PETITIONER:
TITAGHUR PAPER MILLS CO. LTD.
Vs.
RESPONDENT:
STATE OF ORISSA
DATE OF JUDGMENT13/04/1983
BENCH:
SEN, A.P. (J)
BENCH:
SEN, A.P. (J)
VENKATARAMIAH, E.S. (J)
MISRA, R.B. (J)
CITATION:
1983 SCR (2) 743 1983 SCC (2) 433
1983 SCALE (1)437
ACT:
Sales-tax-Central Sales Tax Act, 1956-Repeated notices
for production of records issued to assessee-Best judgment
assessment made-Assessee, if could impugn order under
Article 226 of the Constitution.
HEADNOTE:
It appears that proceedings under r. 12(5) of the
Central Sales Tax (Orissa) Rules 1957 and under sub-s. (4)
of s. 12 of the Orissa Sales Tax Act, 1947 were initiated
against the petitioners for the assessment year 1980-81 in
relation to assessment of tax on sales in the course of
inter-state trade and commerce under the Central Sales Tax
Act, 1956 and inside sales effected during the year in
question under the Orissa Sales Tax Act, 1947. Despite
repeated opportunities to get themselves ready for the
assessment of tax and to produce their account books and
other documents, they sought adjournments on the one pretext
or another. Eventually the Assistant Sales Tax Officer,
Cuttack II circle, Cuttack before whom the assessment
proceedings were pending, refused to grant any further
adjournment and proceeded to best judgment assessment and
treated the gross turnover of Rs. 7,13,94,903.63 p. as
returned by the petitioners for purposes of the Central
Sales Tax Act, 1956 to be their taxable turnover. Similarly,
he treated the gross turnover of Rs. 2,02,07,852.65 p
returned by the petitioners as representing inside sales
vis-a-vis the State of Orissa to be their taxable turnover.
After allowing adjustment of Rs. 27,88,388.47 p paid by the
petitioners, the learned Sales Tax Officer raised a demand
for the payment of a sum of Rs. 43,57,101.89 p towards tax
on sales in the course of inter-State trade and commerce
payable under the Central Sales Tax Act, 1956 and after
allowing adjustment of Rs. 1,08,480.11 p paid by the
petitioners, he raised the demand for payment of a sum of
Rs. 13,06, 069.60 p as tax payable under the Orissa Sales
Tax Act, 1947. Thus the petitioners were faced with a total
demand of Rs. 56,57,171.49 p for the assessment year 1980-
81. The petitioners instead of preferring appeals under sub-
s (1) of s. 23 of the Act filed petitions before the High
Court under Art. 226 of the Constitution challenging the
validity of the two orders of assessment. The High Court was
not satisfied that this was a case of inherent lack of
jurisdiction or any violation of principles of natural
justice and accordingly held that they were not entitled to
invoke the extraordinary jurisdiction of the High Court
under Art. 226 of the Constitution,
Dismissing the Petitions,
^
HELD: In the provenance, of tax where the Act provides
for a complete machinery which enables an assessee to
effectively raise in the courts the question of the validity
of an assessment denied an alternative jurisdiction
744
to the High Court to interfere under Art. 226 of the
Constitution. The phrase "made under the Act" describes the
provenance of the assessment; it does not relate to its
accuracy in point of law. The use of the machinery provided
by the Act, not the result of that use, is the test. [748 G-
H; 749 A]
Under the scheme of the Act, there is hierarchy of
authorities before which the petitioners can get adequate
redress against the wrongful act complained of. They have
the right to prefer an appeal before the prescribed
authority under sub-s. (1) of s. 23 of the Act. If they are
dissatisfied with the decision in the appeal, they can
prefer a further appeal to the Tribunal under sub-s. (3) of
s. 23 of the Act, and then ask for a case to be stated on a
question of law for the opinion of the High Court under s.
24 of the Act. The Act provides for a complete machinery to
challenge an order of assessment, and the impugned orders of
assessment can only be challenged by the mode prescribed by
the Act and not by a petition under Art. 226 of the
Constitution. [751 F-H]
Raleigh Investment Company Limited v. Governor General
in Council, 74 IA 50, followed.
K.S. Venkataraman & Co. v. State of Madras [1966] 2 SCR
229 and State of Uttar Pradesh v. Mohammad Nooh [1958] SCR
595; distinguished.
The question whether a provision is ultra vires or not
cannot obviously be decided by any of the authorities
created by the Act and therefore cannot be the subject
matter of a reference to the High Court or a subsequent
appeal to this Court. No such question arises in a case like
the present where the impugned orders of assessment are not
challenged on the ground that they are based on a provision
which is ultra vires. This is a case in which the
entrustment of power to assess is not in dispute and the
authority within the limits of his power is a Tribunal of
exclusive jurisdiction. The challenge is only to the
regularity of the proceedings before the learned Sales Tax
Officer as also his authority to treat the gross turnover
returned by the petitioners to be the taxable turnover.
Investment of authority to tax involves authority to take
transactions which in exercise of his authority the taxing
officer regards as taxable and not merely authority to tax
only those transactions which are, on a true view of the
facts and the law, taxable. There is no justification for
extending the principles laid down in Raleigh Investment
Company's case or Mohammad Nooh's case to a case like the
present where there is an assessment made by the learned
Sales Tax Officer under the Act. [749 E-H; 753 A-B]
The question whether another adjournment should have
been granted or not was within the discretion of the learned
Sales Tax Officer and is a matter which can properly be
raised in an appeal under sub-s. (1) of s. 23 of the
Act.[751 D]
The rule laid down in Mohammad Nooh's case which
requires the exhaustion of alternative remedies is a rule of
convenience and discretion, rather than a rule of law. [751
E]
745
The Act provides for an adequate safeguard against an
arbitrary or unjust assessment. The petitioner have a right
to prefer an appeal under sub-s. (1) of s. 23 of the Act
subject to their payment of an admitted amount of tax as
enjoined by the proviso thereto. As regards the disputed
amount of tax, they have the remedy of applying for stay of
recovery to the Commissioner of Sales Tax under cl. (a) of
the second proviso to sub-s. (1) of s. 13 of the Act. It is
for the Commissioner to decide whether or not there should
be such stay on such terms and conditions as he thinks fit,
looking to the nature of the demand raised in the facts and
circumstances of the present case. [752 E-F; 753B-C]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Special Leave Petition
Nos. 4513-14 of 1983.
From the Judgment and Order dated the 10th March, 1983
of the Orissa High Court in O.J.C. No. 590 of 1983.
WITH
Writ Petition Nos. 3363-64 of 1983.
(Under Article 32 of the Constitution)
S.R. Banerjee and Vinoo Bhagat for the Petitioners in
S.L.P.
Vinoo Bhagat for the Petitioner in Writ Petition.
F.S. Nariman, V.S. Desai, and R.K. Mehta: for the
Respondent in S.L.P.
S,K. Mehta, for the Respondent in Writ Petition.
The Judgment of the Court was delivered by
SEN, J. These two special leave petitions are directed
against an order of the Orissa High Court dated March 18,
1983 dismissing the Writ Petitions flied by the petitioners
in limine challenging the two orders of assessment passed by
the Assistant Sales Tax Officer, Cuttack II Circle, Cuttack
dated February 16, 1983. The connected petitions under Act.
32 of the Constitution are by an Officer of the Company
challenging the two orders of assessment.
By one of the Writ Petitions, the petitioners
challenged the validity of the order of assessment under the
Central Sales Tax Act, 1956 for the assessment year 1980-81
passed by the Assistant Sales Tax Officer, Cuttack II
Circle, Cuttack dated February 16, 1983 under r.15 of the
Central Sales Tax (Orissa) Rules, 1957 treating the gross
turnover of Rs. 7, 13, 94, 903. 63p. as returned by the
746
petitioners to be their taxable turnover and the tax payable
thereon at 10% at Rs. 71,39,490.36p. By the other, the
petitioners challenged the validity of an order of
assessment under the Orissa Sales Tax Act. 1947 for the
assessment year 1980-81 passed by the Assistant Sales Tax
Officer, Cuttack II Circle, Cuttack dated February 16, 1983
under sub-s. (4) of s.12 of the Orissa Sales Tax Act, 1947
treating the gross turnover of Rs. 2,02,07,852.65p. as
returned by the petitioners to be their taxable turnover and
the tax payable thereon at 7% at Rs. 14,14,549.71p.
It appears from the impugned orders of assessment that
proceedings under r.12 (5) of the Central Sales Tax (Orissa)
Rules, 1957 (“Rules” for short) and under sub-s. (4) of s.12
of the Orissa Sales Tax Act, 1947 (“Act” for short) were
initiated against the petitioners for the assessment year
1980-81 in relation to assessment of tax on sales in the
course of inter-state trade and commerce under the Central
Sales Tax Act, 1956 and inside sales effected during the
year in question under the Orissa Sales Tax Act, 1947. The
provisions contained in r. 12 (5) of the Rules and in sub-s.
(4) of s.12 of the Act enjoin the affording of reasonable
opportunity to the dealer for completion of assessment. The
learned Sales Tax Officer observes that he gave repeated
opportunities to the petitioners to get themselves ready for
the assessment of tax and to produce their account books and
other documents but they sought adjournments on one pretext
or another. Eventually on February 16,1983 the learned Sales
Tax Officer refused to grant any further adjournment holding
that the petitioners had sufficient opportunity and
accordingly proceeded to best judgment under r.15 of the
Rules and sub-s. (4) of s.12 of the Act. In the absence of
any material, the learned Sales Tax Officer made an
assessment under r.15 of the Rules treating the gross
turnover of sales in the course of inter-State trade and
commerce amounting to Rs. 7,13,94,903.63p. as returned by
the petitioners under the Central Sales Tax Act, 1956 to be
their taxable turnover and the tax payable thereon at 10% at
Rs. 71,39,490.36p. After allowing an adjustment of Rs.
27,88,388.47p. paid by the petitioners along with the
quarterly return, the learned Sales Tax Officer has raised a
demand for payment of a sum of Rs. 43,51,101.89p. He
disallowed their claim for deduction of Rs. 6,74,99,085.65p.
representing sales to registered dealers and departments of
Government as well as of Rs. 28,24,224.42p. claimed as
deduction on account of tax collected from purchasers as the
requisite declarations in Form ‘C’ were not forthcoming. He
also disallowed the concessional rate of tax at 4%.
Similarly, while
747
making an assessment under sub-s. (4) of s.12 of the Orissa
Sales Tax Act, 1947, he treated the gross turnover of inside
sales amounting to Rs. 2,02,07,852.65p. as returned by the
petitioners to be their taxable turnover and the tax payable
thereon at 7% at Rs. 14,14,549. 71p. After allowing an
adjustment of Rs. 1,08,480.11p. paid by the petitioners
along with the quarterly return, the learned Sales Tax
Officer has raised a demand for payment of a sum of Rs.
13,06,069.60p. It would thus appear that by the impugned
orders of assessment the petitioners are faced with a total
demand of Rs. 56,57,171.49p. for the assessment year 1980-
81. The petitioners instead of preferring appeals under sub-
s. (1) of s. 23 of the Act filed petitions before the High
Court under Art. 226 of the Constitution challenging the
validity of the two orders of assessment.
The only contention raised before the High Court was
that the impugned orders of assessment being a nullity, the
petitioners were entitled to invoke the extraordinary
jurisdiction of the High Court under Art. 226 of the
Constitution, but the High Court was not satisfied that this
was a case of inherent lack of jurisdiction. The High Court
while dismissing the writ petitions observed:
“Having heard the learned counsel for both the
parties and having gone through the records, we are not
inclined to interfere with the impugned order (s) in
exercise with our extra-ordinary jurisdiction since
there is a right of appeal against the same. It is
contended on behalf of the petitioner that the impunged
order being a nullity is entitled to invoke our extra-
ordinary jurisdiction. We are not satisfied that this
is a case of inherent lack of jurisdiction. There is no
violation of principles of natural justice.”
In support of these petitions, the submissions advanced
by learned counsel for the petitioners rest purely on
procedural irregularities or touch upon the merits of the
assessments. Broadly speaking, the contentions were that:
(1) The learned Sales Tax Officer had no authority or
jurisdiction while making an assessment under r. 15 of the
Central Sales Tax (Orissa) Rules, 1957 to treat the gross
turnover as returned by the petitioners to be their taxable
turnover. (2) He was not justified in disallowing the claim
for deduction of Rs. 6,74,99,085.65p. representing sales to
registered dealers and departments of Government as well as
of Rs. 28,24,224.42p. on account of tax collected from the
purchasers from the gross
748
turnover of sales in the course of inter-State trade and
commerce amounting to Rs. 7,13,94,903.63p. (3) He wrongly
denied the petitioners the benefit of the concessional rate
of tax at 4% merely because they failed to furnish the
requisite declarations in Form ‘C’ (4) He could not, for
similar reasons, while making an assessment under sub-s. (4)
of s. 12 of the Orissa Sales Tax Act, 1947 treat the gross
turnover of inside sales amounting to Rs. 2,02,07,852.65p.
as returned by the petitioners to be their taxable turnover
nor was he justified in disallowing their claim for
deduction of Rs. 1, 80, 65, 167.66p. representing sales to
registered dealers merely because they failed to produce the
prescribed declarations from registered dealers. (5) And the
learned Sales Tax officer had acted in flagrant violation of
the rules of natural justice as the petitioners were
deprived of an opportunity to place their case for the
assessment year in question. We are afraid, these
contentions cannot prevail. It is not for us to say whether
or not the learned Sales Tax Officer was justified in
proceeding to best judgment under r. 15 of the Central Sales
Tax (Orissa) Rules, 1957 and under sub-s. (4) of s. 12 of
the Orissa Sales Tax Act, 1947 or whether he was justified
in treating the gross turnover as returned by the
petitioners to be their taxable turnover or whether he was
wrong in disallowing the deductions claimed for the
assessment year in question. In the very nature of things,
these are the questions which the petitioners should raise
in appeals preferred before the prescribed Appellate
Authority under sub-s. (1) of s. 23 of the Act.
We are constrained to dismiss these petitions on the
short ground that the petitioners have an equally
efficacious alternative remedy by way of an appeal to the
prescribed authority under sub-s. (1) of s. 23 of the Act,
then a second appeal to the Tribunal under sub s. (3) (a)
thereof, and thereafter in the event the petitioners get no
relief, to have the case stated to the High Court under s.
23 of the Act. In Raleigh Investment Company Limited v.
Governor General in Council,(1) Lord Uthwatt, J. in
delivering the judgment of the Board observed that in the
provenance of tax where the Act provided for a complete
machinery which enabled an assessee to effectively to raise
in the courts the question of the validity of an assessment
denied an alternative jurisdiction to the High Court to
interfere. It is true that the decision of the Privy Council
in Raleigh Investment Company’s case, supra, was in relation
to a suit brought for a declaration that an assessment made
by the Income Tax Officer was
749
a nullity, and it was held by the Privy Council that an
assessment made under the machinery provided by the Act,
even if based on a provision subsequently held to be ultra
vires, was not a nullity like an order of a court lacking
jurisdiction and that s. 67 of the Income Tax Act, 1922
operated as a bar to the maintainability of such a suit. In
dealing with the question whether s. 67 operated as a bar to
a suit to set aside or modify an assessment made under a
provision of the Act which is ultra vires, the Privy Council
observed:
“In construing the section it is pertinent, in
their Lordships opinion to ascertain whether the Act
contains machinery which enables an assessee
effectively to raise in the courts the question whether
a particular provision of the Income Tax Act bearing on
the assessment made is or is not ultra vires. The
presence of such machinery, though by no means
conclusive, marches with a construction of the section
which denies an alternative jurisdiction to inquire
into the same subject-matter.”
We are not oblivious of the fact that this Court in
K.S. Venkataraman & Co. v. State of Madras,(1) in a five-
Judge Bench by a majority of 3: 2 has dissented with the
view expressed by the Privy Council in Raleigh Investment
Company’s case, supra, and held that an assessment made on
the basis of a provision which is ultra vires is not an
assessment made under the Act. It was observed that the
entire reasoning of the Judicial Committee was based upon
the assumption that the question of ultra vires can be
canvassed and finally decided through the machinery provided
under the Income Tax Act. The majority observed that the
hierarchy of authorities set up under the Act being
creatures of statute were not concerned as to whether the
provisions of the Act were intra vires or not. If an
assessee raises such a question, according to the decision
of the majority in Venkataraman’s case, supra, the Appellate
Tribunal can only reject it on the ground that it has no
jurisdiction to entertain such objection or render any
decision on it. As no such question can be raised or can
even arise out of the order of the Appellate Tribunal, the
High Court cannot possibly give any decision on the question
of ultra vires because its jurisdiction under s. 66 is a
special advisory jurisdiction and its scope is strictly
limited. It can only decide questions of law that arise out
of the order of the Appellate Tribunal and that are referred
to it. Further, an appeal to this
750
Court under s. 66A (2) does not enlarge the scope of the
jurisdiction of this Court as this Court can only do what
the High Court can under s. 66. It would therefore appear
that the majority decision in Venkataramon’s case, supra,
rests on the principle that (i) An ultra vires provision
cannot be regarded as a part of the Act at all, and an
assessment under such a provision is not “made under the
Act” but is wholly without the jurisdiction and is not
directed by s. 67 of the Act. And (ii) The question whether
a provision is ultra vires or not cannot be decided by any
of the authorities created by the Act and therefore cannot
be the subject matter of a reference to the High Court or a
subsequent appeal to this Court.
No such question arises in a case like the present
where the impugned orders of assessment are not challenged
on the ground that they are based on a provision which is
ultra vires. We are dealing with a case in which the
entrustment of power to assess is not in dispute, and the
authority within the limits of his power is a Tribunal of
exclusive jurisdiction. The challenge is only to the
regularity of the proceeding before the learned Sales Tax
Officer as also his authority to treat the gross turnover
returned by the petitioners to be the taxable turnover.
Investment of authority to tax involves authority to tax
transactions which in exercise of his authority the Taxing
Officer regards as taxable, and not merely authority to tax
only those transactions which are, on a true view of the
facts and the law, taxable.
Emphasis is laid on the following observations made by
this Court in State of Uttar Pradesh v. Mohammad Nooh(1):
“If an inferior Court or tribunal of first
instance acts wholly without jurisdiction or patently
in excess of jurisdiction or manifestly conducts the
proceedings before it in a manner which is contrary to
the rules of natural justice and all accepted rules of
procedure and which offends the superior court’s sense
of fair play the superior Court may, we think, quite
properly exercise its power to issue the prerogative
writ of certiorari to correct the error of the Court or
tribunal of first instance, even if an appeal to
another inferior Court or tribunal was available and
recourse was not had to it or if recourse was had to
it, it confirmed what ex facie was a nullity for
reasons aforementioned.”
We find no justification for extending the principles
laid down in Mohammad Nooh’s case, supra, to a case like the
present where
751
there is an assessment made by the learned Sales Tax Officer
under the Act. In Raleigh Investment Company’s case, supra,
the Privy Council rightly observed that the phrase “made
under the Act” described the provenance of the assessment;
it does not relate to its accuracy in point of law. The use
of the machinery provided by the Act, not the result of that
use, is the test.
The decision in Mohamamd Nooh’s case, (supra) is
clearly distinguishable as in that case there was total lack
of jurisdiction. There is no suggestion that the learned
Sales Tax Officer had no jurisdiction to make an assessment.
Nor can it be contended that he had acted in breach of rules
of natural justice. There is no denying the fact that the
petitioner was served with a notice of the proceedings under
r. 12(5) of the Rules and sub-s. (4) of s. 12 of the Act.
The impugned orders clearly show that the petitioners were
afforded sufficient opportunity to place their case. Merely
because the learned Sales Tax Officer refused to grant any
further adjournment and decided to proceed to best judgment,
it cannot be said that he acted in violation of the rules of
natural justice. The question whether another adjournment
should have been granted or not was within the discretion of
the learned Sales Tax Officer and is a matter which can
properly be raised only in an appeal under sub-s. (1) of s.
23 of the Act. All that this Court laid down in Mohammad
Nooh’s case, supra, is that the rule which requires the
exhaustion of alternative remedies is a rule of convenience
and discretion rather than a rule of law; in other words, it
does not bar the jurisdiction of the Court.
Under the scheme of the Act, there is a hierarchy of
authorities before which the petitioners can get adequate
redress against the wrongful acts complained of. The
petitioners have the right to prefer an appeal before the
prescribed authority under sub-s. (1) of s. 23 of the Act.
If the petitioners are dissatisfied with the decision in the
appeal, they can prefer a further appeal to the Tribunal
under sub-s. (3) of s. 23 of the Act, and then ask for a
case to be stated upon a question of law for the opinion of
the High Court under s. 24 of the Act. The Act provides for
a complete machinery to challenge an order of assessment and
the impugned orders of assessment can only be challenged by
the mode prescribed by the Act and not by a petition under
Art. 226 of the Constitution. It is now well recognised that
where a right or liability is created by a statute which
gives a special remedy for enforcing it, the remedy provided
by that statute only must
752
be availed of. This rule was stated with great clarity by
Willes, J. in Wolverhampton New Water Works Co. v.
Hawkesford(1) in the following passage:
“There are three classes of cases in which a
liability may be established founded upon
statute………………………………But there is
a third class, viz., where a liability not existing at
common law is created by a statute which at the same
time gives a special and particular remedy for
enforcing it…………….the remedy provided by the
statute must be followed, and it is not competent to
the party to pursue the course applicable to cases of
the second class. The form given by the statute must be
adopted and adhered to.”
The rule laid down in this passage was approved by the
House of Lords in Neville v. London Express Newspaper
Ltd.(2) and has been reaffirmed by the Privy Council in
Attorney-General of Trinidad and Tobago v. Gordon Grant &
Co.(3) and Secretary of State v. Mask & Co.(4) It has also
been held to be equally applicable to enforcement of rights,
and has been followed by this Court throughout. The High
Court was therefore justified in dismissing the writ
petitions in limine.
Furthermore, the Act provides for an adequate safeguard
against an arbitrary or unjust assessment. The petitioners
have a right to prefer an appeal under sub-s. (1) of s. 23
of the Act subject to their payment of the admitted amount
of tax as enjoined by the proviso thereto. As regards the
disputed amount of tax, the petitioners have the remedy of
applying for stay of recovery to the Commissioner of Sales
Tax under cl. (a) of the second proviso to sub-s. (1) of s.
13 of the Act which runs:
“Provided further that-
(a) When the dealer or person, as the case may be, has
presented an appeal under sub-s. (1) of s. 23, the
Commissioner may, on an application in that behalf
filed by such dealer or person within thirty days from
the date of
753
receipt by him of the notice under sub-s. (4), in his
discretion, stay the recovery of the amount in respect
of which such notice has been issued or any portion
thereof, for such period and subject to such conditions
as the Commissioner thinks fit;”
The petitioners are at liberty to make an application
for stay of the disputed amount and the Commissioner will
decide whether or not there should be such stay on such
terms and conditions as he thinks fit, looking to the nature
of the demand raised in the facts and circumstances of the
present case.
For these reasons, the petitions must fail and are
dismissed. We hope and trust that the Appellate Authority
will dispose of the appeals as expeditiously as possible.
Shri Nariman, appearing on behalf of the State of Orissa
fairly stated that he has no objection to the appeal being
heard as early as possible without any objection as to
limitation.
Petitions dismissed.
754