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Judgment
Ramesh Ranganathan, CJ
These four special appeals are preferred against the common order passed by the learned Single Judge in Civil Miscellaneous Writ Petition No. 1921 of 2013 dated 9.1.2014. Eleven different assessees had filed a common writ petition in Civil Miscellaneous Writ Petition No. 1921 of 2013. While some of them had invoked the jurisdiction of this Court, questioning the notice issued under Section 28(2) read with Section 25(6) of the Uttarakhand VAT Act, a few others had questioned the assessment order passed by the Assessing Authority holding the subject transaction to be an intra-State purchase exigible to tax under Section 3(10)(b) of the Uttarakhand VAT Act.
Facts, to the extent necessary, are that all the petitioners are registered dealers carrying on business outside the State of Uttarakhand. They, however, procured menthe oil, from farmers / agriculturists within the State of Uttarakhand, through their commission agents. Since the appellants, in these four appeals, were not subjected to assessment by the Assessing Authority, and have invoked the jurisdiction of this Court, under Article 226 of the Constitution of India, questioning the notice, it is unnecessary for us to take note of the contents of the assessment order passed by the Assessing Authority.
The appellants-writ petitioners, through their commission agents, purchased mentha oil and peppermint oil from agriculturists/farmers in the State of Uttarakhand. It was their case, in the writ petition filed by them, that, in terms of the agreement executed by them with their commission agents, the agents were required to purchase the specified quantity of mentha oil, at the prevailing market rate, as intimated by the principal from time to time, for and on behalf of the principal from cultivators, agriculturists, etc. on commission basis @ 50 paisa per kg, and to dispatch the same to the destination of the principal as per his directions; and the principal was to make a lump sum payment in advance by means of a bank draft, bank transfer to the commission agent against the said purchase as per the requirement.
The agreement, on which the appellants place reliance upon, also required the principal to provide empty drums etc. to the commission agents for filling the abovementioned oil; if the drums were not available with the principal, the agent was required to purchase the drums on behalf of the principal, and dispatch the same to the principal after filling the above mentioned oil; the principal was liable to make the payment for the same; the principal was also required to make payment against all expenses, including insurance of the goods, freight, loading and unloading, bharai wages, testing and GLC charges; wherever necessary, expenses to seal the drums, stenciling and other miscellaneous expenses and other incidental expenses and the commission which were to be mentioned in the dispatch note/challan issued by the commission agents; and the quantity of oil, mentioned in the agreement, could be enhanced with the mutual consent of both the parties.
It is also the case of the appellants-writ petitioners that the subject transaction falls within the ambit of Section 3(a) of the Central Sales Tax Act as the purchase of goods, by the commission agents on behalf of the principal, was an inter-State purchase; and since the goods moved to reach a place outside the State, it could not be subjected to tax under Section 3(10)(b) of the Uttarakhand VAT Act.
In the order under appeal, the learned Single Judge observed that the petitioners should first approach the authorities concerned, submit their reply to the show-cause notice, and explain with documentary evidence and establish that the sale was actually an inter-State sale and not an intra-State sale; and they were, therefore, not liable to pay tax under the Uttarakhand VAT Act. The learned Single Judge opined that the question, whether a particular sale was an intra-State sale or an inter-State sale, is a mixed question of fact and law, and it was but appropriate that this question was first determined by the Assessing Authority itself, after hearing the petitioners in each of their cases. The matter was sent back to the Assessing Authority to hear the petitioners. The interim order passed earlier was vacated, and the petitioners were permitted to file their reply, to the show-cause notice issued by the Assessing Authority, within 45 days from the date of the order; and, till then, no coercive measures were to be taken against the petitioners. The learned Single Judge made it clear that the petitioners were at liberty to place all pleadings and arguments, as they had done before the Court in the writ petition, before the concerned authority in order to support their case. Aggrieved thereby the present appeals.
A Division Bench of this Court, by its order in SPA No. 54 of 2014 dated 14.3.2014, granted stay of the judgment and order under appeal; and directed the parties to maintain status quo till the appeal was heard. As a result of the interim order passed by the Division Bench, the Assessing Authority has not taken any further action pursuant to the notice issued by him under Section 28(2) read with Section 25(6) of the Uttarakhand VAT Act
Before us Sri S.K. Posti, learned Counsel for the appellants-writ petitioners, would submit that the notice dated 5.7.2013 was addressed to the principals, all of whom were carrying on business outside the State of Uttarakhand; Section 3 of the VAT Act is the charging section, and must strictly be construed; under Section 3(1), it is only sales, made within the State, which can be subjected to tax under the VAT Act; Section 3(2) deals with registered dealers, and those liable to be registered; since the appellants-writ petitioners are not carrying on any business within the State, they are not liable to be registered, and as such Section 3(2) has no application to their case; Section 3(3) requires tax to be paid on all sales within the State on the taxable turnover; in terms of Section 3(9)(b)(b)(i), sale in the course of inter-State trade and commerce, is required to be excluded from the taxable turnover; the oil purchased by the petitioners, through their commission agents, is from agriculturists / farmers who are not dealers falling within the ambit of the Uttarakhand VAT Act in the light of the proviso to Section 2(11) thereof; clause (1) of Section 3(10)(b) would apply only in cases where the goods are not sold in the course of inter-State trade and commerce; in the present case, the goods were sold and purchased in the course of inter-State trade and commerce falling within the ambit of Section 3(a) of the CST Act; any action which the Assessing Authority could have taken was only in terms of Section 6 of the CST Act, and not under Section 3(10)(b) of the Uttarakhand VAT Act; in the present case, since the seller (farmer/agriculturist) is an unregistered dealer, and the buyer (the appellant-writ petitioner) is located outside the State, the transaction of sale/purchase is in the course of inter-State trade and commerce; the appellants-writ petitioners purchased the goods with the intention of taking it outside the State; the transaction of the sale stood completed outside the State, and fell within the ambit of Section 3(a) of the CST Act; consequently, tax can only be levied under Section 6 of the CST Act, and not under Section 3(10) of the Uttarakhand VAT Act; the agriculturists/farmers knew that they had sold the goods to the buyers who were from outside the State, and that they would take the goods outside the State; this would make the transaction an inter-State sale; if the purchaser purchases goods with the intention to move the goods outside the State, it would then amount to an inter-State sale, and the intention of the seller is wholly irrelevant; in terms of the proviso to Section 3(10), the Assessing Authority can only proceed against the commission agent, and not against the principal; while the commission agent can recover the tax, if any, levied on him by the Assessing Authority, from the principal, that did not confer any power on the Assessing Authority to issue the notice to the principal, who was carrying on business outside the State, and to subject him to tax under Section 3(10)(b) of the Uttarakhand VAT Act; Section 3(D) of the U.P. Trade Tax is in pari materia with Section 3(10) of the Uttarakhand VAT Act, and in the light of the judgment of the Allahabad High Court in Commissioner of Sales Tax, U.P. v. Hanuman Trading Company, 1979 (43) STC 408, affirmed by the Supreme Court in Commissioner of Sales Tax, U.P. & Others v. M/s Bakhtawar Lal Kailash Chand Arhti & Others, (1992) 3 SCC 750, the impugned show-cause notice is without jurisdiction and is liable to be set aside.
Shri S.K.Posti, learned Counsel, would rely on the judgments of the Supreme Court in State of A.P. v. National Thermal Power Corporation Ltd & Others, (2002) 5 SCC 203; M/s Kelvinator of India Ltd. v. The State of Haryana, (1973) 2 SCC 551; and Hyderabad Engineering Industries v. State of Andhra Pradesh, (2011) 4 SCC 705 in support of his submission that the subject transaction falls within the ambit of Section 3(a) of the CST Act. He would place reliance on the judgment of the Supreme Court, in Mahaluxmi Rice Mills & Others v. State of U.P. & Others (1998) 6 SCC 590, in support of his submission that, in the light of the proviso to Section 3(10)(b) of the Uttarakhand VAT Act, the Assessing Authority can only proceed against the commission agent and not against the appellant-writ petitioner who is a principal.
The question, whether the transaction is an inter-State sale or an intra-State sale, is not a pure question of law unrelated to facts, but is a mixed question of fact and law. This Court would not examine disputed questions of fact for the first time in proceedings under Article 226 of the Constitution of India, as these are all matters which must be examined initially by the Assessing Authority and thereafter, if need be, by the statutory Appellate and Revisional Authorities. While the jurisdiction of this Court, under Article 226 of the Constitution of India, can always be invoked in cases where, among others, the complaint is of violation of principles of natural justice or violation of Fundamental Rights or that the order, impugned in the writ petition, is wholly without jurisdiction, the question whether the proceedings suffer from lack of jurisdiction would be examined by this Court on the facts and circumstances of each case.
It is only if the Assessing Authority is satisfied, on an examination of the agreement entered into between the appellant-writ petitioner and its commission agent, that the said agreement is genuine could he then, in the light of the conditions stipulated in the said agreement, determine whether the transaction of purchase of oil by the commission agent, from agriculturists/farmers within the State of Uttarakhand which is being transported to the appellant-writ petitioner outside the State, is an inter-State sale or an intra-State sale.
While, on a cursory reading, the judgment of the Allahabad High Court in Hanuman Trading Company, does also relate to purchase of goods by a commission agent on behalf of a principal carrying on business outside the State, it must be borne in mind that the judgment of the Allahabad High Court in Hanuman Trading Company, which was affirmed by the Supreme Court in Commissioner of Sales Tax, U.P. & Others v. M/s Bakhtawar Lal Kailash Chand Arhti & Others, was in a revision preferred before the High Court by the Commissioner of Sales Tax against the revisional order passed by the Revisional Authority setting aside the order passed by the Appellate Authority affirming the order passed by the Assessing Authority. The view taken by the Sales Tax Officer was upheld in appeal, but in revision it was held in favour of the assessee. It is on the basis of the facts, as noted in these orders, did the learned Single Judge of the Allahabad High Court examine the question whether or not the transaction was an inter-State falling within the ambit of Section 3(a) of the CST Act. The observations, by the learned Single Judge of the Allahabad High Court, in Hanuman Trading Company were made on the revisional authority referring certain questions of law for the opinion of the Allahabad High Court, and not in writ proceedings under Article 226 of the Constitution of India.
Unlike in Hanuman Trading Company, the appellants-writ petitioners herein have straightway invoked the jurisdiction of this Court against the show-cause notice contending that since, according to them, the transaction was in the course of inter-State trade and commerce, and was not an intra-State sale/purchase liable to tax under the Uttarakhand VAT Act, the show-cause notice, issued by the Assessing Authority, was without jurisdiction.
It would be wholly inappropriate for us, in the exercise of the extraordinary jurisdiction under Article 226 of the Constitution of India, to adjudicate questions of fact, that too for the first time in writ proceedings. All the contentions which are now urged before us can as well be urged by the appellant-assessee, before the Assessing Authority in their reply to the show cause notice. In matters of taxation, it is inappropriate for the High Court to interfere in the exercise of its jurisdiction under Article 226 of the Constitution either at the stage of a show cause notice, or at the stage of assessment, where an alternative remedy by way of filing a reply is available. [Union of India (UOI) vs. Hindalco Industries: (2003) 5 SCC 194.]
Issuance of a show-cause notice contemplates that the response shall be considered and only thereafter will the matter be decided. The person asked to show cause has, therefore, full opportunity to satisfy the authorities that no action should be taken against him. (Union of India v. Jain Shudh Vanaspati Ltd.: (1996) 10 SCC 520. The purpose of issuing a show-cause notice is to afford an opportunity of hearing and, once cause is shown, it is open to the authority to consider the matter in the light of the facts and submissions placed and only, thereafter, can a final decision be taken in the matter. Interference by the court before that stage would be premature. (State of U.P. v. Brahm Datt Sharma: AIR 1987 SC 943; Divisional Forest Officer v. M. Ramalinga Reddy (2007) 9 SCC 286).
Ordinarily, a writ court would not exercise its discretionary jurisdiction to entertain a writ petition questioning a notice to show cause unless the same, inter alia, appears to have been issued without jurisdiction, (State of U.P. v. Brahm Datt Sharma, Special Director v. Mohd. Ghulam Ghouse: (2004) 3 SCC 440, Union of India v. Kunisetty Satyanarayana: (2006) 12 SCC 28, Executive Engineer, Bihar State exercise of their jurisdiction and are not matters of jurisdictional factors. (Union of India v. Hindalco Industries: (2003) 5 SCC 194). It would, ordinarily, not be proper or appropriate that the initial jurisdiction of the authority/Tribunal to deal with jurisdictional facts should be circumvented and the decision, on such a preliminary issue, sought before a High Court in its writ jurisdiction. (Express Newspapers (P) Ltd. v . Workers: Housing Board v. Ramesh Kumar Singh: (1996) 1 SCC 327, Ulagappa v. Divisional Commr., Mysore: (2001) 10 SCC 639 and Siemens Ltd. v. State of Maharashtra: (2006) 12 SCC 33), particularly when the petitioner has an effective remedy under the Act itself. (State of Punjab v. Bhatinda District Coop. Milk AIR 1963 SC 569, Divisional Forest Officer v. M. Ramalinga Reddy). However, the self-imposed restrictions on the High Court not to entertain a writ petition, if another effective and efficacious remedy is available, will not operate as a bar where the order or proceedings are wholly without jurisdiction. (Whirlpool Corpn. v. Registrar of Trade Marks: (1998) 8 SCC 1).
In very rare and exceptional cases, the High Court can quash a show-cause notice if it is found to be wholly without jurisdiction. A showcause notice does not give rise to any cause of action as it does not amount to an adverse order which affects the rights of any party. It is quite possible that, after considering the reply to the show-cause notice, the authority concerned may drop the proceedings and/or hold that the allegations are not established. A show-cause notice does not infringe the rights of anyone. It is only when a final order, otherwise adversely affecting a party, is passed that the said party can be said to have any grievance. (Union of India v. Kunisetty Satyanarayana).
On the other hand, where the threat of a prejudicial action is wholly without jurisdiction, a person cannot be asked to wait for the injury to be caused to him before seeking the court's protection. If, however, the authority had the power in law to issue the show cause notice it would not be open to the person, asked to show cause, to approach the Court under Article 226 of the Constitution at the stage of notice. (Chief of Army Staff v. Major Dharam Pal Kukrety: (1985) 2 SCC 412).
The jurisdiction of the High Court, under Article 226 of the Constitution, should not be permitted to be invoked in order to challenge a show-cause notice unless, accepting the facts in the show-cause notice to be correct, the show-cause notice is, ex facie, without jurisdiction, (State of U.P. v. Anil Kumar Ramesh Chandra Glass Works: (2005) 11 SCC 451), i.e., the notice is ex facie a 'nullity' or non est in the eye of the law for absolute want of jurisdiction of the authority to even investigate into the facts or totally "without jurisdiction" in the traditional sense of that expression - i.e., even the commencement or initiation of the proceedings, on the face of it, and without anything more, is totally unauthorised. In all other cases, it is only appropriate that the party shows cause before the authority concerned and takes up the objection regarding jurisdiction therein. (Bihar State Housing Board v. Ramesh Kumar Singh, Special Director v. Mohd. Ghulam Ghouse, Divisional Forest Officer v. M. Ramalinga Reddy).
Mere assertion by the petitioner that a notice is without jurisdiction would not suffice. It should, prima facie, be established to be so. Where factual adjudication is necessary interference is, ordinarily, ruled out. (Union of India v. VICCO Laboratories: (2007) 13 SCC 270). Whether the show-cause notice is founded on any legal premise is a jurisdictional issue which can be urged by the recipient of the notice and such issues can also be, initially, adjudicated by the authority issuing the very notice before the aggrieved can approach the court. (Special Director v. Mohd. Ghulam Ghouse; Divisional Forest Officer v. M. Ramalinga Reddy).
The learned Single Judge has also, without expressing any opinion on merits, relegated the appellants-writ petitioners to the remedy of filing a reply to the show-cause notice. Interference, in an intra-Court appeal, would be justified only if the order under appeal suffers from a patent illegality. The order under appeal does not suffer from any such infirmity. Consequently, the appeals fail and are, accordingly, dismissed. However, in the circumstances, without costs.
Since the time stipulated by the learned Single Judge has already expired, suffice it to permit the appellants-writ petitioners to file their reply to the show-cause notice within 30 days from today. In case, they file their reply within the aforesaid period, the Assessing Authority shall consider the objections raised by them, in their reply to the show-cause notice, and pass a reasoned order in accordance with law. Till such orders are passed by the Assessing Authority, on receipt of the appellants-writ petitioners' reply to the show-cause notice, no coercive steps shall be taken for recovery of the amounts mentioned in the show-cause notice. It is made clear that, in case the appellants-writ petitioners do not submit their reply to the show-cause notice within 30 days from today, it is open to the Assessing Authority to proceed and pass appropriate orders in accordance with law, without awaiting the reply of the appellants-writ petitioners thereafter.
Let a certified copy of this order be furnished, to the learned Counsel for the parties, by 26.3.2019 on payment of usual charges.