M/S. Ballabhdas Agarwal vs The State Of Bihar

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

Court: supreme-court

Case Number: Civil Appeal No. 379 of 1961

Decision Date: 02/02/1962

Coram: J.L. Kapur, M. Hidayatullah, Raghubar Dayal

In this matter the appellant, identified as M S Ballabhdas Agarwal, brought a special leave appeal to the Supreme Court of India against the resolution dated 21 April 1954 issued by the Board of Revenue, Bihar. The judgment was delivered on 2 February 1962 by a bench consisting of Justice J L Kapur, Justice M Hidayatullah and Justice Raghubar Dayal. The case was reported as 1966 AIR 814 and also appeared in the Supplement to the Supreme Court Reports, volume 2, page 967. The dispute arose under the Bihar Sales Tax Act, 1947 (Bihar 19 of 1947), specifically invoking sections 6, 24, 25 and 28 of that enactment. The appellant, who operated as a railway contractor, maintained refreshment rooms and tea stalls at a number of railway stations. He was duly registered as a dealer under the sales‑tax legislation and carried on the business of selling assorted eatables, cigarettes, betel leaves, milk, fruits and tea at those stations. For the assessment year 1950‑51 the sales‑tax officer made an assessment which the appellant contested. He initially pursued the ordinary appellate route before the sales‑tax authorities, and after those appeals were dismissed he filed a revision petition under section 24 of the Act before the Board of Revenue, Bihar. The Board dismissed that revision. Consequently the appellant invoked section 25 of the Act and sought a reference of six questions of law to the High Court of Bihar. The Board, however, referred only a single question. The High Court, after reframing the question, delivered a judgment that answered the reference in the negative, thereby ruling against the appellant. The appellant thereafter instituted a special leave appeal before this Court challenging the order of the Board of Revenue, but he did not appeal the judgment and order of the High Court.

The Court held that an assessee could not question the correctness of a decision of the Board of Revenue concerning the questions that had been referred to, decided by the High Court and answered adversely, when no appeal against that High Court decree had been filed to the Supreme Court. It further observed that if the appellant desired a reference of any question that the Board failed to refer, the correct remedy was to apply to the High Court for a reference under section 28 of the Bihar Sales Tax Act, 1947. The Court also found that the appellant had not demonstrated any breach of the principles of natural justice or any violation of a legal principle that would justify interference with the Board’s orders under Article 136 of the Constitution. In reaching this conclusion, the Court applied the authorities set out in Chimmonlal Rameshwarlal v. Commissioner of Income Tax (Central), Calcutta, A.I.R. 1960 S.C. 280 and Chandi Prasad Chokhani v. State of Bihar, A.I.R. 1961 S.C. 1708. Accordingly, the appeal was dismissed, confirming the Board’s resolution and the High Court’s adjudication on the questions that had been rightly referred.

In Revision Case No. 706 of 1953, counsel S.K. Kapur and K.K. Jain represented the appellants, while counsel D.P. Singh, R.K. Garg, M.K. Ramamurthi and S.C. Agarwal appeared for the respondents. The judgment was delivered on 2 February 1962 by Justice Kapur. The appeal was filed by special leave against an order issued by the Board of Revenue, Bihar, and concerned the assessment of sales tax for the financial year 1950‑51 under the Bihar Sales Tax Act, 1947, hereinafter referred to as “the Act.”

The appellant was engaged in the business of catering for railways. He operated refreshment rooms and tea stalls at several railway stations and sold a variety of consumables, including eatables, cigarettes, betel leaves, milk, fruits and tea. He had been registered as a dealer under the Act and had been carrying on his business for a considerable period. The appellant contended that maintaining separate accounts for taxable and non‑taxable food items was extremely difficult. Consequently, in 1944 he made a representation to the Government of Bihar seeking a convenient arrangement that would remove the necessity of keeping distinct sets of books for the two categories of items.

In response to this representation, the Government of Bihar issued a letter dated 5 June 1915, agreeing that the appellant’s taxable turnover in the State would be deemed to be sixty‑six and two‑thirds percent of his total gross turnover for the quarter ending 31 December 1944. The letter further provided that this percentage could be revised after 31 December 1945. Relying on that government letter, the appellant did not maintain separate accounts for taxable and non‑taxable items. For several quarters that followed, he continued to be taxed in accordance with the arrangement set out in the letter.

For the period from 1 April 1950 to 31 March 1951, the appellant’s gross turnover amounted to Rs 11,16,270‑11‑0. He claimed that his assessment should be based on sixty‑six and two‑thirds percent of that figure, as per the earlier government arrangement. However, the sales‑tax officer assessed him on the entire gross turnover, allowing only the usual rebate of four percent that is normally granted in such cases. The appellant argued that the gross turnover included tax‑exempt articles such as fresh milk, meat, fish and green vegetables, which are exempt under section 6 of the Act. He calculated that the excess amount assessed, after taking into account the exemption, was Rs 11,416‑15‑0.

Following the officer’s assessment, the appellant filed the standard series of appeals before the sales‑tax authorities. Those appeals were dismissed, prompting him to file a revision petition under section 24 of the Act before the Board of Revenue, Bihar. The Board also rejected his claim. Pursuant to section 25 of the Act, the appellant then applied to refer six questions of law to the High Court. The questions he posed were as follows: (i) whether, on a correct construction of the 1945 agreement between the State Government and the appellant, which had been acted upon and not subsequently reviewed, the Department was legally entitled to tax the appellant on his total gross turnover instead of the agreed sixty‑six and two‑thirds percent; (ii) whether a member of the Board of Revenue, having held that “in the circumstances the petitioner had prima facie bona‑fide grounds for his belief that the arrangement which the Department had entered into would continue,” could lawfully conclude that the petitioner was not entitled to be assessed according to that arrangement; (iii) whether, given the facts and circumstances, the Department could challenge the continuation of the arrangement especially when the State Government, by its own acts or omissions, misled the appellant into maintaining accounts in a manner that prejudiced his claim for deductions on account of sales of tax‑free goods during the period; (iv) whether, in the facts and circumstances of the case, the appellant was entitled to the full deduction for the sale of meat and fish under Notification No 5564 Ft. dated 30‑3‑49, pursuant to section 6 of the Bihar Sales Tax Act, 1947; and (v) whether the member of the Board of Revenue, having held that meat and fish mentioned in Notification No 5564 Ft…

The Board of Revenue listed a series of legal questions that it considered necessary to resolve. First, it asked whether, in view of the statement that “in the circumstances the petitioner had prima facie bona fide grounds for his belief that the arrangement which the Department had entered into would continue,” the Board could lawfully hold that the petitioner was not entitled to be assessed under that arrangement. Second, it inquired whether, given the facts and circumstances of the case, the Department was permitted to challenge the continuance of the arrangement that had been reached between the State Government and the petitioner, particularly when the State Government, by its own actions or omissions, had misled the petitioner into maintaining accounts in a way that prejudiced the petitioner’s claim for deductions on the sale of tax‑free goods during the relevant period. Third, the Board questioned whether, on the facts, the petitioner was entitled to the full deduction for the sale of meat and fish under Notification No. 5564 Ft. dated 30‑3‑49, made pursuant to section 6 of the Bihar Sales Act, 1947. Fourth, it considered whether a Member of the Board, having held that the notification included boiled and cold meat and fish, could legally determine that meat and fish prepared by other methods were excluded from the notification’s scope. Fifth, it examined whether, under Notification No. 5564 Ft. dated 30‑3‑49, cold and boiled meat and fish could be distinguished from other preparations of meat and fish. Sixth, the Board referred to the High Court the specific query, framed under section 6, as to whether the following forms of meat and fish were covered by the notification: (i) raw (uncooked) meat or fish; (ii) boiled meat and fish, cooled or uncooled, intended for sale or consumption outside the petitioner’s premises; (iii) fish or meat boiled or cooked in other ways and served as separate dishes or as part of a menu outside the petitioner’s premises; and (iv) fish or meat boiled or cooked in other ways and served as separate dishes or part of a dish outside the petitioner’s premises. The High Court subsequently reformulated the question, asking whether the petitioner was entitled to exemption under Notification No. 5564 Ft., dated 30 March 1949, issued under section 6 of the Bihar Sales Act, 1947, with respect to sales of meat and fish preparations such as meat curry and fish curry served as separate dishes or as part of a menu, whether at the petitioner’s premises or elsewhere. The High Court answered this question against the appellant. The appellant then filed an appeal to this Court by way of special leave, challenging the order of the Board of Revenue, but did not appear to contest the judgment and order of the High Court.

In the case of M/s. Chimmonalall Rameshwarlall v. Commissioner of Income-tax (Central) Calcutta, the Court held that when a reference is made to the High Court and the appeal is filed only against the order of the Income Tax Appellate Tribunal, the Supreme Court, by interfering, would actually be setting aside the High Court’s judgment even though there is no direct appeal to the Supreme Court from that judgment. The Court further stated that the Supreme Court could not circumvent the normal procedural steps required for such matters. Later, in the judgment of Chandi Prasad Chokhani v. State of Bihar, a similar principle was reiterated. The Court observed that because the assessee had not obtained special leave to appeal any of the orders issued by the High Court under section 25, those orders became final and binding. Consequently, the assessee could not be permitted to bypass or disregard the High Court’s orders. The Court warned that allowing such a bypass could create a conflict between the decisions of two courts of competent jurisdiction, which would be contrary to the purpose of sections 23, 24 and 25 of the Act. Applying this view of the law, the Court concluded that the appellant was not entitled to question the correctness of the Tribunal’s decision on the matters that had already been raised before the High Court and decided against the appellant, where no appeal had been filed. The appellant, however, claimed that three additional questions existed, which he had wanted to refer to the High Court but which had not been referred. The Court noted that the appellant could have applied to the High Court for a reference under section 25, but he had not done so. Moreover, there was no evidence of any breach of natural justice or violation of any legal principle that would justify interference with the Board of Revenue’s orders in an appeal under Article 136 of the Constitution. Accordingly, the Court held that the appeal lacked merit, dismissed it, and ordered the appellant to pay costs.