TMI Blog1952 (2) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... en filed on behalf of the applicant by Shri Dalip Singh Jain. No counter-affidavit in this case has been filed on behalf of the State. We have, therefore, to assume that the facts stated by the deponent are correct, they not having been challenged by the State. The applicant is a firm styled Budh Prakash Jai Prakash of Hapur. It carries on business, inter alia, of forward contracts and has been dealing in gold, silver, peas, arhar, urd and sarson. The applicant is also a shareholder member of the Mahabir Beopar Mandal Ltd., Hapur, which is a public limited company. Members of the Mandal carrying on forward contracts register them with it and it acts in respect of those transactions as a clearing house charging commission thereon. On the 1st April, 1948, the U.P. Legislature passed an Act, called the U.P. Sales Tax Act (No. XV of 1948), hereinafter referred to as the Act. Under it forward contracts were made liable for the payment of the sales tax. Thereafter the applicant was assessed to the sales tax on forward contracts in the assessment years 1948-49 and 1949-50. It paid a sum of Rs. 1,082-8-0 and sales tax for the year 1948-49 and Rs. 7,369 for the assessment year 1949-50. In a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er alia, the Mahabir Beopar Mandal, Hapur, and it was also published for the information of all dealers, intimating that they should deposit all taxes in Government treasury along with returns in Form IV by the 31st December, 1950. On the same date, i.e., the 2nd December, 1950, the Sales Tax Officer directed the Mandal to furnish a list of all the dealers who had enter- ed into forward transactions of guar and peas so that notice might be issued to them to deposit the sales tax. The forward contracts related to the delivery of commodities in eight districts of the East Punjab. On the 6th December, 1950, the Mandal informed the Sales Tax Officer, Hapur, that, in its opinion, the decision of Government on the point of the taxability of forward transactions in guar, the delivery of which was contracted to be made in the mandis of the East Punjab, was not binding on the company as no opportunity was given to the said company to represent its case and the company proposed to challenge it in a Court of law if so advised. It further desired the Sales Tax Officer to communicate with the dealers directly in respect of guar transactions. It is further alleged in the affidavit that the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act and whether the provisions in the Act relating to the taxation of those forward contracts in which delivery does not take place are constitutionally legal or not. Learned counsel for the applicant contends that it was open to the United Provinces (now Uttar Pradesh) Legislature to levy a tax under entry 48 of List II of the Seventh Schedule of the Govern- ment of India Act, 1935. Entry 48 is in the following terms: "Taxes on the sale of goods and on advertisements." The powers of the Provincial Legislature to legislate are to be found in Section 100 of the old Government of India Act, 1935, by which the transactions in question are governed. Sub-section (3) of that section enacts that- "Subject to the two preceding sub-sections, the Provincial Legis- lature has, and the Federal Legislature has not, power to make laws for a province or any part thereof with respect to any of the matters enumerated in List II in the said Schedule." Entry No. 48 is in the Provincial Legislative List. The answer to the question whether forward contracts could or could not be legally the subject-matter of taxation by the Provincial Legislature depends upon the meaning to be assigned to the words "s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time being in force, the sale of any goods- (i) which are actually in the United Provinces at the time when in respect thereof, the contract of sale as defined in Section 4 of that Act is made, (ii) or which are produced or manufactured in the United Pro- vinces by the producer or manufacturer thereof, shall, wherever the delivery or contract of sale is made, be deemed for the purposes of this Act to have taken place in the United Provinces. Explanation III-Where goods under a forward contract are not actually delivered, the sale in respect of such contract shall be deemed to have been completed on the date originally agreed upon for delivery." The point which I am stressing is that there is, as is evident from sub-sections (3) and (4) of Section 4 of the Indian Sales of Goods Act, a distinction between an agreement to sell and a sale and what is autho- rised by the Government of India Act is taxation of a sale of goods and not an agreement to sell which has not materialised into a sale. An agreement to sell is, as I have said before, an executory contract pure and simple. No property under it passes. A sale, on the other hand, is an executed contract, i.e., it is a contract plus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s conversant with the meaning of the word "sale" both in British and Indian law and that it was that meaning which it intended to assign to that word in entry 48. I am satisfied that Ex- planation III of sub-section (h) of Section 2 of the Act which seeks to put a meaning not contemplated by the British Parliament on the word "sale" with reference to forward contracts is invalid. I would say that in this particular case, as there is no evidence of delivery, I would not be justified in holding that the forward contract was a sale within the meaning of entry 48 of the State Legislative List. For this reason, the assessments for the years in question as also the settled assess- ment for the year in which the application was filed were not proper. It may in passing be mentioned that under our new Republican Constitution, entry No. 90 of List I of the Seventh Schedule deals with- "Taxes other than stamp duties on transactions in stock exchanges and futures markets." So far as entry No. 48 of List II of the Seventh Schedule of the Government of India Act, 1935, is concerned, it has a counter-part in entry 54 of List II of the Seventh Schedule of our Republican Constitu- tion. I greatly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is open to a dealer by an application in writing accompanied by a pres- cribed fee to approach the revising authority with the prayer that it may be pleased to refer to the High Court any question of law arising out of its order. Now, if the revising authority refuses to make any such reference, the applicant has been given a right to apply to the High Court direct against such refusal. This Court has been further empowered by sub-section (3) of Section 11 to require the revising authority to state a case and refer it to it and on receipt of such requisi- tion the revision authority is bound to state and refer the case. Under sub-section (5) of Section 11 this Court has been further empowered, upon the hearing of such a case, to decide the question of law raised thereunder. The judgment of this Court is to be sent thereafter to the revising authority and it has been made a statutory obligation on the revising authority to dispose of the case according to the judgment of this Court. Thus it will be seen that the Act provides a complete machinery, provided a question of law arises in a case, to ascertain a binding opinion of this Court. Undoubtedly in this case a question of some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diction. The office of the writ, as at common law, is to prevent an unlawful assumption of jurisdic- tion, not to correct mere errors and irregularities in matters over which the court has cognizance. Where the general scope and pur- pose of the action is within the jurisdiction of the court, any error or overstepping of its authority in a portion of its judgment, or any other error in its proceedings, is only ground for a review or appeal, and not prohibition. That is to say, where there is authority to do the act, but the manner of doing it is improper, the writ will not lie. In other words, whatever power is conferred may be exercised, and, if it be exercised injudiciously, erroneously or irregularly, it amounts to error merely and not to a usurpation or excess of jurisdiction. In such a case, however gross the error, irregularity or mistake, the writ does not lie, not because, as is sometimes erroneously stated, there exist other adequate remedies." I must not be understood to agree completely with the proposi- tions relating to the issue of writs of prohibition and certiorari in cases in which, inter alia, a constitutional question is involved laid down by my brother, Agarwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us courts referred to by me as authorities which can dispose of the matter. The proper func- tion of those courts is the assessment of a tax on principles laid down in the Act itself. Here the constitutionality of some of the provisions of the Act has been called in question. This question of the validity of those provisions will have to be decided by the Court at one stage or the other. It is desirable, in view of the fact that we have all the materials before us and have heard full arguments, that it should be decided now and here. (3) A third reason why I think we should interfere in this case is that the Sales Tax Officer is going ahead with proceedings relating to the year in which the writ application was filed. These proceedings can be stopped only by a writ of prohibition. I do not wish to lay down any general or broad principle on which writs of pro- hibition which have been held to be discretionary should be issued by this Court. Suffice it to say that it is desirable, in order to expedite matters, that the Sales Tax Officer should have the guidance of this Court in this case in regard to the manner in which he should proceed. The question on which he should have concen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r equally adequate, efficacious and speedy remedy at their disposal-the remedy by way of appeal from the order of the Sales Tax Officer to the Appellate Authority under Section 9 of the Sales Tax Act. The preliminary objection raised on behalf of the State must be dealt with first. In the present case, writs of certiorari, prohibition and mandamus are sought. In what circumstances these writs should be issued or refused are well known. It has been held in this Court that these writs should be issued only when there is no other adequate, equally convenient, beneficial and effectual remedy available to the applicant, vide Moti Lal v. Government of the State of Uttar Pradesh(1). It is clear that the mere fact that there is another remedy available is not sufficient. In order to debar an applicant from seeking his remedy in this Court, the alternative remedy must be "equally convenient, beneficial and effective." In the case of a writ of prohibition the High Court directs a sub- ordinate Court or Tribunal or other authority having judicial or quasi- judicial functions not to proceed with a pending case before it as in doing so it has either exceeded its jurisdiction or it has no juri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case was very similar to the present, the Court definitely stated that in their opinion the fact that there was an appeal to the Court of Arches was no ground for refusing writ of prohibition." To the same effect was the observation of Scrutton, L.J., in the case. At page 506 Atkin, L.J., stated: "..... I think it is quite plain that the fact of there being a remedy by way of appeal is no answer to a writ of prohibition, where the want of jurisdiction complained of is based upon the breach of a fundamental principle of justice, such as I conceive to have been the case here. There is plenty of authority for the proposition that in such cases prohibition will lie notwithstanding that these is a right of appeal." (1) [1927] 1 K.B. 491, at p. 500. (2) (1862) 12 C.B. (N.S.). 383. In Rashid Ahmad v. The Municipal Board, Kairana(1), the Municipal Board of Kairana had prevented a trader from doing the wholesale business of purchase and sale of vegetables on the ground that the monopoly right to do wholesale business in vegetables had been granted to someone else. The Supreme Court observed as follows: "There can be no question that the existence of an adequate legal remedy is a thin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e question of existence of a specific and adequate alternative remedy is material only when the question of issue of a writ of man- damus is under consideration and not in the case of a writ in the nature of certiorari or a prohibition." If it were urged that there is an alternative remedy by means of a suit in which an injunction could have been issued to the Sales Tax Officer prohibiting him from proceeding with the case before him, still that case would have to be filed in a Court subordinate to this Court and would have to be transferred to this Court under Article 228 of the Constitution. Having regard to all these matters it cannot be said that in the present case there is another adequate, convenient, bene- ficial or effectual remedy so far as the writ of prohibition asked for is concerned. The writ of certiorari which is prayed for in the present case consists of an order of assessment which has already been made. A right of appeal against this order is provided for under Section 9 of the Sales Tax Act. This is an alternative remedy which, in my opinion, is adequate for the purpose of obtaining the relief by way of the issue of a writ of certiorari which is also sought fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e should be decided as early as possible by the High Court itself, as a reading of Article 228 to which reference has already been made would show. The preliminary objec- tion, therefore, fails. Section 2(h) of the U.P. Sales Tax Act runs as follows: "'sale' means, within its grammatical variations and cognate ex- pressions, any transfer of property in goods for cash or deferred pay- ment or other valuable consideration and includes forward contracts but does not include a mortgage, hypothecation, charge or pledge. Explanation II.-Notwithstanding anything in the Indian Sale of Goods Act, 1930, or any other law for the time being in force, the sale of any goods- (i) which are actually in the United Provinces at the time when in respect thereof, the contract of sale as defined in Section 4 of that Act is made, (ii) or which are produced or manufactured in the United Provinces by the producer or manufacturer thereof, shall wherever the delivery or contract of sale is made, be deemed for the purposes of this Act to have taken place in the United Provinces. Explanation III.-Where goods under a forward contract are not actually delivered, the sale in respect of such contract shall be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the distinction very clearly. Says he: "...The distinction consists in this, that in a sale, the thing which is the subject of the contract becomes the property of the buyer (under the contract, that is to say), the moment the contract is concluded, and without regard to the fact whether the goods be delivered to the buyer or remain in possession of the seller, whereas in the agreement to sell, the property is to pass at a future time or subject to the fulfilment of some condition, and the goods remain the property of the seller till the contract is executed." A "forward contract" is a contract under which parties agree that property in certain goods, whether in existence or not, shall be transferred from the buyer to the seller on a future date. Such contracts usually are speculative contracts in which parties intend that they will pay and receive differences according to the market rate prevailing on the date fixed for delivery of goods. Sometimes delivery of goods is actually made but mostly it is not made. When it is not made there is always a question whether contracts were wagering or not. We are, however, not concerned in this case with that matter. The fact remains th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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