1967 (9) TMI 116 - SC - VAT and Sales Tax

Court allows appeal due to lack of tax proof. Procedural rules serve justice.

The Supreme Court allowed the appeal, finding that the rejection of the appellant's memorandum of appeal due to lack of proof of tax payment was ... Entertain an appeal - satisfactory proof of payment of admitted tax - directory versus mandatory nature of procedural rules - rule prescribing challan as mode of proof - remittance for disposal in accordance with lawEntertain an appeal - satisfactory proof of payment of admitted tax - Whether the proviso to section 9 requires that proof of payment must accompany the memorandum of appeal at the time of filing, or whether the requirement is satisfied if satisfactory proof is produced when the appeal is first taken up for consideration. - HELD THAT: - The Court held that the word 'entertain' in the proviso to section 9 means to admit to consideration or to proceed to consider the appeal, not merely the act of filing. Consequently, the statutory requirement is that satisfactory proof of payment of the admitted tax must be available when the appeal is first taken up for consideration (at admission or at the first hearing as the procedure of the forum requires). The proviso does not rigidly prescribe the act of filing as the determinative moment; therefore proof tendered before the matter is considered by the authority satisfies the statutory condition.Satisfactory proof need not necessarily accompany the memorandum at filing; proof produced when the appeal is first taken up for consideration fulfils the proviso to section 9.Rule prescribing challan as mode of proof - directory versus mandatory nature of procedural rules - Whether rule 66(2), which requires the memorandum of appeal to be accompanied by a challan showing deposit of the tax, is mandatory to the exclusion of other forms of satisfactory proof contemplated by section 9. - HELD THAT: - The Court analysed the relationship between the general statutory requirement and the more specific rule. While rule 66(2) prescribes the challan as an uncontestable mode of proof, it does not oust other forms of satisfactory evidence. The rule is directory to the extent that it prescribes one convenient and unquestionable mode of proof; it cannot constrict the broader statutory requirement to the exclusion of other equally satisfactory and irrefutable proof such as an official certificate, bank counterfoil, or other evidence that the tax was paid within time. Denying an appeal on the sole ground that the exact mode specified by the rule was not followed, where equivalent satisfactory proof exists when the appeal is taken up for consideration, would amount to an undue technicality defeating the statutory right of appeal.Rule 66(2) is directory and does not preclude other forms of satisfactory proof; failure to produce the challan with the memorandum is not fatal where equivalent proof is produced when the appeal is first considered.Remittance for disposal in accordance with law - Whether the appellant's appeal should be sent back for consideration in the light of the Court's conclusions. - HELD THAT: - Having held that satisfactory proof of payment was available and that the refusal to consider the appeal on the ground that the challan did not accompany the memorandum was erroneous, the Court found it appropriate to allow the appeal and remit the matter. The Court observed that requiring the appellant to exhaust other remedies would be futile in view of the prevailing binding decision relied upon below and that direct disposal by remittance better serves the ends of justice.The appeal is allowed and remitted to the Assistant Commissioner (Judicial) for disposal in accordance with law.Final Conclusion: The proviso to section 9 is satisfied if satisfactory proof of payment of the admitted tax is produced when the appeal is first taken up for consideration; rule 66(2)'s requirement of a challan is a directory specification of one mode of proof and does not exclude other irrefutable proof. The Assistant Commissioner's rejection of the memorandum as defective was incorrect; appeal allowed and remit for fresh disposal in accordance with law. Issues Involved:1. Rejection of the memorandum of appeal due to lack of proof of tax payment.2. Interpretation of Section 9 of the Uttar Pradesh Sales Tax Act, 1948.3. Validity and application of Rule 66(2) of the U.P. Sales Tax Rules, 1948.4. Definition and timing of the term 'entertain' in the context of appeals.5. Exhaustion of alternative remedies before approaching the Supreme Court.Detailed Analysis:1. Rejection of the Memorandum of Appeal Due to Lack of Proof of Tax Payment:The core issue revolves around the rejection of the appellant's memorandum of appeal by the Assistant Commissioner (Judicial) I, Sales Tax, Kanpur Range, Kanpur. The memorandum was deemed defective because it was not accompanied by the challan showing the deposit of admitted tax under Section 9 of the Uttar Pradesh Sales Tax Act, 1948. Although the appellant had paid the admitted tax before filing the appeal, he failed to present proof of this payment at the time of filing. The Assistant Commissioner rejected the appeal on this basis, despite the appellant later providing a certificate of payment from the Sales Tax Officer.2. Interpretation of Section 9 of the Uttar Pradesh Sales Tax Act, 1948:Section 9 of the Act stipulates that no appeal against an assessment shall be entertained unless it is accompanied by satisfactory proof of the payment of the amount of tax admitted by the appellant to be due. The appellant argued that the provision does not create a bar as long as satisfactory proof is provided before the appeal is heard or admitted. The court examined whether the term 'entertained' in Section 9 means that the appeal must be accompanied by proof of payment at the time of filing or at the time of consideration.3. Validity and Application of Rule 66(2) of the U.P. Sales Tax Rules, 1948:Rule 66(2) of the U.P. Sales Tax Rules requires that the memorandum of appeal shall be accompanied by a challan showing the deposit of the admitted tax. The appellant contended that this rule should be considered directory rather than mandatory, arguing that other satisfactory modes of proof should also be acceptable. The court agreed, stating that the rule indicates one of the modes of satisfactory proof but does not exclude other valid methods.4. Definition and Timing of the Term 'Entertain' in the Context of Appeals:The court analyzed the meaning of the term 'entertain' and concluded that it means 'admit to consideration.' The court held that the appeal should not be considered incompetent if satisfactory proof of tax payment is provided at the time of the first consideration of the appeal, whether at the admission stage or during the hearing. The court referenced several cases from the Allahabad High Court, which supported the interpretation that 'entertain' means to consider or adjudicate upon, rather than merely file or receive.5. Exhaustion of Alternative Remedies Before Approaching the Supreme Court:The appellant bypassed other remedies under the Sales Tax Act, such as revision or reference to the High Court, and directly approached the Supreme Court by special leave. The court justified granting special leave, noting that pursuing other remedies would have been futile given the binding precedent of the Allahabad High Court in Swastika Tannery of Jajmau v. Commissioner of Sales Tax, U.P., Lucknow. The court emphasized that in extraordinary cases, direct intervention is warranted to serve the ends of justice and avoid unnecessary procedural delays.Conclusion:The Supreme Court allowed the appeal, holding that the Assistant Commissioner (Judicial) I, Sales Tax, Kanpur Range, Kanpur, erred in rejecting the appeal despite the appellant providing satisfactory proof of tax payment before the appeal was considered. The court remitted the case to the Assistant Commissioner for disposal in accordance with the law, emphasizing that procedural rules should advance justice rather than defeat it. There was no order as to costs.