Seth Premchand Satramdas vs The State Of Bihar

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 61 of 1950

Decision Date: 30 November 1950

Coram: Saiyid Fazal Ali, B.K. Mukherjea, N. Chandrasekhara Aiyar

In the matter titled Seth Premchand Satramdas versus The State of Bihar, the Supreme Court of India delivered its judgment on 30 November 1950. The case was reported in the 1951 All India Reporter at page 14 and in the 1950 Supreme Court Reporter at page 799. The bench that heard the appeal consisted of Justice Saiyid Fazal Ali, Justice B.K. Mukherjea and Justice N. Chandrasekhara Aiyar. The petitioner was Seth Premchand Satramdas and the respondent was the State of Bihar. The appeal, recorded as Civil Appeal No. 61 of 1950, arose from an order dated 9 September 1948 issued by the Patna High Court, composed of Chief Justice Agarwala and Justice Meredith, which declined to require the Board of Revenue to state a case under section 21(3) of the Bihar Sales Tax Act, 1944 (Act VI of 1944). The order of the High Court was characterised as advisory and not a “final order” within the meaning of clause 31 of the Letters Patent of the Patna High Court. Consequently, the Court held that no appeal lay to the Federal Court from such an order, because the High Court’s direction under section 21(3) did not bind the parties nor affect their rights, and it was not rendered in the exercise of either appellate or original jurisdiction contemplated by the clause.

The Court also examined earlier authorities to determine the scope of “final order”. It referred to Sri Mahant Harihar Gir v. Commissioner of Income-Tax, Bihar and Orissa (AIR 1941 Pat 225) and Tata Iron and Steel Company v. Chief Revenue Authority, Bombay (50 IA 212) as authorities supporting the view that an advisory order of the High Court could not be appealed as a final decree. Conversely, it noted that the decision in Feroze Shah Kaka Khel v. Income-Tax Commissioner, Punjab (AIR 1931 Lab 138) was disapproved. The judgment was delivered by Justice Saiyid Fazal Ali, who noted that the appeal had originally been filed as Federal Court Appeal No. 71 of 1948 after a certificate was granted by the Patna High Court under clause 31, indicating that the case was deemed suitable for appeal to the Federal Court. Counsel for the appellant was S.C. Sinha, assisted by H.P. Sinha, while counsel for the respondent was S.L. Chibber, assisted by S.K. Mitra. The Court concluded that the High Court’s order did not meet the criteria of a final order, and therefore the appeal to the Federal Court was not maintainable.

In this case the Court observed that the assessment in question was made under the Bihar Sales Tax Act of 1944. Section 4 of that Act declares that every dealer whose gross turnover in the year immediately preceding the commencement of the Act exceeded five thousand rupees shall be liable to pay tax on sales effected after the date of notification. It was not contested that, given the statutory definitions of dealer, goods and sale, the appellant, who was carrying out contract work on a fairly extensive basis for the Central Public Works Department and the East Indian Railway, fell within the category of dealer described in section 4. Section 7 further stipulates that no dealer who is liable under section 4 may carry on business unless he is registered under the Act and possesses a registration certificate. Accordingly, the appellant applied for registration on 19 December 1944, and a registration certificate was issued to him on 21 December 1944. On 8 October 1945 the Sales Tax Officer served a notice on the appellant requiring him to produce his accounts on 10 November 1945 and to show cause why, in addition to the tax that would be finally assessed, a penalty not exceeding one and a half times the amount should not be imposed on him under section 10(5). Section 10(5) provides that if, on information obtained, the Commissioner is satisfied that any dealer liable to pay tax has willfully failed to apply for registration, the Commissioner, after giving the dealer a reasonable opportunity of being heard, may assess the tax due for the period in question and any subsequent periods and may direct that the dealer pay, as a penalty, a sum not exceeding one and a half times the assessed amount. The appellant appeared before the Sales Tax Officer in response to the notice but obtained several adjournments until 16 March 1946 and ultimately failed to appear. Consequently the Sales Tax Officer made an assessment, according to his best judgment, and ordered the appellant to pay rupees 4,526-13-0 as tax together with a penalty equal to one and a half times that amount under section 10(5). The appellant appealed this assessment and the penalty to the Commissioner, but his appeal was dismissed on 6 June 1946. Thereafter he filed a petition for revision before the Board of Revenue against the Commissioner’s order, and the Board dismissed the petition on 28 May 1947.

In 1947 the appellant requested that the Board of Revenue refer certain questions of law arising from its order dated 28 May to the High Court. Mr N Baksi, who was a Member of the Board, issued an order on 4 December 1947 rejecting the petition and stating that there was no case for reviewing his predecessor’s order and that no reference to the High Court was necessary. Section 21 of the Act then became relevant. That section provides that when the Board of Revenue refuses to refer a matter to the High Court, the aggrieved party may apply to the High Court against such refusal. If the High Court is not satisfied that the refusal is justified, it may direct the Board of Revenue to state a case and to refer the matter to the High Court. The same provision further requires that the High Court, after hearing the case, shall decide the question of law raised, shall give its judgment with the reasons on which the decision is based, shall send a copy of that judgment under the seal of the Court to the Board of Revenue, and that the Board shall then dispose of the case in accordance with the judgment. Acting under this statutory provision, the appellant filed an application before the High Court asking that the Board of Revenue be called upon to state a case and to refer the matter to the High Court. The High Court, in dealing with the application, observed that the Board Member had not been asked to review his predecessor’s order but only to state a case, and it directed that the matter return to the Board of Revenue so that either a case be stated or a proper order rejecting the application be passed. The Board subsequently reheard the matter, rejected the appellant’s application, and declined to state a case or to refer the issue to the High Court. The appellant then made another application to the High Court requesting that the Board of Revenue be compelled to state a case; this application was summarily dismissed. He further applied to the High Court for leave to appeal to the Federal Court, and the High Court granted the leave, relying on a decision of a Full Bench of the Lahore High Court in the case of Feroze Shah Kaka Khd v Income-tax Commissioner, Punjab and N.W.F.P., Lahore. In granting leave, the Lahore High Court noted that in the appeal taken to the Privy Council in that case an objection had been raised concerning the competency of the appeal. Although the Privy Council dismissed the appeal on its merits, it observed that the objection was serious and that the appeal was not expressly authorized by the Income-tax Act; if any such appeal could be entertained, it must be justified under clause 9 of the Letters Patent of the Lahore High Court as an appeal from a final judgment, decree or order made in the original jurisdiction of a Division Bench of the High Court. The Full Court of the Lahore High Court had held that the appeal was so justified. The Board of Revenue had not fully argued the question before it, and the Lahore judges therefore refrained from expressing any opinion on the matter. The High Court’s decision to grant leave to the appellant appears to have been influenced primarily by the fact that the view expressed by the Lahore High Court had not been rejected by the Privy Council.

In this case, the Court observed that the appeal originated from a decision rendered by a Division Bench of the High Court, and that the Full Court had found the appeal to be justified. The matter had not been fully argued before the Board, and consequently the Court's Lordships chose not to express any opinion on that issue. The High Court, when it granted leave to the appellant, appeared to be mainly influenced by the observation that the view of the Lahore High Court had not been rejected by the Privy Council. The relevant citations were A.I.R. 1981 Lah. 138 and A.I.R. 1933 P.C. 198. At the start of the hearing before this Court, counsel for the respondent raised a preliminary objection that the appeal was incompetent. After hearing both sides, the Court found that objection to be well founded. The Court then referred to the decision in Sri Mahanth Harihar Gir v. Commissioner of Income-tax, Bihar and Orissa, reported in A.I.R. 1941 Pat. 225, where a special Bench of the Patna High Court held that no appeal lay to His Majesty in Council under clause 31 of the Letters Patent of the Patna High Court from an order of the High Court dismissing an application filed under section 66 of the Income-tax Act—a provision analogous to section 21 of the present Act—directing the Commissioner of Income-tax to state a case. In that judgment, the law on the subject had been exhaustively examined, and the Court noted that the view adopted by the Full Bench of the Lahore High Court, which the appellant relied upon, was not supported by several other High Courts. Moreover, the Privy Council, when the matter was later brought before it, refrained from commenting on the correctness of that view. The present Court agreed with the Patna High Court’s reasoning. Accordingly, the Court examined clause 31 of the Letters Patent of the Patna High Court, which the appellant invoked to resist the preliminary objection. The clause states: ‘And We do further ordain that any person or persons may appeal to Us, Our heirs and successors, in Our or Their Privy Council, in any matter not being of criminal jurisdiction, from any final judgment, decree, or order of the said High Court of Judicature at Patna, made on appeal and from any final judgment, decree or order made in the exercise of original jurisdiction by Judges of the said High Court or of any Division Court, from which an appeal does not lie to the said High Court under the provisions contained in the 10th clause of these presents: provided, in either case, that the sum or matter at issue is of the amount or value of not less than ten thousand rupees, or that such judgment, decree or order involves, directly or indirectly, some claim, demand or question to or respecting property amounting to or of the value of not less than ten thousand rupees.’

To invoke the provision of the clause, it was necessary to demonstrate two conditions: first, that the order being challenged qualified as a final order; and second, that the order had been issued while the High Court was exercising either its original jurisdiction or its appellate jurisdiction. The latter condition was evident from the concluding language of the clause. The Court observed that the order under review could not be treated as a final order because it did not, by itself, bind or alter the parties’ rights. Under section 21 of the Bihar Sales Tax Act, the High Court’s duty was limited to deciding the legal question presented and forwarding a copy of its judgment to the Board of Revenue. Subsequently, the Board of Revenue was required to dispose of the matter in accordance with the High Court’s legal determination. Although the Board’s final order relied on the legal position articulated by the High Court, the High Court’s judgment alone did not affect the parties’ rights; the ultimate and binding order was the one issued by the Board of Revenue. The Court referred to the authority of Tata Iron and Steel Company v. Chief Revenue Authority, Bombay, where Lord Atkinson characterised the High Court’s order as merely advisory. The Court also quoted Lord Esher’s observations in In re Knight and the Tabernacle Permanent Building Society, noting that in Ex parte County Council of Kent a statute allowing a case to be stated for the Court’s decision was interpreted, after contextual analysis, as granting only a consultative function and not producing a judgment or order. Consequently, the Court concluded that the order could not be said to have been passed by the High Court in exercise of either original or appellate jurisdiction. It was undisputed that the matter did not arise under the High Court’s appellate jurisdiction because no appeal existed before it. Likewise, it could not be said to have arisen under the High Court’s original jurisdiction, as the Judges of the Lahore High Court had observed in the cited case, since the proceeding did not commence in the High Court, and all original suits and proceedings were required to begin there.

The Court observed that original suits and proceedings should commence in the appropriate forum. However, the High Court had obtained authority to consider the present dispute by virtue of an explicit provision contained in the Bihar Sales Tax Act. Consequently, the essential point was that the High Court’s power in this matter was limited to a consultative function and did not constitute either original jurisdiction or appellate jurisdiction. On that basis, the Court held that the appeal could not be sustained and therefore had to be dismissed. While addressing the submissions of the parties, the Court further noted that the sales-tax authorities, namely the Commissioner of Sales Tax and the Board of Revenue, had erred in levying a penalty against the appellant under section 10(15) of the Act. The Court explained that the penalty provision was inapplicable because the appellant had duly complied with the registration requirements set out in section 7 of the same Act. In view of these observations, the Court proceeded to dismiss the appeal but expressly declined to pass any order regarding the award of costs. The final order therefore read: the appeal is dismissed. The Court identified the representative of the appellant as the agent R.C. Prasad and the representative of the respondent as the agent P.K. Chatterjee.