1989 (12) TMI 306 - SC - VAT / Sales Tax

Proviso to s.39(5) applied; appellate refusals set aside, first-instance appeals restored and to be decided on merits

SC set aside the appellate authorities' orders refusing the benefit of the proviso to s.39(5) and directed that the respondents' first-instance appeals be ... Judicial review versus appellate remedy - reappreciation of primary facts by High Court in writ jurisdiction - proviso to section 39(5) - discretionary waiver of pre-deposit subject to bank guarantee or security - dominant-object test - sale of foodstuffs versus rendering of services in restaurants - perversity/irrationality standard for interference with findings of factJudicial review versus appellate remedy - reappreciation of primary facts by High Court in writ jurisdiction - perversity/irrationality standard for interference with findings of fact - Whether the High Court, in exercise of writ jurisdiction, was entitled to reappreciate primary facts and decide the merits of the assessment when statutory appeals lay and had been filed. - HELD THAT: - The Court held that when a taxing statute provides a hierarchy of appeals and the assessee has availed the appellate remedy, the High Court in exercise of judicial review under Article 226 should not substitute itself for the fact-finding authority by reappreciating primary or perceptive facts and deciding the correctness of the assessment. Judicial review is confined to the decision making process and to instances where a finding of fact is vitiated by exclusion of relevant material, consideration of irrelevant material, or where the finding is so irrational or perverse as to be legally unsustainable. In the present case the High Court went beyond reviewing the legality of the refusal to exercise the proviso to section 39(5) and reappraised the primary facts to conclude that the transactions were services not sales; that constituted an impermissible exercise akin to hearing an appeal on merits rather than supervisory review. [Paras 4]High Court was in error in reappreciating primary facts and cannot be permitted to sit as an appellate forum over the assessment.Proviso to section 39(5) - discretionary waiver of pre-deposit subject to bank guarantee or security - reappreciation of primary facts by High Court in writ jurisdiction - Disposition of the consequence of quashing the High Court's reappraisal and the appropriate remedy regarding the refusal by appellate authorities to waive the pre-deposit requirement under the proviso to section 39(5). - HELD THAT: - The Court, having set aside the High Court's orders that went into the merits, considered the practical position after long delay and declined to remit the question whether the appellate authorities' refusal to invoke the proviso was lawful. Instead, the Court set aside the appellate orders declining relief under the proviso and directed restoration of the statutory appeals to the first appellate authority for adjudication on merits. As a pragmatic measure the Court prescribed conditions for proceeding with the appeals - permitting restoration subject to a stipulated deposit towards assessed tax and requirement of security for the balance to the satisfaction of the appellate authority - so that the respondents may obtain the benefit of the appellate process without further delay. The Court emphasised that appeals shall be dealt with on merits in accordance with law after compliance with these conditions. [Paras 6, 7]Orders of the appellate authorities declining benefit under the proviso set aside; the appeals are restored to first appellate authority to be heard on merits subject to specified deposit and security conditions.Final Conclusion: Appeals by the Revenue allowed; the High Court's orders reappraising facts and allowing relief on merits are set aside, appellate orders refusing provisional relief under the proviso are vacated, and the statutory appeals are restored to the first appellate authority to be decided on merits subject to compliance with the Court's conditions. Issues:- Challenge to the order of assessment under the Haryana General Sales Tax Act, 1973, regarding the turnover of sales of articles of food by respondent-restaurants.- Discretion of appellate authority under section 39(5) to waive payment of tax as a precondition for appeal.- High Court's jurisdiction under article 226 of the Constitution to reassess the evidence and determine if transactions were sales or services.- Judicial review of the correctness of findings by High Court.- Legal validity of appellate authority's refusal to exempt respondents from depositing assessed tax for appeal.Analysis:1. The appeals were directed against the order of assessment under the Haryana General Sales Tax Act, 1973, regarding the turnover of sales of food by respondent-restaurants. The appellate authority had declined to waive the payment of tax as a precondition for appeal, leading to further challenges by the respondents.2. The respondents approached the High Court under article 226 of the Constitution, challenging not only the refusal to exempt them from tax payment but also the nature of the transactions assessed. The High Court reevaluated the evidence and held that the transactions were services, not sales, which raised questions about the High Court's jurisdiction to reassess evidence during appeal proceedings.3. The Supreme Court emphasized that judicial review is not an appeal from a decision but a review of the decision-making process. The High Court erred in reevaluating primary facts that were within the domain of the fact-finding authority under the statute. The correctness of findings, not the decision itself, was challenged, which exceeded the scope of judicial review.4. The Court allowed the appeals, setting aside the judgments of the Division Bench and the orders of the single judge in the High Court. The legality of the appellate authority's refusal to exempt respondents from depositing assessed tax was also raised. The Court determined conditions for granting relief under the proviso to section 39(5) and directed the appeals to be restored and proceeded with on the merits.5. Considering the circumstances and the lapse of time, the Court decided not to remit the matter to the High Court. Instead, it allowed the respondents to appeal by depositing a specified sum towards the assessed tax and providing security. The appeals were to be considered on their merits and disposed of accordingly.6. In conclusion, the appeals were allowed, and no costs were awarded. The Court addressed the issues of exemption from tax payment for appeal, the nature of transactions, and the scope of judicial review, providing clarity on the legal proceedings and conditions for appeal in tax assessment matters.