1983 (4) TMI 49 - SC - VAT and Sales Tax

Supreme Court emphasizes statutory appeal route over High Court jurisdiction for tax issues

Titaghur Paper Mills Co. Limited. And Another Versus State Of Orissa And Another

The Supreme Court dismissed the petitions, emphasizing that the petitioners should pursue statutory appeal remedies provided under Section 23(1) of the ... Whether STO was justified in treating the gross turnover as returned by the petitioners to be their taxable turnover? Whether he was wrong in disallowing the deductions claimed for the assessment year in question? Held that:- In the present case where the impugned orders of assessment are not challenged on the ground that they are based on a provision which is ultra vires. We are dealing with a case in which the entrustment of power to assess is not in dispute, and the authority within the limits of his power is a Tribunal of exclusive jurisdiction. The challenge is only to the regularity of the proceedings before the learned STO as also his authority to treat the gross turnover returned by the petitioners to be the taxable turnover. Investment of authority to tax involves authority to tax transactions which in exercise of his authority the taxing officer regards as taxable, and not merely authority to tax only those transactions which are, on a true view of the facts and the law, taxable. Under the scheme of the Act, there is a hierarchy of authorities before which the petitioners can get adequate redress against the wrongful acts complained of. The petitioners have the right to prefer an appeal before the prescribed authority under sub-s. (1) of s. 23 of the Act. If the petitioners are dissatisfied with the decision in the appeal, they can prefer a further appeal to the Tribunal under sub-s. (3) of s. 23 of the Act, and then ask for a case to be stated upon a question of law for the opinion of the High Court under s. 24 of the Act. The Act provides for a complete machinery to challenge an order of assessment, and the impugned orders of assessment can only be challenged by the mode prescribed by the Act and not by a petition under art. 226 of the Constitution. It is now well recognised that where a right or liability is created by a statute which gives a special remedy for enforcing it, the remedy provided by that statute only must be availed of. Appeal dismissed. Issues Involved:1. Authority and jurisdiction of the STO under Rule 15 of the Central Sales Tax (Orissa) Rules, 1957.2. Disallowance of deductions for sales to registered dealers and departments of Government.3. Denial of concessional tax rate due to non-furnishing of Form C declarations.4. Assessment of gross turnover under the Orissa Sales Tax Act, 1947.5. Alleged violation of principles of natural justice.Detailed Analysis:1. Authority and Jurisdiction of the STO:The petitioners contended that the learned STO had no authority or jurisdiction to treat the gross turnover as returned by them to be their taxable turnover while making an assessment under Rule 15 of the Central Sales Tax (Orissa) Rules, 1957. The Supreme Court dismissed this contention, stating that it is not for the Court to decide whether the STO was justified in proceeding to best judgment under Rule 15 and Section 12(4) of the Orissa Sales Tax Act, 1947. These are questions that should be raised in appeals before the prescribed appellate authority under Section 23(1) of the Act.2. Disallowance of Deductions:The petitioners argued that the STO was not justified in disallowing the claim for deduction of Rs. 6,74,99,085.65 representing sales to registered dealers and departments of Government, as well as Rs. 28,24,224.42 on account of tax collected from purchasers. The Supreme Court held that such procedural irregularities or merits of the assessments should be addressed through the statutory appeal process provided under the Act, rather than invoking the extraordinary jurisdiction of the High Court under Article 226 of the Constitution.3. Denial of Concessional Tax Rate:The petitioners contended that the STO wrongly denied them the benefit of the concessional rate of tax at 4% merely because they failed to furnish the requisite declarations in Form C. The Supreme Court found that the question of whether the STO was justified in denying the concessional rate of tax is a matter that should be addressed in an appeal under Section 23(1) of the Act. The Court emphasized that the presence of an alternative statutory remedy precludes the invocation of the High Court's extraordinary jurisdiction.4. Assessment of Gross Turnover:The petitioners challenged the assessment of their gross turnover of inside sales amounting to Rs. 2,02,07,852.65 under the Orissa Sales Tax Act, 1947. They argued that the STO was not justified in disallowing their claim for deduction of Rs. 1,80,65,167.66 representing sales to registered dealers. The Supreme Court reiterated that such issues should be raised in the statutory appeal process and not through a writ petition under Article 226.5. Alleged Violation of Principles of Natural Justice:The petitioners claimed that the STO acted in flagrant violation of the rules of natural justice by depriving them of an opportunity to present their case. The Supreme Court found no merit in this contention, noting that the petitioners were served with a notice of the proceedings and afforded sufficient opportunity to place their case. The Court held that the refusal to grant further adjournments by the STO does not constitute a violation of natural justice and is a matter that can be raised in an appeal under Section 23(1) of the Act.Conclusion:The Supreme Court dismissed the petitions on the ground that the petitioners have an equally efficacious alternative remedy by way of an appeal to the prescribed authority under Section 23(1) of the Act, followed by a second appeal to the Tribunal and a possible reference to the High Court. The Court emphasized that where a statute provides a complete machinery for challenging an assessment, the remedy provided by the statute must be followed. The Court also noted that the principles laid down in Mohammad Nooh's case do not apply as there was no total lack of jurisdiction or violation of natural justice by the STO. The petitions were dismissed, with the Court expressing hope that the appellate authority would dispose of the appeals expeditiously.