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1970 (9) TMI 108
Issues Involved:
1. Nature of unconstitutionality under Article 13 of the Constitution.
2. Validity of the amendment to a void statute.
3. Effect of judicial decisions on the existence of a statute.
4. Legislative competence to amend or re-enact a void statute.
Detailed Analysis:
1. Nature of Unconstitutionality Under Article 13 of the Constitution:
The primary issue is the nature of unconstitutionality attached to a statute under Article 13 and how it can be cured. The statute in question is the Public Premises (Eviction of Unauthorised Occupants) Act, 1958 (Principal Act). Sections 5 and 7(2) of the Principal Act were found to contravene Article 14 of the Constitution and were declared void under Article 13(2). The unconstitutionality was due to the arbitrary power given to the Government to choose between summary procedures and regular civil suits for eviction and recovery of damages, leading to discrimination.
2. Validity of the Amendment to a Void Statute:
The petitioners argued that the entire Principal Act was void and non-existent in law, and thus, Parliament could not amend it but had to re-enact it entirely. The respondents contended that the Principal Act, although void, continued to exist on the statute book and was available for amendment. The court examined whether a void statute could be amended or if it required re-enactment. The court concluded that a void statute is "ineffectual, nugatory, and devoid of any legal force or binding effect" but still exists on the statute book for the purpose of legislative action, including amendment.
3. Effect of Judicial Decisions on the Existence of a Statute:
The court discussed the distinction between the effects of legislative action (repeal or amendment) and judicial decisions (declaration of unconstitutionality). A judicial decision does not physically remove a statute from the statute book but renders it unenforceable. The court emphasized that only the Legislature has the power to repeal a statute, while the judiciary can declare it void, affecting its enforceability but not its existence on the statute book.
4. Legislative Competence to Amend or Re-enact a Void Statute:
The court analyzed whether Parliament could amend a void statute or if it had to re-enact it. It concluded that the Legislature has the power to amend a void statute to remove its unconstitutionality. The amendment of the Principal Act by the Public Premises (Eviction of Unauthorised Occupants) Amendment Act, 1968, which added Section 10E to bar civil court jurisdiction, was held to be valid. The court held that the amendment cured the unconstitutionality of the Principal Act, making it valid and enforceable.
Conclusion:
The court dismissed the petitioners' contention that the Principal Act was non-existent and could not be amended. It upheld the validity of the amendment, stating that the Principal Act, although void, continued to exist on the statute book for the purpose of legislative action. The court emphasized the distinction between legislative repeal and judicial declaration of unconstitutionality, affirming that the Legislature has the competence to amend a void statute to cure its defects. The proceedings for eviction under the amended Act were deemed valid and could not be quashed.
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1970 (9) TMI 107
Issues:
1. Validity of prosecution sanction by competent authority under the Prevention of Corruption Act.
2. Interpretation of the specific provision under which the prosecution sanction was granted.
3. Jurisdictional challenge regarding the authority responsible for sanctioning the prosecution.
Analysis:
1. The primary issue before the Supreme Court was to determine whether the prosecution of the appellant was sanctioned by the competent authority under the Prevention of Corruption Act. The case involved the appellant, who was caught accepting illegal gratification, leading to his conviction under Section 5(2) of the Prevention of Corruption Act and Section 161 of the Indian Penal Code. The High Court upheld the validity of the prosecution sanction, which was granted by the Ministry of Industrial Development and Company Affairs, signed by the Deputy Secretary to the Government of India. The appellant's challenge was based on the authentication of the sanction.
2. The prosecution sanction, as reproduced in the judgment, clearly outlined the allegations against the appellant and the reasons for prosecution under Section 161, I.P.C. and Section 5(2) of the Prevention of Corruption Act. The sanction was granted under Section 6(1)(c) of the Prevention of Corruption Act, authorizing the prosecution of the appellant for the stated offenses. The High Court validated this sanction, emphasizing the authority's careful examination of the material before granting it.
3. A new jurisdictional challenge was raised during the appeal, questioning the specific provision under which the prosecution sanction was granted and the authority responsible for such sanction. The appellant's counsel argued that the sanction should have been granted under Section 6(1)(a) of the Prevention of Corruption Act and contended that only the Home Department of the Government of India had the authority to sanction the prosecution in this case. This argument was based on a Gazette Notification amending the Allocation of Business Rules. The Supreme Court allowed this new point to be raised and adjourned the hearing to verify if the Home Ministry had sanctioned the prosecution.
4. Ultimately, it was revealed during the hearing that the Home Ministry had not sanctioned the appellant's prosecution, leading to the conclusion that the prosecution was not valid without such sanction. As a result, the Supreme Court allowed the appeal, setting aside the appellant's conviction and sentence. The appellant, who was on bail, had their bail bond deemed canceled. The judgment highlighted the importance of proper sanctioning authorities and jurisdictional requirements in prosecuting offenses under the Prevention of Corruption Act.
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1970 (9) TMI 106
Issues:
1. Validity of the grant of mining lease.
2. Power of Central Government to review its own order.
3. Interconnected nature of relief sought by the 5th respondent.
4. Exercise of suo moto power by the Central Government.
Validity of the grant of mining lease:
The case involved a dispute over the grant of a mining lease for fireclay in a specific area. The Deputy Commissioner announced the availability for regrant of mining rights in a village, and the appellant partnership firm applied for the lease. Subsequently, the State Government granted the lease to the appellant, rejecting other applicants. The 5th respondent challenged this grant before the Central Government, which dismissed the petition on the grounds of being time-barred. The Central Government later issued an order setting aside the State Government's grant, citing procedural irregularities. The appellant challenged this order before the High Court and subsequently the Supreme Court. The Supreme Court held that the Central Government's order lacked clarity on the exercise of suo moto power and failed to provide the appellant with an opportunity to respond adequately. Consequently, the grant of the mining lease to the appellant was upheld, and the Central Government was directed to pay the appellant's costs.
Power of Central Government to review its own order:
The appellant argued that the Central Government did not have the power to review its own order under the Mines and Minerals Act or the Mineral Concession Rules. The High Court upheld the Central Government's order based on the grounds that the initial order was not complete and that the Central Government possessed the suo moto power to review State Government orders. However, the Supreme Court disagreed, stating that there was no provision empowering the Central Government to review its order. The Court emphasized that the lack of explicit communication regarding the exercise of suo moto power by the Central Government invalidated the subsequent order.
Interconnected nature of relief sought by the 5th respondent:
The 5th respondent sought two reliefs in his application: setting aside the grant to the appellant and granting the lease to himself. The High Court viewed these as independent prayers but the Supreme Court disagreed, stating that the reliefs were interconnected. The Court emphasized that the grant in favor of the 5th respondent was contingent on setting aside the initial grant to the appellant. Therefore, the dismissal of the 5th respondent's application as time-barred applied to both aspects of his request.
Exercise of suo moto power by the Central Government:
The Central Government's order was purportedly made under Rule 55 of the Mineral Concession Rules, 1960, and other enabling powers. The Supreme Court noted that the order did not explicitly indicate the exercise of suo moto power. The Court highlighted that the lack of communication regarding the exercise of such power deprived the appellant of the opportunity to respond adequately. The Court concluded that the Central Government's failure to inform the appellant of the intended exercise of suo moto power rendered the order invalid.
In conclusion, the Supreme Court allowed the appeal and the writ petition, setting aside the impugned order and directing the Central Government to bear the appellant's costs.
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1970 (9) TMI 105
Issues Involved:
1. Barred by Limitation
2. Applicability of Section 14 of the Indian Limitation Act, 1908
3. Rate of Damages
Detailed Analysis:
1. Barred by Limitation:
The primary issue in this case was whether the suit filed by the plaintiffs was barred by limitation. The plaintiffs sought recovery of damages for the period from November 22, 1948, to November 5, 1956. The defendant argued that the suit was barred by limitation. The trial court and the High Court both held that the plaintiffs were entitled to the benefit of Section 14 of the Indian Limitation Act, 1908, which allowed for the exclusion of time during which the plaintiffs were prosecuting another civil proceeding in good faith. The High Court found that the previous suit was founded upon the same cause of action and was prosecuted with due diligence, thus satisfying the conditions of Section 14.
2. Applicability of Section 14 of the Indian Limitation Act, 1908:
Section 14(1) of the Indian Limitation Act, 1908, states: "In computing the period of limitation prescribed for any suit the time during which the plaintiff has been prosecuting with due diligence another civil proceeding, whether in a Court of first instance or in a Court of Appeal, against the defendant shall be excluded, where the proceeding is founded upon the same cause of action and is prosecuted in good faith in a Court which, from defect of jurisdiction, or other cause of a like nature, is unable to entertain it."
The High Court held that the plaintiffs could take advantage of Section 14 because the previous suit included the claim for future damages, and it was prosecuted in good faith. The court in the previous suit was found to be "unable to entertain" the claim for future mesne profits due to a defect of jurisdiction or other cause of a like nature. The High Court's decision was based on the principle that the defect must be of such a character as to make it impossible for the court to entertain the suit or to prevent it from deciding it on the merits.
3. Rate of Damages:
The trial court fixed the rate of compensation at Rs. 250 per month, which was upheld by the High Court. The plaintiffs initially claimed damages at the rate of Rs. 300 per month. The High Court, however, upheld the trial court's determination of the rate of damages at Rs. 250 per month. The defendant contested this rate, but the courts found it to be appropriate based on the evidence presented.
Conclusion:
The Supreme Court upheld the High Court's judgment, agreeing that the plaintiffs were entitled to the benefit of Section 14 of the Indian Limitation Act, 1908. The court found that the previous suit was prosecuted in good faith and that the defect in the previous suit was of a nature that prevented the court from entertaining it. The rate of damages determined by the trial court and upheld by the High Court was also affirmed. The appeal was dismissed with costs.
The separate opinion by Hegde, J., acknowledged the long-standing legal principle that a new cause of action accrues when a decree is set aside, thus agreeing with the majority opinion that the plaintiffs were entitled to the benefit of Section 14 and the suit was not barred by limitation.
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1970 (9) TMI 104
Issues Involved:
1. Pre-censorship and Freedom of Speech and Expression
2. Definiteness of Principles for Censorship
3. Reasonable Time-Limit for Censorship Decisions
4. Appeal Process for Censorship Decisions
Detailed Analysis:
1. Pre-censorship and Freedom of Speech and Expression
The petitioner argued that pre-censorship itself cannot be tolerated under the freedom of speech and expression guaranteed by Article 19(1)(a) of the Constitution. The court examined whether pre-censorship by itself offends the freedom of speech and expression. The Constitution allows for reasonable restrictions on this freedom in the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality, or in relation to contempt of court, defamation, or incitement to an offense. The court found that the censorship of films, including pre-censorship, is justified under the Constitution. The court emphasized that the treatment of motion pictures must be different from other forms of art and expression due to their instant appeal and impact, particularly on children and adolescents. Therefore, the classification of films into 'U' (unrestricted) and 'A' (restricted to adults) categories was deemed reasonable.
2. Definiteness of Principles for Censorship
The petitioner contended that even if pre-censorship were a legitimate restraint, it must be exercised on very definite principles to avoid arbitrary action. The court examined the principles laid down in Section 5-B of the Cinematograph Act and the directions issued by the Central Government. The court found that the general principles and specific instances provided in the directions were clear and within the common understanding of the average person. However, the court noted a flaw in the directions: a total absence of any direction to preserve and promote art. The court emphasized that artistic appeal or presentation of an episode could rob it of its vulgarity and harm, and this aspect was completely forgotten in the directions. The court suggested that the principles laid down in Ranjit D. Udeshi's case for determining obscenity in books should apply mutatis mutandis to films.
3. Reasonable Time-Limit for Censorship Decisions
The petitioner argued that there must be a reasonable time-limit fixed for the decision of the authorities censoring the film. The Solicitor-General conceded this point and assured that the government would set legislation to effectuate this at the earliest possible opportunity. The court expressed satisfaction that the time taken for censorship decisions was generally reasonable, except in very rare cases.
4. Appeal Process for Censorship Decisions
The petitioner contended that the appeal should lie to a court or an independent tribunal, not the Central Government. The Solicitor-General conceded this point as well, agreeing that the government would set up legislation to ensure that appeals would be handled by experts sitting as a tribunal and deciding matters quasi-judicially. The court agreed that experts deciding such matters would inspire more confidence than a Secretary of the Central Government.
Conclusion:
The court allowed the petition, noting that the purpose of the petition was served by the assurances given by the Solicitor-General and the observations made by the court. The court emphasized the importance of including directions to preserve and promote art in the censorship guidelines. The court did not make any order regarding costs.
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1970 (9) TMI 103
Issues:
- Interpretation of Section 82(2) of the Madras District Municipalities Act 1920
- Whether the municipality was bound by Rent Acts in determining fair rent
- Validity of the general revision of rental values by Guntur Municipality in 1960
Analysis:
The Supreme Court was tasked with determining whether the Guntur Municipality's general revision of rental values in 1960 was legal and whether the municipality was bound by Rent Acts in assessing fair rent. The Court examined Section 82(2) of the Madras District Municipalities Act 1920, which mandates the annual value of lands and buildings to be based on the rent they could reasonably fetch. The Court emphasized that the municipality must consider the fair or standard rent payable under Rent Acts in force during the assessment period. Referring to the Corporation of Calcutta v. Sm. Padma Debi case, the Court held that the annual rent cannot exceed the standard rent under Rent Control Acts.
Moreover, the Court rejected the argument that fair rent fixation under the Rent Act was a prerequisite for assessing valuation. It clarified that the municipality must consider fair rent principles even when the Controller has not set a fair rent. The assessment should align with the principles laid down in the Rent Act applicable during the assessment period. The Court highlighted the confusion in lower court judgments regarding the applicable Rent Acts for valuation assessment under Section 82(2) of the Municipalities Act.
Consequently, the Supreme Court modified the decrees, ruling that the Guntur Municipality's revision exceeding fair rent determinable under Rent Acts was illegal and ultra vires. A permanent injunction was issued against the municipality from collecting excess tax amounts. The judgment emphasized that valuation for tax purposes must comply with Rent Act provisions in force during the assessment period. The parties were directed to bear their own costs in the proceedings.
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1970 (9) TMI 102
Issues Involved:
1. Validity of the certificate proceedings due to non-compliance with the prescribed form.
2. Validity of the notice under section 7 issued on a different date than the certificate.
3. Application and impact of the Bengal Public Demands Recovery (Validation of Certificates and Notices) Act, 1961 (West Bengal Act 11 of 1961).
Issue-wise Detailed Analysis:
1. Validity of the certificate proceedings due to non-compliance with the prescribed form:
The main contention was that the certificate issued was not in accordance with the prescribed form, as mandated by the Bengal Public Demands Recovery Act. The certificate in question did not follow the exact wording of the prescribed form, which led the trial court to deem it invalid, relying on the decision in Satish Chandra Bhowmick v. Union of India [1961] 65 C.W.N. 324. However, the appellate court referenced a later decision in Messrs. N. C. Mukherjee and Co. v. Union of India [1964] 51 I.T.R. 366; A.I.R. 1964 Cal. 165, which held that "a certificate is not rendered invalid by a mere defect of form and even by an omission to fill up a blank." The court preferred this latter decision, emphasizing that technical defects should not invalidate a certificate. Furthermore, the Bengal Public Demands Recovery (Validation of Certificates and Notices) Act, 1961, clarified that no certificate should be deemed invalid due to form defects, thus superseding the earlier decision.
2. Validity of the notice under section 7 issued on a different date than the certificate:
The second ground for the trial court's decision was that the notice under section 7 was dated differently from the certificate, which was considered invalid based on the Satish Chandra case. The appellate court, however, referred to the later decision in Messrs. N.C. Mukherjee and Company, which explained that a notice issued after the original was set aside could not bear the same date as the certificate. The court stated, "The true principle is that no certificate filed under section 4 or section 6 of the Bengal Public Demands Recovery Act, 1913, and no notice issued under section 7 of that Act should be pronounced to be invalid merely on the ground of a defect, error or irregularity in the form thereof." The court concluded that issuing a second notice with a different date does not invalidate the proceedings, especially considering the 1961 Act which cured such defects.
3. Application and impact of the Bengal Public Demands Recovery (Validation of Certificates and Notices) Act, 1961 (West Bengal Act 11 of 1961):
The appellate court emphasized the significance of the 1961 Act, which was enacted to validate certificates and notices despite any defects in form. The Act explicitly stated that "no certificate filed under section 4 or section 6 of the said Act and no notice served under section 7 of the said Act shall be deemed to be invalid or shall be called in question merely on the ground of any defect, error or irregularity in the form thereof." The court clarified that the statement of objects and reasons for the Act should not control the provisions of the enactment if the words are clear. The Act was intended to cure formal defects and ensure that such technicalities do not invalidate legal proceedings. The appellate court held that the defects cited by the trial court were cured by the 1961 Act, thus validating the certificate and notice in question.
Conclusion:
The appellate court allowed the appeal, setting aside the judgment and decree of the trial court, and dismissed the suit. The court concluded that both grounds for invalidating the certificate proceedings were not sustainable due to the curative provisions of the 1961 Act. Each party was ordered to bear its own costs.
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1970 (9) TMI 101
Issues Involved:
1. Preliminary objection regarding alternative remedy.
2. Binding nature of previous assessment findings.
3. Classification of "hume pipes" as sanitary fittings.
4. Consideration of evidence and material by the Sales Tax Officer.
5. Interpretation of the term "sanitary fittings" in the context of the U.P. Sales Tax Act.
Detailed Analysis:
1. Preliminary Objection Regarding Alternative Remedy:
The learned counsel for the department raised a preliminary objection, arguing that an alternative remedy by way of appeal was available to the petitioner, and thus, the court should not exercise its jurisdiction under Article 226 of the Constitution. The petitioner countered that the issue involved the interpretation of a notification under the U.P. Sales Tax Act, which was of a recurring nature, causing significant financial liability. The court acknowledged that although jurisdiction under Article 226 is typically not exercised when an adequate alternative remedy exists, special circumstances in this case warranted such intervention. The court found the appeal remedy not efficacious due to the substantial additional liability and potential adverse effects on the petitioner's business.
2. Binding Nature of Previous Assessment Findings:
The court pointed out that while each assessment year is a separate unit, the findings of the revising authority (the highest tribunal in the sales tax department hierarchy) should generally be followed in subsequent assessments unless new material justifies a different view. The court cited the Bombay High Court's rulings in H.A. Shah & Co. v. Commissioner of Income-tax and Burmah Shell Refineries Ltd. v. G.B. Chand, Income-tax Officer, emphasizing that earlier decisions should not be reopened without fresh facts. The Sales Tax Officer's disregard for the revising authority's decision for the assessment year 1961-62 was deemed improper and potentially illegal.
3. Classification of "Hume Pipes" as Sanitary Fittings:
The primary dispute was whether "hume pipes" manufactured by the petitioner fell within the category of "sanitary fittings" taxable at 7% under the notification issued under section 3-A of the U.P. Sales Tax Act. The court noted that the term "sanitary fittings" was not defined in the Act or Rules and should be interpreted in a popular and commercial sense. Referring to the Supreme Court's rulings in Commissioner of Sales Tax, Madhya Pradesh, Indore v. M/s. Jaswant Singh Charan Singh and Ramavatar Budhaiprasad v. Assistant Sales Tax Officer, Akola, the court emphasized that terms in sales tax statutes should be construed according to their popular meaning.
4. Consideration of Evidence and Material by the Sales Tax Officer:
The court found that the Sales Tax Officer had disregarded the substantial material presented by the petitioner, including affidavits, opinions from dealers, and official communications, which indicated that "hume pipes" were not considered sanitary fittings in the commercial world. The court held that quasi-judicial orders must consider all material on record, and failure to do so renders the order arbitrary and perverse, justifying intervention under Article 226.
5. Interpretation of the Term "Sanitary Fittings":
The court concluded that "sanitary fittings" in common parlance referred to items used in bathrooms and lavatories, such as washbasins and commodes. While concrete pipes might be used for drainage and sewage disposal, they were also used for various other purposes. The court determined that the term "sanitary fittings" should be restricted to articles commonly understood as such in everyday language and commercial practice. The court found that the pipes manufactured by the petitioner did not fall within this category and were, therefore, unclassified goods taxable at the general rate under section 3.
Conclusion:
The court allowed the petition, quashing the impugned assessment orders for the years 1962-63 and 1965-66, which had levied tax at 7% on the turnover of pipes. The court held that the pipes were unclassified goods and taxable at the general rate specified under section 3. The petitioner was entitled to costs.
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1970 (9) TMI 100
Issues:
1. Whether the assessee, a cooperative housing society, was liable to pay sales tax on the turnover of bricks sold to its members.
2. Whether the transactions between the society and its members constituted a sale under the U.P. Sales Tax Act.
Analysis:
The judgment pertains to a reference under section 11(1) of the U.P. Sales Tax Act involving a cooperative housing society and the sales tax levied on the turnover of bricks sold to its members during the assessment year 1957-58. The society contended that it acted in a supervisory role, distributing bricks to members without profit. The Sales Tax Officer assessed sales tax, which was annulled by the appellate authority but reinstated by the Judge (Revisions), leading to the reference on whether the society was a 'dealer' making sales to its members in the regular course of business.
The High Court found the Judge (Revisions)' approach erroneous, emphasizing that liability to pay tax hinges on being a 'dealer' engaged in buying and selling goods. Referring to a Supreme Court case, the Court highlighted the test of whether property was transferred for a price or if the entity acted as an agent for members. The society's plea that members funded the brick-kiln operation was supported by correspondence and statements, indicating the society did not invest its capital in the venture.
The Court noted that maintaining accounts did not establish the society as a dealer, as it could be consistent with members' contributions funding the operation. It was crucial to determine if the society sold its own goods or acted as an agent for members. Since the property in the bricks did not vest in the society, there was no sale. The Court distinguished a prior case involving a cooperative canteen, emphasizing the agency role of the society in providing the facility to manufacture and distribute bricks.
Ultimately, the Court answered the reference in favor of the assessee, concluding that the society did not engage in sales transactions with its members. The judgment highlighted the distinction between acting as an agent for members versus selling its own goods, leading to the decision against the department.
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1970 (9) TMI 99
Issues Involved:
1. Validity of the assessment made by the Sales Tax Officer for the year 1961-62.
2. Rejection of the assessee's books of account.
3. Interpretation of Section 12(2)(b) of the General Sales Tax Act, 1125 M.E. and Section 17(3) of the Kerala General Sales Tax Act, 1963.
4. Principles governing "best judgment assessment."
5. Validity of inferences drawn by the assessing authorities based on available materials.
Detailed Analysis:
1. Validity of the Assessment Made by the Sales Tax Officer for the Year 1961-62:
The primary issue was whether the assessment made on the petitioner by the Sales Tax Officer for the year 1961-62 was according to the best of his judgment. The court examined the facts and found that the turnover furnished in the return and the accounts produced were defective and unacceptable. The Sales Tax Officer, the Appellate Assistant Commissioner, and the Tribunal all rejected the books of account of the assessee, which the court deemed appropriate.
2. Rejection of the Assessee's Books of Account:
The rejection of the assessee's books of account was based on several reasons:
- The turnover furnished in respect of hill produce was the sales turnover instead of the purchase turnover.
- Sales effected through commission agents were accounted for only after deducting commission, instead of the gross amount.
- Business place inspections revealed unaccounted transactions in note-books and slips, indicating suppressions.
The court upheld the rejection, noting the irregularities and malpractices reflected in the slips, which suggested a pattern of suppression.
3. Interpretation of Section 12(2)(b) of the General Sales Tax Act, 1125 M.E. and Section 17(3) of the Kerala General Sales Tax Act, 1963:
The court analyzed the relevant sections of the General Sales Tax Act, 1125 M.E., and the Kerala General Sales Tax Act, 1963. Section 12(2)(b) of the 1125 Act and Section 17(3) of the 1963 Act both empower the assessing authority to assess the dealer to the best of its judgment if the return is incorrect or incomplete. The court noted that the difference in wording between the two sections did not substantially alter the jurisdiction of the authority to make a "best judgment assessment."
4. Principles Governing "Best Judgment Assessment":
The court referred to several precedents to outline the principles governing "best judgment assessment":
- The assessment must be based on a fair estimate, considering all relevant materials, local knowledge, and previous returns.
- The assessment should not be arbitrary or capricious.
- There must be evidence or material to support the assessment, beyond mere suspicion.
- The assessing officer is not bound by technical rules of evidence and can act on material that may not be accepted in a court of law.
- The principles laid down by the Supreme Court in cases like Raghubar Mandal Harihar Mandal v. The State of Bihar and State of Kerala v. Velukutty were emphasized.
5. Validity of Inferences Drawn by the Assessing Authorities Based on Available Materials:
The court examined whether the inference of continuous suppression for the entire season, based on detected suppressions for a short period, was justified. It was noted that the assessment should have a reasonable nexus to the available material and circumstances. The court found that there was sufficient material to indicate a pattern of suppression:
- Continuous suppression for five days involving considerable amounts.
- Suppressions at both business places.
- Unexplained slips indicating large-scale suppressions.
The court concluded that the inference drawn by the assessing authorities was based on an honest and reasonable assessment of the available materials.
Conclusion:
The court dismissed the tax revision case, affirming that the assessment made by the Sales Tax Officer was according to the best of his judgment and supported by sufficient material evidence. The principles governing "best judgment assessment" were correctly applied, and the rejection of the assessee's books of account was justified based on the irregularities and malpractices detected.
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1970 (9) TMI 98
Issues:
Interpretation of Notification No. S.T. 1367/X-1045(19)-1960 dated 5th April, 1961 regarding taxation rate for steel trays and steel calendars for the years 1963-64 and 1964-65.
Analysis:
The case involved a reference from the Additional judge (Revisions) Sales Tax, Agra, under section 11(3) of the U.P. Sales Tax Act, seeking the opinion of the court on the taxability of steel trays and steel calendars manufactured and sold by the assessee. The dispute centered around whether these items should be taxed at the rate of 3 paise per rupee under Notification No. S.T. 1367/X-1045(19)-1960 or at the general rate of 2 paise per rupee as unclassified items under section 3 of the Act for the assessment years 1963-64 and 1964-65.
The sales tax authorities contended that the items fell within the purview of the notification dated 5th April, 1961, which categorized them as "mill-stores and hardware" taxable at 3 paise per rupee. However, the assessee argued that the items did not fall under the notification and should be taxed as unclassified items at the general rate of 2 paise per rupee. The judge (Revisions) ruled in favor of the assessee, holding that the steel trays and steel calendars were not covered by the notification but should be taxed as unclassified items under section 3 of the Act.
The court referred to a previous case where the interpretation of the term "hardware" in the same notification was discussed. It was established that the term should be understood in a commercial sense rather than a dictionary meaning. Hardware was defined to include small items of base metals like nuts, bolts, hinges, rivets, latches, curtain railings, and window grills, distinct from machinery and spare parts of machinery. Since machinery and spare parts were separately listed in the notification, it indicated that items made of base metals were not automatically considered hardware.
Based on this interpretation, the court concluded that tin trays and tin calendars could not be classified as hardware under the notification and should be taxed as unclassified items at the rate of 2 per cent under section 3 of the Act. The court answered both questions in favor of the assessee, awarding costs of Rs. 100.
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1970 (9) TMI 97
Issues:
1. Stay order validity for assessment years
2. Assessment timeline for 1960-61
3. Tax rate for assembled cycles
4. Justification of sales estimate ignoring Form 'C' purchases
Issue 1: Stay Order Validity for Assessment Years
The case involved a reference under section 11(1) of the U.P. Sales Tax Act regarding the validity of a stay order for assessment years. The Additional Revising Authority submitted questions regarding the effectiveness of the stay order for the year 1959-60 or all years. The stay order was issued in response to a direction by the Commissioner of Sales Tax to assess sales tax on the turnover of assembled cycles. The court found that the stay order applied to all pending assessment proceedings, including those for the year 1960-61. The period of limitation for assessment was extended due to the stay order, making the assessment order for 1960-61 within time.
Issue 2: Assessment Timeline for 1960-61
The assessment for the year 1960-61 was challenged by the assessee on grounds of being time-barred. The Sales Tax Officer had made the assessment order on 10th June, 1965, which the assessee claimed was beyond the limitation period. The Sales Tax Department argued that the period of the stay order should be excluded from the computation of the limitation period. The court found that the stay order covered all pending assessment proceedings, including for 1960-61, and thus the assessment order was held to be within the time limit.
Issue 3: Tax Rate for Assembled Cycles
The question arose whether assembled cycles should be taxed at 2% as an unclassified item or at 3% as manufactured cycles. The court analyzed the definition of "manufacture" and concluded that the process of assembling cycles involved a manufacturing process. Assembled cycles were considered a new commercial commodity different from their component parts, making them liable to be treated as "manufactured" cycles and taxable at 3%.
Issue 4: Justification of Sales Estimate Ignoring Form 'C' Purchases
The fourth question raised was regarding the justification of estimating sales when purchases made on Form 'C' were ignored. However, the court found that this question did not arise from the order of the Additional Revising Authority and thus did not provide an answer to it. The Commissioner of Sales Tax was awarded costs, and the reference was answered accordingly.
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1970 (9) TMI 96
Issues:
1. Whether supplies of bricks against permits constitute sales liable to sales tax.
Analysis:
The judgment pertains to Letters Patent Appeals filed against a Single Judge's decision allowing writ petitions challenging assessment orders on the grounds that supplies of bricks against permits were not sales liable to sales tax. The Single Judge relied on a Supreme Court decision regarding mutual assent in transactions. However, the High Court found the facts in the present case materially different. The Control Order under consideration regulated the supply of bricks but did not control every aspect, allowing room for consensus between parties. The High Court cited a similar Supreme Court case involving a Control Order for steel products to support its interpretation. The court emphasized that mutual assent was present in the brick supply transactions, satisfying the elements of a valid sale.
The court analyzed the Control Order provisions, highlighting that while certain aspects were regulated, parties could agree on terms such as delivery date, payment mode, and transport arrangements. Drawing parallels with the steel products case, the court concluded that the Controller's directions did not eliminate mutual assent in the transactions. Referring to the Supreme Court's criteria for a valid sale, the court confirmed the presence of competent parties, transferred property, and price in the brick supply transactions. Emphasizing the importance of mutual assent, the court distinguished the facts from a previous Supreme Court case where mutual assent was absent, thereby classifying the transactions as sales.
In conclusion, the High Court allowed the appeals, overturning the Single Judge's decision and dismissing the writ petitions. The court aligned with the Supreme Court's interpretation in similar cases, affirming that the transactions involving brick supplies against permits constituted sales liable to sales tax. No costs were awarded in the circumstances of the case.
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1970 (9) TMI 95
Issues:
1. Whether the sale of food to students by a hostel is liable for sales tax assessment under the Mysore Sales Tax Act, 1957.
Analysis:
The case involved writ petitions questioning the assessment of sales tax on wardens of hostels providing boarding and lodging facilities to students. The petitioners contended that there was no sale of goods by the hostels to students, making the levy of sales tax illegal. They also challenged the constitutional validity of explanation (1) of section 2(1)(t) of the Act. The Deputy Commissioner set aside the assessment orders as arbitrary but refused to entertain the constitutional challenge. The court found that there was no sale of goods based on undisputed facts and did not delve into the constitutional validity of the explanation.
In the judgment, reference was made to a Supreme Court case involving a members' club and the liability for sales tax on food supplied to members. The court highlighted that if there is no transfer of property in the supply of goods, it does not fall within the definition of sale. Similarly, in the case of a students' hostel where students manage the hostel and share expenses, there is no sale of goods as there is no transfer of property involved in providing food. Consequently, the assessments made by the authorities on the hostels were deemed to be without jurisdiction. The court allowed the writ petitions, quashed the assessment orders, and directed the tax officer to refrain from making further assessments for the relevant year.
In conclusion, the court ruled in favor of the petitioners, emphasizing that the provision of food by hostels to students did not constitute a sale of goods, thereby rendering the sales tax assessment on the hostels invalid. The judgment highlighted the absence of a transfer of property in the hostel-student food arrangement, aligning with the legal principles established in a similar Supreme Court case regarding members' clubs and sales tax liability.
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1970 (9) TMI 94
Issues:
1. Interpretation of rule 20-B of the U.P. Sales Tax Rules for exemption application.
2. Validity and binding nature of circular issued by Commissioner of Sales Tax regarding extension of time for depositing exemption fee.
Analysis:
The judgment by the High Court of Allahabad involved two main issues. Firstly, the interpretation of rule 20-B of the U.P. Sales Tax Rules for exemption applications was questioned. The assessee, a foodgrains dealer, applied for tax exemption for the year 1957-58 under rule 20-B(a) but failed to deposit the required amount within the specified time frame. The Sales Tax Officer rejected the application based on this non-compliance. The court determined that the deposit made by the assessee was insufficient, as rule 20-B required a specific amount to be deposited within a set timeframe, which was not met by the dealer.
Secondly, the validity and binding nature of a circular issued by the Commissioner of Sales Tax regarding the extension of time for depositing the exemption fee was examined. The circular directed Sales Tax Officers to grant an extension of time for dealers to fulfill the exemption fee requirements. However, the court held that the Commissioner did not have the authority to extend the period specified in rule 20-B(a. The court emphasized that instructions issued by the Commissioner must be consistent with the Act and Rules, and in this case, the circular was not in line with rule 20-B. Therefore, the circular was deemed without legal sanction and not binding on Sales Tax Officers.
The judgment highlighted the importance of adherence to statutory provisions and rules governing tax exemptions. It clarified that instructions issued by authorities must align with existing laws and cannot override statutory requirements. The court's decision emphasized the mandatory nature of rule 20-B and the limitations on the Commissioner's power to alter the prescribed procedures. Ultimately, the court answered both questions in the negative, stating that the first question did not arise, and the circular was not binding. The Commissioner of Sales Tax was awarded costs, and the reference was answered accordingly.
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1970 (9) TMI 93
Issues Involved:
1. Presumption of suppressed turnover being used for inter-State sales.
2. Deduction of extra turnover included in the original assessment.
3. Legality of notice issued under section 21 of the U.P. Sales Tax Act.
Issue-wise Detailed Analysis:
1. Presumption of Suppressed Turnover Being Used for Inter-State Sales:
The court addressed whether a presumption could be raised that the suppressed hill (liquid gold) was used for making inter-State sales. The assessee contended that there was no material or finding to show that goods had moved from one State to another in pursuance of a contract of sale, and hence, the turnover could not be subjected to Central sales tax. The court noted that this question did not arise out of the revisional order since it was not discussed or raised before the Judge (Revisions), the Sales Tax Officer, or the appellate authority. Consequently, the court declined to answer this question, emphasizing that only questions arising out of the revisional order could be referred under section 11.
2. Deduction of Extra Turnover Included in the Original Assessment:
The court examined whether the extra turnover included in the original assessment on a best judgment principle should be deducted from the estimate of turnover due to the escaped hill worth Rs. 4,714. The assessee argued for a set-off of Rs. 14,000 against the enhancement of Rs. 17,000 made by the Judge (Revisions) to avoid double taxation. The court clarified that a set-off depends on the facts and circumstances of each case, particularly whether the original enhancement was made due to specific suppression or a general unreliability of account books. In this case, the original assessment included an estimate of Rs. 14,000 due to the unreliability of the hill register. Since the department later discovered a specific item of purchase of hill, the court held that the sum of Rs. 14,000 should be excluded from the figure of Rs. 17,000 to avoid double taxation. Thus, the court answered this question in the affirmative, in favor of the assessee.
3. Legality of Notice Issued Under Section 21 of the U.P. Sales Tax Act:
The court considered the validity of the notice issued under section 21, which did not mention the escapement of turnover under inter-State sales. The court noted that there is no separate provision under the Central Sales Tax Act for reopening an assessment, and by virtue of section 9(3) of the Act, such an assessment can only be made by issuing notice under section 21 of the U.P. Sales Tax Act. The omission to mention section 9(3) was deemed not material as it did not mislead or prejudice the assessee, who was only dealing in inter-State sales. The court cited a similar case, Pawansut Bangle Stores v. Assistant Sales Tax Officer, where it was held that the notice's validity depends on whether it succeeds in informing the assessee of the proposed action. The court concluded that the notice was legal and proper, answering this question in favor of the department.
Conclusion:
The court provided a comprehensive analysis of each issue. It declined to answer the first question due to procedural reasons, affirmed the assessee's contention on the second question to avoid double taxation, and upheld the legality of the notice under section 21, favoring the department on the third question. No order as to costs was made, and the counsel's fee was assessed at Rs. 100.
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1970 (9) TMI 92
Issues Involved:
1. Whether the Board of Revenue was in error of law in construing the agreement dated 7th April, 1948, between the petitioner and the Bengal Coal Co. Ltd.
2. Whether the petitioner was invested with the status and/or incidence of 'dealer' under the relevant law.
3. Whether the transactions in question attracted West Bengal sales tax.
4. Whether the petitioner acted merely as a middleman or broker and not as a dealer.
5. Whether the transactions constituted 'sales' or 'turnover' under the Bengal Finance (Sales Tax) Act, 1941.
Detailed Analysis:
1. Whether the Board of Revenue was in error of law in construing the agreement dated 7th April, 1948:
The court analyzed the agreement dated 7th April, 1948, between the petitioner and the Bengal Coal Co. Ltd. The significant words in the letter, such as "we will sell to you" and "the output will be made over to you," indicated an outright sale rather than an agency relationship. The court concluded that the language of the letter represented a contract of sale and not a contract of agency or middleman earning commission. The court also noted that there was no mention of the Colliery Control Order in the letter, implying that the contract was not illegal or void under the said Order.
2. Whether the petitioner was invested with the status and/or incidence of 'dealer' under the relevant law:
The court found that the petitioner, Khas Dharmaband Colliery Co. Ltd., was a registered dealer under the Bengal Finance (Sales Tax) Act, 1941. The petitioner had used registered declaration forms and claimed exemptions under various sections of the Act, indicating that it was acting as a dealer. The court held that the agreement dated 7th April, 1948, invested the petitioner with the status and/or incidence of a dealer under the Bengal Finance (Sales Tax) Act.
3. Whether the transactions in question attracted West Bengal sales tax:
The court held that the transactions in question were sales and therefore attracted West Bengal sales tax. The court referred to the Supreme Court decision in The State of Rajasthan v. Karam Chand Thappar, which held that the Control Order only modified the agreement between the parties but did not change the nature of the transaction from a sale to something else. The court concluded that the transactions were sales within the meaning of the Bengal Finance (Sales Tax) Act and were taxable.
4. Whether the petitioner acted merely as a middleman or broker and not as a dealer:
The court rejected the petitioner's contention that it acted merely as a middleman or broker. The court noted that the petitioner had not mentioned this role in its returns or at any of the primary stages of the proceedings. The court also found that the petitioner had claimed exemptions under sections that were applicable to dealers, not middlemen. The court concluded that the petitioner was acting as a dealer and not merely as a middleman or broker.
5. Whether the transactions constituted 'sales' or 'turnover' under the Bengal Finance (Sales Tax) Act, 1941:
The court held that the transactions constituted 'sales' and were part of the petitioner's 'turnover' under the Bengal Finance (Sales Tax) Act, 1941. The court found that the petitioner had admitted to a turnover of Rs. 61,68,231-6-0 and had understated a sum of Rs. 3,00,933-10-0, which was added by the Commercial Tax Officer. The court concluded that the transactions were sales and were part of the petitioner's taxable turnover.
Conclusion:
The court held that the Board of Revenue was not in error of law in construing the agreement dated 7th April, 1948, between the petitioner and the Bengal Coal Co. Ltd. The court concluded that the petitioner was a dealer under the Bengal Finance (Sales Tax) Act, 1941, and that the transactions in question were sales and attracted West Bengal sales tax. The reference was answered in favor of the revenue, with no order as to costs.
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1970 (9) TMI 91
Issues:
1. Challenge to the validity of G.O. Ms. No. 300, Revenue (S), dated 8th March, 1966, amending the Andhra Pradesh General Sales Tax Rules, 1957.
2. Allegation of unreasonable restriction on the right to carry on business under article 19(1)(g) of the Constitution.
3. Claim of discriminatory treatment against oil-millers under the impugned rule.
4. Questioning the rule-making power of the Government under section 39 of the A.P. General Sales Tax Act.
5. Impact of the rule on the oil-millers' operations and machinery.
6. Evaluation of the reasonableness of the restriction imposed by the impugned rule.
7. Examination of the public interest served by the rule.
8. Comparison with a previous court decision regarding similar provisions for rice millers.
9. Analysis of the classification of oilmillers under article 14 of the Constitution.
Detailed Analysis:
The petitioners, a group of oilmillers, challenged the validity of G.O. Ms. No. 300, which introduced rule 45-D mandating hourly maintenance of a detailed register for groundnut oil production. They contended that the rule imposed unreasonable restrictions on their business operations, violating their fundamental right under article 19(1)(g) of the Constitution. Additionally, they argued that singling out oil-millers for such stringent record-keeping was discriminatory and lacked a rational basis compared to other businesses. The petitioners also questioned the Government's authority to make such rules under section 39 of the A.P. General Sales Tax Act.
The petitioners highlighted the adverse impact of the hourly maintenance requirement on their operations and machinery, asserting that it would significantly disrupt production efficiency and result in substantial losses of time and labor. They argued that existing registers under other tax laws could provide the necessary information without the need for additional hourly records. The court acknowledged the potential hardship faced by the oil-millers due to the rule and noted the lack of justification from the respondents on how the rule served the public interest or the objectives of the Sales Tax Act.
Drawing a parallel with a previous case involving rice millers, where a similar provision was upheld to prevent tax evasion, the court found the current rule to be excessively restrictive without aiding tax collection or evasion prevention. Despite a weak argument on the grounds of discrimination under article 14 of the Constitution, the court ultimately ruled in favor of the petitioners. The impugned rule 45-D was struck down as contravening article 19(1)(g) of the Constitution and exceeding the Government's rule-making power under section 39 of the A.P. General Sales Tax Act. The petitioners were granted costs, and the petition was allowed.
This judgment underscores the importance of balancing regulatory measures with business interests, emphasizing the need for rules to be reasonable, proportionate, and serving a legitimate public purpose to withstand constitutional scrutiny.
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1970 (9) TMI 90
Issues:
1. Challenge against the penalty imposed by the Commercial Tax Officer under section 18-A of the Mysore Sales Tax Act, 1957.
2. Interpretation of section 18(1) of the Act regarding the collection of amounts by dealers.
3. Determination of whether the deposit made by purchasers with the petitioner constitutes collection by way of tax or purporting to be by way of tax.
Analysis:
The writ petition challenged the penalty imposed by the Commercial Tax Officer under section 18-A of the Mysore Sales Tax Act, 1957. The petitioner, a commission agent, was assessed to sales tax on the turnover of chillies sold during a specific period. However, following an appeal, the turnover of chillies was exempted from sales tax. The issue arose when the first respondent imposed a penalty on the petitioner for collecting a sum of money as a deposit on the sale of chillies, alleging it to be by way of tax or purporting to be by way of tax. The petitioner contended that the collection did not contravene section 18 of the Act, as the amount collected was a deposit and not tax. The court referred to a previous judgment to analyze the provisions of section 18(1) both before and after an amendment. The court emphasized that the addition of the clause "purporting to be by way of tax" in the amended section does not alter the essence of the provision.
The court analyzed the nature of the deposit made by purchasers with the petitioner. The petitioner argued that the deposit should be considered an entrustment, not a collection by way of tax. The court agreed with the petitioner's interpretation, stating that when a customer deposits an amount with a dealer to meet a contingency, it does not constitute the collection of tax by the dealer. The court clarified that in such cases, the dealer acts as a trustee for the amount deposited, and it cannot be construed as a collection by way of tax or purporting to be by way of tax. Based on these findings, the court concluded that the petitioner did not contravene the provisions of section 18, rendering the penalty imposed as illegal.
In the final judgment, the court allowed the writ petition, thereby quashing the order imposing the penalty. The court held that based on the facts presented, the petitioner had not violated section 18, leading to the decision to invalidate the penalty. The judgment highlighted the distinction between a deposit and tax collection, emphasizing that the former does not fall within the scope of section 18 of the Act.
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1970 (9) TMI 89
Prohibitory injunction contained in rule 31B - Held that:- As taken rule 31B and the notification issued by the State Government on December 26, 1967, must be declared ultra vires, and since rule 31B and the notification are ultra vires, the communication issued by the Superintendent of Commercial Taxes to the railway authorities must also be declared unauthorised. A writ will therefore issue declaring rule 31B and the notification issued by the Government of Bihar on December 26, 1967, ultra vires, and the letter written by the Superintendent of Commercial Taxes to the railway authorities is also declared unauthorised.
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