Sujana Universal Industries Ltd. vs Deputy Commercial Tax Officer

K. Raviraja Pandian, J.—This appeal is filed by the assessee against the order of the writ court dated June 26, 2008 made in Writ Petition No. 2392 of 20081, which was a common order passed in three writ petitions, the other two being Writ Petition Nos. 2393 and 13457 of 20081, in respect of the same assessee for three assessment years. The assessment year relating to this appeal is 2004-05.

In Writ Petition No. 2392 of 20081, the appellant herein sought for the relief of certiorari to quash the order of TNGST assessment dated December 7, 2007 for the assessment year 2004-05. For the said assessment year, the assessing officer determined the taxable turnover at Rs. 2,34,29,59,494 and levied tax in a sum of Rs. 9,39,97,474 and surcharge of Rs. 20,931 and additional sales tax in a sum of Rs. 87,217. Apart from that penalty in a sum of Rs. 14,09,13,503 was also levied.

Aggrieved by the assessment order, the appellant filed Writ Petition No. 2392 of 2008 See Sujana Universal Industries Ltd. v. Deputy Commercial Tax Officer [2009] 23 VST 106 for quashing the assessment on the ground that the assessment has been passed without jurisdiction and in total violation of principles of natural justice. The further ground of attack was that the said assessment order has been passed as per the proposal made by the Enforcement Wing Officers, who conducted the inspection and gathered materials from the appellant''s premises and that the imposition of tax and penalty is totally arbitrary and ex facie illegal and liable to be set aside. The writ court dismissed the petition on the ground of availability of alternative remedy. The said order is canvassed before this Court.

Mr. Arvind P. Datar, learned senior Counsel appearing for the appellant/assessee, contended that the assessment order made in respect of the assessment year 2004-05 is ex facie illegal and it is an exercise exceeding the jurisdiction vested on the assessing officer; abuse of process of law; and violative of principles of natural justice. In such circumstances, the extraordinary jurisdiction under Article 226 of the Constitution of India can very well be invoked. The second sales exemption was claimed by the appellant on the basis that the sale was effected by the registered dealers in respect of the declared goods, i.e., iron and steel, which is taxable only at the first point of sale within the State of Tamil Nadu. As a matter of fact, all the three registered selling dealers from whom the appellant purchased the goods have been assessed by the jurisdiction assessing officer granting second-sale exemption at their hands on the ground that the goods were already subjected to tax. The appellant being a subsequent purchaser, has been now taxed as if it is the first sale, which goes to the root of the matter, in the sense that the assessing officer has no jurisdiction to assess the transaction as first sale in the hands of the assessee. Therefore, on the face of the assessment order, it is manifest that the assessment order has been passed without jurisdiction. When an assessment order has been passed without jurisdiction, it can very well be agitated by invoking the constitutional power under Article 226 of the Constitution of India. He further contended that there is absolutely no answer by the writ court to the three assessment orders produced before it to show that the appellant is entitled to have second-sale exemption as the goods were purchased from the three registered dealers who have themselves claimed the transaction as second sales. Hence, the order has to be set aside by this Court with liberty to the assessing officer to redo the assessment in accordance with the statutory provisions. He further contended that as the appellant was also doing business at Andhra Pradesh, the inter-State investigation cell of the Tamil Nadu enquired about the genuineness of the appellant from its counterpart at Andhra Pradesh and found that they are genuine dealers. When the genuineness has not been disputed, the assessment made by imposing tax on the declared goods purchased from three registered dealers as a first sale and imposition of 150 per cent penalty is not only without jurisdiction but also palpably arbitrary.

On the other hand, the learned Additional Advocate-General argued for the respondent that all these grounds now taken in the appeal and before the writ court could very well be agitated in the statutory appeal provided under the statute. When an efficacious and effective alternative remedy is available, and when a disputed question of fact is involved as to the genuineness of the purchasers, this Court should not interfere with the assessment order, and that is what the writ court has done in the present case. Hence, no interference is called for in the order of the writ court.

We heard the learned Counsel on either side and perused the materials available on record.

Generally, this Court will not interfere with assessment orders, by exercising jurisdiction under Article 226 of the Constitution of India as there are effective and efficacious alternative remedies available to the assessee by way of appeal and further appeal and by way of statutory revision before this Court. However, on the face of the assessment order, if the court feels that the assessment order has been passed without jurisdiction, the court can interfere.

The Rule relating to the existence of an alternative remedy as barring the writ jurisdiction under Article 226 of the Constitution of India is only a Rule of self-imposed limitation. It is essentially a Rule of policy, convenience and discretion. Despite the existence of an alternative remedy, it is well within the discretion of the High Court to grant the relief under Article 226 of the Constitution. At the same time, though the matter relating to an alternative remedy has nothing to do with the jurisdiction of the court, normally the writ court should not interfere if there is an adequate efficacious alternative remedy. However, if a party approaches the court under Article 226 of the Constitution of India, without availing the alternative remedy the court should ensure that he has made out a strong case or that there exist good grounds to invoke the extraordinary jurisdiction and on such consideration if the court comes to the conclusion that the appellant seeks enforcement of any of the fundamental rights or if there is failure of the principles of natural justice or if the orders or proceedings are wholly without jurisdiction or passed in a palpably arbitrary manner or the vires of an Act is challenged, the High Court can very well entertain the writ petition and redress the grievance in accordance with law. See State of H.P. and Others Vs. Gujarat Ambuja Cement Ltd. and Another, .

The Constitution Bench of the apex court in the case of Calcutta Discount Company Limited Vs. Income Tax Officer, Companies District, I and Another, has held in uncertain terms that it is well-settled that though writ of prohibition or certiorari will not issue against an executive authority, the High Courts have power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Court, it is well-settled, will issue appropriate orders or directions to prevent such consequences.

In yet another Constitution Bench decision in the case of A.V. Venkateswaran, Collector of Customs, Bombay Vs. Ramchand Sobhraj Wadhwani and Another, , the apex court has held as follows:

...We must, however, point out that the Rule that the party who applies for the issue of a high prerogative writ should, before he approaches the court, have exhausted other remedies open to him under the law, is not one which bars the jurisdiction of the High Court to entertain the petition or to deal with it, but is rather a Rule which courts have laid down for the exercise of their discretion. The law on this matter has been enunciated in several decisions of this Court but it is sufficient to refer to two cases: In Union of India (UOI) Vs. T.R. Varma, at pp. 503-504 Venkatarama Ayyar speaking for the court said:

It is well-settled that when an alternative and equally efficacious remedy is open to a litigant, he should be required to pursue that remedy and not invoke the special jurisdiction of the High Court to issue a prerogative writ. It is true that the existence of another remedy does not affect the jurisdiction of the court to issue a writ; but, as observed by this Court in Rashid Ahmed Vs. The Municipal Board, Kairana, "the existence of an adequate legal remedy is a thing to be taken into consideration in the matter of granting writs". Vide also K.S. Rashid and Son Vs. The Income Tax Investigation Commission etc., . And where such remedy exists, it will be a sound exercise of discretion to refuse to interfere in a petition under Article 226, unless there are good grounds therefor.

There is no difference between the above and the formulation by Das, C.J. in The State of Uttar Pradesh Vs. Mohammad Nooh, at pp. 605-607. Where he observed:

...It must be borne in mind that there is no rule, with regard to certiorari as there is with mandamus, that it will lie only where there is no other equally effective remedy. It is well established that, provided the requisite grounds exist, certiorari will lie although a right of appeal has been conferred by statute. The fact that the aggrieved party has another and adequate remedy may be taken into consideration by the superior court in arriving at a conclusion as to whether it should, in exercise of its discretion, issue a writ of certiorari to quash the proceedings and decisions of inferior courts subordinate to it and ordinarily the superior court will decline to interfere until the aggrieved party has exhausted his other statutory remedies, if any. But this Rule requiring the exhaustion of statutory remedies before the writ will be granted is a Rule of policy, convenience and discretion rather than a Rule of law and instances are numerous where a writ of certiorari has been issued in spite of the fact that the aggrieved party had other adequate legal remedies.

After referring to a few cases in which the existence of an alternative remedy had been held not to bar the issue of a prerogative writ, the learned chief justice added:

It has also been held that a litigant who has lost his right of appeal or has failed to perfect an appeal by no fault of his own may in a proper case obtain a review by certiorari.

In the result this Court held that the existence of other legal remedies was not per se a bar to the issue of a writ of certiorari and that the court was not bound to relegate the petitioner to the other legal remedies available to him.

The passages in the judgments of this Court that we have extracted would indicate (1) that the two exceptions which the learned Solicitor-General formulated to the normal Rule as to the effect of the existence of an adequate alternative remedy were by no means exhaustive, and (2) that even beyond them a discretion vested in the High Court to have entertained the petition and granted the petitioner relief notwithstanding the existence of an alternative remedy. We need only add that the broad lines of the general principles on which the court should act, having been clearly laid down, their application to the facts of each particular case must necessarily be dependent on a variety of individual facts which must govern the proper exercise of the discretion of the court, and that in a matter which is thus preeminently one of discretion, it is not possible or even if it were, it would not be desirable to lay down inflexible Rules which should be applied with rigidity in every case which comes up before the court.

In a three-judge Bench decision of the Supreme Court in the case of Arun Kumar and Others Vs. Union of India (UOI) and Others, , the Supreme Court has held as follows (at page 91):

A ''jurisdictional fact is a fact which must exist before a court, Tribunal or an authority assumes jurisdiction over a particular matter. A jurisdictional fact is one on the existence or non-existence of which depends the jurisdiction of a court, a Tribunal or an authority. It is the fact upon which an administrative agency''s power to act depends. If the jurisdictional fact does not exist, the court, authority or officer cannot act. If a court or authority wrongly assumes the existence of such fact, the order can be questioned by a writ of certiorari. The underlying principle is that by erroneously assuming the existence of such jurisdictional fact, no authority can confer upon itself jurisdiction which it otherwise does not possess. The existence of jurisdictional fact is thus the sine qua non or condition precedent for the exercise of power by a court of limited jurisdiction.

If the jurisdictional fact exists, the authority can proceed with the case and take an appropriate decision in accordance with law. Once the authority has jurisdiction in the matter on existence of the ''jurisdictional fact'', it can decide the ''fact in issue'' or ''adjudicatory fact''. A wrong decision on a ''fact in issue'' or on an ''adjudicatory fact'' would not make the decision of the authority without jurisdiction or vulnerable provided the essential or fundamental fact as to existence of jurisdiction is present.

The Supreme Court in the case of S.J.S. Business Enterprises (P) Ltd. Vs. State of Bihar and Others, held thus:

...The existence of an adequate or suitable alternative remedy available to a litigant is merely a factor which a court entertaining an application under Article 226 will consider for exercising the discretion to issue a writ under Article 226 A.V. Venkateswaran, Collector of Customs, Bombay Vs. Ramchand Sobhraj Wadhwani and Another, . But the existence of such remedy does not impinge upon the jurisdiction of the High Court to deal with the matter itself if it is in a position to do so on the basis of the affidavits filed. If, however, a party has already availed of the alternative remedy while invoking the jurisdiction under Article 226, it would not be appropriate for the court to entertain the writ petition. The Rule is based on public policy but the motivating factor is the existence of a parallel jurisdiction in another court. But this Court has also held in C.B. Gosain Vs. State of Orissa, that even when an alternative remedy has been availed of by a party but not pursued, the party could prosecute proceedings under Article 226 for the same relief. This Court has also held that when a party has already moved the High Court under Article 226 and failed to obtain relief and then moved an application under Article 32 before this Court for the same relief, normally the court will not entertain the application under Article 32. But where in the parallel jurisdiction, the order is not a speaking one or the matter has been disposed of on some other ground, this Court has, in a suitable case, entertained the application under Article 32 Tilokchand and Motichand and Others Vs. H.B. Munshi and Another, . Instead of dismissing the writ petition on the ground that the alternative remedy had been availed of, the court may call upon the party to elect whether it will proceed with the alternative remedy or with the application under Article 226 K.S. Rashid and Son Vs. The Income Tax Investigation Commission etc., . Therefore, the fact that a suit had already been filed by the appellant was not such a fact the suppression of which could have affected the final disposal of the writ petition on merits.

Thus, the exercise of power under Article 226 of the Constitution of India is well-settled and established that if the order impugned is one passed without "jurisdiction", in spite of the availability of alternative statutory remedy, the court will entertain a petition and grant the appropriate remedy, if the facts available are enough for adjudicating the matter, without relegating the appellant to undergo the ordeal of alternative remedy which imposes certain condition to be fulfilled before filing an appeal.

Generally, assessments are completed based on the books of accounts and other documents required as per the statutory provisions. In case, the assessee is claiming exemption from tax, the assessee has to file supporting documents for claiming such exemption. In this case, the assessee claimed second-sale exemption by filing supporting materials. At the first instance, the assessing officer entertained a doubt as to the claim for exemption of second sale of iron and steel on the ground that the assessee has made heavy purchases from the following dealers:

(i) Omicron Biogenesis Ltd.

(ii) Global Forgings Ltd.

(iii) Future Tech Industries Ltd.

(iv) Endeavour Exim Pvt. Ltd.

(v) Apex Metal Alloys.

The assessing officer called upon the assessee to furnish the details about the dealers in his pre-assessment notice dated June 5, 2006. The said details were called for in spite of the fact that the claim of exemption to the tune of Rs. 2,32,68,77,000 is supported by basic materials like purchase bills, sales bills, etc. The required details were furnished by the appellant, which included the TNGST registration numbers of the said dealers. The assessing officer again issued another notice dated September 27, 2007, calling it as final pre-assessment notice and a revised final assessment notice dated November 26, 2007. In this notice, the reasons stated was that the enforcement wing officers inspected the place of business premises, verified the purchase bills, sales bills and found them to be correct. However, they entertained a doubt that the purchases were effected by the assessee from Nungambakkam and the assessee did not possess any godown facility to unload the goods. In addition to that, the other reason stated was that the selling dealers, whose details have been furnished by the assessee are found to be "O" case assessees, in the sense that there is no tax liability from them and treated as bill traders.

On the abovesaid reasoning, the assessing officer proposed to disallow the second-sale exemption. The appellant filed their objections. On consideration of the objections, the assessment has been framed rejecting the claim of exemption by reproducing the reasons stated in the three notices and on the additional ground that the assessee has not discharged its initial burden as per Section 10 of the TNGST Act. On that basis, the assessment order, which is impugned in the writ petition, has been passed on December 7, 2007 for the assessment year 2004-05.

On a perusal of the assessment order, we are not able to approve the way in which it has been passed, levying a huge amount as tax, additional tax and penalty, as stated above.

The goods for which second-sale exemption has been claimed by the assessee are iron and steel which are declared goods and taxable on the first point of sale. There cannot be any dispute about the said legal position. The fact that the appellant purchased the goods, iron and steel, from the three registered dealers is also not disputed. The further fact is that the three registered dealers from whom the appellant has purchased the declared goods, iron and steel, were also assessed by the jurisdictional authorities in their assessment order dated March 30, 2006. In respect of Omicron Biogenesis Ltd., it is evident from the assessment orders that the dealer had produced the day-book, cash-book and sale bills, forms, etc. Their accounts were called for and checked by the assessing officers. On checking the accounts it was found that the total turnover under the TNGST Act was Rs. 1,75,36,13,661.41 and they claimed exemption on the entire turnover as being a second sale of CTD bars and M.S. rounds, iron and steel. The claim has been verified with reference to the purchase bills and other books of accounts and the assessing officer found that the goods have already suffered tax at the earlier stage. On that basis, the exemption was granted, as claimed. The assessing officer, after verification of the books of account and satisfying himself accepted the book turnover and determined the total and taxable turnover at Rs. 1,75,36,13,664 and Rs. Nil respectively for the assessment year 2004-05 and framed the assessment to that effect.

In respect of the Global Forgings Ltd., the assessment order came to be passed for the assessment year 2004-05 on March 30, 2006 on verification of books of accounts. The said assessment order proceeds that the total turnover of the assessee under the TNGST Act was Rs. 1,45,23,48,104.16. The dealer claimed exemption of the entire turnover being the second sales of CTD bars and M.S. rounds, iron and steel. The said claim has been verified with reference to purchase bills and found that the tax had already been suffered at the earlier stage and exemption, as claimed, has been granted. Same is the case of other selling dealer, Future Tech Ltd., whose assessment for the assessment year 2004-05 has been completed by the assessing officer on March 30, 2006 determining the total turnover at Rs. 1,05,54,02,466.36. Here again, the assessing officer, after checking the accounts, determined that the assessee is entitled to exemption for the sale of CTD bars, M.S. round and iron and steel on the ground that the goods have already suffered tax at the earlier stage.

It is true that as per Section 10 of the TNGST Act, it is for the assessee to initially discharge the burden that the goods has been subjected to tax at an earlier stage. The initial burden could be discharged by production of sale bill, and other information, such as registration certificate number under TNGST Act, etc., of the selling dealer. Thereafter, it is for the Department to verify the accounts of the selling dealers to find out the correctness.

Here in this case, in addition to the production of sale/purchase bills of the goods and other documentary evidence about the selling dealers, the assessment orders passed against the three registered dealers have also been placed before the writ court. The entire turnover of the selling dealers of the appellant had been given exemption which is several manifold higher than the second-sale exemption claimed by the assessee on the ground of purchase that they have made from the abovesaid dealers. When the initial burden has been discharged by the appellant, we are of the view that the appellant cannot be treated as the dealer who is liable to pay sales tax as if the transaction is the first sale in their hands.

The learned Additional Advocate General submitted that as the department has found some irregularity on the part of the assessing officer, action has been taken against him. However, the fact remains, as on date, the assessment orders passed by the jurisdictional assessing officer in respect of the three registered dealers for the assessment year 2004-05 are still in force.

The reason given in the assessment order is that as per the balance sheet, the assessee either manufactured or sold iron and steel from the bought-out goods and the assessee might have brought the goods from Andhra Pradesh or outside the State and camouflaged the transaction as if they were purchased from the local dealers in Tamil Nadu, and claimed second-sale exemption. But there are no materials stated for arriving at such a conclusion. The other reason that the appellant has not filed any evidence for movement of the goods and proof of payment are also not germane to the assessment, as the particulars of the selling dealers have been given and their assessment orders have also been produced. All the reasons are only surmises and not based on cogent materials.

The last of the reason that M/s. Future Tech Industries Ltd., is a bogus industry is also incorrect because it is a registered dealer assessed by the Department itself, as seen from the assessment order dated March 30, 2006. Hence, we are of the view that the levy of tax in the hands of the assessee in respect of the declared goods which have already been subjected to tax, as found by the assessment orders, in respect of three dealers, is without jurisdiction. On the face of the admitted position that the declared goods are taxable only at the first point of sale within the State, the appellant cannot be fixed as first seller. See: Shanmuga Traders and Others Vs. State of T.N. and Others, .

In the abovestated peculiar facts and circumstances of the case, we are of the considered view that the assessment order for the assessment year 2004-05 is passed arbitrarily and without jurisdiction and is liable to be dismissed without unnecessarily subjecting the appellant to the onerous and lengthy appellate proceedings, as held by the Constitution Bench of the Supreme Court in the case of Calcutta Discount Company Limited Vs. Income Tax Officer, Companies District, I and Another, .

For the reasons stated in the foregoing paragraphs, the assessment order, which is the subject-matter of Writ Petition No. 2392 of 2008 See Sujana Universal Industries Ltd. v. Deputy Commercial Tax Officer [2009] 23 VST 106 (Mad), is hereby set aside and the matter is remitted back to the assessing officer to reframe the assessment by giving an opportunity to the appellant in accordance with law. For this purpose, the appellant is hereby directed to appear before the assessing officer on October 23, 2008 with relevant materials. The assessing officer shall proceed with, to frame the assessment, in accordance with law without being influenced by the D3 proposals of the Investigating Wing Officers.

In the result, the appeal stands allowed. No costs. The connected miscellaneous petition is closed.