TMI Blog2011 (1) TMI 1273X X X X Extracts X X X X X X X X Extracts X X X X ..... ld by the apex court in the case of Vicco Laboratories [2007 (11) TMI 21 - SUPREME COURT OF INDIA], the writ court's interference is ruled out where factual adjudication is necessary. That the Deputy Commissioner has taken part in the proceedings of the committee on the subordinate legislation or is instrumental in filing the review petition are no grounds for alleging the bias. In the instant case, the Deputy Commissioner has passed the similar reassessment orders for different assessment periods on July 31, 2006 and January 12, 2007 long before the meeting of the committee on subordinate legislation. On the similar set of facts, the Deputy Commissioner has passed the similar orders. Therefore he cannot be held to be at fault for passing the impugned orders. - Writ petition Nos. 35223 TO 35234,21836 -21887 of 2010 & - - - Dated:- 7-1-2011 - ASHOK B. HINCHIGERI, J. ORDER:- ASHOK B. HINCHIGERI J. The petitioners have raised the challenge to the reassessment orders passed by the Deputy Commissioner of Commercial Taxes under section 39(1) of the Karnataka Value Added Tax Act (for short, the VAT Act ) and/or 12A of the Karnataka Sales Tax Act, 1957 (for short, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an unreasonable restriction upon the right of the service providers to carry on trade under article 19(1)(g). (see Bengal Immunity Co. Ltd. v. State of Bihar [1955] 6 STC 446 (SC); [1955] 2 SCR 603, Himmatlal Harilal Mehta v. State of Madras [1954] 5 STC 115 (SC); [1954] SCR 1122). We are consequently unable to accept either of these contentions of the respondents. Nextly, he sought to draw support from the honourable Supreme Court's judgment in the case of Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District I, Calcutta reported in [1961] 41 ITR 191 (SC); AIR 1961 SC 372. The relevant paragraph of the said judgment is extracted hereinbelow (page 207 in 41 ITR): 26. Mr. Sastri next pointed out that at the stage when the Incometax Officer issued the notices he was not acting judicially or quasijudicially and so a writ of certiorari or prohibition cannot issue. It is well-settled however that though the writ of prohibition or certiorari will not issue against an executive authority, the High Courts have power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l not issue against an executive authority, the High Courts have power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Courts will issue appropriate orders or directions to prevent such consequences. Writ of certiorari and prohibition can issue against the Income-tax Officer acting without jurisdiction under section 34, Income-tax Act.' Sri Venkataraman has also relied on the apex court's judgment in the case of Raza Textiles Ltd. v. Income-tax Officer, Rampur reported in [1973] 87 ITR 539 (SC); [1973] 1 SCC 633 to buttress his submission that if the authorities wrongfully confer upon themselves the jurisdiction, the matter can be examined by the High Court in the proceedings under article 226 of the Constitution of India. It is impermissible for the quasi-judicial authority like the Income-tax Officer to erroneously decide the jurisdictional matter and thereafter proceed to impose a levy on the citizen. He submits that when the jurisdiction of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this time before the High Court, challenging the validity of these notices. The High Court held that the appellant's claims were barred by res judicata by reason of the earlier decision of this court. Challenging the decision of the High Court the appellants approached this court under article 136. In Amalgamated Coalfields Ltd. v. Janapada Sabha [1963] Supp 1 SCR 172; AIR 1964 SC 1013 (referred to hereafter as Amalgamated Coalfields No. (2)), the issue was whether the doctrine of res judicata applied to writ petitions filed under article 226 or to petitions under article 32. The court noted that the judicial view was that even petitions filed under article 32 were subject to the general principle of res judicata. The court then considered whether the principle would apply to tax cases when the earlier decision was in respect of a different period and said: (Amalgamated Coalfields No. 2), (SCR page 184; AIR page 1018) 'In a sense, the liability to pay tax from year to year is a separate and distinct liability; it is based on a different cause of action from year to year, and if any points of fact or law are considered in determining the liability for a given year, they c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench judgment of the Patna High Court in the case of Pest Control India Ltd. v. Union of India reported in [1989] 75 STC 188 (Patna), he would contend that there can be no transfer of property in goods unless the goods themselves exist. Para 3 of the said judgment relied upon by the learned senior counsel is reproduced hereinbelow (pages 189 and 190 in 75 STC): 3. According to the petitioner, it is a company engaged in the business of rendering services such as anti-termite treatment, rodent control, general pest control, household disinfection, etc. For this purpose, the petitioner-company has been engaged by M/s. Tata Iron Steel Co. Ltd. for treating the existing building including wooden and other furniture with pest control and anti-termite treatment. The activity of the petitioner-company is only in the nature of service and no sale of goods is involved in any form whatsoever. According to it, the entire transaction is for rendering services only and, in fact, no goods are transferred in any form whatsoever. The treatment or service rendered by the petitioner is mainly curative or prophylactic/ preventive in nature and there is no supply of goods to the client. The che ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w that a data transfer is only a telecommunication service. Sri Mohan Parasaran, the learned Additional Solicitor General of India appearing for Sri P.S. Dinesh Kumar for the petitioners (M/s. BSNL in W.P. No. 21836 of 2010 and other connected petitions) submits that the alternative remedy of filing the statutory appeal is not efficacious; but it is onerous and burdensome because of the prescribed precondition of depositing 50 per cent of the demanded amounts. Sri Parasaran submits that if the statutory remedy is not adequate or is onerous or tardier, there is no impediment for an aggrieved party in filing the writ petition. In support of his submissions, he has relied on the following authorities: (i) Himmatlal Harilal Mehta v. State of Madhya Pradesh [1954] 5 STC 115 (SC); AIR 1954 SC 403 (ii) Calcutta Discount Co. Ltd. v. Income-tax Officer [1961] 41 ITR 191 (SC); AIR 1961 SC 372 (iii) M.G. Abrol, Additional Collector of Customs, Bombay v. Shantilal Chhotelal and Co. AIR 1966 SC 197 (iv) Whirlpool Corporation v. Registrar of Trade Marks [1998] 8 SCC 1. Sri Mohan Parasaran submits that as the impugned orders are wholly without jurisdiction, there is full just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In Bharat Sanchar Nigam Ltd. case [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 3 SCC 1, bias is alleged. Despite admitting that the honourable Supreme Court's judgment in Bharat Sanchar Nigam Ltd.'s earlier case [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 3 SCC 1 is coming in the way of imposing the sales tax on the transactions in question and despite the Government's filing the review petition and the honourable Supreme Court dismissing the review petition, both on the ground of delay and on merits, the Deputy Commissioner has passed the orders. The learned senior counsel attributes institutional bias to the Deputy Commissioner who has acted in the two capacities of a nodal officer for filing the review petition and as a reassessment officer for passing the impugned orders. Once the Deputy Commissioner has formed the view that the transaction in question is taxable even before his passing of the impugned order, he ought not to have been entrusted with the reassessment work in respect of the petitioner-BSNL. Complaining of the legal bias, Sri Dinesh Kumar, the learned counsel for the petitioners subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d other connected appeals. The said appeals came to be filed aggrieved by the imposition of the condition of depositing Rs. 550 crores at the time of granting an interim order of stay. He also brings to my notice the observation made by the Division Bench that the learned single judge shall hear the case on the merits. Based on these observations of the Division Bench, the senior counsel submits that these petitions be considered and disposed of on the merits. Sri Mohan Parasaran submits that what the reassessment authority (Deputy Commissioner) has done is tantamount to a complaint being entrusted with the task of holding the enquiry. This is impermissible, so contends Sri Parasaran. He read out headnote D of the honourable Supreme Court's decision in the case of Naren Chandra Naskar v. Arun Bhattacharya reported in [2008] 13 SCC 406. It is extracted hereinbelow: D. Administrative Law Natural justice Bias/Nemo debet esse judex in propria sua causa Applicability Enquiry into facts entrusted to public officer who had filed FIR High Court entrusting District Registrar, who had lodged an FIR against appellant under ss. 471/420 IPC and formed an opinion that a prima facie ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respectively. Otherwise the assessing officer would reopen the assessment on the basis of mere change of opinion which cannot be per se the reason to reopen. In support of these submissions, he relies on the apex court's judgment in the case of Commissioner of Income-tax, Delhi v. Kelvinator of India Ltd. reported in [2010] 320 ITR 561 (SC); [2010] 2 SCC 723. Sri Parasaran cites the decision of the honourable Supreme Court in the case of Paradip Port Trust v. Sales Tax Officer, Cuttack reported in [1999] 114 STC 178 (SC); [1998] 4 SCC 90, wherein it felt that if a question relates to the interpretation of sub-clause (d) of clause (29A) of article 366 of the Constitution of India and the taxability of the transaction, the High Court ought to have entertained the writ petition. The learned senior counsel brings to my notice the honourable Supreme Court's decision in the case of Arun Kumar v. Union of India reported in [2007] 1 SCC 732, wherein it is held that no authority can confer upon itself the jurisdiction which it otherwise does not possess and if an authority wrongly assumes the existence of such jurisdictional fact, the order can be questioned by filing a writ o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment is extracted hereinbelow: 10. The High Court, after hearing the parties, held that preliminary objection raised by the respondents was not well-founded. Considering the totality of facts and circumstances and the decisions taken by the respondents, the High Court held that approaching the appellate authority would be a 'futile attempt'. The High Court, considering various decisions of this court on the point, held that it would not be justified in dismissing the petition on the ground of alternative remedy and the said objection was not well-founded. Sri M.R. Bhaskar, the learned senior standing counsel for the Central Government submits that the elements of sale, if any, are to be discerned in a transaction. It is more amatter of perception. He submits that the application of sales tax and service tax is not mutually exclusive. The same transaction can have both sales and service element embedded to it subject to the State Government qualifying the tests laid down by the honourable Supreme Court. In this regard, a precious sentence from para 86 of the earlier Bharat Sanchar Nigam Ltd. case [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (l)(b) of the VAT Act. On the application of the earlier Bharat Sanchar Nigam Ltd. case [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 3 SCC 1 for the cases on hand, it is his emphatic submission that the verdict in the earlier Bharat Sanchar Nigam Ltd. case [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 3 SCC 1 was rendered in connection with mobile telephones involving radio frequency waves. He submits that the judgment in the said case was rendered in the absence of the arguments on properties of the electromagnetic waves. In this regard, he read out para 64 of the judgment in the said case, which reads as follows (page 124 in 3 VST): 64. We cannot anticipate what may be achieved by scientific and technological advances in future. No one has argued that at present electromagnetic waves are abstractable or are capable of delivery. It would, therefore, appear that an electromagnetic wave (or radio frequency as contended by one of counsel for the respondents), does not fulfil the parameters applied by the Supreme Court in Tata Consultancy [2001] 122 STC 198 (SC) for determining whether they are goods, right to use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in article 366(29A) continues to be did the parties have in mind or intend separate rights arising out of the sale of goods. If there was no such intention there is no sale even if the contract could be disintegrated. The test for deciding whether a contract falls into one category or the other is as to what is the substance of the contract. We will, for the want of a better phrase, call this the dominant nature test. The learned senior counsel contends that merely because the same transaction is treated as service for the purpose of service tax, it cannot in any way hinder the power of the State to levy the VAT on telecom contracts for data transfer when they fulfil the concomitants of a sale. The tax levied are in harmony with the legislative power conferred on the State by the Constitution. Levying of the tax in question is based on the well established scientific rules supported by the technical opinion taken by both the parties from the technical bodies/persons. Sri Raghavan brings to my notice, the learned single judge's order in the case of Bharti Airtel Ltd. v. State of Karnataka reported in [2007] 7 VST 505 (Karn) dismissing the writ petition on the ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such question even at the threshold by this court bypassing the statutory authorities, in my view will not be a satisfactory examination of the questions involved and it may result in an inadequate examination. An examination on assuming certain facts even before it is fully settled or finalised could also lead to the possibility of law being not developed in a satisfactory manner. 13. When the statutory provisions provide for appellate authority and ultimately an avenue is provided by the statute itself to bring the questions to this court also, when the question of law is still required to be resolved, in a proper manner by this court, it is not at all desirable to examine these questions under the writ jurisdiction of articles 226 and 227 of the Constitution of India. It is for this reason, I am not inclined to examine these matters in writ jurisdiction, but would relegate the petitioners to avail of the statutory remedies and pursue their relief before the statutory authorities. 16. This again is a question, which is mixed up with facts and law and insofar as the law under the Karnataka Value Added Tax Act is concerned, it is essentially a matter to be examined by the au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the honourable Supreme Court in the case of Tata Consultancy Services v. State of Andhra Pradesh reported in [2004] 137 STC 620 (SC); [2005] 1 SCC 308 and earlier Bharat Sanchar Nigam Ltd. case [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 3 SCC 1, he would submit that if the electricity can be regarded as goods, ACLE also has to be regarded as the goods because electrical energy is a flow of electrons while ACLE is a flow of protons. If the flow of electrons can be held as goods, there is no reason as to why the flow of protons cannot be held as goods. Even when there is no physical transfer of goods, as traditionally understood, the moment the data of the particular customer is embedded to ACLE, there is appropriation, which constitutes symbolic delivery. He brings to my notice, the apex court's judgment in the case of Commissioner of Sales Tax, Madhya Pradesh, Indore v. Madhya Pradesh Electricity Board reported in [1970] 25 STC 188 (SC); [1969] 2 SCR 939, wherein it is held that electrical energy can be transmitted, transferred, delivered, stored and possessed in the same way as any other property and hence, it is goods. He relied on the hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly be done, but it should also appear to have been done. Sri Raghavan contends that if the preference is unaccompanied by considerations of personal interest, it would not vitiate an act. In support of his submission, he relied on the apex court's judgment in the case of G.N. Nayak v. Goa University reported in AIR 2002 SC 790. The relevant paragraphs of the said judgment are extracted hereinbelow: 33. Bias may be generally defined as partiality or preference. It is true that any person or authority required to act in a judicial or quasijudicial matter must act impartially. 'If however, bias and partiality be defined to mean the total absence of pre-conceptions in the mind of the judge, then no one has ever had a fair trial and no one ever will. The human mind, even at infancy, is no blank piece of paper. We are born with pre-dispositions and the processes of education, formal and informal, create attitudes which precede reasoning in particular instances and which, therefore, by definition, are prejudices.' 34. It is not every kind of bias which in law is taken to vitiate an act. It must be a prejudice which is not founded on reason, and actuated by self i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12, 2007 for different assessment years. The reassessment orders, dated July 31, 2006 and January 12, 2007 came to be passed long before the Deputy Commissioner participated in the proceed ings of the committee on subordinate legislation. Sri Kamath further submits that the 33rd report, dated March 27, 2007 of the committee on subordinate legislation involved the using of the ACLE whereas, the 35th report, dated July 25, 2007 of the said committee involved the use of the radio frequency waves. He further submits that the filing of the review petition was recommended in respect of the tax on transactions involving radio frequency waves. In the course of his rejoinder submissions, Sri P.S. Dinesh Kumar, the learned counsel for the petitioners (BSNL), submits that the review petition was filed taking the specific ground that ACLE in OFC network attracts the levy of VAT. On hearing the marathon arguments raised by the learned advocates, I formulate the following questions for my determination: (i) Whether these petitions are to be considered on merits notwithstanding the availability of the statutory remedy of filing the appeal? (ii) Do the impugned orders suffer from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence is ruled out where factual adjudication is necessary. The apex court's judgment in the case of United Bank of India [2010] 8 SCC 110 is of immense value for deciding the issue of maintainability of these petitions. The apex court in the said case has taken the considered view that the statutory remedies must be exhausted before resorting to the remedy under article 226 of the Constitution of India. The apex court has also emphasized the need for circumspection, caution and care by the High Courts to ensure that the statutory schemes are not defeated by exercise of writ jurisdiction. The relevant paragraphs of the said judgment are extracted hereinbelow : 17. . . . Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority to look into it and take a decision one way or the other; it is not an extraordinary case which warrants direct interference under article 226 of the Constitution. It is also profitable to refer to this court's decision in the case of MRF Limited v. Commissioner of Commercial Taxes, Bangalore reported in [2010] 35 VST 539 (Karn), wherein it is held that even if an assessee feels that he has a good case on merits, that by itself is not a justification for the court to entertain the writ petition by-passing the appellate remedies. In tax matters, it is not desirable for the court to exercise the writ jurisdiction at the threshold. The relevant paragraphs of this court's decision are extracted hereinbelow (page 542 in 35 VST): 9. That question is dependant on the nature of the product and as to whether the product would fall under one entry or the other, figuring in the notification issued under the Karnataka Value Added Tax Act, 2003 or even under the Central Excise Tariff Act, 2003 which is a mixed question of fact and law. Such questions are best resolved by the authorities and matters can always be brought to this court in the manner provided under the very ..... X X X X Extracts X X X X X X X X Extracts X X X X
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