DST vs Commercial Tax Officer, Aryapuram, Rajahmundry

P. Venkatrama Reddy, J.—The petitioner which is a West German company carrying on drilling operations for ONGC (Oil and Natural Gas Commission) in Krishna-Godavari basin, has challenged in these writ petitions the assessments made under the Andhra Pradesh General Sales Tax Act, 1957 (hereinafter referred to as "the Act"), for the years 1985-86, 1986-87 and 1987-88.

The petitioner has been subjected to tax u/s 5-E of the Act on the amounts received from ONGC in respect of the drilling units employed by the petitioner-company for the purpose of exploration of oil wells. Section 5-E provides for levy of tax on the transfer of right to use the goods for any purpose whatsoever whether or not for a specified period, to any lessee or licensee for cash, deferred payment or other valuable consideration. This section was introduced into the Act with effect from July 1, 1985, as a sequel to the Constitution (Forty-sixth) Amendment Act. The respondent-Commercial Tax Officer held on a consideration of the terms of the contract between the petitioner and the ONGC that the drilling rigs were hired by ONGC for the purpose of exploration of oil wells and the rigs are practically at the disposal of the ONGC for their use wherever and whenever they want and the contractor has just to keep the rigs operational by their technical personnel as per the requirements and instructions of the ONGC. The writ petitions were filed at a stage when the assessments were made and demands raised. The reasons for not filing the appeals and for invoking the jurisdiction of this Court under article 226 of the Constitution have been stated in the writ petition thus : "Though usually thirty days time is given, in the instant case, only 15 days time is given. The petitioner apprehends that coercive steps will be taken to recover the tax. They reliably understand that the assessments have been made after consultation with and according to the instructions of authorities superior to the assessing authority. The appellate authorities are not granting stay pending the appeal as a rule. They do not pass orders even. An appeal to the Deputy Commissioner in such circumstances would be an exercise in futility. Further, the petitioner is challenging the constitutionality of section 5-E and the connected provisions of the Act. The appellate authority is not competent to adjudicate on the vires of these provisions." The writ petitions were filed on December 9, 1988, soon after the assessment orders were communicated. This Court initially directed show cause notice before admission, by an order dated December 12, 1988. Thereafter, the writ petitions were admitted on July 17, 1989. During the pendency of the writ petitions, stay was granted on condition of furnishing bank guarantee for the disputed amount of tax.

During the pendency of the writ petitions, the petitioner preferred appeals to the Appellate Deputy Commissioner, Kakinada. The appellate authority by his order dated February 22, 1990, dismissed the appeals after hearing the petitioner and confirmed the assessments made by the Commercial Tax Officer. In view of this development, the petitioner has filed applications for amendment of the prayer in the writ petitions by seeking to quash the order of the appellate authority as well. It may be noticed that the petitioner has a right of further appeal to the Sales Tax Appellate Tribunal against the orders of the Appellate Deputy Commissioner, u/s 21 of the Act and there is still time to file the appeals. However, the Tribunal has no power to grant stay of the collection of the disputed tax for the assessment years in question.

Sri Anantha Babu, learned counsel for the petitioner, has contended that the scope of section 5-E of the Act has been considered by this Court in two decisions, viz., State Bank of India and Others Vs. State of Andhra Pradesh, and Rashtriya Ispat Nigam Ltd. v. Commercial Tax Officer [1990] 77 STC 182; (1990) 10 APSTJ 16 and that by applying the tests laid down in the said decisions, section 5-E cannot be invoked in the instant case because there is no transfer of possession of the rigs and consequently there is no transfer of right to use the goods. The learned counsel has taken us through the various clauses in the agreement and pleaded that the control and possession of the drilling rigs always remained with the petitioner-company, the company''s obligation under the terms of the contract being to drill and complete 3 Nos. exploratory wells at the locations specified by the ONGC. The learned counsel further submitted that the writ petitions having been admitted and pending on the file of this Court for over a year, it is just and proper to decide the issue without insisting upon the availment of alternative remedy of appeal before the Tribunal especially because the principles governing the application of section 5-E have been fairly well-settled by now.

The learned Government Pleader supported the conclusion of the assessing and appellate authorities by referring to the clauses in the agreement and also submitted that an effective alternative remedy being available to the petitioner under the statute, this Court ought not to adjudicate upon the factual and legal questions in the writ proceedings under article 226 of the Constitution. He relied upon the judgment of the Supreme Court in Titaghur Paper Mills Co. Ltd. and Another Vs. State of Orissa and Others, and Assistant Collector of Central Excise, Chandan Nagar, West Bengal Vs. Dunlop India Ltd. and Others, . In Titaghur Paper Mills Co. Ltd. and Another Vs. State of Orissa and Others, , which is arising under the Orissa Sales Tax Act, the Supreme Court held thus :

"....... The Act provides for a complete machinery to challenge an order of assessment, and the impugned orders of assessment can only be challenged by the mode prescribed by the Act and not by a petition under article 226 of the Constitution. It is now well-recognised that where a right or liability is created by a statute which gives a special remedy for enforcing it, the remedy provided by that statute only must be availed of ......

Furthermore, the Act provides for an adequate safeguard against an arbitrary or unjust assessment. The petitioners have a right to prefer an appeal under sub-section (1) of section 23 of the Act subject to their payment of the admitted amount of tax as enjoined by the proviso thereto. As regards the disputed amount of tax, the petitioners have the remedy of applying for stay of recovery to the Commissioner of Sales Tax."

The question whether on the facts of the case, section 5-E of the Act is attracted or not is undoubtedly a mixed question of law and fact. The fact that this Court has already interpreted the scope and ambit of section 5-E is a factor that goes against the petitioner rather than in his favour in considering the question whether the petitioner should be relegated to the alternative statutory remedies.

It is worthy of note that the initial difficulties expressed by the petitioner for resorting to the alternative remedy are no longer there. The appeals filed during the pendency of these writ petitions have been disposed of. The next appeal is to the Sales Tax Appellate Tribunal presided over by a District Judge. There can be no apprehension whatsoever - in fact no such apprehension has been expressed before us that there would be no independent adjudication from the Appellate Tribunal.

Though the question of constitutional validity of section 5-E has been raised in the writ petitions, the said question has not been canvassed before us. The validity or otherwise of the assessment casting heavy tax liability on the petitioner depends on various factual aspects. The construction of the clauses in the agreement, the scrutiny of accounts and contemporaneous documents from the stage of the import of equipment to the stage of billing have to be looked into. Incidentally it may be noted that in the affidavit filed in support of the amendment petition, a complaint has been made by the petitioner that the Appellate Deputy Commissioner did not look into the accounts although filed before him by the petitioner''s chartered accountants. In the face of the adequate alternative remedy available, we do not therefore, feel it appropriate to take upon ourselves the task of adjudication on merits. We do not think that there are any exceptional circumstances to allow the petitioner to bypass the normal statutory remedies under the Act and to invoke the jurisdiction of this Court under article 226. It is true that the writ petitions have been admitted and pending for about a year and it is no doubt one of the circumstances that could be kept in view. However, as against this consideration, the subsequent events should also be borne in mind. As already stated, during the pendency of the writ petition, the petitioner filed appeals and the appellate authority passed orders recently. The disposal of these appeals have paved the way for further determination by an independent body, viz., the Sales Tax Appellate Tribunal, presided over by a District Judge. Keeping all these circumstances in view, we are not inclined to express any views on the merits of the assessment orders passed by the Commercial Tax Officer and confirmed by the Appellate Deputy Commissioner.

In a very recent case, the Supreme Court disapproved the practice of entertaining writ petitions against the assessment orders without availing of the appellate remedies. In H. B. Gandhi, Excise and Taxation Officer-cum-Assessing Authority v. Gopi Nath & Sons [1990] 77 STC 1 , a dealer challenged before the High Court of Punjab and Haryana under article 226, the assessments made in respect of the turnover of articles of food supplied to the customers in the restaurant. The appellate authority declined to exercise the discretion vested in him for granting stay pending appeal. At that stage the petitioner moved the High Court under article 226 of the Constitution, and contended that the assessment was opposed to the judgment of the Supreme Court in Northern India Caterers (India) Ltd. Vs. Lt. Governor of Delhi, and that the petitioner merely undertook certain services by supplying the food articles in the restaurant. The High Court allowed the writ petition. The Supreme Court set aside the judgment of the High Court and in view of the long lapse of time, the Supreme Court gave certain directions with regard to the interim relief to be granted pending disposal of the appeals. It is pertinent to notice the observations in the said case :

"The constitutional validity of the provisions in sub-section (5) of section 39 of the Act (Haryana General Sales Tax Act, 1973) was not assailed in the writ petition. Similar provisions, accompanied by similar proviso, have been held valid. At the stage at which the respondents approached the High Court, what the respondents could have, if the facts so justified, assailed was the question of the refusal of the appellate authority to exercise the discretion under the proviso. When an hierarchy of appeals is envisaged by a mxing statute, it is generally to be insisted that an assessee must go through the statutory proceedings ......

In the present case, the stage at and the points on which the challenge to the assessment in judicial review was raised and entertained was not appropriate. In out opinion, the High Court was in error in constituting itself into a court of appeal against the assessment. While it was open to the respondents to have raised and for the High Court to have considered whether the denial of relief under the proviso to section 39(5) was proper or not, it was not open to the High Court to reappreciate the primary or perceptive facts which were otherwise within the domain of the fact-finding authority under the statute. The question whether the transactions were or were not sales exigible to sales tax constituted an exercise in recording secondary or inferential facts based on primary facts found by the statutory authorities ......

................. Judicial review, it is trite, is not directed against the decision but is confined to the decision-making process. Judicial review cannot extend to the examination of the correctness or reasonableness of a decision as a matter of fact. The purpose of judicial review is to ensure that the individual receives fair treatment and not to ensure that the authority after according fair treatment reaches, on a matter which it is authorised by law to decide, a conclusion which is correct in the eyes of the court. Judicial review is not an appeal from a decision but a review of the manner in which the decision is made. It will be erroneous to think that the court sits in judgment not only on the correctness of the decision-making process but also on the correctness of the decision itself."

It is true that a Division Bench of this Court to which one of us (Jeevan Reddy, J.) was a party in Rastriya Ispat Nigam Ltd.''s case [1990] 77 STC 182, granted the relief to a public sector undertaking in a writ petition. However, the facts and circumstances in that case are quite different. The sales tax authorities were subjecting the assessee to tax u/s 5-E by resorting to monthly provisional assessments. Moreover, the appeals against similar assessments have already been allowed by the appellate authority. But the situation here is not the same.

In view of the foregoing discussion, we dismiss the writ petitions without costs, subject to the directions given hereinbelow :

The petitioner may prefer appeals to the Sales Tax Appellate Tribunal. If such appeals are preferred, we direct the Sales Tax Appellate Tribunal to dispose of the same preferably within three months from the date of registration of the appeals. Having regard to the fact that the Tribunal has no power to stay the collection of the disputed tax for the relevant assessment years and keeping in view the facts and circumstances, we feel it just and proper to direct that the stay granted by this Court in W.P. M.P. Nos. 23596, 23597 and 23598 of 1988, will operate pending disposal of the appeals subject to the same conditions prescribed in the said W.P. M.Ps., i.e., keeping the bank guarantees alive, to the satisfaction of the respondents. It is open to either party to move this Court regarding the continuance or otherwise of the interim order in case the disposal of the appeals is delayed. Government Pleader''s fee : Rs. 200 in each.

Writ petitions dismissed.