M/s. Mangalore Ganesh Bedi Works vs The State of Mysore and Another

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

Court: supreme-court

Case Number: Civil Appeal No. 194 of 1962

Decision Date: 25 September 1962

Coram: J.L. Kapur, S.K. Das, A.K. Sarkar, M. Hidayatullah, Raghubar Dayal

In this matter the Supreme Court of India considered the appeal of M/s Mangalore Ganesh Bedi Works against the State of Mysore and another, with the judgment delivered on 25 September 1962. The opinion was authored by Justice J L Kapur and pronounced by a bench comprising Justices J L Kapur, S K Das, A K Sarkar, M Hidayatullah, Raghubar Dayal and M Dayal. The case was cited as 1963 AIR 589 and also appeared in the Supreme Court Reporter and other legal citations. The appellant, a registered firm under the Mysore Sales Tax Act, had been assessed a tax liability of Rs 1,16,728.44 naya paisas calculated at a rate of 0.02 naya paisas per rupee on a turnover of Rs 58,36,422‑26 naya paisas. The firm contended that, under the Mysore Sales Tax Act, the applicable rate should have been 3 pies per rupee, but after the amendment of the Indian Coinage Act (originally Act 3 of 1906, amended by the Indian Coinage (Amendment) Act 31 of 1955), the tax was levied at 0.02 naya paisas per rupee, resulting in a higher payment than would have been required at the earlier rate. The appellant argued that this increase was unconstitutional and illegal, invoking Article 255 of the Constitution. The objections raised were twofold: first, that replacing 3 pies with 2 naya paisas altered the tax base defined by the Mysore Sales Tax Act without compliance with the procedural requirements for money bills prescribed in Articles 198, 199 and 207; second, that the Indian Coinage Act, being a central legislation dealing with “coinage and legal tender” under item 36 of the Union List, could not modify the rate of tax under a state sales tax statute. The Court held that the substitution of new coinage did not constitute a tax enhancement but merely represented a replacement of one form of currency with another of equivalent value. Even assuming that the change could be characterised as a taxing measure, the Court found that it could not be challenged on the ground of violating Articles 197 to 199 or the procedure in Article 202, because Article 212 bars questioning the validity of legislative proceedings on procedural irregularities. The formalities of Article 255 were deemed procedural matters. Consequently, the Court concluded that the amendment of the Indian Coinage Act did not effect a change from 3 pies to 0.02 naya paisas in the tax rate, and that the Mysore Existing Laws (Construction of References to Values) Act 1957 had already provided for charging tax in naya paisas, rendering the levy neither unconstitutional nor a new taxing measure, but simply a conversion of the old coinage to the new.

It was held that the amendment of the Indian Coinage Act did not alter the statutory rate of three pies per rupee that was prescribed in the Mysore Sales Tax Act. Instead, the Mysore Existing Laws (Construction of References to Values) Act, 1957, introduced a provision permitting tax to be levied in naya paisas rather than in pies. Consequently, the collection of tax in naya paisas was not deemed unconstitutional, nor was it characterized as a new tax measure; it merely effected the conversion of the old coinage into the new coinage. The case was listed as Civil Appeal No. 194 of 1962, arising by special leave from the Mysore High Court order dated 15 July 1960 in Writ Petition No. 719 of 1960. Counsel for the appellant were N.C. Chatterjee and S.S. Shukla, while N.S. Bindra and P.D. Men‑on represented the respondents. The judgment was delivered on 25 September 1962 by Justice Kapur.

The appellant, a firm registered under the Mysore Sales Tax Act, had been assessed on a turnover of Rs 58,36,422.26 naya paisas, resulting in a tax demand of Rs 1,16,728.44 naya paisas at a rate of.02 naya paisas per rupee. The appellant contended that the Act required tax at a rate of three pies per rupee, which would have produced a tax liability of Rs 91,690. After the amendment of the Indian Coinage Act (Act 3 of 1906) by the Amending Act 31 of 1955, the tax rate applied to the appellant’s turnover became.02 naya paisas per rupee, causing the appellant to pay an additional Rs 25,038 compared with the amount that would have been payable at the three‑pie rate. The appellant argued before the High Court and before this Court that this increase amounted to an unlawful enhancement of tax, contravening the procedure required by the Constitution and violating Article 265, rendering the assessment void. Under the amended Indian Coinage Act, Section 14 provided for the substitution of values expressed in annas, paise and pies with values expressed in naya paisa, the newly introduced coinage. Section 14 read as follows: “S.14(1) The rupee shall be divided into one hundred units and the new coin representing such unit may be designated by the Central Government, by notification in the Official Gazette, under such name as it thinks fit, and the…”

Section 14 of the Indian Coinage Act provides that the rupee, the half‑rupee and the quarter‑rupee shall respectively be equivalent to one hundred, fifty and twenty‑five of the newly introduced coins, and that these coins shall, subject to the provisions of sub‑section (1) and sub‑section (2) of section 13 and to the extent specified therein, constitute legal tender for payment or settlement accordingly. Sub‑section (2) further stipulates that all coins issued under the authority of the Act in any denomination of annas, pice or pies shall, to the extent specified in section 13, be legal tender for payment or settlement at the rate of sixteen annas, sixty‑four pice or one hundred ninety‑two pies to one hundred of the new coins referred to in sub‑section (1). The conversion must be calculated for any single coin or number of such coins tendered in a transaction, rounding to the nearest new coin; where the new coin above and the new coin below are equally near, the rounding shall be to the lower new coin. Sub‑section (3) mandates that all references in any enactment, notification, rule, order, contract, deed or other instrument to any value expressed in annas, pice or pies shall be construed as references to that value expressed in the new coins referred to in sub‑section (1), using the conversion rate specified in sub‑section (2). Consequently, one rupee is divided into one hundred naya paisas; the old legal tender of sixteen annas, sixty‑four pice or one hundred ninety‑two pies to a rupee remains legal tender, being equivalent to one hundred naya paisas. For the purpose of calculating and converting old coins into new coins, each old coin or any number of such coins must be computed to the nearest new coin, and where the new coin above and the new coin below are equally near, the calculation must be to the lower new coin. Sub‑section (3) further requires that every reference in any law to annas, pice or pies be interpreted as a reference to naya paisas, which must replace the old legal tender and be calculated in the manner laid down in sub‑section (2). On 1 March 1957 the Mysore Legislature enacted the Mysore Existing Laws (Construction of References to Values) Act 12 of 1957. Section 2 of that Act defines “existing law” as an Act, Order or regulation that has the force of law in Mysore State relating to any matter other than any enactment, notification, rule or order to which the provisions of sub‑section (3) of section 14 of the Indian Coinage Act apply. Section 3 of the same Act provides that in every such existing law, any reference to a value expressed in annas, pice or pies shall be construed as a reference to that value expressed in the new coins referred to in sub‑section (1) of section 14, converted at the rate specified in sub‑section (2) of that section.

The Court considered the effect of substituting the new coinage for the old denominations in the computation of tax under the Mysore Sales Tax Act. It noted that the substitution involved replacing three pies with two naya paisas according to the rate prescribed in sub‑section (2) of section 14 of the Indian Coinage Act. The petitioners raised two distinct objections to the validity of the tax that had been imposed under the Mysore Sales Tax Act. The first objection claimed that the replacement of three pies by two naya paisas altered the tax liability and therefore required passage as a Money Bill under Articles 198, 199 and 207 of the Constitution. Because no Money Bill had been introduced or passed for that purpose, the petitioners contended that the tax was illegal and invalid. The Court held that the mere substitution of new coinage for annas, pice and pies did not constitute an enhancement of tax, but only a change of currency of equivalent value. Even assuming that it represented a taxing measure, the Court observed that its validity could not be challenged on the ground that it violated Articles 197 to 199 and the procedure outlined in Article 202. Article 21 barred any challenge to the validity of State legislative proceedings on the basis of alleged procedural irregularity. Article 255 described recommendations and prior sanctions as matters of procedure only and stated that lack of such does not render an Act invalid if assent has been given. Accordingly, the Court concluded that the tax could not be attacked on the basis that it contravened constitutional provisions. The objection asserted that the Indian Coinage Act, being a Central law on “coinage and legal tender” under item 36 of List I, was incapable of altering tax rate under the Mysore Sales Tax Act. The Court found it unnecessary to decide that question because, even if the Central Act did not effect the conversion of three pies into two naya paisas, the issue of whether the Central Act effected the conversion of three pies into two naya paisas was immaterial. The Mysore Existing Laws (Construction of References to Values) Act, 1957, however, expressly authorized the levy of tax in naya paisas instead of pies. Therefore, the levy of tax in naya paisas was neither unconstitutional nor a new taxing measure, but merely a conversion of the old coinage into the new. The petitioners also argued that because of the order of the High Court in a previous proceeding, the matter should be dismissed on the ground of res judicata.

The Court examined the contention that a prior petition filed under Article 226, which had led to the provisional assessment being set aside, barred a new decision in the present petition filed after the final assessment. The Court found that this submission had no merit. It observed that the earlier petition on which the appellant relied was intended solely to overturn the provisional assessment. The order effecting that set‑aside was expressed in the wording: “Read Memo dated 7‑6‑1958 by the Advocate General and Advocate for respondent, stating that the respondents do not oppose the writ petition being allowed.” It further noted that the same order added that the provisional assessment may be set aside. The Court noted that the earlier decision setting aside the provisional assessment did not specify which issues had been raised or finally decided. It also observed that there was no indication that the matter now presented had been previously adjudicated. Consequently, the Court held that the earlier order could not operate as res judicata. On this basis, the Court concluded that the appeal lacked any merit and therefore dismissed it, ordering the appellant to pay costs. The appeal was dismissed. The order thus affirmed the lower court's finding and closed the proceedings, leaving no further relief available to the appellant.