CASE NO.: Appeal (crl.) 107-110 of 1954 PETITIONER: STATE OF MADRAS RESPONDENT: GURVIAH NAIDU & CO. LTD. DATE OF JUDGMENT: 28/10/1955 BENCH: S.R. DAS & V. BOSE & B. JAGANNADHADAS & S.J. IMAM & N.C. AIYAR JUDGMENT:
JUDGMENT
AIR 1956 SC 158
The Judgment was delivered by S. R. DAS, ACTG. C.J
Per S. R. Das, Actg. C.J. This judgment will dispose of the four Criminal
Appeals Nos. 107 to 110 of 1954.
2. These appeals have been filed by the State of Madras under certificates
granted under Article 134(1)(c) of the Constitution by the High Court of
Madras which, by its judgment in revision dated the 12th February, 1954,
reversed the order dated the 29th December, 1952 passed by the Additional
First Class Magistrate II, Salem, and acquitted the accused.
3. The respondents are merchants dealing in hides and skins in Salem. Their
business consists mainly in the purchase of hides and skins and exporting
the same to foreign countries. The respondents were assessed to sales tax
in different amount on their respective turnovers of purchases of skins
made by them in pursuance of orders placed with them by foreign buyers for
the supply of the same. The respondents having failed to pay the entirety
of the amounts of sales tax so assessed, complaints were laid against them
under Section 15(b) of the Madras General Sales Tax Act.
4. Before the Magistrate it was contended on behalf of the respondents that
the purchases of skins sought to be taxed having taken place in the course
of their export out of the territory of India, no sales tax could be levied
thereon by reason of Article 286(1)(b) of the Constitution and that, as
such, the assessments were illegal and, therefore the non-payment of such
illegal impositions was no offence at all. The answer of the prosecution
was that the purchases of skins for the purpose of implementing the order
of the foreign buyers were not purchases in the course of export within the
meaning of Article 286(1)(b) and that, in any event, under Section 16A of
the Madras General Sales Tax Act the validity of the assessment could not
be questioned in any criminal court in any prosecution or other proceeding
whether under the Act or otherwise.
5. After noting the contention of the prosecution that the purchases in
question were not in the course of export within the meaning of Article
286(1)(b) but without deciding the same, the learned Magistrate went on to
discuss the second contention of the prosecution, namely, that under
Section 16A it was not open to the respondents to question the validity of
the assessment. Relying on two decisions of the Madras High Court, the
learned Magistrate upheld the contention of the prosecution on the second
point.
The fact of assessment and non-payment of the assessed tax having been
proved, the learned Magistrate convicted the respondents under Section
15(b) of the Madras General Sales Tax Act and sentenced them to varying
fines with provision for simple imprisonment for 15 days in default of
payment and also directed that the amount of sales tax remaining due from
the respective respondents should be recovered as if the same were a fine.
6. Against their convictions, the respondents separately went up before the
High Court in revision. The main controversy in the High Court centered
round the validity or otherwise of Section 16A of the Madras General Sales
Tax. After dealing at considerable length and in great detail with the
respective contentions urged from different aspects, the High Court came to
the conclusion that Section 16A of the Madras General Sales Tax Act was
‘ultra vires’ the Constitution and the provisions of the Criminal Procedure
Code and the fundamental principles of criminal justice.
The High Court did not go into the question of the validity or otherwise of
the assessments in the light of Article 286(1)(b) of the Constitution. The
learned Judges pointed out that the Magistrate, who had heard the evidence,
had not recorded any finding as to whether the transactions in respect of
which the sales tax was assessed and demanded by the taxing authorities
came within the scope of that article.The High Court did not consider the
respective contentions of the parties regarding the effect of Article
286(1)(b) on the assessments but stated that in the absence of any proper
enquiry into the question in the absence of any discussion of the evidence
on this point and of a finding by the trial Court, it was difficult for the
High Court to come to any definite conclusion.
The High Court seems to have thought that the respondents had not been
permitted to raise the question of the validity of assessment in the light
of the relevant article and plead the same in defence. In the result, the
High Court reversed the decision of the Magistrate but without remanding
the case for retrial on the first point based on Article 286(1)(b) set
aside the conviction and sentences passed by him. Being aggrieved by this
order of acquittal the State of Madras has preferred these appeals with a
certificate granted by the High Court under Article 134(1)(c) of the
Constitution.
7. In the view we have taken about the validity of the assessments on which
the prosecutions were founded, we do not considered it necessary on this
occasion to expect any opinion on any of the question raised about the
validity or otherwise of Section 16A of the Madras General Sales Tax Act.
We have gone through the record carefully and we have come to the
conclusion, for reason to be presently stated, that the grievance made by
the respondents before the High Court was not well founded.
8. The prosecution was for non-payment of the assessed tax. The prosecution
examined K. M. Narayan (P.W. 1), the Deputy Commercial Tax Officer, Salem
town, in each of these cases. In his examination-in-chief he deposed to the
fact of the respective assessment and to the fact of the non-pay-ment of
the assessed tax by the respondents. In cross-examination it was quite
clearly put to this witness that the respondents purchased the skins for
exporting them to London. This was put to the witness once by the opening
question in cross examination and twice again about the middle of it.The
service of notice was proved by the prosecution by examining Kandaswami
(P.W. 2), who was a peon in the office in the Assistant Commercial Tax
Officer. The trend of the cross-examination quite clearly suggests that the
defence was that the skins were purchased for the purpose of export and
obviously the purpose of the cross-examination was to make out a case on
Article 286(1)(b) for exemption from sales tax. The matter did not rest
there. The respondents adduced substantive evidence in their defence. In
each of the cases the respondents examined their respective shipping agent
and also a clerk in their respectlive business.
The evidence of the shipping agent shows that he acted as an intermediary
between the respondents and the London buyers as also as the shipping and
forwarding agent to the respondents, that whenever he got orders from the
London buyers for skins, of any of the respondents he used to contact the
particular respondent, that after the price was settled and the order was
accepted the respondent concerned used to send the skins to the
intermediary who was also the shipping agent at Madras, that the latter,
after assorting them according to the size and range and rejecting those
which were unfit for export, used to send them to the London buyers.
The evidence of the respective clerks quite clearly indicates that upon the
shipping agent and the intermediary intimating that skins of certain types
were required by the London buyers and after the price was settled with the
intermediaries, the respondents would purchase the goods and forward the
same to the intermediary and shipping agent for the purpose of exporting
them to the London buyers.
9. There can be no doubt, on the evidence on record, that the object of the
respondents was to avail themselves of the exemption from sales tax
provided for in Article 286(1)(b) and to question the legality of the
assessments on which the proseutions were based. It is, therefore, not
correct to say that the respondents were in any way prevented from adducing
evidence or that there was no sufficient enquiry into this aspect of the
matter.The evidence adduced by the respondents will, therefore, have to be
read and considered and it will have to be decided whether the defence is
made out on that evidence. Unfortunately for the respondents, the evidence
on record amounts only to this, namely, that after securing orders for
supply of skins to the London buyers the respondents used to go about
purchasing the requisite kind and quantity of skins to implement such
orders.
Such purchases were, it is true, for the purpose of export, but such
purchases did not themselves occasion the export and consequently did not
fall within the exemption of Article 286(1)(b) of the Constitution as held
by this Court in the State of Travancore-Cochin v. Bombay Co. Ltd., Alleply
– 1952 AIR(SC) 366. Nor did such purchases in the State by the exporter for
the purpose of export come within the ambit of Article 286(1)(b) as held by
the decision of the majority of a Constitution Bench of this Court in the
State of Travancore-Cochin v. Shanmugha Vilas Cashew Nut Factory – 1953
AIR(SC) 333.
In this view of the matter, there can be no question that these purchases
were liable to be included in the turnover and assessed to sale tax. Even
if, therefore, we concede, without deciding it, that Section 16A did not
prevent the respondents from questioning the validity of the assessment, it
was quite impossible for the respondents, on the evidence adduced by them,
to contend, in view of the majority decision referred to above, that the
purchases were exempt from sales tax by virtue of Article 286(1)(b), that
the assessments were illegal and that consequently the non-payment thereof
was not an offence.
In our view, the High Court erred in holding that the prosecution had
failed to establish their case and in acquitting the accused.
10. Our attention was drawn by the learned Advocate for the respondents to
the decision of this Court in State Govt. Madhya Pradesh v. Ramkrishna
Ganpatrao Limsey – 1954 AIR(SC) 20 and it was contended that these appeals
are not maintainable as the High Court had no jurisdiction to grant
certificates of fitness for appeal against acquittal under Article 134 of
the Constitution, for there was no provision in the Constitution
corresponding to Section 417 of the Criminal Procedure Code which gave a
right of appeal to the State against an order of acquittal passed by the
High Court.
That was a decision of a Bench of three Judges and not that of a
Constitution Bench. There, the appeal was by special leave granted by this
Court. The observation that there was no provision in the Constitution
corresponding to Section 417 of the Criminal Procedure Code was obviously
made to emphasise that this Court should not, in an appeal by special
leave, interfere with an order of acquittal passed by the High Court merely
for correcting errors of facts or law.
Without hearing further arguments on the scope of Article 134(1)(c), we
would prefer not to express any opinion as a Constitution Bench as to the
validity of the certificates given by the High Court in this case, for
assuming, without deciding, that the certificate were wrongly given, we
would, in view of the clear majority decision of this Court on Article
286(1)(b) which is not questioned before us and the equally clear and
convincing evidence on record in these cases, be willing, if it were
necessary, to regularise these appeals by giving special leave to appeal
here and now.
11. For reasons stated above, we accept these appeals, reverse the order of
acquittal passed by the High Court and restore and confirm the order of
conviction, sentences and directions made and passed by the trial Court,
although on different grounds.