1. Sales-tax assessment under Assam Sales Tax Act, 1947 — Dispute over taxable turnover and the location of goods at the time of contract of sale. (Para 2 , 3 )
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1964 Supreme(SC) 32
SUPREME COURT OF INDIA
P.B.Gajendragadkar, C.J.I., J.C.Shah, K.C.Das Gupta, K.N.Wanchoo, N.Rajagopala Ayyangar, JJ.
Thansingh Nathmal: Onkarmal Jawalaprasad: Indrachand Premsuch: Ramdeo Satyanarayan: Indrachand Premsuch: Shewpratap Tantia
Versus
Superintendent Of Taxes, Dhubri: Superintendent Of Taxes, Dhubri: Superintendent Of Taxes, Dhubri And Others (In All The Appeals) : Superintendent Of Taxes, Dhubri And Others (In All The Appeals) : Superintendent Of Taxes, Dhubri And Others (In All The Ap
Case No. : 86 , 87 of 1962
Date of Decision : 2/4/64
Advocates Appeared: Ghosh Sukumar : Kapila P.K. : Lal Naunit : Setalvad M.C. : Shroff Sohan
Advocates:
M.C.SETALVAD, NAUNIT LAL, P.K.Kapila, Sohan Shroff, SUKUMAR GHOSH
M.C.SETALVAD, NAUNIT LAL, P.K.Kapila, Sohan Shroff, SUKUMAR GHOSH
The legislature can determine the site of sale for tax purposes based on the location of goods at the time of contract. Additionally, writ jurisdiction under Article 226 cannot be used to bypass statutory alternative remedies or to challenge factual findings of taxing authorities.
Headnote:(A) Sales Tax Act - Section 2(12) and Explanation thereto - Constitution of India - Article 226 - Alternative Remedy - The legislature is competent to locate the site of sale for the purpose of levying sales tax by fixing upon the actual situation of the goods within the State at the date of the contract, notwithstanding the provisions of the Sale of Goods Act. Such a provision does not overstep the limits of legislative authority. (Para 13)
(B) Writ Jurisdiction - Article 226 - Scope and Limitations - The exercise of jurisdiction under Article 226 is discretionary and ordinarily will not be entertained where the petitioner has an alternative remedy which, without being unduly onerous, provides an equally efficacious remedy. The High Court does not act as a court of appeal to correct errors of fact or bypass the machinery created under a statute. (Paras 7, 10)
(C) Questions of Fact - Determination of Tax Liability - Whether goods were actually within the State at the time of the contract of sale is a question of fact to be determined by the taxing authorities. If the statutory mechanism for reference on questions of law is bypassed, the court will not reopen factual findings unless the adjudication is vitiated by a total lack of evidence or is based on conjectures. (Paras 9, 10)
Facts of the case:
Dealers in jute with a branch in the State were assessed for sales tax. The taxing authority made best judgment assessments after the dealers failed to produce books of account. The dealers challenged the assessment, arguing that the goods were not in the State at the time of the contracts. They bypassed the statutory remedy of seeking a reference to the High Court on questions of law and instead filed a writ petition under Article 226 to challenge both the constitutionality of the Act and the factual findings of the Commissioner.
Findings of Court:
The court held that the provision deeming a sale to take place in the State if goods are present there at the time of contract is constitutional. It further held that the High Court should not exercise its discretionary jurisdiction under Article 226 to bypass statutory remedies or to act as an appellate authority on questions of fact, especially when the party failed to produce evidence during the initial assessment.
Issues: Whether the provision regarding the location of goods at the time of contract for determining the site of sale is ultra vires, and whether a writ petition under Article 226 is maintainable to challenge factual findings when a statutory alternative remedy exists.
Ratio Decidendi: The legislature has the authority to create a legal fiction to determine the site of sale for tax purposes. Furthermore, the discretionary jurisdiction of the High Court under Article 226 is not an alternative to statutory remedies; it cannot be used to reopen factual determinations exclusively vested in taxing authorities, particularly when the party failed to utilize the statutory reference mechanism.
Result: All the appeals fail and are dismissed with costs.
Legal Category Hierarchy
Table of Contents
2. Validity of the Explanation to Section 2(12) — Whether the taxing authority's finding on the location of goods was speculative — Maintainability of writ petition over statutory remedy. (Para 2 , 3 , 4 )
3. High Court cannot act as an appellate authority on facts under Article 226 when a statutory remedy for reference on questions of law exists. (Para 6 , 7 , 8 , 10 , 11 )
4. A state legislature may determine the site of sale for tax purposes by the location of goods at the time of contract, regardless of property transfer. (Para 9 , 13 )
5. Appeals dismissed with costs. (Para 14 )
6. Can a writ petition under Article 226 be used to bypass a statutory remedy for challenging tax assessments on questions of fact?
No. The High Court ordinarily will not entertain a petition under Article 226 where an equally efficacious statutory remedy exists, and it does not act as a court of appeal to correct errors of fact. (Para 7 , 8 , 11 )
7. Is a legislative provision that deems a sale to occur within a state if goods are located there at the time of contract constitutionally valid?
Yes. The legislature has the authority to locate the site of sale for tax purposes by fixing the actual situation of the goods within the province at the date of the contract. (Para 13 )
8. Can a party challenge findings of fact in an appeal under Article 132 of the Constitution if the certificate was granted only on constitutional grounds?
Generally, no. A person appealing under Article 132 may not challenge the decision on grounds other than those for which the certificate was granted, unless the court grants leave. (Para 5 )
9. Who is competent to determine questions of fact regarding the location of goods for sales tax liability?
Questions of fact are exclusively within the competence of the taxing authorities. The High Court's role is limited to giving opinions on questions of law arising from the Commissioner's order. (Para 6 , 9 , 10 )
J.C.SHAH, J.
(1) 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 petitions 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 assessments` 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 appellant 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 transactions 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. The 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 years 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 orde
