Bhopal Sugar. Industries Ltd., Madhya Pradesh v. D. P. Dube, Sales Tax Officer, Bhopal Region, Bhopal

Shd, J.

The Company set up two grounds in support of its petition :

(1) That the Sales Tax Officer. had power to levy tax on 'sale' only i. e. on transfer of property for a price, and as there "'as no sale of motor oil and lubricants consumed by the Company for its own vehicles there being no transfer of property to any one, and no price being paid or promised, consumption of the articlca was not taxa-ble. That it was submitted is manifest from the charging section 3 read with the definition under s. 2(k) of the Act of 'retail sale' which does not include con· sumption by a retail dealer of his own goods.

(2) That power of the State to levy tax on the sale or purchase of goods (other than news-papers) could be exercised only under Entry 54 of List II of the 7th Schedule to the Constitution. Therefore the attempted levy of tax was illegal and without autho-rity of law, and infringed the Company's fundame:ital right to carry on business and to hold and acquire property as gi.aran-teed by Art. 19(1) (f) and (g) of the Cons-titution.

At the hearing of the petition the High Court did not consider the grounds set up in support of the petition, but called upon the Company to produce a copy of its agreement with Caltex (India) Ltd., under 1982 which the supply of motor-spirits and lubricants was B!i.pal Sutrzr obtained by the Company, and proceeded to adjudi-l11/w1r1,, •• Lttl. cate the claim for relief in the light of the covenants Du~1, Salis Tax of the agreement. The High Court dismissed the peti· VjfiUf" tion holding that the assumption made in the petition SIWI, /. that the Company was the owner of the motor spirit, and lubricants obtained from Caltex (India) Ltd., was not warranted. It was observed :

"These clauses and other clauses relating to the responsibility for loss, safeguard against con-tamination of petrol, sale by the dealer of the products of Caltex (India) Limited only, settle· ment of accounts-alt point to the fact that the petitioner (the Company) was not consti· tuted a full and absolute owner of the petrol supplied by Caltex (India) Limited at. the petrol pump maintained by the petitioner at Sehorc. The petrol remained the property of of Caltex (India) Limited, and the petitioner sold it as an agent of the supplying Com· pany. When, therefore, the petitioner obtain-ed petrol for itself at the pump and used it in its own vehicles, there was a sale of the petrol by the petitioner as an agent of Caltex (India) Limited to the petitioner-company as a con-sumer. It was nothing but a purchase by_ the a~ent of property belonging to the principal.

That being so, there was retail sale by the petitioner as agent of Caltex (India) Limited of the petrol consumed in its vehicles."

Against the order dismissing the petition this appeal is preferred with special leave.

In our judgment the High Court was in error in proceeding to decide the petition on a ground which was not set up in the affidavit of the Sales Tax Officer. The Company claimed relief on the

49:! SL'PREME COLIZT REfORTS [l:Jli-!J \"OL. 1962 assumption that motor spirits and lubricants used by Bhopal •. Sugat it for its own vehicles were of its ownership, and ltu/wtrits lid . appropriation by a retail dealer of the stock in trade Dui1, Sain Tax owned by him for his own use docs not cons1i 1u1c

Offim sale within the meaning of the Act. The Sales Tax ~flab, J. Officer submitted that the consumption of motor

spirits and lubricants by the Company amountrd to sale, brcause there was transfer of property "from one establishment of the retail dealer to another." On the pleadings two questions arose for determination :- (a) whether the appropriation of goods amoun· ted to transfer of property by the retail dealer to another person; and (b) whether such transfer amounted in law to sale.

The Legislature has set up an elaborate and self. contained mechinery for investigating whether a transaction is liable to be taxtd because it is of the nature of a retail sale within the meaning of the Act. The taxing Officer is invested with authority to deter-mine the nature of the transaction and its liability to tax, and against his decision there is an appeal to the appellate authority and a further right of revision to the Commissioner. It is true that the jurisdiction of the High Court under Art. 2:!6 is extensive, but normally the High Court does not exercise that jurisdiction by entertaining petitions against the or-ders of taxing authorities, when the statute under which taic is sought to be levied provides a remedy by way of an appeal or other proceeding to a party aggrieved and thereby by-pass the statutory machi-nery. That is not to say that the High Court will never entertain a petition against the ordrr of the , taxing Officer. The High Court has undoubtedly

jurisdiction to decide whether a statute under which a tax is souglit to be levied is within the legislative competence of the Legislature enacting it or whether J96t the statute defies constitutional restrictions or iufrin-ges any fundamental rights, or whether the taxing Blwpal Suiw lndu1lriu Lui authority has arrogated to himself power which he •• does not·possess, or has committed a serious error of Dub1, Salis Tu Olfim procedure which has affected the validity of his con;· clus\on or even where the taxing authority threatens Shah. J. to recover tax on an interpretation of the statute which is erroneous. The Hig·h Court may also in appro-priate cases determine the exigibility to tax of trans-actions the nature of which is admitted, but the High Court normally does not proceed to ascertain the nature of a transaction which is alleged to be tax-able. The High Court leaves it to the tax payer to obtain an adjudication from the taxing authorities in the first instance.

In the present case the Company invoked the jurisdiction of the High Court on question of fact as well as on the constitutionality of the taxing statute and breach of tundamental rights. The High Court instead of determining the Constitutional questions, on which alone the petition could normally be entertained, proceeded to investigate the correctness of an assumption made by the Company, and thereby decided the case which was not expressly raised by the other party. In doing so the High Court fell into an error: it assumed jurisdiction to decide the dispute which had to be decided by resort to the machinery provided under the Act after ascertain-ment of the true nature of the transaction in the light of the agreement and surrounding circumstan-ces. The order passed by the High Court caqnot therefore be upheld.

The next question is about the order to be pass-ed in this appeal. For that purpose we must consider the two grounds set up in the petition by the Com- : pany. The challenge to the action of the Sales Tax Officer on the plea of infringement of fundamental

1961 s., .. rights must fail. It is common ground that the &opal State of Madhya Pradesh had power to levy tax on 1"'"11riu •• Lid . sale or purchase of motor spirits and such power Dol1, S.lu T.,, could be exercised only in respect of sales tradition-

Offi" ally so understood. Tlie Stale of Madras v. Gannon Shoh, /. Dunlcarley &; Go. (Madras) Ltd. ('). Section 2 (k) of

the Act defines a 'retail sale' as meaning "a sale of motor spirit by a retail dealer f9r the purpose of consumption by the person by whom or on whose behalf it is or may be purchased, and the expression 'sell in retail' shall be construed accordingly." But there is nothing in the definition of s. 2 (k) 'retail sale' nor in the charging section (s. 3) which indi-cates that the Legislature had enacted legislation beyond its competence. If the taxing authority had sought to bring to tax a transaction which is made taxable by a competent enactment it would not be open to the High Court exercising power under Art. 226 of the Constitution to con-sider whether the taxing authority was justified in taxing the transaction. Levy of a tax lawfully imposed under a statute within the competence of the Legislature cannot be deemed to infringe the fundamental rights guaranteed by Art. 19 (l) (f) and (g), and whether the tax is properly levied in respect of a traruaction is for the taxing authority to deter· mine and not for the High Court.

The levy and collection of sales tax on motor spirits and lubricants consumed by the Company cannot therefore be regarded as illegal unless it is found that the goods were of the ownership of the Company; and for reasons already set out the question whether the goods consumed belonged to the Com-pany must be left to be determined under the Act. The first question raised in the petition cannot there-fore be determined by this Court a, it could not be determined by the High Court.

On the view taken by us this appeal must fail and is dismissed. It will of coune be open to the Company in an appeal properly filed before the 1161 taxing authorities to contend that under the terms of s.,., the agreement with Caltex (India) Ltd., the Company B~o/ ltUlw1ri11 .. Lid. is the owner of the goods received by it and that on that account consumption of those goods by it for its Dub1. S•lu Tax Vffici1r own vehiclCll did not amount to sale and the Sales Tax Officer will be entitled to consider that question Shah, J. on its merits and will not be bound by any expression of opinion by the High Court as to the interpretation of the agreement produced before it. Having regard to the circumstances, there will be no order as to costs.

Appeal clisrni8sed.

ITTAVIRA MATHAI 1963

v . .

VARKEY VARKEY AND ANOTHER

(S.J. IMAM, K. SUBBA RAO, RAGHUBAR DAYAL,

and J. R. Mul)HOLKAR, JJ.) Limitaticm-Suit filed beycmd time-Decree, if a nu//ity-Paint of limitation n'ot rai<ed in High Court, if entertainable by ,9uprern.rt. Oou.rt-Recei,ver'a po~seasion., -if muqt ensure to aucc~s­ ful party-Appeal-Forum-Abrogated by subsequent legis/,aticm-1/ and whe• can be cluzllen(Jfd-Travancore High Courl Act, 1099 (IV of 1099)), s. 11 (1), M repealed by Ordinance II o/ 1124-ln<lian Limitation Act, 1908 (9 o/ 1908), s. 3. Arts. 47, 142.

One lttiyavira, the deceased father of the appellant puxhascd propertiei and p.Jd part of the con•ideration for the tranMction in cash arui"f1.>l' the balance executed two hypothe-cation bonds in favour of his vendors, Ramalinga Iyrr and Raman Vela Yudhan. Ranulinga Iyer a'8igned his hypothe-cation bond in favour of one Sankara Rama Iyer. He had cxr-c•1tcd a promissory note in favour of one Anantha Iyer who, •ftcr hfa death, institurcd a suit agaimt his son Sankara Subha Iyer for rec,wery of the amount thereunder and obtained a decree. T1e4ting the deed of assignment c~ecnted by Ramalinga