2005 Supreme(SC) 900

2005(5) Supreme 161
Supreme Court of India
(From Himachal Pradesh High Court)
Mrs. Ruma Pal, Arijit Pasayat & C.K. Thakker, JJ.
State of H.P. & Ors. —Appellants
versus
Gujarat Ambuja Cement Ltd. & Anr. —Respondents
Civil Appeal No. 2641 of 2000
With
Civil Appeal No. 2642 of 2000
And
Civil Appeal Nos. 3744-3746 of 2000
Decided on 18-7-2005
Counsel for the Parties :
For the Appellants : Anoop G. Chaudhary, Sr. Advocate, J.S. Attri, Addl. Advocate General for State of H.P., L.R. Seth, Atul Sharma, Ms. June Chaudhary, Advocates.
For the Respondents : Harish N. Salve, Dr. A.M. Singhvi, Manmohan, R.F. Nariman, Manmohan Khanna, Sr. Advocates, Ms. Bina Gupta, Manish Jha, Mrs. Divya Roy, U.A. Rana, Ms. Sumathi K., Biju Mattam, C.P. Pandey, B.K. Satija and Varinder Kumar Sharma, Advocates.

Important points
1. The levy of purchase tax on the royalty paid is not legally sustainable.2. Rule of exclusion of writ jurisdiction by availability of alternative remedy is a rule of discretion and not one of compulsion.

Headnote:Central Sales Tax Act, 1956—Section 8(5)—Himachal Pradesh General Sales Tax Act, 1968—Section 42(1)—Liability to pay purchase tax on the royalty paid by respondents companies—Assessment years 1995-96 and 1996-97—Excise and Taxation Department issued a notification dated 31.12.1994 to grant exemption from payment of sales tax to pioneer indus­tries, bifurcated in different categories with effect from the date of their commercial production against the periods as enumerated in the notifica­tion—On 11.8.1995, Gujarat Ambuja started trial production and on 26.9.1995 regular commercial produc­tion was started—This entitled the company to exemption from sales tax in terms of the notifications—Unit was already registered as a ‘Prestigious unit’ on 13.1.1993 in accordance with the notification issued by the State Government—Prescribed Authority after due enquiry issued a certificate of exemption in form STH-II for the period from 30.1.1996 to 31.3.1996 and the same was extended further from time to time upto 31.3.1998—Assessing Authority passed an order of assessment for the assessment year 1995-96 and granted exemption w.e.f. 30.1.1996—Order challenged—Whether High Court was justified in holding that approach of the authorities was erroneous—(Yes)—It was held that levy of purchase tax on royalty paid is not legally sustainable.

       Held : The High Court held that the approach of the authorities was clearly erroneous, on a mis-reading of the various Notifications and keeping out of consi­deration certain relevant materials. Particular reference was made to the Registration Certificate dated 13th January, 1993 issued by the Empowered Committee. Taking note of the fact that the notifications were issued by promulgating rules, the High Court was of the view that they are to be considered in the background of Section 42 of the Act. The emphasis on defects in ‘C’ forms was held to be clearly without any basis, and the same was held to be totally insignificant for the purpose of denying benefits in terms of the policy of the State to encourage setting up of cement industries. (Para 12)

       Respondent No. 1-company’s stand was that it was granted exemption from payment of sales tax and, therefore, there was no requirement of furnishing any “C Form” for certain periods relating to which there was a doubt about availability of the concession, the declaration Forms were filed. Therefore, the assessing officer shall grant opportunity to the respondent No. 1-company to cure the defects, if any in the Declaration Forms. (Para 42)

       ‘Royalty’ is not a term used in legal parlance for the price of the goods sold. It is a payment reserved by the grantor of a patent, lease of a mine or similar right, and payable proportionately to the use made of the right by the grantee. (Para 48)

       ‘Royalty’ is not a tax. Simply because the royalty is levied by reference to the quantity of the minerals produced and the impugned cess too is quantified by taking into considera­tion the same quantity of the mineral produced, the latter does not become royalty. The former is the rent of the land on which the mine is situated or the price of the privilege of winning the minerals from the land parted by the government in favour of the mining lessee. The cess is a levy on mineral rights with impact on the land and quantified by reference to the quantum of mineral produced. The distinction, though fine, yet exists and is perceptible. (Para 50)

       (ii) Constitution of India—Article 226—Writ jurisdiction of High Court—Scope—Though matter relating to an alternative remedy has nothing to do with the jurisdiction of the case, normally the High Court should not interfere if there is an adequate efficaci­ous alternative remedy—However, despite the existence of an alternative remedy it is within the jurisdiction of discretion of the High Court to grant relief under Article 226.

       Held : Except for a period when Article 226 was amended by the Constitution (42nd Amendment) Act, 1976, the power relating to alternative remedy has been considered to be a rule of self imposed limitation. It is essentially a rule of policy, convenience and discretion and never a rule of law. Despite the existence of an alternative remedy it is within the jurisdiction of discretion of the High Court to grant relief under Article 226 of the Constitution. At the same time, it cannot be lost sight of that though the matter relating to an alternative remedy has nothing to do with the jurisdiction of the case, normally the High Court should not interfere if there is an adequate efficacious alternative remedy. If somebody approaches the High Court without availing the alternative remedy provided the High Court should ensure that he has made out a strong case or that there exist good grounds to invoke the extra-ordinary jurisdiction. (Para 19)

       Where under a statute there is an allegation of infringement of fundamental rights or when on the undisputed facts the taxing authorities are shown to have assumed jurisdiction which they do not possess can be the grounds on which the writ petitions can be entertained. But normally, the High Court should not entertain writ petitions unless it is shown that there is something more in a case, something going to the root of the jurisdiction of the officer, something which would show that it would be a case of palpable injustice to the writ petitioner to force him to adopt the remedies provided by the statute. (Para 25)

       (iii) Words and Phrases—Royalty—Meaning—It is not a term used in legal parlance for the price of the goods sold—‘Royalty’ is not a tax—Expressions ‘dead rent’ and ‘royalty’—Meanings. (Paras 48 to 54)