16 March 1954
Supreme Court
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HIMMATLAL HARILAL MEHTAV Vs THE STATE OF MADHYA PRADESH AND OTHE

Bench: MAHAJAN, MEHAR CHAND (CJ),MUKHERJEA, B.K.,DAS, SUDHI RANJAN,BOSE, VIVIAN,HASAN, GHULAM
Case number: Appeal (civil) 20 of 1952


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PETITIONER: HIMMATLAL HARILAL MEHTAV

       Vs.

RESPONDENT: THE STATE OF MADHYA PRADESH AND OTHE

DATE OF JUDGMENT: 16/03/1954

BENCH: MAHAJAN, MEHAR CHAND (CJ) BENCH: MAHAJAN, MEHAR CHAND (CJ) MUKHERJEA, B.K. DAS, SUDHI RANJAN BOSE, VIVIAN HASAN, GHULAM

CITATION:  1954 AIR  403            1954 SCR 1122  CITATOR INFO :  F          1955 SC 661  (5,8,60,123,145)  R          1955 SC 765  (5)  R          1957 SC 397  (14)  R          1957 SC 790  (10)  RF         1958 SC 578  (228)  RF         1959 SC 725  (10)  D          1960 SC 424  (14)  RF         1961 SC  65  (5)  R          1961 SC1615  (11)  R          1962 SC 123  (12)  RF         1962 SC1006  (77)  R          1962 SC1621  (10,12,39,44,45,46,110)  R          1967 SC1401  (8)  D          1971 SC2280  (11)  F          1975 SC1443  (6)

ACT:   Constitution  of  India, arts, 19(1)(g),  226,  286(1)(a)- Central  Provinces  and  Berar Sales Tax Act  (Act   XXI  of 1947),  as  amended by, Act XVI of  1949-Explanation  II  to section 2(g)-Whether ultra vires the Constitution-Threat  to use  coercive  machinery of Act  for  realising  tax-whether infringement  of fundamental rights under art.  19(1)(g)  of the Constitution.

HEADNOTE:   Held,  (i) that explanation II to s. 2(g) of  the  Central Provinces  and  Berar  Sales Tax Act (Act XXI  of  1947)  as amended by Central Provinces and Berar Act (Act XVI of 1949) is ultra vires the State Legislature. (ii) A threat by the State to realize tax from the  assesses without the authority of law by using the coercive machinery of  the  impugned Act is a sufficient  infringement  of  his fundamental right under art. 19(1)(g) and gives him a  right to  seek  relief under art. 226 of  the  Constitution.   The impugned Act, requiring the assesses to-deposit the whole of the tax before he can get the relief provided by it,  cannot be said to provide an adequate alternative remedy.     The  State of Bombay v. The United Motors  (India)  Ltd.

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([1953]  s  C.R.  1069);  Baleigh  Investment  Co.  v.   The Governor-General in council (L.R. 74 I.A. 50); Mohd.   Yasin v. The Town Area Committee([1952] S.C.R. 572) referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No, 20 of 1952.    Appeal under article 132(1) of the Constitution of  India from  the Judgment and Order dated the 25th April, 1952,  of the  High  Court of Judicature at Nagp ur  in  Miscellaneous Petition No. 1623 of 1951.    N.     P. Engineer (R.  S. Dabir and I. N. Shr off,  with him) for the appellant.    T.L.  Shevde, Advocate-General of Madhya  Pradesh,   T.P. Naik, with him) for respondent No. 1. 1123     V.K.T.   Chari,  Advocate-General  of  Madras  (V.    V. Raghavan, with him) for the intervener.    1954.   MArch  16.   The  Judgment  of,  the  Court   was delivered by    MAHAJAN C. J.-This is an appeal by leave from a  judgment of the High Court of Judicature at Nagpur dated the 25th  of April, 1952, dismissing a petition under article 226 of  the Constitution of India filed by the appellant questioning the vires  of  certain provisions of the Central  Provinces  and Berar Sales Tax Act 1947.    The appellant represents a concern C. Parakh and  Company (India)  Limited,  a company registered  under’  the  Indian Companies  Act, 1913, having its head office at Bombay,  and several branches in . the State of Madhya Pradesh.  The main business  of the appellant company is that of  cotton.   The head-office of the appellant at Bombay sells cotton bales to several  mills  and individuals under the  control  and  the system regulated by the Textile Commissioner at Bombay,  and upon  a  contract of sale being completed  the  goods  after being  ginned and pressed are sent from Khamgaon  and  other places  in  the  State of Madhya Pradesh  and  are  actually delivered in Bombay and such other places outside the  State of  Madhya  Pradesh  as directed by the  head  office.   The cotton  bales are sent by rail under an insurance in  favour of  the appellant, and are delivered to the buyer by  tender of railway receipt against the payment of price in Bombay.    Under the Central Provinces and Berar Sales Tax Act, 1947 (Act I XXI of 1947), cotton was declared liable to sales tax on  the  11th  of  April, 1949,  and  since  that  date  the appellant  commenced  paying  the  tax  in  respect  of  the purchases made by it, and continued to pay it till the  31st of  December,  1950.  For the quarter ending on  the  31stof March,  1951,  the  appellant declined to  pay  the  tax  in respect of the purchases made during that quarter, realizing that it could not be made legally liable for the payment  of this  tax in the State of Madhya, Pradesh, the  transactions done or effected in Madhya Pradesh not being " sales" within that State.  Apprehending that  the company 1124 may be subjected to the payment of the tax without authority of  law, an application was preferred in the High  Court  of Judicature  at  Nagpur praying for an  appropriate  writ  or writs  which may secure to the company protection  from  the impugned  Act  and  its enforcement by the  State.   It  was alleged  that Explanation II to section 2(g) of the  Central Provinces and Berar Sales Tax Act, 1947, as further  amended by Act XVI of 1949 was ultra vires and illegal.   This  petition, along with a refer eence in  another  case

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(Miscellaneous Civil Case No. 258 of 1951: A.I.R. 1952  Nag. 378), was heard by a Division Bench of the Nagpur High Court and  it was held that Explanation II to section 2(g) of  the Act was not enforceable because under the Constitution sales tax  could only be collected, in the State where  the  goods were  delivered for consumption.  It was further  held  that Explanation  11  as amended by the C.P. & Berar Act  XVI  of 1949 was not validly enacted because it made drastic changes in  the rules of the Sale of Goods Act.   Without  obtaining the  assent of the Governor-General as required  by  section 107 of the Government of India Act, 1935.  ’It was  observed that  the  mere p reduction of the goods in a State  is  not enough  to  make  the  tax  payable  unless  the  goods  are appropriated  to a particular contract, and that  to  impose the  tax  at that stage would be tantamount to  charging  an excise duty and not a tax on the sale of goods.  In spite of these  findings the High Court declined to issue a writ  and dismissed. the petition made to it under article 226 of  the Constitution  on the ground that a mandamus issues  only  to compel  an authority to do or abstain from doing  some  act, that  it is seldom anticipatory and certainly  never  issues where  the  action  of the authority is  dependant  on  some action  of the petitioner and that in the present  case  the petitioner  had not even made his return and no  demand  for the tax could be made from him.   In this appeal it was argued, by Shri Noshirwan  Engineer, learned  counsel  for  the appellant, that  an  illegal  and unjust imposition operates as an illegal restraint on  trade and violates fundamental rights, 1125 that  the  High Court having held that the  Constitution  by article   286  thereof  made  delivery  of  the  goods   for consumption the decisive factor for determining which  State should have the right of taxing such sales, and having  thus found the provision of the Explanation to the definition  of "sale"  unconstitutional,  should  have  issued  a  writ  of mandamus  restraining  the respondent State  from  enforcing that part of the Act.     To appreciate the contentions of the learned counsel  it is  necessary to set out the relevant provisions of the  Act which,  the  High Court has declared ultra vires  the  State Legislature.  Act XXI of 1947 defines the expression  "sale" in section 2(g) of the Act in these terms:-  "  ’Sale’ with all its grammatical variations  and  cognate expressions means any transfer of property in goods for cash or   deferred  payments  or  other  valuable   consideration including  transfer  of property in goods made in the course of  the  execution  of a contract, but does  not  include  a mortgage, hypothecation, charge or pledge ".    "  Explanation.(I)-" A transfer of goods on  hirepurchase or other instalment system of payment shall, notwithstanding that the seller retains a title to any goods as security for payment of the price, be deemed to be a sale.  "     Explanation  (II)-"  Notwithstanding  anything  to   the contrary in the Indian Sale of Goods Act, 1930, the sale  of any  goods which are actually in the Central  Provinces  and Berar  at the time when the contract of sale as  defined  in that  Act  in respect thereof is made, shall,  wherever  the said contract of sale is made, be deemed for the purpose  of this  Act to have taken place in the Central  Provinces  and Berar.  "   This  provision was amended by the Central  Provinces  and Berar  Act XVI of 1949 which came into force on the 11th  of ApriL  1949,  by which Explanation II of  section  2(g)  was amended as follows:-

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   Explanation  (II)-,’  Notwithstanding  anything  to  the contrary in the Indian Sale of Goods Act, 1930, the sale  or purchase  of any goods shall be deemed for the  purposes  of this Act, to have taken place in this 1126    Province-wherever the contract of sale or purchase  might have been made   (a)     If the goods were actually in this Province at the time  when  the  contract of sale  or  purchase  in  respect thereof was made, or    (b)    In case, the contract was for the sale or purchase of  future  goods  by description, then, if  the  goods  are actually  produced  or found in this Province  at  any  time after  the contract of sale or purchase in respect  ’thereof was made.  "     Certain  amendments were made in the Act, by Act  IV  of 1951  which came into force on the 1st of April.  1951,  but these are not relevant to the present’ inquiry.     As  pointed out above, the High Court held that the  new Explanation  II  was ultra vires the State  Legislature  and that the mere production of goods was not enough to make the tax  payable  unless  the  goods  were  appropriated  to   a particular  contract.  The correctness of this view  can  no longer  be questioned by reason of the majority decision  of this  court  in  The State of Bombay v.  The  United  Motors (India) Ltd.(1), wherein it was held that article 286(1) (a) of  the Constitution read with the Explanation  thereto  and construed  in  the  light of article  301  and  article  304 prohibits  the  taxation  of sales  or  purchases  involving inter-State  elements,  by all States except  the  State  in which the goods are delivered for the purpose of consumption therein  and  that the view that the  Explanation  does  not deprive  the  State,  in which the  property  in  the  goods passed,  of its taxing power and that consequently both  the State  in  which the property in the goods  passes  and  the State i n which the goods are delivered for consumption have the power to tax, is not correct.     The  learned  Advocate-General of the State did  not  in this situation, and very properly, challenge the correctness of  the  decision  of  the High Court  on  this  point,  and conceded  that the Explanation was clearly ultra  vires  the State  Legislature.   He  however  contended  that  on   the principle enunciated by the Privy (1)  [1953] S.C.R. 1069. 1127     Council  in  Raleigh  Investment Co.  v.  The  Governor- General  in Council(1), jurisdiction to question  assessment otherwise than by use of the machinery expressly provided by the  Act, was inconsistent with the statutory obligation  to pay,  arising  by  virtue of the  assessment  and  that  the liability  to pay the sales tax under the Act is  a  special liability  created by the Act itself which at the same  time gives  a  special and particular remedy which  ought  to  be resorted to, and therefore the remedy by a writ ought not to be allowed to be used for evading the provisions of the Act, especially  a  fiscal Act.  It was also said that  the  con- ditions  requisite for the issue of a writ of mandamus  were not present in the case and that it was not within the scope and purpose of article 226 of the Constitution to decide  an academic question.   In  our  opinion, the contentions raised  by  the  learned Advocate-General are not well founded.  It is plain that the State  evinced an intention that it could certainly  proceed to  apply  the  penal  provisions of  the  Act  against  the appellant  if  it failed to make the return or to  meet  the

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demand and in order to escape from such serious consequences threatened   without  authority  of  law,   and   infringing fundamental rights, relief by way of a writ of mandamus  was clearly the appropriate relief.  In Mohd.  Yasin v. The Town Area Committee(2), it was held by this court that a  licence fee  on a business not only takes away the property  of  the licensee  but  also  operates  as  a,  restriction  on   his fundamental right to carry on his business and therefore  if the imposition of a licence fee is without authority of  law it can be challenged by way of an application under  article 32, a fortiori also, under article 226.  These  observations have  apposite  application  to  the  circumstances  of  the present  case.   Explanation II to section 2(g) of  the  Act having  been declared ultra vires, any imposition  of  sales tax  on  the  appellant in Madhya  Pradesh  is  without  the authority  of law,, and that being so a threat by the  State by using the coercive machinery of the impugned Act to (1)  74 I.A. 5o. (2)  [1952] S.C.R. 572, I46 1128 realize  it from the appellant is a sufficient  infringement of his fundamental right under article 19(1) (g) and it  was clearly  entitled  to  relief  under  article  226  of   the Constitution.   The contention that because a  remedy  under the  impugned  Act  was available to the  appellant  it  was disentitled to relief under article 226 stands negatived  by the  decision  of this court in The State of Bombay  v.  The United Motors (India) Ltd.(1), above referred to.  There  it was  held that the principle that a court will not  issue  a prerogative  writ  when an adequate alternative  remedy  was available  could not apply where a party came to  the  court with  an  allegation  that his fundamental  right  had  been infringed  and sought relief under article  226.   Moreover, the  remedy  provided  by  the Act  is  of  an  onerous  and burdensome character.  Before the appellant can avail of  it he  has  to  deposit the whole amount of the  tax.   Such  a provision can hardly be described as an adequate alternative remedy.    For  the reasons given above, we are of the opinion  that the  High  Court,  having held that the  Explanation  II  to section  2(g)  of the Act was ultra vires, was in  error  in dismissing  the  application on the ground that it  was  not entitled  to relief under the provisions of article  226  of the  Constitution.   In the result therefore  we  &How  this appeal  with costs and direct an appropriate writ  to  issue restraining   the   first  respondent   from   imposing   or authorising imposition of a tax on the appellant in exercise of its authority under Explanation 11 held void.      Appeal allowed. (I) [1953] S.C.R. 1069. 1129