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Bakul Cashew Company and ors. Vs. the Sales Tax Officer (R) and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKerala High Court
Decided On
Case NumberO.P. No. 1740 of 1976-F
Judge
Reported in[1977]40STC178(Ker)
AppellantBakul Cashew Company and ors.
RespondentThe Sales Tax Officer (R) and ors.
Appellant Advocate F.S. Nariman,; R.N. Banerji,; M. Ramachandran,;
Respondent AdvocateThe Adv.-General
DispositionPetition dismissed
Cases ReferredSales Tax Officer v. Shiv Ratan A.I.R.
Excerpt:
- - from and after 1st september, 1970, the import and export of nuts were canalised through the cashew corporation of india (hereinafter referred to as the 'corporation'). under the scheme of canalisation, the corporation is a functionary or agent of the government of india whose function was to import raw nuts from african countries and distribute the same to actual users like the petitioners. the purchase of nuts by the petitioners from the corporation is said to be in accordance with the policy enunciated by the central government under the provisions of the import and export control order and the yearly import trade policy, announced in what is generally known as the 'red book'.the import licences are issued in the name of the corporation and the letters of authority in favour of.....v.p. gopalan nambiyar, ag. c.j.1. the 46 petitioners in this writ petition are cashew processors owning and/or working cashew factories. nearly 80 per cent of the raw nuts processed in their factories are imported from african countries and processed along with nuts of indigenous variety. some of the petitioners are companies registered under the companies act, 1956, some are partnership firms and/or proprietary concerns. the petition prays to declare that the transactions of purchase of imported raw nuts through the cashew corporation of india are not liable to purchase tax under the kerala general sales tax act, 1963 and/or are exempt from the said tax under article 286(1)(a) or (b) of the constitution ; and a writ of certiorari quashing the assessment orders, the provisional assessment.....
Judgment:

V.P. Gopalan Nambiyar, Ag. C.J.

1. The 46 petitioners in this writ petition are cashew processors owning and/or working cashew factories. Nearly 80 per cent of the raw nuts processed in their factories are imported from African countries and processed along with nuts of indigenous variety. Some of the petitioners are companies registered under the Companies Act, 1956, some are partnership firms and/or proprietary concerns. The petition prays to declare that the transactions of purchase of imported raw nuts through the Cashew Corporation of India are not liable to purchase tax under the Kerala General Sales Tax Act, 1963 and/or are exempt from the said tax under Article 286(1)(a) or (b) of the Constitution ; and a writ of certiorari quashing the assessment orders, the provisional assessment orders and orders in appeal for the assessment years 1970-71, 1971-72, 1972-73, 1973-74 and 1974-75.

2. In brief, the case of the petitioners as stated in the petition is as follows : Prior to 1st September, 1970, the import and export of cashew could be had under licences issued by the trade authorities under the 'open general licence scheme'. The petitioners were under an obligation to re-export the processed cashew-nuts and earn foreign exchange. Therefore, the purchases of nuts were in the course of import and export and, therefore, subject to Article 286(1) (b) of the Constitution. Alternatively, or by way of an additional ground of challenge, they would contend that, for reasons and on the facts to be noticed hereinafter, the transactions in question were 'outside sales' and, for that reason again, exempt from taxation under Article 286(1)(a) of the Constitution. From and after 1st September, 1970, the import and export of nuts were canalised through the Cashew Corporation of India (hereinafter referred to as the 'corporation'). Under the scheme of canalisation, the corporation is a functionary or agent of the Government of India whose function was to import raw nuts from African countries and distribute the same to actual users like the petitioners. The petitioners in their turn are, under the conditions of allotment, required to export the processed nuts. The purchase of nuts by the petitioners from the corporation is said to be in accordance with the policy enunciated by the Central Government under the provisions of the Import and Export Control Order and the yearly Import Trade Policy, announced in what is generally known as the 'Red Book'. The import licences are issued in the name of the corporation and the letters of authority in favour of individual allottees are issued to enable persons like the petitioners to complete the process of importation. For the years 1970-71 and 1971-72 the letters of authority were issued by the Chief Controller of Imports and Exports in the form prescribed in appendix XXV to the import Trade Control Hand Book of Rules and Procedure. In deference to representations, the form of the letter of authority was modified stipulating that the property in the goods shall be the property of the holder of the letter of authority. The then chairman of the corporation and its managing director are said to have assured the petitioners when the scheme of canalisation was introduced in September, 1970, that the purchase of nuts would not be liable to sales tax. At a meeting on 25th April, 1971, it is stated that the representatives of the industry were assured by the Chief Minister of the State, Shri C. Achutha Menon, the then Industries Minister, Shri N.E. Balaram and the then Revenue Minister, Shri Baby John, that no tax would be levied under the Sales Tax Act on the turnover of African nuts. In pursuance of the policy enunciated and the assurance conveyed, for three years no steps for assessment of the petitioners were taken and the petitioners were led to believe that their purchases of the nuts were not liable to tax. On the faith of these, the petitioners have quoted prices for exports and incurred heavy commitments. The assurances conveyed to the petitioners found tangible reflection in exhibit A notification dated 12th October, 1973, published in the Kerala Gazette dated 23rd October, 1973 (copy exhibit A), issued under Section 10(1) of the General Sales Tax Act. The same exempted the cashew manufacturers in the State from sales (purchase) tax on the purchase turnover of cashew-nuts imported from outside India through the corporation for the period from 1st September, 1970, to 30th September, 1973. But the petitioners were aggrieved when exhibit A notification was cancelled by exhibit B notification dated 9th November, 1973, withdrawing the exemption (copy exhibit B). This is the gist of the pleadings on the basis of which they have sought the reliefs prayed for.

3. In paragraph 13 of the petition the petitioners have stated that the corporation explained the nature of the transaction between itself and individual allottees and evolved the procedure for allotment, which was communicated to the first petitioner by letter dated 4th November, 1970, (reproduced in paragraph 13 of the petition). The said letter recalled that the consignment of nuts was being shipped against one bill of lading and that the sale had already been effected to the 1st petitioner for the quantities allotted, when the goods were on the high seas before the arrival of the vessel. The petitioners have produced exhibit E letter dated 31st July, 1971, by which the corporation treated the goods as having been sold to the first petitioner on the high seas. Exhibit J dated 11th February, 1972, is an endorsement of the insurance policy by the corporation in favour of the allottee. It also contains the bill of entry which shows that the delivery order of the steamer agent M/s. Harrisons and Crosfield Ltd., Quilon, is before the goods arrived at Quilon which was on 26th February, 1972. Exhibit C dated 20th March, 1973, is the reply by the corporation to the Secretary of Taxes of the Government of the State stating that none of the sales of imported raw nuts made by the corporation would attract purchase tax as the sales are in the course of import. The mechanics of the transactions was explained in the letter, under seven heads, in the course of which it was stated that the sales were effected to the local buyers by transfer of the bills of lading before the goods crossed the customs frontiers of India. Exhibit A, the notification granting exemption from tax, is said to be only in recognition of the real nature of the transactions and the course of dealings between the parties; and exhibit B which represented a reversal of the Government's stand is attacked as being a complete and unjustified volte face on the part of the Government.

4. Clause 5(3) of the Imports (Control) Order, 1955, enacts :

It shall be deemed to be a condition of every such licence that :-

(i) no person shall transfer and no person acquire by transfer any licence issued by the licensing authority except under and in accordance with the written permission of the authority which granted the licence or of any other person empowered in this behalf by such authority.

(ii) that the goods for the import of which a licence is granted shall be the property of the licensee at the time of import and thereafter up to the time of clearance through customs :

Provided that the conditions under items (i) and (ii) of this Sub-clause shall not apply in relation to licences issued to the State Trading Corporation of India, the Minerals and Metals Trading Corporation of India and other similar institutions or agencies owned or controlled by the Central Government and which are entrusted with canalisation of imports.

(iii) the goods for the import of which a licence is granted shall be new goods, other than disposal goods, unless otherwise stated in the licence.

Appendix XXV, which gives the form of the letter of authority is in accordance with the provisions of the above clause of the Imports (Control) Order (see page 432 of the Import Trade Control Hand Book of Rules and Procedure, 1971). The petitioners would contend that for the years 1970-71, 1971-72 and 1972-73 the letters of authority were issued in this form. But thereafter a new form of letter of authority was introduced a copy of which is exhibit L. Condition No. 3 of the letter reads as follows :

The goods for the import of which this letter of authority has been granted shall be the property of the holder of the letter of authority at the time of import and thereafter up to the time of clearance through customs.

The said condition is sanctioned by the Red Book for the year 1971 (see para 268 at page 180).

5. Despite what the petitioners would claim to be the clear effect, implications and inferences to be gathered from the nature of the transactions and the course of dealings as evidenced by the aforesaid documents, the petitioners' complaint is that the sales tax authorities have been taking a wrong view of the law and demanding sales tax from the petitioners in respect of purchases of raw nuts imported through the corporation and allotted by the said corporation to the petitioners. This has occasioned the filing of this writ petition.

6. The contentions urged by the petitioners are that there was an expectation induced in the cashew industry by the assurances conveyed that purchase tax would not be levied regarding the import of raw nuts canalised through the corporation, that this assurance was acted upon to the prejudice of the industry as the price for the nuts were fixed without reference to the element of purchase tax; that on their side, the departmental authorities also were satisfied of this position and, therefore, did not initiate proceedings for escaped assessment for the years 1970-71 or 1971-72; and the position was also recognised by the Government in exhibit A notification dated 12th October, 1973. On these were founded a plea of equitable estoppel. Next, it was contended that the exemption having been granted could not be revoked or cancelled at all and exhibit B notification cancelling the same was invalid, (a) as it was retrospective and not made in public interest; (b) as it was in contravention of the assurances given ; (c) as no reasons are given for the cancellation ; and (d) as no opportunity was afforded to the industry before the cancellation was ordered. Above all, it was argued that there was no jurisdiction even on the sales tax authorities to assess sales by the canalising agents to the petitioners after 1st September, 1970, as they were not 'inside' sales but 'outside' sales, exempt from taxation under Article 286(1)(a) of the Constitution.

7. Whatever be the merits of these contentions, the difficulty for the petitioners and, indeed, the serious objection raised against them by the learned Advocate-General on behalf of the respondents, is that the court would not be justified in interfering under Article 226 of the Constitution of India at this stage and in quashing the assessment orders as prayed for. It was contended that the assessment proceedings are pending in appeal before one or the other of the appellate authorities under the statute and in many, if not most, cases before the Sales Tax Appellate Tribunal. It was for these authorities to determine, in the first instance, the nature of the transactions, namely, whether they are sales in the course of import, or 'outside' or 'inside' sales. Even the question of the validity of the cancellation of the exemption, it was said, could be decided by them.

8. We shall proceed to consider these contentions. We do not think that it would be proper to leave it to the authorities constituted under the Act to deal with the question of the scope of the exemption and its cancellation under Section 10 of the Act. We, therefore, consider it necessary to deal with this part of the objection. Section 10 of the General Sales Tax Act, 1963, in so far as it is relevant, reads as follows :

10. Power of Government to grant exemption and reduction in rate of tax.-(1) The Government may, if they consider it necessary in the public interest, by notification in the Gazette, make an exemption or reduction in rate, in respect of any tax payable under this Act-

(i) on the sale or purchase of any specified goods or class of goods, at all points or at a specified point or points in the series of sales or purchases by successive dealers, or

(ii) by any specified class of persons, in regard to the whole or any part of their turnover....

(3) The Government may, by notification in the Gazette, cancel or vary any notification issued under Sub-section (1).

Exhibit A dated 12th October, 1973, issued under Section 10(1) of the Act reads:

Kerala Gazette No. 42 dated 23rd October, 1973, Part I, Section iv.

Government of Kerala Taxes 'B' Department

Notification G.O. Ms. No. 127/73/TD

Dated, Trivandrum, 12th October, 1973.

S.R.O. No. 648/73.-In exercise of the powers conferred by Section 10 of the Kerala General Sales Tax Act, 1963 (15 of 1963), the Government of Kerala, having considered it necessary in the public interest so to do, hereby make an exemption in respect of the tax payable under Section 5 of the said Act by the cashew manufacturers in the State on the purchase turnover of cashew-nuts imported from outside India through the Cashew Corporation of India, for the period from the 1st September, 1970, to the 30th September, 1973.

By order of the Governor,

V. Venkitanarayanan,

Secretary....

(We are omitting the explanatory note to the notification which is not relevant for our purpose.)

Exhibit B, which cancelled exhibit A, is as follows :

Government of Kerala Reg. No. K. 107.Kerala Gazette ExtraordinaryPublished by Authority_________________________________________________Vol. XVIII Tnvandrum, Friday,9th November, 1973/18th Karthika 1895 No. 1158_________________________________________________Government of Kerala Taxes 'B' Department

Notification G.O. Ms. No. 143/73/TD

Dated, Trivandrum, 9th November, 1973.

S.R.O. No. 686/73.-In exercise of the powers conferred by subSection (3) of Section 10 of the Kerala General Sales Tax Act, 1963 (15 of 1963), the Government of Kerala hereby cancel the notification issued in G.O. Ms. No. 127/73/TD dated the 12th October, 1973 and published as S.R.O. No. 648/73 in Part I of the Kerala Gazette No. 42 dated the 23rd October, 1973.

By order of the Governor,

V. Venkitanarayanan,

Secretary to Government....

(Explanatory note omitted.)

It was argued that the exemption once having been granted under Section 10(1) of the Act cannot be cancelled at all under Sub-section (3) in respect of the period for which it was already granted. We are unable to accept this argument. The exemption was granted on 12th October, 1973, in respect of the period from 1st September, 1970, to 30th September, 1973. The cancellation followed on 9th November, 1973, within a few days of the notification granting exemption. In pursuance of the exemption and acting on the same, no return had been filed by the petitioners and no assessment proceedings had even been initiated by the sales tax authorities before the cancellation. The language of Clause (3) of Section 10 indicates that there is power in the Government to nullify or vary the exemption granted under Sub-section (1). On the facts and circumstances disclosed, we think that the cancellation of the exemption was really not retrospective ; and that with it, the petitioners lost the privilege of getting the sales in question exempt from tax on the basis of exhibit A, if the sales were otherwise taxable in law, for the period for which exhibit A notification was issued.

9. The doctrine of equitable estoppel was pressed into service to support the plea that the assurances given to the petitioners and to the cashew industry had been acted upon to the prejudice of persons like the petitioners, that exhibit A notification was only the culmination and the embodiment of these assurances and that the Government should not be allowed to go back on the assurances and on the exemption by the cancellation notification, exhibit B. Attention was called to the judgment of Chandrasekhar Aiyar, J., in Shankari Prasad v. Union of India, A.I.R. 1951 S.C. 458 to the decision in Municipal Corporation of Bombay v. Secretary of State, (1904) I.L.R. 29 Bom. 580 and to the decisions of the Supreme Court in Union of India v. Anglo Afghan Agencies, A.I.R. 1968 S.C. 718 at 726 and 728 Century Spinning and Manufacturing Co.'s case A.I.R. 1971 S.C. 1021. 1331 and to Ramanatha Pillai's case. A.I.R. 1973 S.C. 2641. It was stressed that the allegation in paragraph 10 of the petition that at the meeting on 25th April, 1971, the representatives of the industry were assured by the Chief Minister Shri C. Achutha Menon, by the then Industries Minister Shri N.E. Balaram and by the then Revenue Minister Shri Baby John that no tax would be levied under the Act on the turnover of African raw nuts, stood uncontroverted. It seems to us of little consequence whether these allegations have been denied or not. They fall for short of covering the entire gamut of the petitioners' arguments. We are not prepared to believe that the assurances referred to were unsolicited presents to the cashew processors. It appears too much, in such circumstances, to build up a case of estoppel by representation. That apart, as rightly pointed out by the learned Advocate-General, the power under Section 10(3) of the Act is a power of subordinate legislation, whether it be delegated legislation or conditional legislation. It was ruled recently by the Supreme Court in Oil and Natural Gas Commission's case, [1975] 47 F.J.R. 214 (S.C.) that rules and regulations framed by the Oil and Natural Gas Commission, the Life Insurance Corporation of India and the Industrial Finance Corporation have the force of law. In paragraph 33 of the judgment, Ray, C.J., observed :

There is no substantial difference between a rule and a regulation inasmuch as both are subordinate legislation under powers conferred by the statute. A regulation framed under a statute applies uniform treatment to every one or to all members of same group or class. The Oil and Natural Gas Commission, the Life Insurance Corporation and Industrial Finance Corporation are all required by the statute to frame regulations inter alia for the purpose of the duties and conduct and conditions of service of officers and other employees. These regulations impose obligation on the statutory authorities. The statutory authorities cannot deviate from the conditions of service. Any deviation will be enforced by legal sanction of declaration by courts to invalidate actions in violation of rules and regulations.

The learned Advocate-General further submitted that the power to tax is a legislative power and referred to the decision in Narinder Chanel's case A.I.R. 1971 S.C. 2399 in support of his submission. He also relied on S.I. Syndicate Ltd. v. Union of India, A.I.R. 1975 S.C. 460 where it was held that price fixation under the provisions of the Sugar Control Order was more in the nature of a legislative measure and could not therefore give rise to a complaint that rules of natural justice had not been followed in fixing the price (vide paragraph 13). We agree that the power under Section 10(3) is a legislative power. In Ramanatha Pillai's case, A.I.R. 1973 S.C. 2641 at 2649 the following passage from American Jurisprudence 2nd, at page 783, paragraph 123, was approved :

'Generally, a State is not subject to an estoppel to the same extent as in an individual or a private corporation. Otherwise, it might be rendered helpless to assert its powers in Government. Therefore as a general rule the doctrine of estoppel will not be applied against the State in its governmental, public or sovereign capacity. An exception however arises in the application of estoppel to the State where it is necessary to prevent fraud or manifest injustice.' The estoppel alleged by the appellant Ramanatha Pillai was on the ground that he entered into an agreement and thereby changed his position to his detriment. The High Court rightly held that the courts exclude the operation of the doctrine of estoppel, when it is found that the authority against whom estoppel is pleaded has owed a duty to the public against whom the estoppel cannot fairly operate.

The principle that the power of granting exemption is legislative, follows also from the decision in Bhikusa Yamasa Kshatriya v. Sangamner Akola Taluka Bidi Kamgar Union [1963-64] 24 F.J.R. 79 (S.C) We cannot see any manifest injustice to attract the exception as stated in American Jurisprudence. The Advocate-General further contended that there can be no estoppel, whether equitable or otherwise, against the provisions of law or statute. He relied on the Full Bench ruling of this Court in Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd.'s case, 1972 K.L.J. 628 (F.B.) where it was ruled (vide paragraph 14) that there can be no equitable estoppel against legislative power. The decision was, no doubt, reversed by the Supreme Court on the main question dealt with by it, namely, the constitutionality of the provisions of the Act there considered. But this part of the judgment rejecting the plea of equitable estoppel was sustained : see State of Kerala v. G.R. Silk Mfg. Co. A.I.R. 1973 S.C. 2734 The principle was also stated by this court in Ramanatha Pillai's case 1970 K.L.T. 1008, paras 12 to 14 and in Achuthan Pillai v. State of Kerala 1970 K.L.T. 838 (F.B.). The decision in Ramanatha Pillai's case 1970 K.L.T. 1008, paras 12 to 14 was confirmed by the Supreme Court in N. Ramanatha v. State of Kerala A.I.R. 1973 S.C. 2641 noticed earlier. In the light of the principles in the above cases we would reject the plea of equitable estoppel.

10. It was stated that exemption can be granted under Section 10(1) only in public interest and, therefore, the same can be cancelled under Sub-section (3) only in public interest. Exhibit A notification granting exemption expressly recites that it was done in public interest; and exhibit B, which followed closely in its wake, significantly omits any mention of any public interest which actuated its promulgation. Indeed, the proximity of time between the two notifications, it was stated, would negative any consideration of public interest having actuated the cancellation. The requirement of public interest which is embodied in Sub-section (1) is not to be expressly found in Sub-section (3). Whether it can be implied in Sub-section (3), under Section 20 of the Kerala General Clauses Act or otherwise, is not free from doubt. The petitioners' counsel would contend that no allegation of public interest had been disclosed in the counter-affidavit filed on behalf of the Government. We do not wish to express a final opinion whether the cancellation under Section 10(3) can only be in public interest. Assuming that the element of public interest should be satisfied before cancellation, the learned Advocate-General submitted that the power to tax has to be presumed to be in public interest and as the cancellation of the exemption would result in subjecting the exempted categories to taxation, the test of public interest would stand satisfied. He relied on the decision in State of Madras v. Nataraja Mudaliar, A.I.R. 1969 S.C. 147 at 155 and Atia-bari Tea Co. Ltd.'s case A.I.R. 1961 S.C. 232 at 254 in support of his submission. The observations in these decisions lend support to the contentions of the learned Advocate-General. We accept them as authorities for the proposition submitted for acceptance. The presumption of public interest for a measure of taxation, as laid down in these decisions would put the State in a position of vantage and require the petitioners to rebut the presumption. This has not been done. From that point of view it appears to us that the petitioners' contention that the cancellation was not in public interest must fail.

11. There is little force in the contention that no reasons at all have been given in exhibit B for cancellation of the exemption. Being a legislative measure, there can be no complaint about the absence of reasons or violation of natural justice : vide S.I. Syndicate Ltd. v. Union of India A.I.R. 1975 S.C. 460. Counsel for the petitioners cited the decision in Lachrni Narain v. Union of India (1976) 2 S.C.C. 953. There, certain notifications granting exemption under the Bengal Finance (Sales Tax) Act, 1941, were cancelled and the validity of the cancellation was attacked. It was held by the Supreme Court that the exemption can be granted only after not less than three months' notice of the intention to do so had been notified and that the notification to that effect was not proper or valid. The conclusion flowed directly from the language of Section 6(2) of the Bengal Act, which is quoted at page 956 of the Reports (page 271 of 37 S.T.C.), as follows:.(2) The State Government after giving by notification in the official Gazette not less than 3 months' notice of its intention so to do, may by like notification add to or omit from or otherwise amend the schedule and thereupon the schedule shall be deemed to be amended accordingly.

On the express language of the statute considered by the Supreme Court, the cancellation could only be by a 'like notification'. The decision is of no avail to the petitioners.

12. For the same reason we think that the decision in Indian Sugar and Refineries v. Amarvathi Service Co-operative Society, (1976) 1 S.C.C. 318 cited by the petitioners is also distinguishable. In paragraphs 17 and 18 of the judgment, it was observed :

17. The provision for granting exemption is part of the procedure prescribed by Clause 6 of the 1966 Control Order. The power to grant exemption cannot be said to be independent of the provisions under Clause 5 of the Order. The object of the 1966 Control Order is to promote sugar industry and to eliminate unnecessary impediments in the production of sugar. It also ensures a fair deal to the growers of sugarcane. The provisions of the Control Order are intended to maintain harmony between the growers of sugarcane and the producers of sugar and to enable both of them to share profits reasonably. Therefore, the power conferred on the Government is required to be exercised having regard to the view points of the growers of sugarcane as well as the producers of sugar. It is necessary to give opportunity to the growers of sugarcane as well as the producers of sugar to be heard when the Government exercises powers under the 1966 Control Order for determining the additional price and granting exemption from payment of additional price.

18. The grant of exemption from payment of price affects rights and interests of the growers of sugarcane. The Control Order contains elaborate machinery for fixation of additional price having regard to all relevant factors. The additional price fixation authority afforded opportunity to both the growers of sugarcane as well as the producers of sugar to be heard in the determination of the additional price. The subsequent order by the Government granting exemption to the factories for payment of additional price takes away rights which had accrued in favour of the growers of sugarcane.

The above observations clearly emphasise the nature of the provisions considered by the court and the principle underlying the decision. The provision in the present case and the background against which it has to be viewed are quite different.

13. We should now notice one of the contentions of the learned Advocate-General. It was argued that there was no power under Section 10(1) or (3) to issue a notification with retrospective effect. Therefore, it was said that exhibit A in so far as it granted the exemption in October, 1973, in respect of an antecedent period from 1st September, 1970, to 30th September, 1973, was illegal; and, exhibit B having only corrected the illegality, was not liable to be quashed under Article 226, as, to do so would result in reviving exhibit A and perpetuating the illegality in its promulgation. There is force in the submission thus made by the learned Advocate-General. Having taken the benefit of a notification granting exemption on 12th October, 1973, in respect of a period prior to the date of the notification, the petitioners now contend that the cancellation of the exemption cannot take effect in respect of the period for which the exemption had already been granted. The proposition submitted by the learned Advocate-General is supported by the decision of the Supreme Court in Nilkanth Prasad v. State of Bihar, A.I.R. 1962 S.C. 1135 at 1137 where despite the finding that the appeal in which the impugned order was passed was incompetent, interference under Article 226 was declined, as the decision on the merits, by the impugned order was just and proper and had not occasioned any manifest injustice. The same was the principle of the decision of a Full Bench of this Court in Mani v. Kerala Electricity Board 1967 K.L.T. 885 (F.B.). Attention was called to a few more decisions laying down the same principle (see for instance Venkateswara Rao v. Government of Andhra Pradesh A.I.R. 1966 S.C. 823 at 837 In the circumstances, without pronouncing on the question whether the State can plead the invalidity of its own notification, we would decline interference under Article 226 on the ground that the petitioners having taken the benefit of the exemption notification exhibit A in respect of a period prior to its promulgation, cannot be heard in these proceedings to contend that the cancellation of the exemption in similar fashion is illegal. In the result, we would uphold the validity of exhibit B notification.

14. The two other principal points stressed by counsel for the petitioners were that the transactions in question were 'outside sales' and/or sales in the course of import or export and, therefore, exempt under Article 286(1)(a) and (b) of the Constitution. We do not think that it is either fair or proper or even within our jurisdiction, in the first instance to pronounce on these aspects of the case. It has been repeatedly laid down by the Supreme Court that the investigation of facts, in regard, for instance, to the nature of the transaction, has to be left to be found, in the first instance, by the taxing authorities and that it is not for the High Court to appropriate to itself this task under Article 226: see Sales Tax Officer v. Shiv Ratan A.I.R. 1966 S.C. 142 and Bhopal Sugar Industries case A.I.R. 1967 S.C. 549. The petitioners' counsel contended that in the light of the documents and the nature of the course of dealings in which we have already referred in the course of this judgment, the nature of the transactions had to be carefully considered and determined. This, it was complained, had not been done by the sales tax authorities. In support of this submission counsel drew our attention to the order exhibit H passed by the appellate authority on the preliminary point raised before it as to the real nature of the transactions. There is force in the complaint made by the petitioners' counsel that the order has not got to grips with the real questions which were highlighted by the counsel for the petitioners. It was submitted by the learned Advocate-General that the petitioners must take the blame for any perfunctoriness in the discussion of the appellate authority, as all the documents now produced before this court and stressed before us were not placed before the sales tax authorities. This was denied by the petitioners. We do not wish to go into this controversy. As requested by us, the counsel for the petitioners and the learned Advocate-General submitted statements showing the position in which the assessment proceedings for the years in question in respect of each of the petitioners stood. It is seen from the statements filed by the learned Advocate-General that in 39 cases the appeals are pending before the Sales Tax Appellate Tribunal, Trivandrum and in 37 cases before the Deputy Commissioner (Appeals), Quilon and in one case before the Deputy Commissioner (Appeals), Ernakulam. The petitioners have also filed a statement indicating the position in respect of the assessments of the petitioners.

15. We feel it would be best to direct the Sales Tax Appellate Tribunal to dispose of the appeals pending before it in respect of the assessment proceedings of the petitioners. It would do so on the basis that exhibit B is valid. The petitioners would tender within two months from today before the Tribunal all the documents and records on which they rely in support of their contentions. The Government would be at liberty to produce the records and materials, if any, in rebuttal and/or in support of its case within one month thereafter. The Tribunal will consider and decide the question of receiving these documents and will deal with the appeals and dispose of the same within four months after the production of records by both sides within the stipulated time. We have little doubt that the decision of the Tribunal in regard to the nature of the transactions and the other matters relating to the assessment would be respected and followed by the assessing authorities before whom the proceedings are pending, where these involve identical or similar facts. The petitioners have furnished bank guarantee in respect of the tax due from them at the stage of the assessment. Their counsel intimated that they are prepared to make available one-third of the bank guarantee so far furnished by them to cover their approximate tax liability and that the rest of the bank guarantee be released to them. We think this is a reasonable request. The bank guarantee furnished will be discharged; but the petitioners will within ten days after such discharge of the bank guarantee, furnish fresh bank guarantee for one-third of the amount covered by the guarantee discharged under this order. We are not directing that there should be no coercive steps against the petitioners till the Tribunal gives its decision, as indicated by us and the other authorities before whom the assessment proceedings are pending in one form or other, follow up in the wake of the Tribunal's decision. We expect that such steps will not be precipitated till then. A declaration on the lines indicated in this paragraph will issue in favour of the petitioners; and subject as above, this writ petition will stand dismissed with no order as to costs. Issue carbon copies to all counsel.


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