Ramsaran Das And Bros vs Commercial Tax Officer, Calcutta

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 592 of 1960

Decision Date: 31 October 1961

Coram: Bhuvneshwar P. Sinha, J.L. Kapur, M. Hidayatullah, J.C. Shah, J.R. Mudholkar

In the case titled Ramsaran Das And Bros vs Commercial Tax Officer, Calacuttaand, the Supreme Court delivered its judgment on 31 October 1961. The opinion was authored by Justice Bhuvneshwar P. Sinha, who sat with Justices J. L. Kapur, M. Hidayatullah, J. C. Shah and J. R. Mudholkar. The petitioner was identified as Ramsaran Das and Bros, while the respondents were the Commercial Tax Officer, Calacuttaand, together with other parties. The bench composition was recorded as Chief Justice Bhuvneshwar P. Sinha, Justice Kapur, Justice Hidayatullah, Justice Shah and Justice Mudholkar. The citation of the decision appeared as 1962 AIR 1326 and 1962 S.C.R. Supl. (1) 276. The case concerned the practice before the Supreme Court when a special leave to appeal is sought from an order of assessment, and it examined whether statutory remedies must be exhausted before invoking Article 136 of the Constitution of India.

The headnote explained that the appellant firm, engaged as a middleman in the inter‑State trade of coal and coke, had been assessed to central sales tax under section 8(2) of the Central Sales Tax Act, 1956, by the Commercial Tax Officer. The firm had not used the remedies provided by the Act and instead applied directly for special leave to appeal under Article 136, challenging the assessment order. When the appeal was scheduled for hearing, the question arose whether it could be entertained, because the factual issues had not yet been finally determined by the authority designated to find facts under the Act, and the High Court’s jurisdiction under the Act had not been invoked. The Court held that a taxpayer could not normally approach the Supreme Court directly against the assessing authority’s judgment without first using the remedies prescribed in the taxing statutes. The Court referred to the decisions in Mahadayal Premchandras v. Commercial Tax Officer Calcutta [1959] S.C.R. 551, The State of Bombay v. M/s. Ratilal Vedilal [1961] 2 S.C.R. 367, Chandi Prasad Chokhani v. The State of Bihar [1962] 2 S.G.R. 276 and Kanhaiyalal Lohia v. Commissioner of Income‑Tax Bengal [1962] 2 S.C.R. 839, which were followed. The Court further held that in the present case, there were no special circumstances and the facts had not yet been finally determined; consequently, the appeal was deemed incompetent. The judgment was issued under civil appellate jurisdiction as Civil Appeal No. 592 of 1960, filed by special leave from the judgment and order dated 17 June 1959 of the Commercial Tax Officer, Calcutta, in case No. 54(c) of 1969‑60. Counsel for the appellants appeared, and counsel for respondent No. 3 also appeared. The Court’s opinion, delivered by Justice Sinha, noted that the appeal concerned a direct special leave granted on 7 September 1969 against the order dated 17 July 1959, which had assessed the appellant to central sales tax of approximately Rs. 42,647 for the period beginning 30 July 1957 to 31 March 1958 under the Central Sales Tax Act (LXXIV of 1956).

The Court noted that the assessment in question covered the period from 1 January 1957 to 31 March 1958 under the Central Sales Tax Act (LXXIV of 1956), which the Court would hereafter refer to as the Act. It identified the second respondent as the State of West Bengal and the third respondent as the Union of India. While the Court was prepared to issue an order in the present appeal, it observed that a detailed recitation of the factual background leading to the appeal was unnecessary for the purpose of the order. The appellant was described as a partnership firm constituted under the Indian Partnership Act, whose principal place of business was located at 18 Netaji Subhas Road, Calcutta, an area within the territorial jurisdiction of the first respondent, the Commercial Tax Officer. The appellant asserted that it engaged in two distinct lines of business: first, as a dealer in coal and coke, and second, as an intermediary who facilitated transactions of coal and coke between colliery owners and end‑users. Regarding its dealer activity, the appellant held registration as a dealer under the Bengal Finance (Sales Tax) Act (Bengal Act VI of 1941). The intermediary activity primarily involved the sale of coal and coke in the context of interstate trade or commerce, and the tax dispute concerned this second line of business. The Court explained that the Act became operative in West Bengal on 1 July 1957, and that the appellant applied for and received a certificate of registration under the Act on 30 July 1957. In May 1958, the appellant filed its return under the Act for the relevant period, declaring that its turnover was nil. Despite the appellant’s submission of a show‑cause statement contesting the proposed assessment, the first respondent determined that the appellant’s turnover for the same period was Rs 9,17,196 and consequently levied a central sales tax of Rs 42,617.82 under section 8(2) of the Act, thereafter issuing a demand notice. The appellant subsequently approached this Court and obtained special leave to appeal the assessment order and the later demand issued on its basis. From these facts, the Court observed that the appellant had not exhausted all remedial avenues provided by the Act and had directly approached the Supreme Court as though the assessment order were final. The Court therefore considered whether it should entertain an appeal when the factual issues had not yet been conclusively resolved by the designated fact‑finding authority under the Act, and when the High Court’s jurisdiction had not been invoked to exercise its statutory powers. Counsel for the appellant argued that the Supreme Court possessed sufficiently wide powers to entertain a direct petition because, in his view, the assessment had been made without lawful authority. The Court acknowledged that the jurisdiction conferred by Article 136 of the Constitution was indeed expansive, noting that, unlike many other constitutional provisions, it contained no explicit limitation on the Court’s power to grant special leave.

In this case the Court explained that a judgment, decree or order must be final in the sense that the appellant must have exhausted every remedy provided by law before seeking the Court’s special leave to appeal from any judgment, decree, determination, sentence or order issued by any Court or Tribunal in India. Although the Court possesses a very wide jurisdiction to entertain appeals by special leave, it has deliberately placed limitations on that jurisdiction for sound reasons and has ordinarily refused to entertain such appeals when the party seeking relief has not first used the ordinary remedies available under the law. Counsel for the appellant drew the Court’s attention to the earlier decision of the Court in Mahadayal Premchandra v. Commercial Tax Officer, Calcutta, reported in 1959 S.C.R. 551, where the Court interfered with an assessment order made by the Commercial Tax Officer of Calcutta after the matter was brought before it by way of special leave. The appellant argued that the earlier decision entirely covered the points of dispute in the present matter and that it involved commission agents who, like the appellant, had been assessed sales tax. The Court, however, identified several reasons why that precedent could not be invoked to justify entertaining the present appeal. Firstly, the earlier case did not raise the preliminary question now before the Court about whether the appeal should be entertained at all; both parties’ counsel in that case were eager to obtain a final determination from the Court. Secondly, the earlier case arose under special circumstances that do not exist here. The most striking feature of the Mahadayal Premchandra case, as highlighted by the Court, was that the Assessing Authority had not exercised its own judgment in making the assessment. Instead, contrary to its own opinion, the Assessing Authority followed instructions from an Assistant Commissioner and acted on those directions. The Court noted that even though the Assessing Authority was satisfied, based on the material placed by the assessee, that the assessee was not liable to pay sales tax, it still complied with the superior officer’s directives. Moreover, the Court pointed out a complete failure of justice because the assessee was not given an opportunity to address the points raised by the Assistant Commissioner, and the assessment order was issued without his knowledge. As a result, the Court made a significant observation, stating that the procedure adopted was, at the very least, unfair and was likely to undermine public confidence in the impartial and fair administration of the sales‑tax department.

On the basis of the earlier observations, the Court set aside the assessment order that had been issued by the first respondent and directed that the matter be remanded to that authority for proper consideration in accordance with law. However, because the matter was old and a remand would cause unnecessary hardship to the appellants, the Court chose to decide the appeal on its merits, as recorded on page 560. In doing so, the Court examined the entire controversy and ultimately decided the appeal in favour of the assessee. The Court noted that this earlier decision did not establish any precedent that could be invoked by the present appellant.

The appellant’s counsel then relied upon the decision in The State of Bombay v. M/s. Ratikal Vadilal (1). In that case, the State of Bombay had filed a special leave application before this Court against an order of the Sales Tax Tribunal, Bombay, which had allowed the appeal and set aside the order of the Collector of Sales Tax issued under the Bombay Sales Tax Act. The respondents in that matter were commission agents engaged in clearing and transport contracting, as reported in the citation (1) [1961] 2 S.C.R. 367. Those respondents had approached the Collector of Sales Tax, Bombay, seeking a determination of whether they could be described as “dealers” within the meaning of the Act, after presenting the relevant facts and circumstances of their business. No procedural step was taken to refer the question to the High Court, and the Court observed that it was common to encounter appeals filed directly before this Court without first exhausting all remedies available under the law. The Court further expressed that, as a general rule, it would not permit a bypass of the High Courts and that an appellant should ordinarily exhaust all such remedies before invoking the jurisdiction of this Court under Article 136 of the Constitution.

Nevertheless, this Court examined the merits of the Bombay case because both parties invited such consideration and did not insist that the preliminary issue be decided first. Consequently, the Court concluded that neither of the two authorities cited by the appellant’s counsel provided support for the proposition that a party may approach this Court on special leave directly against a judgment of the Assessing Authority without first exhausting the remedies provided under the relevant Act.

The Court also referred to other decisions in which petitions were made directly to this Court against assessment orders, disregarding the High Court’s refusal to refer the matter or to decide the specific point raised by the assessee. In those instances, this Court declined to entertain the appeals, holding that the appellant could not invoke the jurisdiction of this Court under Article 136 without first appealing the final decision rendered by the High Court. The most recent authority on this point, according to the Court, was the decision in Chandi Prasad Chokhani v. The State of Bihar (1), which reiterated the earlier rulings.

The Court observed that every authority previously cited by the parties had been examined in full. It stated that it was in complete agreement with the propositions that this Court has set out in that whole batch of cases. The Court further mentioned another decision of a Division Bench that is reported in (1) [1962] 2 S. C. R. 276, and also recalled the decision rendered in Kanhaiyalal Lohia v. Commissioner of Income Tax, West Bengal (1). In the Kanhaiyalal Lohia case, this Court adopted exactly the same approach and dismissed the appeal on the ground that the appeal was incompetent. The matter that is before the Court now is much simpler. There are no special circumstances affecting the dispute and the factual issues have not yet been finally determined. It may also be observed that the appellant has not contested the validity of the Act or of any other statute that governs the question. Accordingly, the Court concluded that the present appeal must be dismissed as incompetent and that it would not express any opinion on the substantive merits of the controversy. The Court further held that the appellant remains free to seek any other remedy that may be available under the law, as may be advised by counsel. The Court therefore found no basis to allow the appeal to proceed and dismissed it without any order as to costs. The appeal is hereby dismissed.