Hoosein Kasam Dada (India) Ltd vs The State Of Madhya Pradesh And Others

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

Court: supreme-court

Case Number: Civil Appeal No. 182 of 1952

Decision Date: 23 February 1953

Coram: DAS

In this matter the parties were Hoosein Kasam Dada (India) Ltd., the petitioner, and the State of Madhya Pradesh together with other respondents. The case was decided by the Supreme Court of India on 23 February 1953. The judgment was written by Justice Mehr Chand Mahajan, and the bench also included Justices Das and Sudhi Ranjan. The citation of the decision is 1953 AIR 221 and 1953 SCR 987, and it has been referred to in subsequent reports including 1957 SC 540, 1960 SC 980, 1967 SC 344, 1968 SC 13, 1978 SC 2280 and 1988 SC 2010. The principal question concerned the right of appeal under the Central Provinces and Berar Sales Tax Act, 1947, particularly whether the right to appeal was a substantive vested right or merely a procedural requirement, and how that right was affected by an amendment of the Act in 1950.

The headnote of the Court summarised that the right of appeal is a substantive right that becomes vested in a party when the original proceedings are first instituted in the lower court, and that such a right cannot be removed except by a clear legislative provision or by necessary intendment of the legislature. Section 22(l) of the Central Provinces and Berar Sales Tax Act, 1947, originally stipulated that an appeal against an assessment would not be entertained unless the appellant had paid the amount of tax that he admitted to be due. On 25 November 1949 the Act was amended, and the amended provision required that an appeal could be admitted only if the appellant produced satisfactory proof of payment of the tax in respect of which the appeal was filed.

The factual background was that on 28 November 1947 the appellant submitted a sales-tax return to the Sales Tax Officer. The Officer found that the turnover exceeded the threshold of two lakh rupees and consequently referred the matter to the Assistant Commissioner, who issued an assessment on 8 April 1950. The appellant then filed an appeal on 10 May 1950, but did not deposit the tax amount that the assessment required. The Board of Revenue held that the amended Section 22(l) applied because the assessment had been made after the amendment came into force, and therefore rejected the appeal on the ground of non-payment.

The Supreme Court held that the appellant possessed a vested right of appeal at the time the original proceedings were initiated in 1947, and that this right was governed by the law as it stood on that date. The Court further held that the 1950 amendment could not be characterised merely as a procedural change; rather, it altered the substantive right itself by imposing an additional condition of payment, and because the amendment did not expressly or by necessary intendment apply retrospectively, the appellant’s right to appeal could not be denied on the basis of the non-payment requirement introduced later.

In its analysis, the Court held that the amendment enacted in 1950 could not be given retrospective effect because the Amendment Act of 1950 did not expressly provide, nor could it be said to necessarily intend, such retroactive operation. Accordingly, the appeal that had been filed could not be rejected on the ground that the appellant had failed to pay the tax in respect of which the appeal was made. The Court cited the authorities Colonial Sugar Refining Co. Ltd. v. Irving [1905] A.C. 369, Nanabin Aba v. Sheku bin Andu (I.L.R. 32 Bom. 337), Delhi Cloth and General Mills Co. Ltd. v. Income-tax Commissioner, Delhi (54 I.A. 421), Kirpa Singh v. Rasaldar Ajaipal Singh (A.I.R. 1928 Lab. 627), Sardar Ali v. Dalimuddin (I.L.R. 56 Cal. 512) as applied, and noted the disapproval in Badraddin Abdul Rahim v. Sitaram Vinayak Apte (I.L.R. 52 Bom. 753). The Court also referred to the decisions in In re Vasudeva Samiar (A.I.R. 1929 Mad. 381), Ram Singha v. Sankar Dayal (I.L.R. 50 All. 965), Radhakisan v. Sri Dhar (A.I.R. 1950 Nag. 17), Gordhan Das v. Governor-General in Council (A.I.R. 1950 Punj. 103) and Nagendra Nath Bose v. Monmohan (1930, 34 C.W.N. 1009). The judgment concerned Civil Appeal No. 182 of 1952, which was taken on special leave from the order dated 2 August 1951 of the High Court of Judicature at Nagpur in Miscellaneous Petition No. 187 of 1950 under Articles 226 and 227 of the Constitution. Counsel for the appellant appeared, as did counsel for the State of Madhya Pradesh. The judgment was delivered on 23 February 1953 by Justice DAS.

On 28 November 1947, the appellant Hoosein Kasam Dada (India) Ltd., hereinafter referred to as the assessee, submitted a sales-tax return in Form IV for the first quarter to the Sales Tax Officer in Akola. The Officer issued a notice in Form XI requiring the assessee to produce documentary evidence in support of the return. The assessee complied by producing its account books. The Officer was not satisfied that the books proved the correctness of the return and, being of the opinion that the taxable turnover exceeded two lakh rupees, forwarded the matter to the Assistant Commissioner of Sales Tax in Amravati for assessment. On 25 January 1949, the Assistant Commissioner issued a fresh notice in Form XI pursuant to section 11 and fixed the date of disposal for 5 February 1949. After several adjournments and procedural steps that are not material to the present narration, the hearing actually began on 9 June 1949, when an agent of the assessee appeared with the books of account of the Akola branch. Following further proceedings, the Assistant Commissioner rendered an assessment on 8 April 1950, fixing the tax liability at the sum of Rs. 58,657140, and sent a copy of the order in Form XIV to the assessee. Dissatisfied with this assessment, the assessee filed an appeal on 10 May 1950 to the Sales Tax Commissioner of Madhya Pradesh under section 22(l) of the Central Provinces and Berar Sales Tax Act, 1947, without accompanying proof of payment of the tax that was the subject of the appeal.

Because the appeal was not accompanied by any proof of payment of the tax for which the appeal was filed, the authorities, after granting the assessee several adjournments, refused to admit the appeal. The assessee then filed a revision application before the Board of Revenue, Madhya Pradesh, challenging the order of the Sales Tax Commissioner. In the revision, the assessee argued that his appeal should be governed by the proviso to section 22(1) of the Central Provinces and Berar Sales Tax Act as it existed when the assessment proceedings began, that is, before the amendment made on 25 November 1949 by the Central Provinces and Berar Sales Tax (Second Amendment) Act (Act LVII of 1949). The Board of Revenue held that the order of assessment was made after the amendment and that the appeal was filed thereafter; consequently, the Board concluded that the appeal must be governed by the law as it stood at the time the appeal was actually filed, and that the pre-amendment provisions could not be applied to the case. Dissatisfied with that view, the assessee approached the High Court of Madhya Pradesh under Articles 226 and 227 of the Constitution of India, seeking, among other relief, a writ of mandamus or any appropriate order directing the Sales Tax Commissioner to admit and hear the appeal without requiring payment of the assessed sales tax. The High Court dismissed the application on 2 August 1951. The assessee subsequently sought leave to appeal to this Court, but the High Court again denied the request on 14 March 1952. The assessee thereafter applied to this Court for special leave to appeal on 12 May 1952. This Court granted special leave, but limited the leave to the specific question of the effect of the amendment to section 22 on the assessee’s appeal to the Sales Tax Commissioner, Madhya Pradesh, holding that any other questions raised by the assessee would have to be decided by the Sales Tax Commissioner if the appeal were to succeed. The appeal now stands for final disposal before this Court, and the present consideration is confined to the narrow issue of how the amendment to section 22 of the Act influences the right to appeal. Section 22(1) of the Act, in its original form, read: “22. (1) Any dealer aggrieved by an order under this Act may, in the prescribed manner, appeal to the prescribed authority against the order: Provided that no appeal against an order of assessment, with or without penalty, shall be entertained by the said authority unless it is satisfied that such amount of tax or penalty or both as the appellant may admit to be due from him, has been paid.” The relevant portion of the section…

Section 22, as amended, reads as follows: “22. (1) Any dealer aggrieved by an order under this Act may, in the prescribed manner, appeal to the prescribed authority against the order: Provided that no appeal against an order of assessment, with or without penalty shall be admitted by the said authority unless such appeal is accompanied by a satisfactory proof of the payment of the tax, with penalty, if any, in respect of which the appeal has been preferred.” The court observed that the language of the proviso to section 22(1) before amendment required only that an aggrieved assessee pay the amount of tax which he admitted to be due. By contrast, the proviso to the amended subsection imposes the condition that the appeal must be supported by satisfactory proof of payment of the tax which is the subject of the appeal. The present assessee argued that, because the amendment was not made retrospective, its right of appeal under the original provision of section 22(1) remained intact. Consequently, the assessee maintained that it was not required to admit any tax liability, was not obligated to deposit any sum along with its appeal, and that the Commissioner was legally bound to admit the appeal. The assessee further contended that the Commissioner possessed no jurisdiction or authority to reject the appeal on the ground that it lacked the proof of payment demanded by the amended proviso, and that both the Board of Revenue and the High Court erred in refusing to direct the Commissioner to admit the appeal. The court acknowledged that the amendment undeniably introduced a substantial restriction on the assessee’s right of appeal, for the revised provision effectively makes payment of the full assessed amount a prerequisite for the admission of an appeal. The pivotal question therefore was whether such a restriction, introduced by amendment, could impinge upon the assessee’s right to appeal a decision in proceedings that had commenced before the amendment came into force, when that right was previously unencumbered by the present condition. The court referred to the precedent set by the Judicial Committee in the case of Colonial Sugar Refining Co., Ltd. v. Irving, wherein the Collector of Customs, acting under the Excise Tariff Act 1902, demanded payment of £20,100 excise duty on 6,700 tons of sugar. The appellants disputed the claim, deposited the money with the Collector, and instituted proceedings by issuing a writ on 25 October 1902. A special case was referred to the Supreme Court, which on 4 September 1903 rendered judgment in favour of the Collector. During the pendency of that case, the Judiciary Act 1903 received Royal assent on 25 August 1903, roughly ten days before the judgment was delivered.

The judgment had been delivered. By virtue of section 39(2) of the Judiciary Act, the statutory right of appeal from the Supreme Court to the Privy Council, which had been created by the Order in Council of 1860, was removed; consequently the only remaining avenue of appeal from the Supreme Court was directed to the High Court of Australia. The appellants, having obtained leave from the Supreme Court, nevertheless filed an appeal to the Privy Council. The respondents subsequently filed a petition asserting, as a preliminary point, that no appeal could lie to the Privy Council and requesting that the appeal be dismissed. When the Privy Council considered that petition, Lord Macnaghten delivered the judgment. He stated that, with regard to the general principles applicable to the case, there was no dispute. He explained that if the issue under consideration were purely procedural, the petition would be well founded; however, if the issue extended beyond mere procedure and affected a right that existed at the time the Act was passed, the authorities—from Lord Coke to the present—would support the appellants’ position. He further observed that the Judiciary Act was not retrospective either by explicit wording or by necessary implication. Accordingly, the crucial question was whether the right of appeal to His Majesty in Council was a vested right of the appellants at the moment the Act was enacted, or merely a procedural matter. Lord Macnaghten expressed that this question admitted no doubt. He emphasized that depriving a litigant, whose action was pending, of an existing right to appeal to a superior tribunal was fundamentally different from merely regulating procedural aspects. In principle, the Court saw no distinction between the complete abolition of an appeal and its transfer to a new tribunal; both actions interfered with established rights and contravened the well-known principle that statutes are not to operate retrospectively unless a clear intention to that effect is manifested. The Court noted that the same principle had been applied by Jenkins C.J. in Nana bin Aba v Sheku bin Andu and by the Privy Council itself in Delhi Cloth and General Mills Co Ltd v Income-tax Commissioner, Delhi. A Full Bench of the Lahore High Court adopted the principle in Kirpa Singh v Rasaldar Ajaipal Singh, regarding the right of appeal as a vested right that attached to a party from the commencement of the action in the court of first instance and could be removed only by an express provision or by necessary implication. The Court further referred to Sardar Ali v Dalimuddin, in which the suit that gave rise to the appeal had been filed in the Munsiff’s Court at Alipore on 7 October 1920 and dismissed on 17 July 1924.

In the matter before the Court, the plaintiffs first appealed to the Court of the District Judge, but that appeal was dismissed. They subsequently filed a second appeal to the High Court on 4 October 1926. That second appeal was heard by a Single Judge of the High Court and was dismissed on 4 April 1928. While this appeal was pending, Clause 15 of the Letters Patent was amended on 14 January 1928 to provide that no further appeal could lie from the decision of a Single Judge hearing a second appeal unless the Judge certified that the case was fit for further appeal. The learned Judge who dismissed the second appeal on 4 April 1928 declined to grant any such certificate of fitness. Undeterred, the plaintiffs filed on 30 April 1928 an appeal relying on Clause 15 of the Letters Patent as it existed before the amendment. The appellants contended that the amended clause could not be applied to their appeal because doing so would apply the amendment retrospectively and would impair, indeed defeat, a substantive right that had already vested. They pointed out that the suit giving rise to the appeal had been filed on 7 October 1920, and that by the law then in force they possessed a substantive right to a Letters Patent appeal from the decision of a Single Judge. Accordingly, they argued that any intention to interfere with that right, to burden it with a new condition, or to impair it, could not be presumed unless the legislature had expressed such intention in clear words or through necessary implication. In addressing the appellants’ submissions, Rankin C.J. observed at page 518: “Now, the reasoning of the Judicial Committee in The Colonial Sugar Refining Company’s case is a conclusive authority to show that rights of appeal are not matters of procedure, and that the right to enter the superior court is for the present purpose deemed to arise to a litigant before any decision has been given by the inferior court. If the latter proposition be accepted, I can see no intermediate point at which to resist the conclusion that the right arises at the date of the suit.” The Court held that the newly amended clause could not be given retrospective effect. Consequently, the date on which the second appeal was presented to the High Court was not the controlling date for the applicability of the amended Clause 15; rather, the date of institution of the original suit determined the right. The Court further noted that, contrary to the earlier decision of the Calcutta High Court, counsel for the respondent referred to the Bombay High Court decision in Badruddin Abdul Rahim v. Sitaram Vinayak Apte for guidance.

The Court noted that a previous decision, recorded as (1), had held that the amendment of clause fifteen of the Letters Patent was to operate retrospectively. That judgment was itself based on an earlier ruling of the same High Court in Fram Bomanji v. Hormasji Barjorji (2). The earlier ruling was premised on two propositions: first, that the question at issue was one of procedure; and second, that section two of the New Letters Patent of 1865 gave the Letters Patent retrospective operation by making it applicable to all suits pending at that time. The first proposition was found to be in direct conflict with the Privy Council decision in Colonial Sugar Refining Co. Ltd. v. Irving, and the Court observed that this conflict required the earlier view to be considered overruled, a position that Fawcett J. himself had acknowledged at page 756 of the earlier report. As to the second proposition, the Court held that it was irrelevant to the matter before it and therefore refrained from expressing any opinion on the soundness or validity of that ground.

In addition, the Court mentioned that in Shaikh Hasan Abdul Karim v. King Emperor (1) another bench of the same High Court had expressly dissented from the decision in Badruddin Abdul Rahim v. Sitaram Vinayak Apte. The principle formulated in the Colonial Sugar Refining case was subsequently adopted by a Special Bench of the Madras High Court in In re Vasudeva Samiar (2). A Full Bench of the Allahabad High Court in Ram Singha v. Shankar Dayal (3) aligned itself with that principle and held that the earlier decision of that Court in Zamin Ali Khan v. Genda (4) had been overturned by the Privy Council decision in the Colonial Sugar Refining case. A Full Bench of the Nagpur High Court in Radhakisan v. Shridar (5) also endorsed the same view, as did the Punjab High Court in Gordhan Das v. The Governor General in Council (1). The Court observed that the case of Nagendra Nath Bose v. Mon Mohan Singha Roy (7) was particularly relevant to the present issue.

In the Bose case, the plaintiffs had instituted a suit for rent valued at Rs 1,306 15 and had obtained a decree. In execution of that decree, the defaulting tenancy was sold on 20 November 1928 for Rs 1,600. On 19 December 1928, an application was filed under Order XXI, rule 90 of the Code of Civil Procedure by the present petitioner, who was one of the judgment-debtors, seeking to set aside the sale. The application was dismissed because the petitioner failed to appear. Consequently, the petitioner appealed to the District Judge of Hooghly, who refused to admit the appeal on the ground that the amount recoverable in execution of the decree had not been deposited as required by the proviso to section 174, clause (c), of the Bengal Tenancy Act as amended by the 1928 amendment. The petitioner contended that the amendment, which came into force on 21 February 1929, could not affect the right of appeal from the decision on the application made on 19 December 1928. The Court recorded this contention and the subsequent refusal of the District Judge to admit the appeal.

The Court noted that the decree had not been deposited as required by the proviso to section 174, clause (c), of the Bengal Tenancy Act as amended by an amending Act in 1928. The petitioner contended that the amended provision, which became operative on 21 February 1929, could not prejudice the right of appeal that arose from a decision on an application filed on 19 December 1928 seeking to set aside the sale. Justice Mitter, in the report on page 1011, remarked: “We think the contention of the petitioner is well-founded and must prevail. That a right of appeal is a substantive right cannot now be seriously disputed. It is not a mere matter of procedure. Prior to the amendment of 1928 there was an appeal against an order refusing to set aside a sale (for that is the effect also where the application to set aside the sale is dismissed for default) under the provisions of Order 43, rule (1), of the Code of Civil Procedure. That right was unhampered by any restriction of the kind now imposed by section 174(5), Proviso. The Court was bound to admit the appeal whether appellant deposited the amount recoverable in execution of the decree or not. By requiring such deposit as a condition precedent to the admission of the appeal, a new restriction has been put on the right of appeal, the admission of which is now hedged in with a condition. There can be no doubt that the right of appeal has been affected by the new provision and in the absence of an express enactment this amendment cannot apply to proceedings pending at the date when the new amendment came into force. It is true that the appeal was filed after the Act came into force, but that circumstance is immaterial— for the date to be looked into for this purpose is the date of the original proceeding which eventually culminated in the appeal.” The Court further observed that the foregoing decisions, together with its own rulings in Janardan Reddy v. The State (1) and Ganpat Rai v. Agarwal Chamber of Commerce Ltd. (2), firmly uphold the principle that a right of appeal is not merely procedural but a substantive right. Such a right becomes vested in a party when proceedings are first instituted before a decision is rendered by the inferior tribunal. Referring to the language of Jenkins C.J. in Nana bin Aba v. Shaik bin Andu, the Court held that disturbing an existing vested right of appeal is not a simple procedural alteration; it can be withdrawn only by express enactment or a necessary implication. An intention to interfere with, impair, or endanger such a vested right cannot be presumed unless it is clearly manifested by express words or necessary implication. Sri Ganapathy Aiyar argued that the amended language of section 22(1) makes the provision retrospective, and that the new proviso, as drafted, imposes a mandatory requirement on the authority to refuse admission of an appeal unless a satisfactory proof of tax payment is produced at the time the appeal is preferred.

The amendment to section 22(1) of the Act, as it was explained, expressly required the authority not to admit an appeal unless the appellant produced satisfactory proof that the tax in dispute had been paid, and the authority was required to discharge this duty at the very moment the appeal was presented before it. The counsel for the petitioner argued that, after the amendment, the authority possessed no discretion and no jurisdiction to admit any appeal unless the assessed tax had been deposited. By that reasoning, the counsel submitted that the amended provision must, by necessary implication, apply both to appeals against assessment orders made before the amendment and to appeals against orders made after the amendment. A similar line of argument had been advanced before the Calcutta Special Bench in Sardar Ali v. Dalimuddin, where it was asserted that, following the amendment, the court could not entertain an appeal without a certificate from the Single Judge. Rankin C.J. rejected that contention, observing at page 520 that “unless the contrary can be shown, the provision which takes away jurisdiction is itself subject to the implied saving of the litigants’ right.” In our opinion that observation was directly relevant and applicable to the matter before us.

The essential implication of that observation, as well as of the earlier decisions cited, was that a pre-existing right of appeal was not destroyed by the amendment unless the amendment was expressly made retrospective by clear words or by a necessary implication. The continuation of the pre-existing right necessarily meant that the old law, which had originally created that right, must also continue to exist in order to support it. Since the old law remained in force for the purpose of sustaining the pre-existing right, it must consequently govern the exercise and enforcement of that right, and the amended provision could not be allowed to impede the exercise of the right. The argument that the authority had no option or jurisdiction to admit the appeal unless the assessed tax was deposited, as required by the amended proviso to section 22(1), disregarded the existence of the old law that supported the pre-existing right and, in effect, amounted to begging the question. The new proviso was wholly inapplicable in such a situation, and the authority’s jurisdiction had to be exercised under the old law that continued to exist. Accordingly, the argument advanced by Sri Ganapathy Aiyar on this point could not be accepted. The counsel further maintained that the requirement of depositing the assessed amount did not affect the substantive right of appeal, which remained intact, but merely introduced a new procedural condition. He also contended that the present case differed from Sardar Ali v. Dalimuddin, because here the appellant could choose to deposit the tax, whereas in the earlier case the appellant could not obtain the necessary certificate from the Single Judge.

In the earlier decision of Sardar Ali v. Dalmuddin (supra), the Court noted that the appellant possessed the complete discretion to deposit the tax if he chose to do so, whereas in that case the appellant did not have the authority to obtain a certificate from the learned Single Judge who had disposed of the second appeal. The present matter is different because the condition imposed by the amended provision requires the appellant to deposit the assessed tax before the appeal can be entertained, and such a condition may, in a particular case, actually prevent the exercise of the statutory right of appeal where the assessee is unable to secure the necessary funds in time. This argument, however, cannot prevail in view of the decision of the Calcutta High Court in Nagendra Nath Bose v. Mon Mohan Singha (supra), and no convincing submission has been placed before this Court to show that the earlier decision is erroneous. There can be no doubt that the new requirement “touches” the substantive right of appeal that is vested in the appellant, and it cannot be ignored that the requirement is deliberately designed to interfere with, or at least to fetter, that substantive right. The right conferred by the amended section is unquestionably narrower than the right that was available before the amendment. A provision that is calculated to deprive the appellant of an unfettered right of appeal therefore cannot be characterised merely as a procedural alteration. In reality, the new requirement does more than merely regulate the manner in which a pre-existing right is exercised; it actually diminishes the right itself and thus cannot be regarded as a simple rule of procedure. Finally, counsel for the appellant gently suggested that until an actual assessment is made there can be no “lis” and consequently no right of appeal can accrue before that event. Two responses answer this submission. First, whenever one party makes a proposition and another party opposes that proposition, a “lis” arises. It may be conceded, without deciding the issue, that when the assessee files his return a “lis” may not immediately spring into existence because, under section 11(1), the authority may accept the return as correct and complete. However, if the authority is not satisfied with the correctness of the return and calls for evidence, a genuine controversy emerges involving a proposition by the assessee and an opposition by the State. The fact that the authority who raises the dispute also functions as the adjudicating judge does not alter the nature of the dispute, because the authority acts in the interest of the State and therefore represents the State. The dates placed on record show that, in this case, the “lis” as explained above arose before the amendment of the section took effect. Moreover, even if the “lis” were to be taken as arising only on the date of assessment, the possibility of a “lis” existed as soon as the proceedings were initiated by the filing of the return or, at the very least, when the authority called for evidence and commenced the hearing, and the right of appeal must be considered to have accrued at that stage.

The Court observed that the right of appeal had already existed even on the dates in question. For the purpose of determining when the right of appeal accrued, the Court explained that the essential and controlling date is the date on which the proceedings were initiated, and not the date on which a final decision was rendered. Accordingly, the Court held that, on all the grounds previously discussed, the appeal filed by the appellant should not have been dismissed merely because it was not accompanied by satisfactory proof of payment of the tax that had been assessed. The Court noted that the appellant had never conceded that any tax amount was actually owed by it. Consequently, under the provision of the statute as it stood before the amendment, the appellant was legally entitled to file its appeal without having to deposit any sum of money as security. In view of this reasoning, the Court allowed the appeal and directed that the Commissioner admit the appeal and decide the matters raised therein in accordance with the applicable law. Further, the Court ordered that the appellant be awarded the costs of this appeal. The order therefore concluded with the statement that the appeal was allowed. The appellant’s representative was identified as Rajinder Narain, while the respondent’s representative was identified as G. H. Rajadhyaksha.