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The Kashmir House Vs. the Deputy Commissioner of Commercial Taxes and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case NumberWrit Petition No. 2861 of 1967
Judge
Reported in[1971]28STC297(AP)
AppellantThe Kashmir House
RespondentThe Deputy Commissioner of Commercial Taxes and anr.
Appellant AdvocateP.A. Choudary, Adv.
Respondent AdvocatePrincipal Government Pleader
DispositionPetition dismissed
Excerpt:
.....representation or instructions and if a dealer acts on the representations and so arranges his affairs, he clearly does so at his risk. the department itself is clearly bound, and as it is but an agent for the crown it binds the crown also and as the crown is bound, so are the other departments, for they also are but agents of the crown. in my opinion, the answer is clearly :no. 555: it is now well settled that there could be no estoppel against a statute......then was) said :i come, therefore, to the most difficult question in the case. is the minister of pensions bound by the war office letter i think he is. the appellant thought, no doubt, that, as he was serving in the army, his claim to attributability would be dealt with by or through the war office. so he wrote to the war office. that war office did not refer him to the minister of pensions. they assumed authority over the matter and assured the appellant that his disability had been accepted as attributable to military service. he was entitled to assume that they had consulted any other departments that might be concerned, such as the ministry of pensions, before they gave him the assurance. he was entitled to assume that the board of medical officers who examined him were recognised.....
Judgment:

Chinnappa Reddy, J.

1. The petitioner-firm is a dealer within the meaning of the Andhra Pradesh General Sales Tax Act. Among other commodities the petitioner deals in badam, chironji and pista. In the final assessment order relating to the assessment year 1962-63, the Commercial Tax Officer excluded the sales relating to these three commodities from the petitioner's turnover on the ground that badam, chironji and pista were oilseeds which were 'declared goods' specified in the Third Schedule to the Andhra Pradesh General Sales Tax Act and which could only be taxed at the point of first purchase in the State; these commodities were purchased by the petitioner outside the State. The order of assessment was made on 18th March, 1964. On 13th December, 1966, the Deputy Commissioner of Commercial Taxes issued a notice proposing to revise the assessment under Section 20(2) of the Act on the ground that the three commodities were not oil-seeds and that the sales relating to them were wrongly excluded from the turnover. The petitioner has thereupon filed the present writ petition seeking to have the notice quashed.

2. Sri P.A. Choudary, learned Counsel for the petitioner, made two submissions. The first submission was that the Commercial Tax Officer was not subordinate to the Deputy Commissioner of Commercial Taxes and therefore he was not competent to revise the orders of the Commercial Tax Officer under Section 20(2) of the Act. There is no substance in this submission since Rule 33-A of the Sales Tax Rules expressly specifies Commercial Tax Officer among the authorities subordinate to the Deputy Commissioner for the purpose of Section 20. The second submission of Sri Choudary was as follows: In 1957, on a clarification sought by the Hyderabad Kirana Merchants' Association, the Revenue Board stated that these commodities and some others would be treated as oil-seeds. The petitioner acted upon the representation of the Revenue Board and did not collect any sales tax from the consumers to whom the commodities were sold. The assessment orders also were made on the basis that they were oil-seeds and their sales had not to be included in the total turnover. If the Deputy Commissioner were to be allowed to revise the order of assessment so as to include the sales relating to these commodities in the total turnover, the petitioner would be prejudiced since the tax could not any longer be passed on to the consumers. The petitioner having acted on the representation of the Board of Revenue, the commercial tax authorities were estopped from reopening the assessments and including sales relating to these commodities in the total turnover. In support of his submission Sri Choudary relied upon the observations of Lord Denning in Robertson v. Minister of Pensions [1949] 1 K.B. 227 and Falmouth Board Construction Co. Ltd. v. Howell [1950] 1 All E.R. 538 and on the decision of the Supreme Court in Century Spinning & . v. The Ulhasnagar Municipal Council Civil A.I.R. 1971 S.C. 1021.

3. We are unable to agree with the submission of Sri Choudary. under Section 5(1) of the Act, sales tax is leviable on the turnover of every dealer whose total turnover is not less than Rs. 10,000 at the rate of three paise on every rupee. Section 6, however, prescribes that in the case of declared goods specified in the Third Schedule sales tax shall be levied at the rate and only at the point of sale, or purchase as specified in the Third Schedule. Oil-seeds described as seeds yielding non-volatile oils used for human consumption, or in industry, or in the manufacturing of varnishes, soaps and the like or in lubrication and volatile oils used chiefly in medicines, perfumes, cosmetics and the like (other than groundnuts, coconuts, castor seeds) are specified as declared goods in the Third Schedule and the point of levy is specified as the point of purchase in the State. Therefore, whenever a dealer claims that a commodity is an oil-seed and that he purchased the goods outside the State, the assessing authority must determine (1) whether the commodity is an oil-seed answering the description mentioned in the Third Schedule and (2) whether the dealer was not the first purchaser within the State. These questions must be decided by the assessing authority. The decision of the assessing authority is subject to appeal to an appellate authority, a second appeal to the Appellate Tribunal and a further revision to the High Court. The Act does not authorise the Board of Revenue or any other authority to issue directions to the assessing authority, except of course when dealing with an appeal or revision, to tax or not to tax any commodity as declared goods or otherwise. If the Board of Revenue or any other authority issues such directions, they would be acting beyond their powers and the assessing authority would be justified in ignoring such instructions. It is for the assessing authority alone to determine in the first instance whether a commodity is 'declared goods' or not whenever the question arises before him. That statutory right of the assessing authority cannot be bartered away by any authority. If the Board of Revenue chooses to advise dealers whether a commodity is 'declared goods', it is not doing so in pursuance of any authority conferred under the Act. It would be acting entirely outside its statutory powers. If the Board makes any representation to dealers or if it issues any instructions in the matter to assessing authorities then too it would be acting outside the Act. No one is bound by the representation or instructions and if a dealer acts on the representations and so arranges his affairs, he clearly does so at his risk. There can be no estoppel, legal or equitable, against a statute. What the Legislature had prescribed must be done and no authority can contract itself or others out of what is prescribed by the Legislature. We are firmly of the opinion that the statutory right and duty to levy tax entrusted by the Legislature to the assessing authority cannot be the subject-matter of a bargain and if there is such a bargain the courts will not enforce the bargain on any alleged ground of estoppel. It would be against the public policy to do so.

4. In Robertson v. Minister of Pensions [1949] 1 K.B. 227 the appellant who received a letter from the War Office assuring him that his disability had been accepted as 'attributable to military service' refrained from obtaining an independent medical opinion. Later, the Minister of Pensions, the competent authority decided that the appellant's disability was not attributable to war service. The question arose whether the Minister of Pensions was bound by the War Office letter. Denning, J. (as he then was) said :

I come, therefore, to the most difficult question in the case. Is the Minister of Pensions bound by the War Office letter I think he is. The appellant thought, no doubt, that, as he was serving in the army, his claim to attributability would be dealt with by or through the War Office. So he wrote to the War Office. That War Office did not refer him to the Minister of Pensions. They assumed authority over the matter and assured the appellant that his disability had been accepted as attributable to military service. He was entitled to assume that they had consulted any other departments that might be concerned, such as the Ministry of Pensions, before they gave him the assurance. He was entitled to assume that the board of medical officers who examined him were recognised by the Minister of Pensions for the purpose of giving certificates as to attributability. Can it be seriously suggested that, having got that assurance, he was not entitled to rely on it In my opinion if a Government department in its dealings with a subject takes it upon itself to assume authority upon a matter with which he is concerned, he is entitled to rely upon it having the authority which it assumes. He does not know, and cannot be expected to know, the limits of its authority. The department itself is clearly bound, and as it is but an agent for the Crown it binds the Crown also and as the Crown is bound, so are the other departments, for they also are but agents of the Crown. The War Office letter therefore binds the Crown and through the Crown, it binds the Minister of Pensions. The function of the Minister of Pensions is to administer the Royal Warrant issued by the Crown, and he must so administer it as to honour all assurances given by or on behalf of the Crown.

5. The crux of the answer of Denning, J., lies in the sentences underlined by us. The Crown was bound by the assurance given by the War Office, an agent of the Crown and the Minister was bound by what bound the Crown since it was the Minister's duty to so administer the Royal Warrant so as to honour all assurances given by or on behalf of the Crown. We doubt very much whether the theory that every department of the Crown is bound by an assurance given on behalf of the Crown can be extended so as to control the discharge of statutory functions in India. The position of the Legislature, the Executive Government, and the officers of the States in India should not be confused with the position of the Crown, its Ministers and its departments. There is no analogy between the Crown and the Legislature or between the Crown and the Executive Government. Under our Constitution it is impossible to conceive of a legislative mandate being subordinated to an executive assurance on any theory of agency. Will any court uphold an assurance given by a Minister to an industrialist that if he started an industry in the Minister's home town, he would not be subjected to tax Nor are we able to see, with the greatest respect to Denning, J., why the Crown should be held to be bound by an unauthorised assurance given by a department whose task it was not to decide the question concerned in the assurance and which task was expressly entrusted by law to another authority.

6. In Falmouth Boat Construction Ltd. v. Howell [1950] 1 All E.R. 538 the facts were that under the Restriction of Repairs of Ships Order, 1940, the Admiralty prohibited any ship repairer from carrying out any repairs to ship 'except in accordance with a licence granted by the Admiralty'. On 24th June, 1962, the Director of Merchant Ship Building and Repairs at the Admiralty issued general instructions that repairers may carry on repairs pending the actual issue of a licence. A ship repairer, after applying for a licence but before it was granted, commenced and completed the work on a ship. The ship owner refused to pay the charges of repair on the ground that the work was illegal. Considering the question whether the work was illegal, Denning, L.J., observed :

It really depends on the nature of the order issued by the Admiralty in 1940. That was not an Act of Parliament and should not be treated as such, nor was it even a Defence Regulation such as regulation 56A which was considered by this Court in the Jackson Stansfield case. It was merely an order made by the Admiralty under the authority of the regulation. As such it was not discussed in Parliament or laid on the table of the House. It was not even necessary that it should be made public : See Blackpool Corporation v. Locker. It could be made without any formality or publicity and--this is the point--it could be revoked or varied likewise : See Defence (General) Regulations--regulation 98.

I decline to believe that the plaintiffs were guilty of an illegality. They acted on what they were told by the licensing officer. They did not know what orders had actually been made by the Admiralty or what variations had been made in them. They had no means of knowing the orders, or, at any rate, they had no sure means, because the Admirality was not bound to publish them. They could only rely on what they were told by the licensing officer. Can it be seriously suggested that, having relied on him, they have been guilty of an offence In my judgment, there is a principle of law which protects them from such an injustice. It is a principle of particular importance in these days when the officers of Government departments are given much authority by orders and circulars which are not available to the public. The principle is this: Whenever Government officers, in their dealings with a subject, take on themselves to assume authority in a matter with which the subject is concerned he is entitled to rely on their having the authority which they assume. He does not know, and cannot be expected to know, the limits of their authority and he ought not to suffer if they exceed it. That was the principle which I applied in Robertson v. Minister of Pensions [1949] 1 K.B. 227 and it is applicable in the present case also.

7. Denning, L.J., laid emphasis on the fact that an order of the nature of the Restriction of Repairs of Ships Order which could be made, varied or revoked without any formality or publicity could not be given the status of an Act of Parliament and held that if the Government department dealt with a matter in a particular manner as if authorised to deal in that manner, the citizen would be entitled to act as if the department had the authority which it assumed. The observations of Denning, L.J., are hardly of avail to the petitioner because we are here concerned with an Act of the Legislature enacted with all the attendant pomp and circumstance. Further the observations of Denning, L.J., appear to be rather wide and were not accepted by the House of Lords when the matter went up in appeal to them. Referring to Denning, L.J.'s observations, Lord Simonds remarked :

The illegality of an act is the same whether the action has been misled by an assumption of authority on the part of a Government officer, however high or low in the hierarchy . . . The question is whether the character of an act done in the face of a statutory prohibition is affected by the fact that it had been induced by a misleading assumption of authority. In my opinion, the answer is clearly : No.

8. In Century Spinning & . v. The Ulhasnagar Municipal Council A.I.R. 1971 S.C. 1021 some of the observations of their Lordships of the Supreme Court seem to support Mr. Choudary's submission. The observations require to be scrutinized carefully. The facts of the case were that when certain villages were constituted into the Municipality of Ulhasnagar, some persons who had set up industries in one of the villages made representations and the industrial area was excluded from the Municipality. Later, the Municipality made representations to the Government, and on the Municipality agreeing to exempt existing factories from levy of octroi duty for a period of seven years, the Government included the industrial area within the limits of the Municipality. The Municipality also passed a resolution exempting existing factories from payment of octroi duty for a period of seven years. Five years afterwards the Municipality passed a resolution proposing to levy octroi duty at minimum rates on goods imported for use, sale and consumption within the municipal council limits. As the Municipality was proposing to levy octroi duty on the factories exempted by the earlier resolution, the owners of the factories invoked the jurisdiction of the High Court under Article 226 of the Constitution of India to restrain the Municipality from collecting octroi duty from them. According to them on the basis of the assurance and undertaking given by the Municipality earlier they had expanded their activities and commenced manufacture of new products which they would not have done but for the assurance. The Bombay High Court dismissed the writ petition in limine without assigning any reasons. On appeal, their Lordships of the Supreme Court observed that it was only if a claim was frivolous, vexatious or prima facie unjust, or if it could not appropriately be tried in the exercise of extraordinary jurisdiction that a High Court should refuse to entertain a writ petition. Their Lordships also said that a party claiming to be aggrieved by the action of a public body or authority 'on the plea that the action was unlawful, highhanded, arbitrary or unjust' was entitled to a hearing of the petition on merits. Their Lordships thought that the factory owners were prima facie treated unjustly and, therefore, they were entitled to have their grievance against the Municipality heard on merits. They set aside the order of the High Court and remanded the matter to the High Court with a direction to issue a rule to the Municipality and the Government and to dispose of the petition. In the course of their discussion they made certain observations and it was on these observations that the learned Counsel for the petitioner relied. They are :

Public bodies are as much bound as private individuals to carry out representations of facts and promises made by them, relying on which other persons have altered their position to their prejudice. The obligation arising against an individual out of his representation amounting to a promise may be enforced ex contractu by a person who acts upon the promise: when the law requires that a contract enforceable at law against a public body shall be in certain form or be executed in the manner prescribed by statute, the obligation if the contract be not in that form may be enforced against it in appropriate cases in equity.

9. Their Lordships then referred to Union of India and Ors. v. Indo-Afghan Agencies Ltd. A.I.R. 1968 S.C. 718 and the observations of Denning, J., in Robertson v. Minister of Pensions [1949] 1 K.B. 227. They also referred to the observations of Denning, L.J., in Falmouth Boat Construction Co. Ltd. v. Howell [1950] 1 All E.R. 538 and the observations of Lord Simonds in Howell v. Falmouth Boat Construction Co. Ltd. [1950] 1 All E.R. 538 to which we have already referred. They then observed :

If our nascent democracy is to thrive, different standards of conduct for the people and the public bodies cannot ordinarily be permitted. A public body is, in our judgment, not exempt from liability to carry out its obligation arising out of representations made by it relying upon which a citizen has altered his position to his prejudice.

10. The observations of their Lordships must be understood in the context of the fact that they were only considering the question whether the High Court was justified in dismissing the writ petition in limine. They did not purport to decide the question finally whether the Municipality was estopped from levying octroi duty from the factory owners. It will be seen from the observations of Lord Denning in Robertson v. Minister of Pensions [1949] 1 K.B. 227 on which they relied that their Lordships had in mind executive action pure and simple. It is possible that the Maharashtra Municipalities Act contains provisions authorising a Municipality to grant exemption to a person or class of persons under certain circumstances. If in exercise of such a power a Municipality grants an exemption for a limited period to a citizen and that citizen takes action on the basis of the exemption, it may be possible to urge that the Municipality is estopped from going back upon the exemption during the period for which it was granted. But, in the present case, the situation is otherwise. The statute prescribes what goods may be taxed at what point. The assessing authority must determine during the assessment proceedings whether the particular goods are taxable. No representation can be made by any one, high or low, whether any goods are taxable. A representation, if made, can bind none.

We have dealt at such great length on a question which did not present us any difficulty because we thought that the observations in Century Spinning & . v. The Ulhasnagar Municipality A.I.R. 1971 S.C. 1021 are likely to mislead, if left unexplained. We may add that we are supported in our conclusion by the following observations of Hidayatullah, J., in Mathra Parshad and Sons v. State of Punjab [1962] 13 S.T.C. 180 at 184 (S.C.):

There can be no estoppel against a statute. If the law requires that a certain tax be collected, it cannot be given up, and any assurance that it would not be collected, would not bind the State Government, whenever it chose to collect it.

and of Chandra Reddy, C.J., in Venkateswara Oil Mills v. State of Andhra Pradesh [1960] 11 S.T.C. 555:

It is now well settled that there could be no estoppel against a statute. Here, the Hyderabad General Sales Tax Act imposes a duty on every dealer to pay tax on the goods sold or purchased by him as required by the provisions of the Act. That being so, the dealer was under a liability to pay tax on his turnover and it was not competent for any official of the department to release any dealer from payment of such tax. Such a release will be null and void and cannot be relied upon by any dealer to evade payment of tax.

In the result, the writ petition is dismissed with costs. Advocate's fee Rs. 100.


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