2008 (8) TMI 1008 - HC - Indian Laws

State granted extension to obtain Supreme Court order on Special Leave Petitions. Adjourned for 4 weeks.

The Court allowed time for the State to obtain an order from the Supreme Court regarding the pending Special Leave Petitions. The case was adjourned for ... - ISSUES PRESENTED AND CONSIDERED 1. Whether the mere pendency of Special Leave Petitions (SLPs) before the Supreme Court operates as a stay on the operation and finality of a Division Bench judgment of the High Court declaring statutory provisions (entry tax) ultra vires. 2. Whether, consequent upon the Division Bench judgment declaring the entry tax provisions ultra vires, the State is obliged to refund entry tax collected for the relevant assessment year together with interest, or whether refund may be withheld pending disposal of SLPs unless a stay is obtained from the Supreme Court. ISSUE-WISE DETAILED ANALYSIS Issue 1: Effect of pendency of Special Leave Petitions on the operation of a High Court Division Bench judgment Legal framework: Article 136 jurisdiction and the Supreme Court Rules (Order XVI Rules 4, 10, 11, 13) distinguish two stages: (a) grant of special leave to appeal, and (b) hearing of the appeal. The Supreme Court's discretionary jurisdiction to grant leave is distinct from its appellate jurisdiction once leave is granted. Absent a specific order staying the judgment under challenge, the impugned judgment remains final, effective and binding between the parties. Precedent Treatment: The Court follows and applies the ratio of the Supreme Court's decision in Kunhayammed v. State of Kerala (paras 14 and 28), which holds that mere filing or pendency of an SLP does not suspend the operation of the impugned judgment; only an order refusing/allowing leave or a specific stay order affects finality in practice. The decision and its analysis of the merger doctrine and of the two-stage nature of Article 136 proceedings are treated as binding and followed. Interpretation and reasoning: The Court reasons that (i) an SLP petition is an application for leave and does not automatically invoke appellate jurisdiction; (ii) until leave is granted, the appellate gate remains closed and the impugned High Court judgment retains its finality and binding effect between the parties; (iii) only upon grant of leave or upon a specific order staying the operative effect of the judgment does the judgment's finality become put in jeopardy. The Court relies on the Supreme Court's explanation that merger and review principles do not operate simply because an SLP is pending. Ratio vs. Obiter: The holding that mere pendency of SLPs does not stay operation of the Division Bench judgment is ratio decidendi of the Court's decision; reliance on the described Supreme Court authority constitutes the controlling precedent applied to the facts. Observations about procedural steps for obtaining interim relief from the Supreme Court are explanatory but supportive of the ratio. Conclusions: Mere pendency of Special Leave Petitions does not amount to a stay of the High Court Division Bench judgment declaring the entry tax provisions ultra vires; the impugned judgment continues to be operative and binding unless and until the Supreme Court grants stay or otherwise suspends its operation. Issue 2: Entitlement to refund of entry tax collected after a Division Bench judgment declaring provisions ultra vires and the effect of SLP pendency on refund Legal framework: Principles governing refund of tax collected under a statute held to be ultra vires, and the effect of a binding High Court declaration of invalidity on tax assessments and collections for the relevant period. Procedural law on interim relief before the Supreme Court (that a stay must be obtained from the Supreme Court to suspend the High Court order) is applied. Precedent Treatment: The Court refers to analogous relief granted in a prior Division Bench decision in which refunds were directed in similar circumstances (as relied on by the petitioner). The Court does not overrule or distinguish that decision; rather it relies on it as persuasive authority demonstrating equitable and legal entitlement to refund where statutory provisions are held ultra vires. Interpretation and reasoning: Applying the principle that a declaration of unconstitutionality renders the statutory charge ineffective as between the parties, the Court recognizes the petitioner's prima facie entitlement to refund of entry tax paid for the assessment year in question. However, recognizing the procedural reality that the State has the right to seek interim relief from the Supreme Court, the Court affords the State an opportunity to obtain an appropriate stay from the Supreme Court before directing refund. Absent such a stay, the High Court will be compelled to pass appropriate orders in accordance with law (which, given the Division Bench precedent, would include refund with interest). Ratio vs. Obiter: The core ratio is twofold: (a) where a Division Bench has declared tax provisions ultra vires, taxpayers are entitled to relief including refund of tax collected, and (b) the pendency of an SLP does not, by itself, justify withholding of such relief unless a stay has been obtained from the Supreme Court. The direction to give the State time to seek a stay is procedural and interlocutory in nature (ratio insofar as it governs immediate case management; partly obiter as to the ultimate entitlement if no stay is obtained). Conclusions: The petitioner is prima facie entitled to refund of entry tax collected pursuant to a High Court Division Bench judgment declaring the provisions ultra vires. The State may forestall a refund only by procuring an express stay from the Supreme Court; mere filing or pendency of SLPs is insufficient. The Court grants a limited adjournment to permit the State to seek interim relief in the Supreme Court and reserves the right to pass appropriate orders thereafter if no stay is obtained. Cross-reference See Issue 1 analysis regarding the non-suspensive effect of pendency of SLPs; Issue 2 applies that principle to the specific remedy of refund where a High Court declaration of invalidity exists and where a prior Division Bench decision directed refund in analogous circumstances.