1. Sales tax assessment dispute — claim of non-dealer status and exemption for sales in the course of import under Article 286(1)(b) of the Constitution. (Para 2 )
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1965 Supreme(SC) 39
SUPREME COURT OF INDIA
P.B. GAJENDRAGADKAR, C.J.I., M. HIDAYATULLAH, J.C. SHAH AND S.M. SIKRI, JJ.
Sales Tax Officer, Jodhpur and another, Appellants
Versus
M/s. Shiv Ratan G. Mohatta, Respondent.
Civil Appeal No. 652 of 1964
Advocates appeared
Mr. G. C. Kalsiwal, Advocate General, for Rajasthan (M/s. K. K. Jain and R. N. Sachthey, Advocates, with him), for Appellants; M/s. M. D. Bhargava and B. D. Sharma, Advocates, for Respondents.
Advocates:
B.D.SHARMA, G.C.KASLIVAL, K.K.JAIN, M.D.BHARGAV, R.N.SACH
B.D.SHARMA, G.C.KASLIVAL, K.K.JAIN, M.D.BHARGAV, R.N.SACH
High Courts should not exercise extraordinary jurisdiction under Article 226 to decide disputed questions of fact in tax assessments when alternative statutory remedies exist, unless exceptional circumstances or a total lack of jurisdiction are present. Such matters should be remanded to the assessing authority for factual determination.
Headnote:(A) Rajasthan Sales Tax Act, 1954 - Section 2(f) - Constitution of India - Articles 226 and 286(1)(b) - Sales tax assessment - Challenge to assessment order via writ petition - Alternative remedy available - High Court's jurisdiction to determine facts in tax matters - It is not the object of Article 226 to convert High Courts into original or appellate assessing authorities whenever an assessee chooses to attack an assessment order on the ground that a sale was made in the course of import - Extraordinary jurisdiction should be exercised only in exceptional circumstances or where there is a total lack of jurisdiction or palpable injustice (Paras 11, 13).
(B) Taxability of turnover - Determination of facts - When taxability depends upon a precise determination of facts and some facts are in dispute or missing, the High Court should decline to decide such questions - Proper course is to quash the order and remand the case to the assessing authority to find facts and decide according to law (Paras 13, 14).
Facts of the case:
An assessee acting as an agent for the import of cement from another country entered into agreements with buyers in a state. The assessing authority levied sales tax on the turnover, treating the assessee as a dealer, without considering the contention that the sales were made in the course of import. The High Court, in a writ petition, quashed the assessment, holding that the sales occurred in the course of import.
Findings of Court:
The High Court should have declined to entertain the petition as no exceptional circumstances existed to warrant the exercise of extraordinary jurisdiction under Article 226, especially when an alternative statutory remedy of appeal was available. Furthermore, the High Court should not have decided disputed questions of fact regarding the passing of property in goods.
Issues: Whether the High Court was justified in entertaining a petition under Article 226 despite the availability of an alternative remedy and whether it could decide disputed questions of fact regarding the taxability of turnover.
Ratio Decidendi: High Courts should not use Article 226 to bypass statutory remedies in tax matters unless there is a fundamental jurisdictional error or palpable injustice. In cases where taxability depends on factual determinations not fully addressed by the assessing officer, the High Court should remand the matter rather than substituting its own factual findings.
Result: Appeal allowed.
Legal Category Hierarchy
Table of Contents
2. Whether the assessee is a dealer under the Sales Tax Act and whether the sales occurred in the course of import under Article 286(1)(b) of the Constitution. (Para 2 , 6 , 9 , 10 , 12 )
3. High Courts should not exercise extraordinary jurisdiction under Article 226 to decide disputed questions of fact in taxing matters where statutory remedies exist. (Para 11 , 13 )
4. In taxing matters, High Courts under Article 226 should not act as original or appellate authorities to determine disputed facts; such matters must be decided by assessing authorities. (Para 13 )
5. Appeal allowed — High Court order set aside — assessment order quashed — case remitted to Sales Tax Officer for fresh determination of facts and law. (Para 14 )
6. When can a High Court entertain a petition under Article 226 against a tax assessment order?
Only in exceptional circumstances, such as when the challenge goes to the root of the assessing officer's jurisdiction or where forcing the assessee to use statutory remedies would cause palpable injustice. (Para 11 )
7. Can a High Court determine disputed questions of fact in a tax assessment challenge under Article 226?
No. High Courts are not original or appellate assessing authorities. When taxability depends on precise factual determinations that are disputed or missing, the court should decline to decide and instead remand the case. (Para 13 )
8. What is the proper course of action for a High Court if an assessing officer fails to consider a legal ground raised by the assessee?
The High Court should quash the assessment order and remand the case to the assessing authority to dispose of the matter according to law and find the necessary facts. (Para 13 , 14 )
Judgement
SIKRI, J.: This appeal by certificate of fitness granted by the Rajasthan High Court is directed against its judgment, dated May 7, 1963, quashing the order of assessment, dated March 5, 1962, made by the Sales Tax Officer, Jodhpur City, in so far as it levied sales tax on the turnover of Rs.23,92,252.75 nP.
2. The respondent M/s. Shiv Ratan G. Mohatta, which is a partnership firm having its head office at Jodhpur, hereinafter referred to as the assessee, claimed before the Sales Tax Officer that they were not liable to be assessed to sales tax in respect of the above turnover because, firstly, the assessee was not a dealer within S. 2 (f) of the Rajasthan Sales Tax Act (Rajasthan Act XXIX of 1954) with respect to this turnover, and secondly, because the sales were in the course of import within Art. 286 (1) (b) of the Constitution. Although the Sales Tax Officer set out the facts of the case relating to the second ground, he deemed it sufficient to assess this turnover on the ground that the assessee was a dealer within S. 2 (f) of the Rajasthan Sales Tax Act, without adverting to the second ground. The facts on which the assessee had relied upon to substantiate his second ground were these. The Zeal-Pak Cement Factory, Hyderabad (Pakistan), hereinafter called the Pakistan Factory, manufactured cement in Pakistan. The Pakistan Industrial Development Corporation, hereinafter called the Pakistan Corporation, entered into an agreement with M/s. Mikhiram and Sons (P) Ltd., Bombay, for the export of cement manufactured in Pakistan to India. The State Trading Corporation of India entered into an agreement with the said M/s. Milkhiram and Sons for the purchase of, inter alia 35,000 long tons of cement to be delivered to it F. O. R. Khokhropar in Pakistan, on the border of Rajasthan. The State Trading Corporation appointed the assessee as its agent, broadly speaking to look after the import and the sale of the imported cement. The modus operandi adopted by the assessee for the sale of the cement was as follows. It would obtain from a buyer in Rajasthan an order under an agreement, a sample of which is on the record. The agreement fixed the price and the terms of supply. By one clause the assessee disclaimed any responsibility regarding delay in despatch and non-receipt of consignment or any loss, damage or shortage in transit due to any reason whatsoever. The agreement further provided that "all claims for loss, damage or shortage, etc., during transit will lie with the carriers and our payments are not to be delayed on any such account whatsoever." It was further provided in the agreement that the dues were payable in advance in full, or 90 per cent in advance and the balance within 15 days of billing plus sales tax and other local taxes. Clause 6 of the agreement is in the following terms:
"A post Card Loading Advice will be sent to you by the Factory as soon as the wagons are loaded in respect of your orders, and it will be your responsibility to arrange for unloading the consignment timely according to Railway Rules. Ourselves, and the supplies will not be responsible for demurrage, etc. on any account whatsoever. If the consignment reaches earlier than the Railway Receipt, it is the responsibility of buyer to arrange for and get the delivery timely against indemnity bond, etc. All the Railway Receipts, etc., will be sent by registered post by the Suppliers in Pakistan".
3. After this agreement had been entered into, the assessee would sent (sic) despatch instructions to the Pakistan Corporation. These instructions indicated the name of the buyer consignee and the destination, and provided that the railway receipt and D/A should be sent by registered post to the consignee. These instructions were sent with a covering letter to the Pakistan Corporation requesting that these instructions be passed on to the Pakistan Factory for necessary action. The Pakistan Corporation would then forward these despatch instructions to the Ze
