State Of Bihar vs Barakar Engineering And Foundry Works LTD. , (Now Oriental Coal Co. )

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1971 Supreme(SC) 541

SUPREME COURT OF INDIA
K.S. HEGDE AND A.N. GROVER, JJ.
The State of Bihar, Appellant
Versus
Oriental Coal Co. Ltd., Respondent.
Civil Appeal No. 307 of 1970, D/- 6-10-1971.
Advocates appeared
M/s. D. P. Singh, V. J. Francis, S. C. Agrawal and Narayana Nettwar, Advocates, for Appellant; Mr. S. T. Desai, Senior Advocate, (Miss Bhuvanesh Kumari, Advocate, and M/s. J. B. Dadachanji, O. C. Mathur and Ravinder Narain, Advocates of M/s. J. B. Dadachanji and Co., with him), for Respondent.

Headnote:
Bihar Sales Tax Act, 1947 – Section 23, 25, 3 and 24 - Sales Tax Laws Validation Act, 1956 - Section 2 – Constitution Of India, 1950 – Article 286 (2) and 286 - Bihar Sales Tax Rules, 1949 - Rule 40, 41, 42 and 43 - Company - Liable to Pay Sales Tax - Whether High Court of Calcutta had territorial jurisdiction to entertain plaintiff s suit - Whether any part of cause of action for suit arose outside Bihar - Whether any part of cause of action arose in Calcutta, differing from view taken by Ray J. - Whether that order was right or wrong – Held, Court have come to conclusion that under law, assessments made by assessing authority are valid assessments and therefore it cannot be said that payments made by plaintiff were made under any mistaken impression of law - Hence in Court opinion fact that cheques issued by plaintiff were encashed in Calcutta could not have afforded any cause of action for filing suit in Calcutta High Court Assuming, but not deciding that, fact of encahsment of cheques in Calcutta gave rise to a cause of action at Calcutta gave rise to a cause of action at Calcutta for a claim based on ground that payments were made on a mistaken impression of law but that circumstance cannot be said to give rise to a cause of action for the suit on ground that plaintiff is entitled to refund of amounts paid because of appellate authority order - In consequence of order of appellate authority - As per Rule 40 of Bihar Sales Tax Rules, 1949 made in pursuance of rule making power conferred under Act, all applications from a dealer for refund of excess tax paid have to be made to Commissioner in form XIII - Rule 41 provides that when Commissioner is satisfied that refund is due, he shall record an order sanctioning refund - Rule 42 provides that when an order for refund has been passed under Rule 41, Commissioner shall, if dealer desires payment in cash issue refund payment order in form XIV and shall make it over to dealer for encashment at Government treasury, a copy of refund order shall also be forwarded to Treasury Officer concerned - Entire cause of action in respect of claim for refund on basis of appellate authority s order arose only within State of Bihar and no part of that cause of action arose outside Bihar - For same reasons no part of cause of action for claiming amount in question on basis of doctrine that debtor must seek his creditor and pay debt due could have arisen outside Bihar, in view of rules referred to earlier - Fact that plaintiff based his claim on three alternative grounds, for one of which alone a part of cause of action can at best be said to have arisen in Calcutta but not for others, cannot confer jurisdiction on Calcutta High Court to try suit on basis of grounds in respect of which no part of cause of action arose in Calcutta - Cause of action, within contemplation of law is that which relates to a tenable plea - For reasons mentioned Court is unable to agree with High Court that any part of cause of action for suit arose in Calcutta - Hence Court set aside judgment of Division Bench of Calcutta High Court and restore that of single judge but not on ground that found favour with learned judge - Appeal allowed.

Judgment

HEGDE, J. :- The respondent-original plaintiff (which will hereinafter be referred to as the plaintiff ) is a company having its registered office at Calcutta. It was a registered dealer under the Bihar Sales Tax Act, 1947 (in brief the Act). On or about December 14, 1953, the plaintiff issued a cheque to the defendant-appellant for a sum of Rs. 10,000/- drawn on the Oriental Bank of Commerce Ltd., Calcutta towards the sales tax due from it for the years 1950-51. 1951-52 and 1952-53. That cheque was sent to Calcutta for encashment and encashed at that place. On September 25, 1954, the Assistant Superintendent of Sales-tax passed assessment orders in respect of the years mentioned earlier. According to those orders, the plaintiff was liable to pay sales tax amounting to Rs. 2803/2/- in respect of the year 1950-51; Rs. 3670/5/- for the year 1951-52; Rs. 4623/6/- for the year 1952-53, thus a total of Rs. 11,096 /-13/-. As seen earlier, it had already paid a sum of Rs. 10,000/- earlier. On July 23, 1955, it paid the balance of Rupees 1096/13/-; this again by a cheque on the bank mentioned earlier. This was also encashed at Calcutta.

2. Aggrieved by the assessment orders made by the assessing authority, the plaintiff went up in appeal to the Assistant Commissioner of Sales Tax, Chhotanagpur Division, Bihar. Those appeals were heard by the appellate authority at Calcutta. The appellate authority by its order of September 24, 1955 allowed the appeals and set aside the orders of assessment. Before that order was made, this Court had ruled in Bengal Immunity Co. Ltd. v. State of Bihar (1955) 2 SCR 603 that until Parliament by law made in exercise of the powers vested in it by clause (2) of Art. 286 provides otherwise, no State can impose or authorise the imposition of any tax on sales or purchases of goods when such sales or purchases take place in the course of inter-State trade or commerce. On the basis of that conclusion this Court held that the charging section of the Act read with the relevant definitions cannot operate to tax inter-State sales or purchases and as the Parliament has not otherwise provided, the Act, in so far as it purports to tax sales or purchases that take place in the course of inter-State trade or commerce, is unconstitutional, illegal and void. Evidently that decision was brought to the notice of the appellate authority at the hearing of the appeals and that authority purported to act on the basis of that decision. The appeals in question were allowed with these observations :

"These three appeals are directed against assessment order for the years 1950-51, 1951-52 and 1952-53.

The only point pressed before me is that since this is a case of non-resident dealers, there should have been no assessment. The lower Court records show that the workshop of the plaintiff is situate in Barakar which is outside Bihar. From here he supplies goods to collieries in Bihar. In other words, he is a non-resident dealer and so, according to the latest decision of SC, he cannot be assessed to pay any tax in Bihar.

These appeal are accordingly allowed in full."

Sd/- M. Ahmad,

24-9-195,

Assistant Commissioner of Sales Tax."

3. It is rather difficult to understand this order. But before the High Court Counsel for both the parties agreed that the decision referred to in the order is the decision in the Bengal Immunity s case, (1955) 2 SCR 603.

4. On October 12, 1955, the plaintiff filed an application before the Superintendent of Sales Tax, Dhanbad for refund of the tax paid by him. This claim was made on the basis of the appellate order. On January 30, 1956, Sales Tax Laws Validation Ordinance (No. 3 of 1956) was issued which was followed up by Sales Tax Laws Validation Act, 1956. The scope of this Act was considered by this Court in M. P. V. Sundararamier & Co. v. State of Andhra Pradesh (1958) SCR 1422. Therein this Court by majority held that the Sales Tax Laws Validation Act, 1956 is in substance one lifting the ban on taxatio

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