1. This is a petition under Article 226 of the Constitution for the issue of a writ of Prohibition against the Deputy Commercial-tax Officer, Special Circle, Non-resident, Madras, restraining him from proceeding with the collection of sales-tax as per his communication No. Section 10/39BLR dated 8-5-1959, in respect of the assessment year 1954-55 under the Madras General Sales Tax Act.
2. The petitioners constitute a firm of partnership carrying on business in silk yarn at Avenue Road, Bangalore. They are residents of the Mysore State. During the years 1953 to 1955, they effected sales of consignments of silk yarn in this State. They claimed to be immune from the levy of sales tax either in the State of Mysore or in this State, on the grounds that their transactions of sales referred to were Inter-State sales governed by Article 286 of the Constitution. After the decision of the Supreme Court of India in the United Motors case (State of Bombay v. United Motors (India) Ltd., : 4SCR1069 ), and as a result of Central Act VI of 1956 (the Sales Tax Validation Act), and Section 22 of the Madras General Sales Tax Act, the Inter-State sales effected by the petitioners in this State, in which the deliveries of goods sold were made for purposes of consumption, came within the ambit and purview of the Madras General Sales Tax Act. The petitioners were, therefore, called upon to submit returns of their turnover for the years 14-1953 to 6-9-1955.
It must be mentioned that the petitioners collected amounts from their purchasers in this State, not purporting to be sales tax due and payable to the State of Madras, but alleged to be by way of 'deposits', possibly by way of abundant caution to save themselves from pecuniary liability in the event of this State taxing them. Having regard to the uncertain legal position regarding the 'State' jurisdiction to levy sales tax on purchases and sales relating to Inter-State transactions, and in order to save dealers from paying tax, which they failed to collect from their purchasers in the bona fide belief that the transactions were immune from tax, the Government of Madras, passed a G. O. G. O.Ms. No. 2386 Revenue, dated 13-6-1956, the effect of which was thus promulgated by the Board of Revenue in these terms:
The Government have decided that action in pursuance of the Sales Tax Laws Validation Ordinance, 1956 should be taken on the following lines :
1. As this Government had already agreed not to collect sales-tax on inter-State transaction upto 31-3-1953, no action should be taken to collect the tax on these transactions.
2. In regard to the period from 1-4-1953 to 30-9-1953, as this Government had already agreed not to collect sales tax on inter-State transactions, where the non-resident dealer had not collected tax from his customers, action should betaken to collect the tax only in cases where the non-resident dealer had collected it from his customers.
3. As regards the period from 1-10-1953 to 5-9-1955, action should be taken to assess and collect sales tax on inter-State transactions validated by the Ordinance in all cases except those in which the non-resident dealers had not collected the tax or had collected and refunded it.
Action should be taken not only to finalise the assessment proceedings now pending, but also to initiate fresh assessment proceedings, in these cases.
2. The Board is requested to submit proposals very urgently for the employment of additional staff, if any, that are required for attending to this work.
Copy of Board's Ref. A.766/56-A dated 18-6-1956.' .
3. The Deputy Commercial-tax Officer assessed the petitioners to tax as per details set out hereunder :
Year of assessmentNet turnover determinedTax dueTax collected by appellantsTax demanded by the department
1953-54Rs.86,946Rs.1358-8-0Rs. 978-14-0Rs.978-14-01954-55Rs.40,682Rs.635-10-5Rs.692-4-0Rs.692-4-0 (inclusive of Rs. 56-9-7 undes S. 8-B (2))1955-56Rs. 6,549 (net turnover upto 5-9-55)Rs.102-5-3Rs.106-0-0Rs.106-0-0
The petitioners preferred appeals to the Commercial-tax Officer, Special Circle, Non-resident, Madras City against the said orders. But these appeals were dismissed on 31-1-1958. Further appeals were preferred by the petitioners to the Sales Tax Appellate Tribunal, Madras. The main contentions urged by the petitioners before the Tribunal were : (1) The transactions of sales were not liable to be taxed; and (2) Even if they can be taxed, no amount by way or tax can be collected from them in view of the provisions of the G. O. referred to above.
4. The G. O. undoubtedly gives relief to the assessees In respect of inter-State sales, if they prove to the satisfaction of the taxing authorities that they had not collected any tax from their constituents. In regard to the years 1954-55 and 1955-56, there was a demand against the petitioners for payment of Rs. 56-9-7 and Rs. 3-10-9 respectively under Section 8-B(2) of the Act. These demands were presumably based on the ground that the petitioners had collected excess amounts from their constituents, over end above the amount of tax lawfully payable by them to the State. The contention of the petitioners has all along been that they never collected any sales tax from their purchasers, that they merely obtained some amounts from them by way of 'deposits', that these deposits were refundable to them, and that they were therefore, entitled to the benefit of the G. O. These contentions did not find favour either with the Deputy Commercial-tax Officer or with the Commercial-tax Officer. The Tribunal took a different view of the nature of the collection made by the petitioners. The Tribunal examined the sale bills mentioning the 'deposits' received by the petitioners and found that the amounts of 'deposits' did not tally with the amount payable as tax under the Act. The Tribunal observed thus in its order :
'It was noticed that wherever the appellants had charged 'deposit', the amount so charged did not amount to the actual amount of tax due on the sale price. The contention of the appellants (petitioners) that the deposits collected from their buyers did not represent amount purporting to be by way of tax under the Madras General Sales Tax Act, appears to be correct'
I In this view of the matter, the Tribunal held that the demand under Section 8-B (2) in respect of the years 1954-55 and 1955-56 cannot be maintained. This, however, was the only modification made by the Tribunal in respect of the orders appealed against. The Tribunal refused to go into the question whether the demand of tax can be made despite the G. O., as, in its view, it was not concerned with the administrative instructions issued by the Government, which have no statutory force. Dealing with this aspect of the matter, the Tribunal observes thus :
'We have held in other similar cases that the departmental action in restricting the demand to the actual amount of tax collected by the appellants was the result of administrative instructions with which the Tribunal is not concerned. So far as the validity of these assessments are concerned, the fact whether the appellants did or did not collect tax from their buyers is not material, under the law, tax could have been demanded from the assessee on the net assessable turnover. The contention of the appellant that no demand could be made because they had not collected any tax from their buyers has, therefore, to be rejected.'
It must be noted that even the department claims from the petitioners, not the full amount of tax due and payable on the net turnover determined, but only that amount which was alleged to have been collected by the petitioners from their purchasers. It is clear that the department intended to give the petitioners the benefit of the G. O. The dispute between the petitioners and the department was, whether, in fact, the petitioners has collected tax or not. If they had collected the tax, undoubtedly the G. O. cannot come to their rescue; but, if they had not collected the tax, it is equally clear that the department, which is certainly bound by the G. O., cannot make any demand by way of tax from the petitioners.
5. After the disposal of the appeals by the Tribunal In the aforesaid manner, the petitioners applied to the Board of Revenue on 28-1-1959 for directions not to collect any sales tax from them for all the three assessment years. The Board of Revenue, by its communication dated 26-2-1959, declined to grant any relief. The Board observedthus :
'The Board has examined the contentions of the petitioners. It sees no reasons to interfere on their behalf.The petitions are, therefore, rejected.'
Thereafter, the Deputy Commercial-tax Officer, Special Circle, called upon the petitioners, by his communication dated 8-5-1959, to pay the sums of Rs. 734-15 for 1953-54 and Rs. 401-23 for 1954-55. These amounts were claimed to be arrears of tax due by the petitioners arising out of the assessment orders already passed. The petitioners submit that this demand for payment of tax is illegal and have, therefore, approached this court for the issue of a writ of prohibition to prevent further action being taken by way of collection of the tax said to be due.
6. In W. P. No. 595 of 1959, the petitioners prayed for the issue of a writ of Prohibition against the Deputy Commercial-tax Officer, Special Circle, to forbear from collecting the tax for the year 1953-54. This petition was heard by Veeraswami, J., who, by his order dated 11-12-1961, issued a writ as prayed for.
7. The question for consideration in this writ petition is whether the tax demand against the petitioners is lawful and whether this court can issue a writ of prohibition orother appropriate writ restraining the department from collecting the amounts demanded. Here is a case where the collection of tax levied would be manifestly illegal and improper, if not unjust. The Tribunal has quite clearly held that the petitioners have not collected any sales-tax during the relevant years and that the deposits received cannot be correlated or equated to the tax. The demand of the department under Section 8-B(2) was struck down bythe Tribunal on the ground that there was no excess collection by the assessees from their purchasers over and above the tax payable by them.
The department claimed as excess the difference between the deposits received by the assessee and the tax levied on their assessed turnover. The petitioners contended that there was no such excess in their hands, as they never collected the tax, but only received 'deposits' towards some future contingent tax liability, and that the deposits were refundable to the persons who made them. If the receipt of the deposits is not tantamount to collection of tax, Section 8-B(2) is not attracted. The Tribunal accepted the contention of the petitioners. It held in clear and precise terms that the petitioners did not collect any tax from their purchasers. The reason why the Tribunal dismissed the appeals (subject to the modification in deleting the demand under Section 8-B(2)) was that the G. O. was only an administrative direction regulating the collection of tax levy, the enforcement of which was beyond its jurisdiction. We may also point out that the Supreme Court has held in State of Mysore v. Mysore Spinning and ., 1960 11 STC 734, that 'deposits' received by the assessee are not by way of tax. The following headnote of the case sets out the ratio of the decision:
'Where the assessee, a registered dealer received certain amounts from its constituents merely by way of deposits on the express understanding or undertaking that the moneys would be refunded to the constituents if the assessee was held not liable to include the relevant sales in its taxable turnover, the assessee held the moneys as a mere custodian, and on the fulfilment of the condition be came a trustee for the depositors. When once the tax authorities determined that the proceeds of the sales werenot within the taxable turnover of the assessee, the beneficial ownership became vested in the depositors and the assessee ceased to have any right to continue to hold the moneys. The fact that the physical control of the moneys passed from the 'depositors' to the assessee did not render the receipt a 'collection' by way of tax of any amount under Section 11(2) of the Madras General Sales tax Act, 1948.'
The conclusion of the Tribunal striking down Section 8-B(2) demand is, therefore, perfectly correct. The order of the Tribunal has to be read and understood in a fair, reasonable and sensible manner, without missing the substance and looking merely to the form. This is a duty cast upon the department, from which it cannot absolve itself by applying the telescope to the blind eye.
8. Any transgression by the department of the Tribunal's order, by violating it or by failing to give effect to it, would be a plain contravention of the statute. Section 12-A(4) of the Madras General Sales Tax Act reads:
'The Appellate Tribunal shall, after giving both parties to the appeal a reasonable opportunity of being heard, pass such order thereon as it thinks fit;'
'Every order passed by the Appellate Tribunal under Sub-section (4) or (6) shall be communicated by it to the assessee, the authority from whose order the appeal was preferred, the Deputy Commissioner, if he is not such authority, and the Board of Revenue.'
'Every order passed by the Appellate Tribunal Sub-section (4) shall, subject to the provisions of Sub-section (6) and Section 12-B, be final; .... . '
9. The statutory subordination of the department to the Tribunal is so elementary that it needs no elaboration or emphasis. We would not have referred to this aspect, but for the fact that in this case the Department appears to have lost sight of the substance of the Tribunal's verdict.
10. What then is the present position? That the petitioners feel aggrieved by the tax demand is quite obvious. That their grievance is legitimate, cannot be gain said, as they got a finding in their favour from the Tribunal on the crucial question, but to no purpose, justice and fairness, which we conceive to be of the essence of law, require that the petitioners should be afforded relief.
11. Will the scope of Article 226 of the Constitution conferring the right to issue prerogative writs disentitle the petitioners from getting the relief has now to be considered. A reading of the constitutional provision clearly indicates that the jurisdiction of this court is not limited to the issuing of the types of writs mentioned therein, but extends to granting appropriate writ, direction or order. This does not mean an absolute freedom to cut adrift from the moorings of prerogative writs sanctioned by ages and settled by judicial precedents. The applicant, seeking relief, is no doubt bound to name the remedy that he wants, but if he chooses the wrong lable of writ, he should not be made to suffer the penalty of the rejection of his claim on that ground. This court is not powerless to mould and issue appropriate writ suitable to the occasion.
The form of the writ to be issued is only of secondary importance. The primary things to be considered are, broadly, as follows: (1) Whether the applicant is a person aggrieved having an interest or legal right in the subject matter; (2) Whether there has been an infraction or violation of such right or interest; (3) Whether the matter is justiciable. The denial of relief to a suitor, becauseof his error of judgment in selecting the proper writ, will defeat the very purpose of writs.
12. The petitioners pray for the issue of a writ of prohibition. Prohibition is intended to check excess of jurisdiction, or threatened usurpation of jurisdiction where there is none. It also lies to correct any departure by an inferior tribunal from the rules of natural justice. The petitioners have already been assessed to tax and the demand for tax is only the inevitable consequence of an order for assessment, which has become indefeasibly final. It is not possible to hold that the Deputy Commercial Tax Officer is exceeding his jurisdiction or is suffering from total lack of jurisdiction in demanding the tax due from the petitioners. Prima facie the writ of Prohibition does not appear to be well founded.
13. It will be convenient to deal first with the contention raised by the learned Additional Government Pleader that the writ cannot issue, as in effect the violation complained of by the petitioners, is of an administrative direction of the Government, which has no statutory force, and which does not create or vest any legal right. The executive instructions or administrative directions issued by the State regulating the working of the departments in the State do not clothe any person with vested rights, when they are of non-statutory character. Violation of such instructions cannot form the subject-matter of a lis in a civil court or in a proceeding for the issue of a prerogative writ. Subordinates who offend such instructions only lay themselves open to disciplinary action that may be taken against them.
This position is well settled in law and does not re-qurie a lengthy citation of cases. It is enough to refer to two recent decisions of the Supreme Court in Raman and Raman Ltd. v. State of Madras, : AIR1959SC694 and B. Abdulla Rowther v. State Transport Appellate Tribunal, Madras, AIR 1959 SC 896. In the latter case, Gajendragadkar J. delivering the opinion of the majority Judges observes thus at p. 899:
'The executive orders properly so-called do not confer any legal enforceable rights on any persons and impose no legal obligation on the subordinate authorities for whose guidance they are issued, that is not to say that the directions are not valid and should not be followed by the said authorities; the said authorities are undoubtedly expected to follow the said directions and their for each may expose them to disciplinary or other appropriate action. If the present Government order is held to be an executive order it would confer no legal and enforceable rights on any applicant for permits; so that, even if any of the directions contained in the order is found to have been ignored or misapplied, the applicant for a permit cannot claim any relief by way of a writ of certiorari. The direction itself, though valid, and in a sense binding on the subordinate authorities is not a statutory rule and has not the force of law; and so its misconstruction cannot be said to be an error of law.'
Though the learned Additional Government Pleader is well-founded in his contention that violation of an administrative G. O. cannot attract the applicability of Article 226 of the Constitution, in our opinion, the present petition cannot fail as it cannot be said that the petitioners really feel aggrieved by any contravention of the G. O. It is common ground that the G. O. has no statutory force and that it is a mere administrative direction or executive instruction. As we have already stated, the department hasapplied the G. O. to the petitioners and has therefore confined the tax demand only to the alleged amount of tax said to have been collected by the petitioners. The real grievance of the petitioners is that the department has failed to give effect to the findings of the Tribunal holding that the petitioners have not collected any amount by way of tax. The Department was bound by the tribunal's decision in the matter. The finding of the Tribunal that the 'deposits' received by the petitioners were not taxes collected cannot be ignored or brushed aside in view of the fact that the Tribunal eventually dismissed the appeals subject to the modification cancelling the demand under Section 8-B(2).
14. Now, the question arises as to what is the relief which the petitioners can be granted, though in terms they are only praying for the issue of a writ of Prohibition. We are of opinion that the petitioners can successfully claim the issue of a writ of Mandamus.
15. Mandamus is a command issuing from the High Court or Supreme Court, to any person or inferior Tribunal, directing the performance of a public duty appertaining to the office of the person or tribunal.
'Its purpose is to supply defects of justice, and accordingly it will issue, to the end that justice may be done, in all cases where there is a specific legal right and no specific legal remedy for enforcing that right; and it may issue in cases where, although there is an alternative legal remedy, yet that mode of redress is less convenient, beneficial and effectual.' (Halsbury's Laws of England Vol. II, p. 84).
'If public officials or a public body fails to perform any public duty with which they have been charged, an order of mandamus will lie to compel them to carry it out. .... A mandamus will issue to Government officials in their capacity as public officers exercising executive duties which affects the rights of private persons.' (See Halsbury's Laws of England, Vol. II page 91).
On an analysis of the facts of this case, the true position that emerges is this. The department applied the provisions of the G. O. to the assessee, and, consequently, made a demand for payment of tax only of the amounts alleged to have been collected by way of sales tax, and not the amount of tax due on a proper assessment of the turnover. The department took the view that the petitioners actually collected tax from their purchasers. It seems to be obvious that no tax-demand would have been made upon the petitioners, if only the taxing authorities had taken the other view, viz., that no tax had been collected. The Tribunal, however, held that the petitioners had only taken some amounts by way of 'deposits' from their purchasers, that they had not collected anything by way of tax, and that, therefore, Section 8-B(2) of the Act did not come into play. The Tribunal cancelled the demand made by the department on the basis of Section 8(B)(2), but did not give relief to the petitioners otherwise, as, it was of opinion that the applicability of the G. O. was a matter exclusively within the purview of the department, the G. O. being non-statutory in character.
16. The petitioners have a legal right to claim that the G. O. applies to them as well as it does apply to others similarly placed. On the finding of the Tribunal that they had not collected tax on their inter-State sales, they obtained the benefit of the G. O. This adjudication of the Tribunal, undoubtedly, conferred a legal right on the petitioners, securing them from being, adversely affected contrary to such adjudication. There is certainly apublic duty on the part of the Deputy Commercial Tax Officer to conform himself and to give effect to, and implement, the findings of the Appellate Tribunal. The G. O. restrains him from collecting any amount from the petitioners, if it were to he found that they had not collected any tax. The Tribunal has found that the petitioners received only 'deposits' and did not collect any tax. The officer cannot fail to give effect to the findings of the Tribunal and thus proceed against the petitioners making a demand against them. The combined effect of the decision of the Tribunal and the administering of the G. O. can only result in freeing the petitioners from the present tax-liability.
17. The learned Additional Government Pleader urges that the assessment against the petitioners has become final and no writ can issue to prevent the officers from collecting the tax levied. He also contends that the G. U. has no statutory force imposing a legal obligation on the State, which a court can enforce. We are not prepared to say that the assessment orders against the petitioners can be enforced as they stand. It is not permissible for the department to overlook or disregard the findings of the Tribunal and dissociate the assessment orders from such findings. The substance of the matter is that the so-called assessment orders have been undermined by the findings of the Tribunal and ceased to have any legal efficacy.
As stated already, the violation of administrative orders issued by the Government may not be justiciable in proceedings under Article 226 of the Constitution. It may be open to the Government to vary its directions from time to time and no subject can plead estoppel against the Government to escape the operation of a statute. But, in this case, the complaint of the petitioners is not that the Deputy Commercial Tax Officer has violated the provisions of the G. O., but that he failed to give effect to the finding of the Tribunal in applying the G. O.
18. In our opinion, the public duty of the DeputyCommercial Tax Officer to conform to the finding of theAppellate Tribunal has to be enforced by the issue of awrit of Mandamus, and such a writ we hereby issue. Thepetition is allowed. The rule nisi is made absolute substituting a mandamus for prohibition. There will, however, be no order as to costs.