Sales Tax Officer, Jodhpur and Another v. M/S. Shiv Ratan G. Mohatta

Sikri, J. This appeal by certificate of fitness granted by the Ra jasthan High Court is directed against its judgment dated May 7, 1963, quashing the order of assessment dated March 5, 1962, made by the Sales Tax Officer, Jodhpur City, in so far as it levied J) sales tax on the turnover of Rs. 23,92,252.75 np.

The respondent, Mis Shiv Ratan G. Mohatta, which is a partnership firm having .its head office at Jodhpur, hereinafter re-ferrd to as the assessee, claimed before the Sales Tax Officer that they were not liable to be assessed lo sales tax in respect of the ab~ve turnover because, firstly, the assessee was not a dealer within s.' 2(f) of the Rajasthan Sales Tax Act (Rajasthan Act XXIX of 1954) with respect to this turnover, and secondly, be· cause the sales were in the course if import within Art. 186 (])(b) of the Constitut:on. Although the Sales Tax Officer set out the facts of the case relating to the secJnd ground, he deemed it sufficient to assess this turnover on the ground that the assessee was a dealer within s. 2(f) of the Rajasthan Sales Tax Act, without adverting to the second ground. The facts on which the assessee had relied. upon to substantiate his second ground were these. The ·Zeal-Pak Cement Factory, Hyderabad (Pakis-tan), hereinafter called the Pakistan Factory, manufactured ce-ment in Pakistan. The Pakistan Industrial Development Corpora-tion, hereinafter called the Pakistan Corooration, entered into an agreement with Mis Milkhirain and So~s (P) Ltd., Bombay, for the export of cement manufactured in Pakistan to India. The State Trading Corporatian of India entered into an agreement with the said M/ s Milkhiram & Spns for the purchase of, inter alia, 35,000 long tons of cement to be delivered to it F.O.R. Khokhropar in Pakistan, on the border of Rajasthan. The State Trading Corpo-ration appointed .the assessee as its agent. broadly speaking, to look after the import and the sale of the imported cement. The modus operandi ad-0pted by the assessee for the sale of the cement was as follows. It would obtain from a buyer in Rajasthan an order under an agreement, a sample of which is ·on the record The agreement fixed the price and the terms of supply. By one clause the assessee disclaimed any responsibility regarding delay in despatch and non-receipt of consignment or any loss, damage or shortage in transit due to any reason whatsoever. The agree-ment further provided that "all claims for loss, damage or shor-tage, etc., during transit will lie with the carriers and our pay-ments are not to be delayed on any such account whatsoever." It was further provided in the agreement that the dues were payable in advance in full, or 90% in advance and the balance within 15 days of billing plus sales tax and other local taxes. Clause 6 of the agreement is in the following terms:

"A Post Card Loading Advice will be sent to you by the Factory as soon as the wagons are loaded in respect of your orders, and it will be your responsibility to ar-range for unloading the consignment timely according to Railway Rules. Ourselves, and the suppliers will not be responsible for demurrage etc. on any account whatso-ever. If the consignment reaches earlier than the Railway Receipt, it is the responsibility of buyer to arrange for and get the delivery timely against indemnity bond etc. All the Railway Receipts etc. will be sent by registered post by the Suppliers in Pakistan.".

After this agreement had been entered into, the assessee would send despatch instructions to the Pakistan Corporation. These instructions indicated the name of the buyer-consignee and the destination, and provided that the railway receipt and DI A should be sent by registered post to the consignee. These instructions were sent with a covering· letter to the Pakistan Corporation requesting that these instructions be passed on to the Pakistan Factory for I' necessary action. The Pakistan Corporation would then forward

these despatch instructions to the Zeal-Pak Cement Factory. Later, the Pakistan Factory would advise the consignee that they had "consigned to the State Bank of India, Karachi, the particular quantity as per enclosed railway receipt and invoice." The State Bank of India, Karachi, would endorse the railway receipt in fa-vour of the consignee and send it to him by post. The consignee would take delivery either by presentation of the railway receipt or by giving indemnity bond to the Station Master undertaking to deliver the railway receipt on its receipt.

The Sales Tax Officer did set out most of these facts and the contentions of the assessee in the assessment order but disposed of the case with the following observations:

"All the above went to prove that the assessee was an Agent of the non-resident dealer for the supplies in the State. The Assessee was an importer and hence submitted an application to the Custom Authority for the same. It booked orders and issued sale bills. Under the terms of an agreement of appointment of Agent, sale was to be effec-

ted by the Agent. Again while obtaining 'Jrders from the buye_rs under condition S Sales Tax was to be paid by the buyers to the assessee.

Thus to all intents and purposes the assessee is a dealer who is liable for payment of Sales Tax to the State. They have rightly collected this amount fr.om the buying dealers and retained with them. This should come to the Govern-ment.".

We can find no discussion in the order on the question raised by the assessee that the sales were made irl the course of import within Art. 286(l)(b) of the Constitution.

The assessee then filed a petition under art. 226 of the Con-stitution and raised two contentions before the High Court, name-ly, (I) that the Sales Tax Officer failed to consider the impact and the effect of Art. 286(l)(b) on the facts of the case, and (2) that the Sales Tax Officer illegally held that the petitioner for all in-tents and purposes was a dealer liable to pay sales tax. The State raised an objection to the maintainability of the petition on the ground that the petitioner should have availed of the alternative remedy bf appeal provided under the Rajasthan Sales Tax Act, but the High Court overruled this objection on the ground that "the contention of the petitioner is that in view of Art. 286(l)(b) of the Constitution, the respondent had no jurisdiction to assess the petitioner to pay the 'Sales tax on the sale of goods in the course of the import into the territory of India", and that even if there was no total lack of jurisdiction in assessing the petitibner to pay sales tax, the principle enunciated in A.V. Venkateswarn v Ram-chand Sobharaj Wadhwani (') applied, and it was a case which should not be dismissed in limine.

Then the High Court proceeded to deal with the merits of the case. It first dealt with the question whether the petitioner was a dealer within the meaning of s. 2(f) of the Rajasthan Sales Tax Act, and came to the conclusion that the petitioner must be deemed to be a dealer within the said s. 2(t).

Then it proceeded to deal with the question whether the sales. had ta~en place in the course of import. The High Court held that m the crrcumstances of the case these sales had not occasioned th~ movement of goods but it was t~e first sale made by M / s Mil-khJTam and Sons to the State Tradmg Corporation which had oc-Il casioned the movement of goods. Seconidly, it held that in the circumstances of the case "the property in goods after the deli-yery had bee~ taken by the petitioner on behalf of the State Trad-1~g Corporation passed t? the State Trading Corporation. and simultaneously to the ultimate buyers. Thus the property in the

S.T.O. v. Mjs SHIV RATAN (Sikri, J.), 75 goods passed to the ultimate buyers in Rajasthan when the goods had not reached the territory of India and were in course of im-port. In view of the authority of their I .ordships of the Supreme Court fo J.V. <;okal and Co. (Private) Ltd. v. The Assistant Col-lector of Sales Tax (Inspection) & Others, ('), it must be takt:n that the sale took place when the goods were in the course of the import and they should not be liable to the payment of the Sales Tax by virtue of Art. 286(1)(b). ". In the result, the High Court quashed the order of assessment in so far as it sought to levy tax on the turnover in dispute. The Sales Tax Officer, Jodhpur, and the State of Rajasthan having obtained certificate of fitness from the High Court filed this appeal.

The learned Advocate-General has raised two points before us: First, on the facts of this case the High Court should have re-fused to entertain the petition, and secondly, that it has not been established that the cement was sold in the course of import with-in Art. 286(l)(b).

Regarding the first point, he urges that an appeal lay against the order of the Sales Tax Officer; no question of the validity of the Sales Tax Act was involved and the taxability of the turnover depended on where the property passed in each consignment. I This involved consideration of various facts and, according to him.

the crucial facts had not been brought on the record by the assessee on whom lay the onus to establish that the sales were in the course of import. He says that the assessee should have proved that each railway receipt was endorsed by the State Bank of India, Karachi, to the buyer before each consignment crossed the frontier.

We are of the opinion that the High Court should have declin-ed to entertain the petition. No exceptional circuinstances exist in this case to warrant the exercise of the extraordinary jurisdiction under Art. 226. It was not the object of art. 226 to convert High Courts into original or appellate assessing authorities whenever an assessee chose to attack an assessment order on the ground that a sale was made in. the course of import and therefore exempt from tax. It was urged on behalf of the assessee that they would have had to deposit sales tax, while filing_ an appeal. Even if this is so, does this mean that in every case in which the assessee has to de-posit sales tax, he can bypass the remedies provided by the Sales Tax Act? Surely not. There must be something mpre in a ca~e to warrant the entertainment of a petition under art. 226, something going to the root of the jurisdiction of the Sales Tax Officer, some-thing to show that it would be a case of paipable injustice to the assessee to force him to adopt the remedies provided by the Act. But as the High Court chose to entertain the petition, we are not inclined to dismiss the petition on this ground at this stage.

Regarding the second point, the learned Advocate-General A· .argues that the onus was on the assessee to bring his case within Art. 286(1)(b) of the Constitution in respect of the sales to the va-rious consignees. He says that there is no evidence on record as to when, the State Bank of India endorsed the railway receipt in fa-vour of the ultimate buyer in respect of each consignment and w.ithout this evidence it cannot be said that the title to the goods passed to the ultimate buyer at Khokhropar or in the course of im-port. He further urges that it would have to be investigated in each case as to when the State Bank endorsed the railway receipt and when the goods crossed the customs barrier. He says that it is not contested that the ultimate buyer took delivery of goods without producing the railway receipt by virtue of special arrangements entered into with the railway, and according to him, it is only when the delivery was taken by the buyer in Rajasthan that the title passed. By that time, accodring to him, the course of import had ceased. ·

We do not think it necessary to consider the various argu-ments addressed by the learned Advocate-General or the sound-ness of the view of the High Court on this point, because we are of the opinion that the High Court should not have gone into this question on the facts of this case. The Sales Tax Officer had not dealt with the question at all, and it is not the function of the High Court under art. 226, in taxing matters, to constitute itself into an original authority or an appellate authority to' determine questions relating to the taxability of a particular turnover. The proper order in the circumstances of this case would have been to quash the order of assessment and send the case back to the Sales Tax Officer to dispose of it according to law. Under the Rajas-than Sales Tax Act, and other Sales Tax Acts, the facts have to be found by the assessing authorities. If any facts are not found by the Sales Tax Officer, they would be found by the appellate autho-rity, and it is not the function of a High Court to find facts. The High Court should not encourage the tendency on the part of the assessees to rush to the High Court after an assessment order is made. It is only in very exceptional circumstances that the High Court should entertain petitions under art. 226 of the Constitution in respect of taxing matters after an assessment order has been made. It is true, as said by this Court in A. V. Venkateswarn v. Ramchand Sobharaj Wadhwani(') that it would not be desirable to lay down inflexible rules which should be applied with rigidity in every case, but even so when the question of taxability depends upon a precise determination .of facts and some of the facts are in dispute or missing, the High Court should decline to decide such questions. It is true that at times the assessee alleges some additio-nal facts not found in the assessment order and the State, after a fresh investigation, admits these facts, but in a petition under art. 226 where the prayer is for quashing an assessment order, the High Court is necessarily confined to the facts as stated in the order or appearing on the record of the case.

In this case, as already indicated, we have come to the con-clusion that the High Court should not have decided disputed questions of fact, but should merely have quashed the assessment order on the ground that the Sales Tax Officer had not dealt with the question raised before him and remanded the case. According-ly, we allow the appeal, set aside the order of the High Court, quash the assessment order in so far as it relates to the turnover of Rs. 23,92,252.75 np, and remit the case to the Sales Tax Officer to decide the case in accordance with law. He will find all the facts necessary for the determination of the question and come to an independent conclusion untrammelled by the views expres-sed by the High Court. We may make it clear that we are not ex-pressing any view wheth~r the finding of the High Court that the property in the goods passed simultaneously at Khokhropar ttJ the State Trading Corporation and the ultimate buyer is· correct or not. There would be no order as to costs in this appeal.

Appeal allowed. li'B(D)2SCI-7