1. Levy of sales tax on rentals for telephone connections and instruments under state sales tax statutes — Challenge to the levy via writ petitions. (Para 2 )
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1998 Supreme(SC) 863
SUPREME COURT OF INDIA
M. M. Punchhi, CJI., K.T.Thomas, M.Srinivasan, JJ.
Union Of India
Versus
State Of Haryana
Case No. : 4253 of 1998
Date of Decision : 8/25/98
High Courts should not dismiss writ petitions on the grounds of an alternative statutory remedy when the issues raised are purely legal and fundamental in nature.
Headnote:(A) Constitution of India - Article 366 - Sales Tax Statutes - Indian Telegraph Act, 1885 - Levy of sales tax on rentals for telephone connections - Whether the provision of telephone connections and instruments amounts to a sale and whether the central government is exempt from payment of sales tax under the respective statutes - Question being pristinely legal and fundamental in character, the same need not be put through the process of statutory appeals in the hierarchy before the High Court entertains a writ petition. (Para 3)
(B) Writ Jurisdiction - Alternative Remedy - High Courts should not dismiss writ petitions by suggesting an alternative remedy when the issues raised are purely legal and fundamental. (Para 3)
Facts of the case:
The appellant provides telecommunication facilities under a statutory act. Respondent states amended their sales tax statutes to redefine "purchase" and "sale" to align with the Constitution, subsequently assessing sales tax on rentals for telephone connections. The appellant challenged these levies via writ petitions in the High Courts, which were dismissed on the grounds that an alternative statutory remedy of appeal was available.
Findings of Court:
The High Courts erred in dismissing the writ petitions. Since the questions regarding whether the service constitutes a sale and the applicability of exemptions are purely legal and fundamental, they do not require the exhaustion of statutory appeals.
Issues: Whether the High Courts were justified in dismissing writ petitions by directing the petitioner to an alternative statutory remedy when the questions raised were purely legal.
Ratio Decidendi: When a dispute involves a fundamental legal question, the existence of an alternative statutory remedy does not bar the High Court from exercising its writ jurisdiction to decide the matter on its merits.
Result: Appeals allowed.
Legal Category Hierarchy
Table of Contents
2. Whether provision of telephone connections and instruments constitutes a sale and whether the Union of India is exempt from sales tax under relevant statutes. (Para 3 )
3. Questions regarding the nature of the transaction as a sale and statutory exemptions are pristinely legal and fundamental, bypassing the need for statutory appeals. (Para 3 )
4. Writ petitions involving fundamental and pristinely legal questions should not be dismissed on the ground of availability of an alternative statutory remedy. (Para 3 )
5. High Court orders set aside; writ petitions remitted for decision on merits; tax recovery and interim payment directions stayed. (Para 3 , 5 )
6. When can a writ petition be maintained despite the existence of an alternative statutory remedy?
A writ petition can be maintained if the questions raised are pristinely legal and fundamental in character, as such matters need not be processed through the hierarchy of statutory appeals. (Para 3 )
7. Can interim payment directions be stayed in writ petitions involving fundamental legal questions?
Yes, the court reversed interim directions requiring partial payment of tax demands, staying recovery until the disposal of the writ petitions on their merits. (Para 3 , 5 )
M.M.PUNCHHI, CJI.
(1) LEAVE granted.
(2) IN this batch of appeals the common appellant is the Union of India and its officers. The appellants are discharging their statutory functions under the Indian Telegraph Act, 1885 for the purpose of providing telecommunication facilities in providing telephone connections to the subscribers. The respondents herein are the respective States of Haryana, Orissa, Uttar Pradesh and Andhra Pradesh. In their respective sales tax statutes, the State Governments have made amendments so as to redefine the words "purchase" and "sale" in order to bring those in conformity with the definitions given in Article 366 of the Constitution. The respective assessing authorities under those laws have assessed sales tax on the rentals being charged for supply of telephones. The aggrieved Union of India filed writ petitions in the respective High Courts challenging the levy. Those writ petitions were dismissed suggesting to the writ petitioners that an alternative remedy lay in the form of a statutory appeal. Challenging those respective orders of the High Courts, the Union of India and others have approached this Court by way of these appeals.
(3) HAVING heard learned counsel for the parties at length, we are of the view that these are the matters which should not have been dismissed by the respective High Courts in suggesting an alternative remedy. The question raised was pristinely legal which required determination as to whether provision of telephone connections and instruments amounted to sale and even so why was the Union of India not exempt from payment of sales tax under the respective statutes. The respondents counter such stance. We think the question raised was fundamental in character and need not have been put through the mill of statutory appeals in the hierarchy. For this reason alone, we set aside the respective impugned orders of the High Courts and remit the writ petitions back to them for decision in accordance with law. The recovery of tax would stand stayed till the disposal of the writ petitions. Ordered accordingly. No costs.
(4) LEAVE granted.
(5) HERE in these matters the respective High Courts have kept pending before them the writ petitions, but by interim directions had ordered the appellants to pay 50% of the demand before the disposal of the writ petitions. The respective State Governments had filed their counter-affidavits. On approaching this Court, the appellants had obtained stay orders regarding payment of 50% of the dues. These orders of the respective High Courts would stand reversed for identical reasons as given in the above cases. It would now be expected of the respective High Courts to decide the writ petitions on merits. The appeals would stand allowed in these terms. No costs.
