1. Sales-tax assessment under Assam Sales Tax Act, 1947 — Dispute over taxable turnover and the situs of goods at the time of contract of sale. (Para 2 , 3 )
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1964 Supreme(SC) 31
SUPREME COURT OF INDIA
4th February, 1964.
P.B. GAJENDRAGADKAR, C.J.I., K.N. WANCHOO, K.C. DAS GUPTA, J.C. SHAH AND N. RAJAGOPALA AYYANGAR, JJ.
1. Thansingh Nathmal (In C. A. Nos. 86 and 87 of 1962) 2. Onkarmal Jawalaprasad (In C. A. Nos. 88 and 89 of 1962) 3. Indrachand Premsuch (In C. A. Nos. 90 and 91 of 1962) 4. Ramdeo Satyanarayan (In C. A. No. 92 of 1962) 5. Indrachand Premsuch (In C. A. Nos. 93 to 95 of 1962) 6. Shewpratap Tantia (In C. A. Nos. 96 and 97 of 1962), Appellants
Versus
The Superintendent of Taxes, Dhubri and others (In all the appeals), Respondents.
Civil Appeals Nos. 86 to 97 of 1962. 1420
Advocates appeared
Mr. M. C. Setalvad, Senior Advocate. (Mr. Sohan Shroff, Miss P. K. Kapila and Mr. Sukumar Ghose, Advocates, with him), for Appellants (In all the Appeals); Mr. Naunit Lal, Advocate, for Respondents (In all the Appeals).
The State Legislature can constitutionally determine the situs of sale for tax purposes based on the location of goods at the time of contract. Additionally, writ jurisdiction under Article 226 should not bypass statutory alternative remedies or be used to re-examine factual findings of taxing authorities.
Headnote:(A) Sales Tax Act - Section 2(12) and Explanation thereto - Constitution of India - Article 226 - Definition of "sale" including goods actually within the State at the time of contract regardless of where the contract is made - Legislative competence of the State Legislature to determine the situs of sale for tax purposes - Such provision is not ultra vires. (Para 13)
(B) Writ Jurisdiction - Article 226 - Alternative Remedy - Exercise of jurisdiction under Article 226 is discretionary and ordinarily not entertained where an equally efficacious alternative remedy is provided by statute - High Court does not act as a court of appeal to correct errors of fact or bypass statutory machinery. (Paras 7, 8, 11)
(C) Taxing Authorities - Question of Fact - Determination of whether goods were actually within the State at the time of contract is a question of fact exclusively within the competence of taxing authorities - High Court cannot re-open such findings unless they are based on no evidence or are perverse. (Paras 6, 10)
Facts of the case:
Dealers in jute were assessed for sales tax based on "best judgment assessment" after failing to produce books of account. The taxing authority included sales in the taxable turnover because the goods were deemed to be within the State at the time of the contract, as per the statutory explanation. The dealers challenged the finding as speculative and the provision as ultra vires, approaching the High Court under its extraordinary jurisdiction instead of seeking a statutory reference on questions of law.
Findings of Court:
The court found that the statutory provision regarding the situs of goods was within the legislative competence of the State. It further held that the High Court should not re-evaluate questions of fact when the appellants had bypassed the statutory remedy of reference and failed to provide evidence before the taxing authorities.
Issues: Whether the provision deeming a sale to occur where goods are located at the time of contract is constitutional, and whether a writ petition under Article 226 can be used to challenge factual findings of taxing authorities in the presence of an alternative statutory remedy.
Ratio Decidendi: The State Legislature has the authority to define the situs of sale for tax purposes. Furthermore, the discretionary jurisdiction of the High Court under Article 226 should not be used to bypass statutory remedies or to act as an appellate body over factual determinations made by specialized taxing tribunals.
Result: All the appeals fail and are dismissed with costs.
Legal Category Hierarchy
Table of Contents
2. Validity of Explanation to Section 2(12) — Whether tax is leviable based on goods' presence in the state regardless of contract location — Factual correctness of goods' situs. (Para 2 , 3 , 4 , 10 )
3. Statutory machinery for tax disputes must be followed — High Court's Article 226 jurisdiction is discretionary and not an alternative to statutory remedies for correcting factual errors. (Para 6 , 7 , 8 , 10 , 11 )
4. Legislative competence allows fixing the situs of sale for tax purposes based on the location of goods at the time of contract, regardless of contract location. (Para 9 , 13 )
5. Appeals dismissed with costs. (Para 14 )
6. Can a petitioner invoke the High Court's jurisdiction under Article 226 when an alternative statutory remedy exists?
Ordinarily, the High Court will not entertain a petition under Article 226 where an equally efficacious alternative remedy is provided by statute, as it is not intended to be an alternative remedy or a court of appeal to correct errors of fact. (Para 7 , 8 , 11 )
7. Is a state legislature competent to deem a sale as taking place within the state if the goods are physically present there at the time of contract?
Yes, the legislature can locate the situs of sale for tax purposes by fixing the actual situation of the goods within the province at the date of the contract, regardless of where the contract is made. (Para 9 , 13 )
8. Does the High Court have the power to decide questions of fact in tax assessment disputes?
No, the High Court is not an appellate authority over the decision of the Commissioner on questions of fact; it only decides questions of law arising out of the order. (Para 6 , 10 )
9. Can a party challenge the correctness of a decision on grounds other than those for which a certificate under Article 132 was granted?
A person appealing under Article 132 may not challenge the decision on grounds other than those in the certificate unless the Supreme Court grants leave, typically in cases of grave miscarriage of justice or substantial questions. (Para 5 )
Judgement
SHAH, J. : These appeals have been filed with certificates granted by the High Court of Assam under Art. 132 of the Constitution against orders passed in certain petition filed by the appellants praying for writs of certiorari or other appropriate writs quashing orders relating to assessment of sales-tax, and prohibiting the Superintendent of Taxes, Dhubri and other officers from taking action in enforcement of the said orders. The appeals raise common questions and may be disposed of by a common judgment.
2. The appellants are merchants carrying on business as dealers in jute, and have their principal place of business at Calcutta. The appellants have a branch office at Dhubri in the State of Assam and are registered dealers under the ASSAM SALES TAX ACT , 1947 (17 of 1947). The appellants purchased jute at Dhubri and other places in the State of Assam and despatched bales of jute to diverse factories outside the Province of Assam. The appellants submitted returns of turnover for purposes of sales-tax before the Superintendent of Taxes, Dhubri, under the ASSAM SALES TAX ACT in respect of transactions of sale during the period between March 1948 to March 1950. The Superintendent of Taxes called upon the appellants under S. 17(2) of the Act to produce their books of account and other evidence in support of their returns and granted them time to enable them to comply with the requisition, but the appellants failed to do so. The superintendent of Taxes then made "best judgment assessment" exercising his powers under S. 17(4) of the Act and issued demand notices for the tax determined. Against the orders passed by the Superintendent of Taxes appeals were preferred to the Assistant Commissioner of Taxes. Before the appellate authority the appellants produced some but not all their books of account and documents in support of their returns. Before the appellate authority it was contended, inter alia, that the definition of "sale" in S. 2(12) of the Act was beyond the legislative competence of the Provincial Legislature, that tax was sought to be levied on sales effected outside the State, and that imposition of sales tax on the transaction of the appellant amounted to levying an "export tax" which was not open to the Provincial Legislature. It was however not contended before the Assistant Commissioner of Taxes that the jute bales, sale price of which was included in the turnover were not at the time of the contracts in the form of jute bales actually within the State of Assam and therefore the Explanation to S. 2(12) did not make that sale price liable to be included in the turnover of the appellants. Assistant Commissioner of taxes, Assam, dismissed the appeals.
3. In the revision applications preferred to the Commissioner of Taxes, Assam against the order of the Assistant Commissioner of Taxes it was contended for the first time that the price of jute included in the turnover under the orders passed by the Superintendent of Taxes was not liable to be taxed because within the meaning of the Explanation to S. 2(12) the goods were not at the time of the contracts actually in the Province of Assam. The Commissioner rejected the contention after examining what he called the "time-table of cultivation". He observed that the usual time for marketing jute of the new crop was between July and June of the following year, jute being planted in or about February and being ready for marketing some time about the month of June. The Commissioner further observed that the contracts were made on diverse dates between March and September and deliveries under the contracts were made after the month of July when the new crop was brought into the market. The contracts between the months of March and July were therefore in respect of the last year s crop and the goods sold must actually have been in the Province of Assam at the date of the contracts. The Commissioner made certain modifications in the assessment order, but with those modific
