issued the following orders:

A writ in the nature of certiorari quashing the assessment order dated 16th March, 1952, passed by the Sales Tax Officer, Banaras, against the petitioner.
A writ in the nature of certiorari quashing the order of the Collector of Banaras initiating certificate proceedings based on that assessment order.
A writ in the nature of mandamus restraining respondents 1 and 2 from enforcing the assessment order dated 16th March, 1952, and directing them to withdraw the certificate proceedings pending with respondent No. 4 that were founded on that assessment.
Consolidated costs of Rs. 300 awarded to the petitioner against respondents 1, 2 and 3.

DISPOSITION: Application allowed; assessment order and certificate proceedings quashed; respondents restrained; costs awarded.

Implications: The direct effect is the quashing of the challenged assessment and the related certificate proceedings and a prohibition on enforcing the assessment against the petitioner. The opinion rests on statutory interpretation of "dealer" and Rule 6 procedural requirements and invokes Article 19(1)(g) where a tax is found to be without authority of law. The opinion does not purport to create a broader new precedent beyond applying established authority (notably the Supreme Court decision in Himmatlal Harilal Mehta) to the facts of this case.

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J.L Morison v. The Sales Tax Officer And Others.

1. This is a petition under Article 226 of the Constitution for relief against an assessment order of the Sales Tax Officer, Banaras, dated 16th March, 1952, under section 21 of the U.P Sales Tax Act, 1948.

2. The petitioner is a company incorporated under the Indian Companies Act of 1913 with its registered office in Bombay and branch offices at Calcutta, Madras and Delhi, but none in Uttar Pradesh carrying on the business of sale of toilet goods, patent medicines and goods of general merchandise. Its allegation is that it has no place of business nor any agent in this State. The method adopted by the petitioner company in effecting sale of its goods is the following: Payments are received by the petitioner in Calcutta and goods are despatched to this State, the railway receipts in respect of the goods being sent to the purchasers concerned according to their instructions, and railway receipts are drawn on “self” but actually endorsed in Calcutta according to the usual business practice of the company. It is therefore contended that the petitioner company is not a dealer within the definition of that term as given in section 2(c) of the said Act. The petitioner was assessed to sales tax in respect of the assessment year 1949-50 by an order of the Sales Tax Officer, Banaras, dated 9th March, 1953. The petitioner went up in appeal against that order, and the Judge, Sales Tax (Appeals), Allahabad, allowed the appeal and set aside the order of the Sales Tax Officer on 4th December, 1953, holding that the petitioner company was not a dealer as defined in the Act. With a view to assessing the petitioner company with tax for the assessment year 1948-49 under section 21 of the Act the said Sales Tax Officer demanded a return from it by a communication dated 6th March, 1952. The petitioner company did not submit a return but wrote to the Sales Tax Officer that it was not liable to taxation as it did not carry on business in this State. No reply was received by the petitioner to this letter, but on 1st April, 1952, it received a notice with an order of assessment of the year in question, and also a notice of demand for a sum Rs. 7,812 as sales tax. On 10th April, 1952, the petitioner company's solicitors again sent a letter of protest to the Sales Tax Officer to which the latter replied by a communication dated 2nd May, 1952, requiring the petitioner to comply with the order of assessment and the notice of demand attached thereto or, in case it felt aggrieved by that order, to have recourse to an appeal against that order. There was further correspondence between the petitioner's solicitors and the Sales Tax Officer ending with the petitioner's letter dated 8th May, 1952. On 21st April, 1954, the petitioner received a notice from the Certificate Officer, Alipur, West Bengal, showing that certificate proceedings had been started by the Collector of Banaras against the petitioner for realization of the said sum of Rs. 7,812. Thereupon the present petition was filed on 11th June, 1954, against the Sales Tax Officer, Banaras, the Collector of Banaras, the State of U.P and the Certificate Officer, 24 Parganas, Alipur, Calcutta. The reliefs prayed for are the quashing of the Sales Tax Officer's order of assessment and the order of the Collector of Banaras initiating certificate proceedings by a writ of certiorari and directing the opposite parties 1 to 3 to withdraw the certificate proceedings initiated by the opposite party No. 2 and restraining them from realising the said sum of Rs. 7,812 from the petitioner by a writ of mandamus. An ad interim order was obtained by the petitioner from this court on nth June, 1954, restraining the opposite parties 1 to 3 from taking any further steps in the matter of realising the sum of Rs. 7,812 as sales tax on the basis of the assessment order dated 16th March, 1952, from the petitioner.

3. The present petition has been opposed by the opposite parties 1 to 3. There is no appearance on behalf of the opposite party No. 4. The counter affidavit filed by the present Sales Tax Officer (not the Sales Tax Officer who passed the assessment order in question) relates mostly to matters which would show whether the sales effected by the petitioner did or did not take place within this State.

4. The assessment order of the Sales Tax Officer dated 16th March, 1952, has been impugned on behalf of the petitioner on the ground that it was without jurisdiction. Two grounds have been put forward in respect of this allegation: (1) that the petitioner company is not a dealer as defined in the said Act, and (2) that the Sales Tax Officer in question did not have the power of making the assessment since no declaration had been made by the petitioner company nor had the Commissioner determined any Sales Tax Officer who was to be the assessing authority in respect of the petitioner, as required by clauses (c) and (d) of Rule 6 of the Rules framed under the U.P Sales Tax Act, 1948. It was therefore contended on behalf of the petitioner that the tax sought to be realised from the petitioner company was a tax without authority of law and therefore it infringed its fundamental right of carrying on business under Article 19(1)(g) of the Constitution.

5. There was a preliminary objection taken by the learned standing counsel that the petitioner had no right to file this petition under Article 226 of the Constitution since it had failed to avail itself of the remedy of appeal provided by section 9 of the Act. That the petitioner did not go up in appeal against the order of assessment in question is an admitted fact. The explanation offered by the petitioner is that it received that reply dated 2nd May, 1952, from the Sales Tax Officer in question too late to be able to file an appeal (the period of 30 days from the date of receipt of notice of assessment provided by section 9 having expired on 1st May, 1952). This explanation has however no force since it cannot be said that merely because the Sales Tax Officer in question delayed his reply to the petitioner's letter of protest the petitioner was prevented from filing an appeal against the order. That the petitioner had no justification for not filing an appeal from the assessment order is however immaterial since I agree with the argument put forward by the learned counsel for the petitioner on the basis of the decision of their Lordships of the Supreme Court in Himmatlal Harilal Mehta v. State of Madhya Pradesh [1954] 5 S.T.C 115; 1954 S.C.A 654., that the plea of the availability of an alternative remedy is not applicable in a case like the present. For reasons to be recorded presently, the tax which was sought to be realised from the petitioner was one without the authority of law. That being so, a threat to realise that tax from the petitioner was a sufficient infringement of his fundamental right under Article 19(1)(g) of the Constitution. The petitioner was therefore entitled to relief under Article 226 of the Constitution, and the objection of an alternative remedy having been available to the petitioner could not validly be taken against the petitioner. This follows inevitably from the decision of their Lordships of the Supreme Court just cited. It is not necessary therefore to refer to the decision in Wiswanath Ramkrishna Pandit v. Second Additional District Judge A.I.R 1951 Nag. 6. or Kandhari Oil Mills v. Excise and Taxation Commissioner [1953] 4 S.T.C 367; A.I.R 1953 Punj. 245., cited by the learned standing counsel. Another ruling cited by the learned standing counsel was Naubat Rai v. Union of India A.I.R 1953 Punj. 137., where it was laid down that a High Court would not exercise jurisdiction under Article 226 where the facts were in dispute. This ruling also has no application to this case since, as I shall presently show, the facts on which the decision in the present case rests cannot be said to be disputed. The preliminary objection therefore fails.

6. Coming now to the merits of the present petition, the first ground taken on behalf of the petitioner, as stated above, is that the petitioner company is not a dealer within the definition of that term as given under section 2(c) of the Sales Tax Act. The definition is to the following effect:—

“‘Dealer’ means any person or association of persons carrying on the business of buying or selling and supplying goods in the United Provinces, whether for commission, remuneration or otherwise, and includes any firm or Hindu joint family and any society, club or association which sells or supplies goods to its members; but does not include any department of the Provincial Government or of the Indian Union (hereinafter called the Dominion Government);

Explanation.—The agent of a person resident outside the United Provinces who carries on the business of buying or selling or supplying goods in the United Provinces on behalf of Such person shall, in respect of such business, be deemed to be a dealer for the purposes of this Act.”

7. The above definition has been amended under the U.P Act VIII of 1954, but as this case relates to an assessment for the year 1948-49 the old definition would be applicable. The question of fact in controversy under the affidavit and the counter affidavit filed in the present case is as to whether under the provisions of the Sale of Goods Act property in the goods sold by the petitioner to persons in U.P passed inside or outside this State. That, in my opinion, is a matter which is irrelevant for the disposal of the question whether the petitioner company is or is not a dealer under the above definition. Reading the definition of “dealer” with the Explanation appended thereto, it appears that a person would be liable to taxation under the Act if he carries on the business of buying or selling in U.P, or, in case he resides outside U.P, his agent carries on the business of buying or selling in U.P It is noteworthy that both in the definition of “dealer” and in the Explanation the words used are “carrying on the business of buying or selling” and not merely “selling” It would thus appear that the Legislature sought to draw a distinction between a mere sale and the carrying on of the business of sale. It may be that the transactions carried on by the petitioner company were transactions of sale within this State within the purview of the Sale of Goods Act, but if the petitioner company was not itself or through an agent carrying on the business of sale in this State it would not be a dealer. To my mind, physical presence of the person concerned or his agent within the State of U.P for the purpose of carrying on the business of sale is necessary before it can be said to be carrying on that business within the definition of a “dealer”. That this is the correct interpretation of the term “dealer” would appear from the fact that it was necessary for the Legislature to add the said Explanation to the definition of “dealer”. If a person residing outside U.P could be a dealer by the mere reason of the property in the goods sold passing in U.P under the law relating to sales it would be quite superfluous to add the said Explanation relating to an agent of such a person carrying on the business in U.P That the petitioner company has no place of business nor any agent in this State are averments in the affidavit of the petitioner which have not been traversed. The petitioner company is therefore not a dealer as defined in the Act.

8. It was argued in this connection by the learned standing counsel that under the said definition of “dealer” the petitioner company would be a dealer because it admittedly “supplied” goods in this State irrespective of where the business of sale was carried on by it. According to him the words “in the United Provinces” in the definition of “dealer” applied only to the words “supplying goods” and not to the words “carrying on the business of buying or selling”. This interpretation of the word “dealer” does not seem to be correct. In the first place, the word “supplying” seems to convey no sense since, as the preamble to the Act shows, the purpose of the enactment is to provide for the levy of a tax on the sale of goods. It was presumably for this reason that this word was deleted under the U.P Act VIII of 1954. In the next place, if supplying goods in the U.P were sufficient, the Explanation relating to the agent of a person resident outside U.P would again become redundant. It follows therefore that the words “in the United Provinces” apply not only to the supplying of goods but also to the carrying on of business of sale. The petitioner company having neither a place of business nor an agent in U.P, it was not a dealer within the definition of that term in the said Act.

9. The second ground taken by the petitioner is equally unassailable. Rule 6 of the Rules framed under the United Provinces Sales Tax Act, 1948, relates to the powers of assessment. Clauses (c) and (d) apply to the case of a dealer whose principal place of business is situated outside the U.P, as is the case with the petitioner. In such a case it is necessary that under clause(c) the Sales Tax Officer having jurisdiction over the place in the U.P should have been declared by the dealer himself, and in that case he would be the assessing authority in respect of that dealer. In case of there being any doubt, it is for the Commissioner under clause(d) to determine the Sales Tax Officer who will be the assessing authority in respect of a dealer. It is averred in the affidavit of the petitioner that no such declaration as is provided by clause(c) of the rule was ever made by it, and that no determination was ever made by the Commissioner. These averments in the affidavit of the petitioner were not traversed in the counter affidavit. That being so, the Sales Tax Officer of Banaras had not the power of assessment in respect of the petitioner company under the said rule.

10. In view of the findings recorded above, namely, (1) that the petitioner company was not a dealer as defined in the Act, and (2) that the Sales Tax Officer in question did not have the power of assessing the petitioner company, it is manifest that the Sales Tax Officer in question did not have the jurisdiction to pass the said order of assessment dated 16th March, 1952. In other words, the tax sought to be realised from the petitioner was a. Tax without authority of law, and therefore it infringed the fundamental right of the petitioner company under Article 19(1)(g) of the Constitution and should be relieved against, as held by their Lordships of the Supreme Court in the said case of Himmatlal Hari Lal Mehta. Before I conclude I have to refer to one argument put forward by the learned standing counsel, and it was that no relief had been claimed against the respondent No. 4, the Certificate Officer, 24 Parganas, Alipur. No such relief was necessary since if the requisite writs are issued against the opposite parties 1 and 2 adequate relief would be granted to the petitioner.

11. The application is allowed. A writ in the nature of certiorari will issue quashing the order of assessment dated 16th March, 1952, passed by the Sales Tax Officer, Banaras, against the petitioner and also quashing the order of the Collector of Banaras initiating certificate proceedings against the petitioner company on foot of that order. A writ in the nature of mandamus shall issue restraining respondents T and 2 from enforcing the said assessment order dated 16th March, 1952, and directing them to withdraw the certificate proceedings pending with the respondent No. 4 on foot of the said assessment order. Considering the expenses to which the petitioner company must have been put in the present case, consolidated cost of Rs. 300 are awarded to it against respondents 1, 2 and 3.

12. Application allowed.

J.L Morison v. The Sales Tax Officer And Others.

Structured Summary of the Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioner's Arguments

Opposite Parties' / Standing Counsel's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

J.L Morison v. The Sales Tax Officer And Others.

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