# [1967] 2 S.C.R. 751

- **Citation:** [1967] 2 S.C.R. 751
- **Court:** Supreme Court of India
- **Decided:** 1967-02-24
- **Case number:** Civil Appeal No. 1604 of 1966
- **Bench:** M. Hidayatullah, J. M. Shelat, G. K. Mitter
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1967-2-s-c-r-751-4178
- **Pages:** 6

## Headnote

Constitution of India, Art. 226-Princip/es
for
exercise
of High
CoHrt's polver under-Existence of alternative rentedies when not a bar.
The appellant company manufactured trucks, bus cbasis etc. in Bihar
State.
Some of the goods so manufactured were sent to the stockyards
maintained by the company in various State> outside Bihar. The goods
in the said stockyards, according to the company, had not been appro~
priated to any contract and remained
the property
of the
company.
Therefore, in proceedings for the assessment
of Sales Tax before
the
Assistant Commissioner of Commercial Taxes, Jamshedpur the comr ny
contended that the sales effected from these
stockyards were taxable
neither under the Bihar Sales Tax Act., nor under the Central Sales Tax
Act.
Th~ contention was rejected by the Assistant
Commissioner who
demanded Rs. 1,73,84,273 as tax.
The company thereupon filed a petition under Art. 226 of the Constitution questioning the jurisdiction of the
Taxing Authority.
The High Court
refused
to give
relief
because
oadequate alternative rernedie" under the taxing statute were
available
and had not been exhausted and dismissed the petition in limine.
By
special leave the company appealed.
HELD : The jurisdiction of the High Court under Art. 226 of the
Constitution cannot bP. a substitute for the ordinary_ remedies
at Jaw.
Nor is its exercise desirable if facts have to be found on evidence.
But
there are exceptions.
One such exception is when action is being taken
under an invalid law or arbitrarily without the sanction of law. In such
a case the High Court raay interfere to avoid hardship to a party which·
will be unavoidable if the quick and mo·re efficacious remedy
envisaged
by the article were not allowed to be invoked.
As the appeals required
paxment of tax at least in part the High Court ought to have taken
1unsdiction in this case at least to issue a rule nisi to see what the Assis ..
tan! Commissioner had to say. (755 E-0, 756 C-D]
Thansingh v. Supdt. of Taxes (1964] 6.S.C.R.
654 and Himmat/al
v. State of M.P. [1954] S.C.R. 1122, referred to.
Clv1L APPELLATE JURISDICTION : Civil Appeal No. 1604
of 1966.
Appeal by special leave. from the judgment and order dated
April 20, 1966 of the Patna High Court in C.W.J.C. No. 252 of
1966.'
N. A. Palkhiwala, S. P. Mehta, Ravinder Narain and 0. C.
Mathur, for the appellant
Niren De, Addi. Solicitor-General and U. P. Singh, for the
respondents.
751
752
SUPREME COURT REPORTS
(196 7] 2 S.C.R.

## Text

-
A
TATA
ENGINEERING AND LOCOMOTIVE
COMPANY
LTD.
B
c
D
E
F
G
H
v.
ASSISTANT COMMISSIONER OF COMMERCIAL TAXES
& ANR.
February 24, 1967
(M. HIDAYATULLAH, J. M. SHELAT AND G. K. MITTER, JJ.]
Constitution of India, Art. 226-Princip/es
for
exercise
of High
CoHrt's polver under-Existence of alternative rentedies when not a bar.
The appellant company manufactured trucks, bus cbasis etc. in Bihar
State.
Some of the goods so manufactured were sent to the stockyards
maintained by the company in various State> outside Bihar. The goods
in the said stockyards, according to the company, had not been appro~
priated to any contract and remained
the property
of the
company.
Therefore, in proceedings for the assessment
of Sales Tax before
the
Assistant Commissioner of Commercial Taxes, Jamshedpur the comr ny
contended that the sales effected from these
stockyards were taxable
neither under the Bihar Sales Tax Act., nor under the Central Sales Tax
Act.
Th~ contention was rejected by the Assistant
Commissioner who
demanded Rs. 1,73,84,273 as tax.
The company thereupon filed a petition under Art. 226 of the Constitution questioning the jurisdiction of the
Taxing Authority.
The High Court
refused
to give
relief
because
oadequate alternative rernedie" under the taxing statute were
available
and had not been exhausted and dismissed the petition in limine.
By
special leave the company appealed.
HELD : The jurisdiction of the High Court under Art. 226 of the
Constitution cannot bP. a substitute for the ordinary_ remedies
at Jaw.
Nor is its exercise desirable if facts have to be found on evidence.
But
there are exceptions.
One such exception is when action is being taken
under an invalid law or arbitrarily without the sanction of law. In such
a case the High Court raay interfere to avoid hardship to a party which·
will be unavoidable if the quick and mo·re efficacious remedy
envisaged
by the article were not allowed to be invoked.
As the appeals required
paxment of tax at least in part the High Court ought to have taken
1unsdiction in this case at least to issue a rule nisi to see what the Assis ..
tan! Commissioner had to say. (755 E-0, 756 C-D]
Thansingh v. Supdt. of Taxes (1964] 6.S.C.R.
654 and Himmat/al
v. State of M.P. [1954] S.C.R. 1122, referred to.
Clv1L APPELLATE JURISDICTION : Civil Appeal No. 1604
of 1966.
Appeal by special leave. from the judgment and order dated
April 20, 1966 of the Patna High Court in C.W.J.C. No. 252 of
1966.'
N. A. Palkhiwala, S. P. Mehta, Ravinder Narain and 0. C.
Mathur, for the appellant
Niren De, Addi. Solicitor-General and U. P. Singh, for the
respondents.
751
752
SUPREME COURT REPORTS
(196 7] 2 S.C.R.
The Judgment of the Court was delivered by
Hidayatullah, J
The appellant is a public limited Company
whid1 manufactures the well-known Tata Mercedes-Benz trucks,
bus chassis, their spare parts and other accessories al Jamshcdpur
in the State of Bihar and they arc sold to the Govcrr._ncnt of India,
the State Governments, State Transport Corporations and others.
In the course of its business the appellant Company sells its products, particularly the trucks and bus chassis, to dealers in various
parts of India and the dealers resell them to consumers all over
India.
According to the appellant Company, its sales in the
Indian market are of three kinds :
(a) Sales inside Bihar State;
( h) Sales in the course of inter-State trade and commerce; and
(~) Sales effected from their stockyards located m
States other than Bihar.
The present appeal concerns sales in the last category and the
question arises in the followin3 circumstances.
The appellant Company tiled returns for the quarter ending
on June 30, 1965, under the B1har Sales ·fox Act and the Central
Sales Tax Act respectively. including in the former <a:cs to consumers in Bihar State and m the latter sales in the course of interStale 1rade or commerce. and paid full tax due on such sales.
The appellant Com!lany did not include sales from the stockyards,
in any of its returns.
On November 12, 1965 the Assist~nt Commission~r of Commercial Taxes, Jamshedpur sent a notice (No. I 1234) informing li1e appellant Company that the returns appeared to bz incorrect as all sales were not included and directed the appellant
Company to include ail its sales in revised returns and all returns
to be filed in future. The appellant Company demurred that sal.:s
from their stocky:irds in other St:ites were neither sales in the
State of Bihar, nor sales in the course of inter-Slate trade or
commerce and were thus not taxable in Bihar.
This plea was
noi a"<.:cptcd and revised returns !or the quarters ending on
June 30 and September 30, 1965 were ordered to be filed. The
ap!"'llant Company filed amended returns under pro!cst and
wi<hout prejudice to its contentions.
At the same time the
appclian: Companv disclosed the en; ire procedure of saks eJtstockv:..rds and relied unon s. 4 (2) of the Central Sales Tax
Ac! i~' exclude· such sales.
The appellant Company also inquired
whdher these sales were 10 be treated as sales in Bihar for the
purrn,cs of the Bih:ir Sales Tax Act or as sales in the course
oi in!cr-Statc
tr~dc ancl commerce for purposes of the Central
A
B
c
D
-
E
F
G
II
-
TATA ENG. co. v. ASST. COMMR. (Hidayatullah, I.)
7 53
A
Sales Tax Act, but no reply was given. The appellant Company
furtlter asked for an opportunity to produce declarations from its
customers, who are also registered dealers, with a view to claiming a rebate, but . this ·opportunity was denied.
The appellant
Company objected to the assessment for a period of six months
unoer a tax legislation, which it claimed; was intended to operate
B yearly but to no effect.
According to the revised returns filed
under compulsion, the lireak-up of the sales was as follows :
The total gross turnover was Rs. 33,99,23,595. The appellant
Comean~ claimed to deduct (a) sales from ~tockyards at extra
State pomts (Rs. 15,09,24,204); (b) sales m the course of
exoorl out of India (Rs. 34,83,671); and (c) sales effected in
Bihar on which Bihar Sales Tax was payable (Rs. 3,64,79,20.9).
C The balance Rs. 14,90,36,510, according to the appellant Company, consisted of sales (Rs. 14,33,02,855) to registered dealers
taxable at 2 % and sales of the balance to unregistered dealers
taxable at 10%. The tax for the period April l, 1965 to September 30, 1965 was computed at R,s. 34,05,028. The appellant
Company stated to have paid against it Rs. 34,45,699 as tax in
D the Government Treasury and denied any further liability.
E
F
G
H
The Assistant Commissioner after turning dnwn the requests
for adjournments proceeded to assess the appellant Company.
The gross turnover for the two quarters was taken to be
Rs. 35,13,60,725.
The difference (Rs. 1,14,37,129) arose
because tax in other States was also added to the sale prices.
Deducting the sales made in Bihar State (Rs.'3,64,79,209) and
the sales in the course of export (Rs. 34,83,671) the balance
(Rs.
31,13,97 ,844)
was held taxable at different rates.
Rs. 12,94,81,387 for which C and D forms were produced from
registered
dealers were taxed
at 2 %
and the balance
(Rs. 16,23,61,334 plus local taxes Rs. 1,14,37,129 abovementioned) at 10%.
The total tax was computed to be
R5. 2,07,81,273 from which deducting the tax already paid, a
demand for the sum of Rs. 1,73,84,273 was made. The order
of assessment was passed on March l, 1966 and the amount of
arrears of tax was made payable on or before March 15, 1966.
The appellant Company asked for time to make the payment and
it was extended to March 21, 1966.
The appellant Company filed a petition under Art. 226 of
the Constitution of India in the Patna High Court for directions
or orders or writs, including a writ in nature of certiorari calling
for the records and quashing the orde1 of the Assistant Commissioner. By the petition the jurisdiction of the Assistant Commissioner to make the assessment and the demand of tax in
respect of stcckyard sales were questioned. Of the grounds
urged, the following were questions of jurisdiction :
7 54
SUPREME COURT REPORTS
[1967] 2 S.C.R
" (a) The assessment on the Petitioner for two
quarters is illegal as the Central Sales Tax is a yearly
tax.
(b) Respondent No. 1 erred in assuming jurisdiction to tax the outside sales by wrong interpretation of
evidence;, concrary to the overwhelming evidence on
record.
(c)
(d)
( e) Respondent No. 1 failed to appreciate that in
law sale took place only at the stockyard where the
vehicle was appropriated to a particular contract and
that the sale did not occasion inter-State movement of
the vehicle.
( f) Respondent No. 1 has relied on section 84 of
the Contract Act even though the same was repealed in
1930 and thereby erred in applying a wrong provision
of law.
(g)
The petition came up for hearing before Narasimham C.J. and
Ahmad J. on April 20, 1966 and v·as dismissed at the threshhold.
A
B
c
D
The order of the High Court was :
E
"The petitioner has not exhausted the internal
remedies provided in the Sales Tax Act by way of
appeal, revision or reference and statement of a case to
this Court.
We are not satisfied that this is a fit case for this
Court to exercise its extraordinary jurisdiction at this
stage.
The petition is dismissed summarily,
Sd/- R L. Narasimham
Sd/- Anwar Ahmed".
A rc4ues1 for ccrtificacc co appeal to this Court was chcn mauc.
The High Court pointed out that an appeal against the order of
assessment was possible on payment of 20% of the assc"cu ta.~.
As this came to Rs. 40,00,000 and odd only and Rs. 33, 97,000
hau alreauy been paid. the High Court held thac the ("ompany
ought to
appeal
first
si~ce the
payment of
tit~ balance
(Rs. 6,00.000) was well within the capacity of the appclbnt Com·
pany and was not so onerous as to merit intericrence by w1y of
extraordinary powers of the High Court.
The application for
ccr1ificatc was accordingly dismissed.
The appellant Company.
F
G
II
B
c
D
E
F
G
H
TATA ENG. co. V. ASST. COMMR. (Hidayatul/ah, /.)
7 5 5
however, obtained special leave from this Court and this appeal
was filed.
The learned Additional Solicitor General, who appeared for
the Assistant Collllllissioner, raised a preliminary objection that
the appellant Company could not be heard as it had not exhausted
the remedies available under the taidng statutes which gave right
of appeal and revision and finally for mvoking the advisory juf!Sdiction of the High Court. He also relied upon Tizaminglz v.
Supdt. of Taxes(1) in support of the order of the High Court.
The preliminary objection really dcies no more than try to
check in advance the points which the appellant Company is seeking to raise in !his appeal. Whether one looks at the matter from
the point of view of the appeal proper or from the point of view
of the prelia;!inary objection raised before us, the question is
the same. namely, whether the High Court ought in this case to
have exercised jurisdiction and if it took jurisdiction whether any
settled principle governing Art. 226 would have been departed
from.
The power and jurisdiction of the High Court under Art. 226
of the Constitution has been the subject of exposition from this
Court. That it is extraordinary and to be used sparingly goes
without saying.
In spite of the. very wide terms in which this
jurisdiction is conferred, the High Courts have rightly recognised
certain limitations on this power. The jurisdiction is not appellat.e and it is obviou5 tliai it cannot be a substitute for the ordinary remedies at law. Nor is its exercise desirable if facts have
to be iound on evidence. The High Court, therefore, leaves the
party aggrieved t9 take recourse to the remedies available under
the ordinary law if they are equally efficacious and declines to
assume -jurisdiction to enable such remedies to be by-passed. To
these there are certain exceptions. One such exception is where
action is being taken under an invalid Jaw or arbitrarily without
the sanction of Jaw. In such a case, the High Court may interfere
to avoid hardship to a party which will be unav_oidable if the
quick and more efficacious remedy envisaged by article 226 were
not allowed to be invoked. In our judgment the present is an
example of the exceptional situation above cont.emplated just as
Himmatlal v. State of M.P.(') was :mother instance which came
before this Court.
The power and jurisdiction of the Assistant Commissioner,
Jamshedpur, were exercisable in respect of sales to consumers
in Bihar State and to transactions of sales fu the course of interState trade _and commerce.
They could not be utilised to tax
sales outside the State of Bihar. The appellant Company claimed
(I) [1964] S. C. R. 654.
(2) (1954] S. C. R. 11.22
756
SUPREME COURT REPORTS
(1967) 2 S.C.R.
exemption in respect of sales efie~ted from
t~·eir stockyards in
the vanous States, no doubt fed from Bihar but run by the Col'lpany locally. The Company asserted that the goods in the stockyarus we1e still those of the appeUant Company and neither the
property in them had passed to any one nor had they been appropriated to a contract of sale. The question was whether in law
such sales could be regarded as in the course of inter-state trade
or commerce or outside sales, subject of course to the claim of
the Company being found on n:cord to be good. There is nothing
to show that any further evidence beyond documents produced
to illu~trate sample sales was nece~ary. Nor did the learned
Additional Solicitor General suggest that this was going to be
an issue of fact rather than of law.
It would certainly have
avo!dcd circuity of action and proved altogether more satisfactory if the High Court had considered whether the sample transaction as illustrated by the documents, disclosed a transaction of
sale outside the State of Bihar and not in the course of inter-State
trade or ccmmcrce.
On that de;iencted the payment of tax of
the order of R~. I, 73,00,000 and odd for two quarters alone.
We arc clearly uf opinion that the High Court ought to have
taken jurisdiction in this case at least to issue a rule nisi to see
what the Assistant Commissioner had to say.
The High Court
could always decline to decide the case if disputed questions of
fact 1equiring finding thereon arose, but so far as we can see, no
such question was likely to arise.
We accordingly set aside the order of the High Court and
remit the case for further consideration after issuing a rule niri
so that the Assistant Commissioner may file a return to the claim
put forward by the appellant Company.
The appeal will be
allowed but we make no order about costs.
G.C.
Appeal allowed.
A
B
c
D
E