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PETITIONER: TATA  ENGINEERING AND LOCOMOTIVE COMPANYLTD.

       Vs.

RESPONDENT: ASSISTANT COMMISSIONER OF COMMERCIAL TAXES& ANR.

DATE OF JUDGMENT: 24/02/1967

BENCH: HIDAYATULLAH, M. BENCH: HIDAYATULLAH, M. SHELAT, J.M. MITTER, G.K.

CITATION:  1967 AIR 1401            1967 SCR  (2) 751  CITATOR INFO :  F          1977 SC 854  (13)

ACT: Constitution  of India, Art. 226-Principles for exercise  of High  Court’s power under-Existence of alternative  remedies when not a bar.

HEADNOTE: The  appellant company manufactured trucks, bus chasis  etc. in Bihar State.  Some of the goods so manufactured were sent to  the  stockyards  maintained by the  company  in  various States  outside  Bihar.  The goods in the  said  stockyards, according  to the company, had not been appropriated to  any contract   and  remained  the  property  of   the   company. Therefore.  in proceedings for the assessment of  Sales  Tax before  the  Assistant  Commissioner  of  Commercial  Taxes, Jamshedpur  the  company contended that the  sales  effected from  these stockyards were taxable neither under the  Bihar Sales  Tax Act,, nor under the Central Sales Tax  Act.   The contention  was rejected by the Assistant  Commissioner  who demanded  Rs.  1,73,84,273 as tax.   The  company  thereupon filed  a  petition  under  Art.  226  of  the   Constitution questioning  the jurisdiction of the Taxing Authority.   The High   Court  refused  to  give  relief  because   ,adequate alternative remedies under the taxing statute were available and  had  not been exhausted and dismissed the  petition  in limine.  By special leave the company appealed. HELD : The jurisdiction of the High Court under Art. 226  of the  Constitution  cannot be a substitute for  the  ordinary remedies  at  law.  Nor is its exercise desirable  if  facts have  to  be found on evidence.  But there  are  exceptions. One  such exception is when action is being taken  under  an invalid law or arbitrarily without the sanction of law.   In such  a case the High Court may interfere to avoid  hardship to a party. which will be unavoidable if the quick and  more efficacious remedy envisaged by the article were not allowed to  be invoked.  As the appeals required payment of  tax  at least   in  part  the  High  Court  ought  to   have   taken jurisdiction  in this case at least to issue a rule nisi  to see  what the Assistant Commissioner had to say.  [755  E-G, 756 C-D]

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Thansingh  v.  Supdt.  of  Taxes [1964]  6  S.C.R.  654  and Himmatlal V.   State  of M.P. [1954] S.C.R.  1122,  referred to.

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  1604  of 1966. Appeal  by special leave from the judgment and  order  dated April  20, 1966 of the Patna High Court in C.W.J.C. No.  252 of 1966. N.   A.  Palkhiwala, S. P. Mehta, Ravinder Narain and O.  C. Mathur, for the appellant. Niren De, Addl.  Solicitor-General and U. P. Singh, for  the respondents. 75 752 The Judgment of the Court was delivered by Hidayatullah,  J. The appellant is a public limited  Company which manufactures the well-known Tata Mercedes-Benz trucks, bus  chassis,  their spare parts and  other  accessories  at Jamshedpur  in the State of Bihar and they are sold  to  the Government of India, the State Governments, State  Transport Corporations and others.  In the course of its business  the appellant  Company  sells  its  products,  particularly  the trucks and bus chassis, to dealers in various parts of India and  the dealers resell them to consumers, all  over  INdia. According to the appellant Company, its sales in the  Indian market are of three kinds (a)  Sales inside Bihar State; (b)  Sales in the course of inter-State trade and  commerce; and (c)  Sales effected from their stockyards located in  States other than Bihar. The  present appeal concerns sales in the last category  and the question arises in the following circumstances. The  appellant Company filed returns for the quarter  ending on  June  30, 1965, under the Bihar Sales Tax  Act  and  the Central Sales Tax Act respectively, including in the  former sales to consumers in Bihar State and in the latter sales in the  course of interState trade or commerce, and  paid  full tax  due  on  such sales.  The  appellant  Company  did  not include sales from the stockyards, in any of its returns. On  November  12, 1965 the Assistant  Commissioner  of  Com- mercial   Taxes,  Jamshedpur  sent  a  notice  (No.   11284) informing the appellant Company that the returns appeared to be incorrect as all sales were not included and directed the appellant  Company  to  include all  its  sales  in  revised returns  and  all  returns  to  be  filed  in  future.   The appellant Company demurred that sales from their  stockyards in  other States were neither sales in the State  of  Bihar, nor sales in the course of inter-State trade or commerce and were thus not taxable in Bihar.  This plea was not  accepted and  revised returns for the quarters ending on June 30  and September 30, 1965 were ordered to be filed.  The  appellant Company  filed  amended returns under  protest  and  without prejudice  to  its  contentions.   At  the  same  time   the appellant  Company disclosed, the entire procedure of  sales ex-stockyards  and relied upon s. 4(2) of the Central  Sales Tax  Act to exclude such sales.  The appellant Company  also inquired whether these sales were to be treated as sales  in Bihar  for  the purposes of the Bihar Sales Tax  Act  or  as sales  in the course of inter-State trade and  commerce  for purposes of the Central

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753. Sales  Tax  Act,  but no reply  was  given.   The  appellant Company   further  asked  for  an  opportunity  to   produce declarations  from  its customers, who are  also  registered dealers,  with  a  view  to  claiming  a  rebate,  but  this opportunity  was denied.  The appellant Company objected  to the  assessment  for  a period of six  months  under  a  tax legislation,  which  it claimed, was  intended  to  operated yearly  but to no effect.  According to the revised  returns filed  under  compulsion, the break-up of the sales  was  as follows  :  The total gross turnover was  Rs.  33,99,23,595. The  appellant  Company  claimed to deduct  (a)  sales  from stockyards  at  extra State points (Rs.  15,09,24,204);  (b) sales.   in  the  course  of  export-  out  of  India   (Rs. 34,83,671);  and (c) sales effected in Bihar on which  Bihar Sales  Tax was payable (Rs. 3,64,79,209).  The  balance  Rs. 14,90,36,510, according to the appellant Company,  consisted of sales (Rs. 14,33,02,855) to registered dealers taxable at 2% and sales of the balance to unregistered dealers  taxable at  10%.  The tax for the period April 1, 1965 to  September 30,  1965  was  computed at Rs.  34,05,028.   The  appellant Company stated to have paid against it Rs. 34,45,699 as  tax in the Government Treasury and denied any further liability. The  Assistant Commissioner after turning down the  requests for adjournments proceeded to assess the appellant  Company. The gross turnover for the two quarters was taken to be  Rs. 35,13,60,725.    The  difference  (Rs.  1,14,37,129)   arose because  tax  in  other States was also added  to  the  sale prices.     Deducting    the   sales,    made    in    Bihar State(Rs.3,64,79,209) and the sales in the course of  export (Rs.  34,83,671)  the balance (Rs.  31,13,97,844)  was  held taxable  at different rates.  Rs. 12,94,81,387 for  which  C and  D  forms were produced from,  registered  dealers  were taxed  at  2% and the balance (Rs. 16,23,61,334  plus  local taxes  Rs. 1,14,37,129 above mentioned) at 10%.   The  total tax  was computed to be Rs 2,07,81,273 from which  deducting the  tax  already  paid,  a  demand  for  the  sum  of   Rs. 1,73,84,273 was made.  The order of assessment was passed on March  1,  1966 and the amount of’ arrears of tax  was  made payable on or before March 15, 1966.  The appellant  Company asked  for time to make the payment and it was  extended  to March 21, 1966. The appellant Company filed a petition under Art. 226 of the Constitution of India in the Patna High Court for directions or orders or writs, including a writ in nature of certiorari calling  for  the  records and quashing  the  order  of  the Assistant Commissioner.  By the petition the jurisdiction of the  Assistant Commissioner to make the assessment  and  the demand   of,  tax  in  respect  of  stockyard   sales   were questioned.   of  the  grounds. urged,  the  following  were questions of jurisdiction 754               " (a) The assessment on the Petitioner for two               quarters  is illegal as the Central Sales  Tax               is a yearly tax.               (b)   Respondent  No.  1  erred  in   assuming               jurisdiction to tax the outside sales by wrong               interpretation  of evidence,, contrary to  the               overwhelming evidence on record.               (c)               (d)               (e)   Respondent  No. 1 failed  to  appreciate               that  in  law  sale took  place  only  at               the   stockyard   where   the   vehicle    was               appropriated to a particular contract and that

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             the sale did not occasion inter-State movement               of the vehicle.               (f)   Respondent  No. 1 has relied on  section               84  of the Contract Act even though  the  same               was  repealed  in 1930 and  thereby  erred  in               applying a wrong provision of law.               (g)               The  petition  came  up  for  hearing   before               Narasimham C.J. and Ahmad J. on April 20, 1966               and  was  dismissed at  the  threshhold.   The               order of the High Court was :               "The petitioner has not exhausted the internal               remedies provided in the Sales Tax Act by  way               of appeal, revision or reference and statement               of a case to this Court.               We  are not satisfied that this is a fit  case               for  this Court to exercise its  extraordinary               jurisdiction  at this stage.  The petition  is               dismissed summarily.               Sd/- R. L. Narasimham Sd/- Anwar Ahmed". A  request for certificate to appeal to this Court was  then made.  The High Court pointed out that an appeal against the order  of assessment was _possible on payment of 20% of  the assessed  tax.  As this came to Rs. 40,00,000 and  odd  only and Rs. 33,97,000 had already been paid, the High Court held that the Company ought to appeal first since the payment  of the  balance (Rs. 6,00,000) was well within the capacity  of the  appellant  Company and was not so onerous as  to  merit interference  by  way of extraordinary powers  of  the  High Court.   The  application for  certificate  was  accordingly dismissed.  The appellant Company,                             755 however,  obtained  special leave from this Court  and  this appeal was filed. The  learned Additional Solicitor General, who appeared  for the  Assistant Commissioner, raised a preliminary  objection that the appellant Company could not be heard as it had  not exhausted  the remedies available under the taxing  statutes which  gave  right of appeal and revision  and  finally  for invoking  the advisory jurisdiction of the High  Court.   He also relied upon Thansingh v. Supdt. of Taxes(1) in  support of the order of the High Court. The  preliminary objection really does no more than  try  to check  in advance the points which the appellant Company  is seeking  to raise in this appeal.  Whether one looks at  the matter  from the point of view of the appeal proper or  from the point of view of the preliminary objection raised before us, the question is the same, namely, whether the High Court ought in this case to have exercised jurisdiction and if  it took  jurisdiction whether any settled  principle  governing Art. 226 would have been departed from. The power and jurisdiction of the High Court under Art.  226 of  the Cnstitution has been the subject of exposition  from this  Court.   That  it  is extraordinary  and  to  be  used sparingly  goes without saying.  In spite of the  very  wide terms  in  which this jurisdiction is conferred,  the,  High Courts  have rightly recognised certain limitations on  this power.  The jurisdiction is not appellate and it is  obvious that it cannot be a substitute for the ordinary remedies  at law.   Nor  is its exercise desirable if facts  have  to  be found  on evidence.  The High Court, therefore,  leaves  the party  aggrieved to take recourse to the remedies  available under  the ordinary law if they are equally efficacious  and declines  to assume jurisdiction to enable such remedies  to be  by-passed.  To these there are certain exceptions.   One

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such  exception  is  where action is being  taken  under  an invalid law or arbitrarily without the sanction of law.   In such a case, the High Court may interfere to avoid  hardship to  a party which will be unavoidable if the quick and  more efficacious remedy envisaged by article 226 were not allowed to  be invoked.  In our judgment the present is  example  of the   exceptional  situation  above  contemplated  just   as Himmatlal  v.  State of M.P.(1) was another  instance  which came before this Court. The  power and jurisdiction of the  Assistant  Commissioner, Jamshedpur,   were  exercisable  in  respect  of  sales   to consumers in Bihar State and to transactions of sales in the course of interState trade and commerce.  They could not  be utilised  to  tax  sales outside the State  of  Bihar.   The appellant Company claimed (1) [1964] S. C. R. 654. (2) (1954) S. C. R. 11.22 7 56 exemption  in  respect of sales effected from  their  stock- yards in the various States, no doubt fed from Bihar but run by the Company locally.  The Company asserted that the goods in the stockyards were. still those of the appellant Company and  neither the property in them had passed to any one  nor had  they  been  appropriated to a contract  of  sale.   The question was whether in law such sales could be regarded  as in  the course of inter-state trade or commerce  or  outside sales,  subject of course to the claim of the Company  being found  on record to be good.  There is nothing to show  that any further evidence beyond documents produced to illustrate sample sales was necessary.  Nor did the learned  Additional Solicitor General suggest that this was going to be an issue of fact rather than of law.  It would certainly have avoided circuity of action and proved altogether more  satisfactory, if the High Court had considered whether the sample transac- tion   as   illustrated  by  the  documents,   disclosed   a transaction  of sale outside the State of Bihar and  not  in the  course  of  inter-State trade  or  commerce.   On  that depended the payment of tax of the order of Rs.  1,73,00,000 and  odd for two quarters alone.  We are clearly of  opinion that the High Court ought to have taken jurisdiction in this case at least to issue a rule nisi to see what the Assistant Commissioner  had  to  say.  The  High  Court  could  always decline  to  decide the case if disputed questions  of  fact requiring  finding.thereon arose, but so far as we can  see, no such question was likely to arise. We  accordingly  set aside the order of the High  Court  and remit  the  case for further consideration after  issuing  a rule  nisi  so that the Assistant Commissioner  may  file  a return  to the claim put forward by the  appellant  Company. The appeal will be allowed but we make no order about costs. G.C.            Appeal allowed 757