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Siemens India Ltd. Vs. the Commercial Tax Officer and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKolkata High Court
Decided On
Case NumberCivil Rule No. 6465 (W) of 1974
Judge
Reported in[1978]41STC75(Cal)
AppellantSiemens India Ltd.
RespondentThe Commercial Tax Officer and ors.
Appellant AdvocateDebi Prosad Pal and ;Anil Kanti Roy Choudhury, Advs.
Respondent AdvocateSamarendra Nath Dutta, Adv.
Cases ReferredMod. Serajuddin v. State of Orissa
Excerpt:
- sabyasachi mukharji, j.1. the petitioner is a company incorporated under the companies act. the petitioner has registered office at 134a, dr. annie besant road, worli, bombay. the petitioner is a registered dealer in west bengal under the bengal finance (sales tax) act, 1941 and also under the central sales tax act, 1956. the principals of the petitioner are messrs. siemens aktiengesellschaft situated at muenchen in west germany. it is the case of the petitioner that the petitioner entered into contracts with the indian railways, hindustan steel limited, rourkela steel plant and various other parties to supply materials from time to time as per orders placed by the aforesaid parties to the petitioner. so far as the railways are concerned, the petitioner contends that under the terms of.....
Judgment:

Sabyasachi Mukharji, J.

1. The petitioner is a company incorporated under the Companies Act. The petitioner has registered office at 134A, Dr. Annie Besant Road, Worli, Bombay. The petitioner is a registered dealer in West Bengal under the Bengal Finance (Sales Tax) Act, 1941 and also under the Central Sales Tax Act, 1956. The principals of the petitioner are Messrs. Siemens Aktiengesellschaft situated at Muenchen in West Germany. It is the case of the petitioner that the petitioner entered into contracts with the Indian Railways, Hindustan Steel Limited, Rourkela Steel Plant and various other parties to supply materials from time to time as per orders placed by the aforesaid parties to the petitioner. So far as the railways are concerned, the petitioner contends that under the terms of the contract, the railways were obliged to procure specific import licences against goods contracted for and under the terms of the contract, goods were to be manufactured in foreign country as per specifications given in those contracts. The goods were also, according to the petitioner, inspected by the representatives of the railways. The respective authorities had to carry out inspection at the works of the foreign supplier situated in West Germany and after such inspection the goods were stamped with Government markings and special certificates were given to the petitioner on the basis of which instalment payments were received. After these steps were completed, goods were shipped to the Indian Ports through the shipping agencies named by the petitioner and delivered to the consignees named by the railways and other licensees. According to the petitioner, final payments were received on final acceptance of the goods by the consignees. The petitioner states that the obligation to procure import licence was of the railways and but for the discharge of the said obligation, which was done by procuring import licences, these contracts could not have been executed at all. The petitioner further states that the goods required by the railways were specific goods and were never kept in stock by the petitioner. In the case of supplies to customers, other than the railways, i. e., Hindustan Steel Limited and others, actual user's licences were held by those parties with the letters of authority from the Import Controller in favour of the petitioner. Under the terms of the contracts, it was the responsibility of the customers to procure the actual user's import licences with the letters of authority in favour of the petitioner to enable the petitioner to import the goods and pay for the foreign exchange. The petitioner has set out the conditions of the letter of authority. The goods were required to be manufactured in foreign countries as named by the licensees according to the specifications given in the contracts. The petitioner states that the goods in question were ordered and imported by the petitioner in compliance with the contracts without which import and delivery, the petitioner could not have executed the contracts. The petitioner further states that the petitioner was obliged under the contract as also under the import licences to import the said goods and deliver the goods to the customer. For the assessment period for four quarters ending 30th September, 1963, under the said Act, the petitioner claimed before the Commercial Tax Officer exemp-tion under Section 5(2) of the Central Sales Tax Act, 1956, in respect of the said contracts, being sales in the course of imports, as movement of the goods, according to the petitioner, was the result incidental to the contracts of sales. For the assessment period fourth quarter ending 30th September, 1963, for the assessment proceedings under Section 5(2) of the Central Sales Tax Act a sum of Rs. 47,46,773.69 was claimed as sales in the course of imports into India. Before the Commercial Tax Officer, the petitioner states, the petitioner produced all evidence for claiming exemption. It was argued on behalf of the petitioner that the facts and circumstances of the case were identical to the facts and circumstances decided by the Supreme Court in the case of K.G. Khosla & Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes, Madras Division [1966] 17 S.T.C. 473 (S.C.) and, as such, the sales should be exempted. The Commercial Tax Officer rejected this contention. In rejecting the contention, the Commercial Tax Officer observed, inter alia, as follows :

Dealer's claims for sales in the course of import under Section 5(2) of the Central Sales Tax Act, 1956, are checked at random on production of papers maintained by the dealer. The dealer files a statement of sales in the course of imports. A claim can be allowed under Section 5(2) as a sale in the course of imports if these are proved to be incidental to the contract of sale as laid down in the case of K. G. Khosla & Co. (P.) Ltd. [1966] 17 S.T.C. 473 (S.C.) Except in few cases the dealer produces orders to show that these may be allowed under Section 5(2) of the Act in pursuance of the decision in the case of K. G. Khosla & Co. (P.) Ltd. [1966] 17 S.T.C. 473 (S.C.) These orders are checked at random. Characteristics of these orders cannot be detailed here in full. In a nutshell, it may be said that the facts of these contracts are not identical to those of K. G. Khosla & Co. (P.) Ltd. [1966]17 S.T.C. 473 (S.C.) Again, the Additional Member, Board of Revenue, has held in the case of Associated Electricals that a sale may be treated as incidental to the contract of sale if the contract included the provision for importing goods from abroad by the petitioner on behalf of the purchaser in India. This decision laid down by the Board of Revenue as the criterion is lacking in many contracts. Therefore, the claim under Section 5(2) for sales in the course of imports are disallowed in full.

2. The said order was passed on 29th August, 1967. Being aggrieved by the said order rejecting the claim for exemption under Section 5(2) of the Central Sales Tax Act, 1956, the petitioner preferred an appeal before the Assistant Commissioner of Commercial Taxes, South Calcutta, challenging the legality and validity of the said rejection of the claim under Section 5(2) of the Act. The Assistant Commissioner of Commercial Taxes by his order dated 4th February, 1969, set aside the order of assessment with a direction to the Commercial Tax Officer to make the assessment in accordance with law. It is necessary to set out the relevant portion of the said order. The Assistant Commissioner, inter alia, observed as follows:

It is argued that the learned Commercial Tax Officer was not justified in disallowing in full the claim on account of imports into the territory of India of goods sold to the customers from whom the orders were received earlier for such importation and consequential sale. The findings of the learned assessing authority were cryptic and his observations were slip shod. It has merely been stated that a claim of this kind could be allowed if the imports were incidental to the contract of sale as laid down in the case of K. G. Khosla & Co. [1966] 17 S.T.C. 473 (S.C.) It has been admitted in the impugned order that the dealer produced orders to show that the imports were entitled to the benefits of exemption in terms of the Supreme Court's decision in the aforesaid case. The details of the orders have not been recorded and it has been superficially observed that the contracts were not identical to those in the case of K. G. Khosla & Co. [1966] 17 S.T.C. 473 (S.C.). The learned assessing authority could not differentiate the facts of the case in hand with those involved in the Supreme Court's case. The learned Commercial Tax Officer also sought to rely on the decision of the Board of Revenue in Associated Electricals, which laid down that an import may be treated as incidental to the contract of sale if the contract included the provision for importing goods from abroad. In the instant case, a detailed statement has been prepared by the appellant to show that orders were received from the customers earlier and then arrangements were made for the import licences and final orders were placed with the overseas manufacturers for despatch of the goods to India. The contracts (some of the specimen copies have been filed) themselves stipulated that the goods were to be manufactured by Siemens in West Germany. The contracts provide for payment of the customs duty as an extra and there were provisions for escalation of price. The orders placed by the railways and the D.G.S. & D. also stipulate for submission of the foreign supplier's invoice, banker's certificate and certificate of remittance in foreign exchange and' evidence of shipment. The goods ordered by the railway administration and the D.G.S. & D. were to be inspected in London. In all cases, except the D.G.S. & D. and the railways, the imports were said to have been made under the actual user's licence. In the case of orders placed by the D. G.S. & D. and the railways, the appellant was asked to apply through them to the Joint Controller of Imports for obtaining the import licence. These buyers recommended the issue of licences quoting the relevant Government sanction for releasing foreign exchange. As these material details have not been examined in the impugned assessment, it would be necessary to cause fresh examination to ascertain if 'the materials were manufactured in West Germany as per specification of the relevant contracts placed and if the movement of the goods from West Germany was pursuant to the contracts placed by the Indian buyers with the appellant and if the materials imported could be diverted for any purpose other than sale to the particular customer who placed the order. The expression 'occasion the movement of goods' occurring in Sections 5(1) and 5(2) of the Central Sales Tax Act, 1956, has the same meaning, i. e., when the movement of the goods is as a result of the covenant or incidental to the contract of sale, the benefit of exemption would be attracted. This position is also buttressed by the provisions contained in Articles 286(1)(b) and 286(2) of the Constitution of India. Thus, before the sale could be said to have occasioned the import of the goods it was not necessary that the sale should have preceded the import. If the parties agree that the goods are to be made in foreign country, inspected and approved by the buyers there and then imported into India for the buyer, there being no possibility of the goods being diverted by the seller for any other purpose, the sale must be treated as one in the course of import of the goods into India entitling the benefit of exemption. Relying upon the decision of the Supreme Court int he case of K. G. Khosla & Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes [1966] 17 S.T.C. 473 (S.C.), the impugned order will be set aside with a direction to make a fresh assessment in accordance with law.

3. Pursuant to the direction of the Assistant Commissioner of Commercial Taxes on 19th November, 1973, the Commercial Tax Officer completed the fresh assessment accepting the contentions and claims for exemption for Rs. 47,46,773.69 being the sales in the course of import. The Commercial Tax Officer in his order dated 19th November, 1973, observed, inter alia, as follows:

The dealer had produced the bill copies, correspondence copies of the indents and orders and other evidences. The dealer's statement of claim under the head 'goods sold in the course of import' is scrutinised with the bill copies and other papers as noted above at some length.

It appears that the customers to whom the goods were sold by the dealer had obtained import licences in the name of the concerned railway authority, the D.G.S. & D. specifying the goods to be brought from the dealer's principal in West Germany.

It appears that the dealer had the total claim under this head, Rs. 47,46,773.69 (excluding sales tax realised), most of the sales to Government parties and other dealers being supported by necessary declaration forms. The amounts which were disallowed in the original assessment was charged to tax as follows:

@ 1% ... Rs. 14,50,439.27@ 2% ... Rs. 31,87,213.08@ 7% ... Rs. 63,791.84@ 10% ... Rs. 45,329.50-----------------Rs. 47,46,773.69-------------------Thus the abovenoted amounts are allowed as claimed by the dealer, being the sales in the course of import to India, referring the decision of the Honourable Supreme Court in the case of K.G. Khosla & Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes [1966] 17 S.T.C. 473 (S.C.).

4. Thereafter, between 2nd February, 1973 and April, 1974, the petitioner wrote several letters and made several representations claiming refund of tax paid. It is not necessary to set out in detail these letters. On 6th May, 1974, a notice in form IX was issued Under Rule 79 of the Bengal Sales Tax Rules, 1941, informing the petitioner that the Commercial Tax Officer proposes to revise his order of assessment dated 19th January, 1973 and to charge tax on the sales which were already exempted by him as being in the course of import. On 22nd June, 1974, the petitioner appeared before the Commercial Tax Officer and contended that the proposed review proceedings should be dropped as the exemption allowed to the petitioner in view of the decision of the Supreme Court was in accordance with law. The petitioner thereupon requested the Commercial Tax Officer to cancel the notice and to refund the amount due to the petitioner. On 24th June, 1974, the Commercial Tax Officer passed an order under Section 9 of the Central Sales Tax Act, 1956, read with Section 20(4) of the Bengal Finance (Sales Tax) Act, 1941, disallowing again the exemption of Rs. 47,46,773.69. The Commercial Tax Officer in his order dated 24th June, 1974, observed as follows :

The reassessment of this period was completed by me on 19th January, 1973.

In that order of reassessment I had allowed Rs. 47,46,773.69 as sales in the course of import.

On going through the recent judgment of the Honourable Supreme Court in the case of Binani Bros. (P.) Ltd. v. Union of India [1974] 33 S.T.C. 254 (S.C.), it appeared to me that the said amount could be included in the turnover under the Central Sales Tax Act, 1956.

As such I issued notice in form IX to review my said assessment order under this office memo. No. 5778 dated 29th April, 1974, fixing the date of hearing on 18th May, 1974.

5. The gist of the order proposed to be passed was stated as follows:

Whereas it appears that the sales to the extent of Rs. 47,46,773.69 was allowed by me as sales in the course of import. Now it appears to me that the said sales should be charged to tax as per the provisions of the Central Sales Tax Act, 1956, referring the latest decision of the Honourable Supreme Court in the case of Binani Bros. (P.) Ltd. v. Union of India [1974] 33 S.T.C. 254 (S.C.). Hence I propose to review my assessment order dated 19th January, 1973, under Section 9 of the Central S. T. Act, 1956, read with Section 20(4) of the B. F. (S.T.) Act, 1941.

On 17th May, the dealer submitted a petition praying adjournment from the 18th to some other date.

The case was adjourned to 19th June, 1974. On 14th June, 1974, the dealer again submitted a petition for time.

The case was adjourned to 27th June, 1974. On 24th June, 1974, the dealer's representative appeared and submitted a petition stating that their Tax Adviser, Mr. C. N. Gurbaxani, is at Calcutta today (24th June, 1974) and it would be beneficial to them if the case would be taken up on 24th June, 1974, instead of on 27th June, 1974. On that request I agreed to hear the case on 24th June, 1974.

The dealer's representative stated that the sales to the extent Of Rs. 47,46,773.69, which was allowed in the order of reassessment on 19th January, 1973, as sales in the course of import could not be disallowed now referring to the judgment of the Supreme Court in the case of Binani Bros. (P.) Ltd. [1974] 33 S.T.C. 254 (S.C.).

I have heard the dealer's representative on the point as stated in their letter dated 22nd June, 1974, submitted on 24th June, 1974 and other points raised during hearing.

After the decision of the Supreme Court in the case of Binani Bros. (P.) Ltd. [1974] 33 S.T.C. 254 (S.C.), it appears to me that the transactions claimed for deduction under this head should not be allowed under Section 5(2) of the Central S. T. Act, 1956.

It appears that each transaction claimed for deduction under Section 5(2) of the C. S. T. Act, 1956, consists of two distinct sales. One is the purchase of the dealer from the foreign supplier (i. e., foreign supplier's sale). Then after taking delivery of the goods in India, there is another sale being the sale by the dealer to customers in India. Hence referring to the recent judgment of the Honourable Supreme Court the claim should not be allowed under Section 5(2) of the Act.

The said amount is added to the G. T. as determined in the order for reassessment.

Thus the G. T. determined as follows :As determined in the reassessment order...Rs. 17,22,517.32Add : Sales in the course of import now disallowedand added ...Rs. 47,46,773.69----------------Rs. 64,69,291.01-----------------

6. In this application under Article 226 of the Constitution the petitioner challenges the aforesaid order dated 24th June, 1974, passed by the Commercial Tax Officer. The first challenge to the order is on the ground that the Commercial Tax Officer had no power under Section 20(4) of the Bengal Finance (Sales Tax) Act, 1941, to pass the impugned order. It was contended that there was no error apparent on the face of the record nor was there any scope of discovery of any new evidence subsequent to the original order passed by the Commercial Tax Officer and, as such, in the facts and circumstances of the case, the Commercial Tax Officer was not competent to review his former order. In order to deal with this contention, it is necessary to refer to the terms of Section 20(4) of the Act. Section 20(4) of the Bengal Finance (Sales Tax) Act, 1941, provides as follows :

(4) Subject to such rules as may be prescribed, any assessment made or order passed under this Act or the Rules made thereunder by any person appointed under Section 3 or Section 3A may be reviewed by the person passing it upon application or of his own motion (and subject as aforesaid, the Tribunal may, in like manner and for reasons to be recorded, review any order passed by it, either on its own motion or on application).

7. Therefore, under the Section, subject to the rules as may be prescribed, any assessment order made or order passed under the Act may be reviewed by the person passing the said order either on the application or on his own motion. Rule 79 of the Bengal Sales Tax Rules enjoins that before any person empowered under Section 20 passes any order in appeal, revision or review likely to affect any person adversely he shall send to such person a notice in form IX, fixing a place and time, ordinarily not earlier than fifteen days for hearing any representation which such person may wish to make. Under the Rules, the order can be reviewed within a period of four years from the date of the order. Therefore, in terms of Sub-section (4) of Section 20, according to the rules as prescribed, an order can be reviewed provided-firstly, that opportunity has been given to the person to be adversely affected, secondly, that the order is within a period of four years from the date of the original order and, thirdly, that the authority passing the order of review states his reason for passing the said order. Apart from the aforesaid, there are no other limitations, engrafted in the express provision of Sub-section (4) of Section 20 of the Bengal Finance (Sales Tax) Act, 1941. My attention was drawn to several decisions either under Rule 1 of Order 47 of the Code of Civil Procedure or other provisions of the sales tax laws of other States which give the power of review either on sufficient cause or on mistake apparent on the face of the record. Counsel on behalf of the petitioner relied on the observations in the cases of Thungabhadra Industries Ltd. v. Government of Andhra Pradesh A.I.R. 1964 S.C. 1372, Bisheshar Pratap Sahi v. Parath Nath A.I.R. 1934 P.C. 213 Budhram Kashiram v. State of Bihar [1970] 26 S.T.C. 505 and Deputy Commissioner of Commercial Taxes, Madras v. Khanna Auto Corporation [1969] 24 S.T.C. 153. These decisions turn on the language of either Rule 1 of Order 47 of the Code of Civil Procedure or other provisions of the statute which, as mentioned hereinbefore, circumscribe the power of review on certain conditions. Apart from the conditions indicated before as prescribed in the rule the provisions of the Bengal Finance (Sales Tax) Act do not circumscribe the power of review in any manner. The power of review under the Bengal Finance (Sales Tax) Act, 1941, is not dependent on the existence either of sufficient cause or of discovery of new or additional evidence or an error or mistake apparent on the face of the record. Counsel submitted that unless these conditions were impliedly read in Section 20(4) of the Act it would lead to granting arbitrary power to the revenue authorities which should not be so. I am unable to accept this contention. When the legislature has not thought it fit to circumscribe the power of review under Sub-section (4) of Section 20 it is not for the court to curtail that power. It is also not correct to say that power given to review under Sub-section (4) of Section 20 is arbitrary or naked. As mentioned hereinbefore, the power must be exercised within the period of four years. Secondly, the power must be exercised if it adversely affects a party by giving reasonable opportunity. Thirdly, the power being a quasi-judicial power must be exercised by passing a speaking order. Fourthly, it must be presumed that the power must not be used arbitrarily or maliciously or whimsically. Apart from these, in my opinion, there is no other limitation upon the exercise of power of review under Sub-section (4) of Section 20. It would not, therefore, be inappropriate to base the decision on the scope of Sub-section (4) of Section 20 of the Act on the ratio of decisions based on languages different from Sub-section (4) of Section 20 of the present Act. In the aforesaid view of the matter, I am unable to accept the first contention in support of this application. Reliance in this connection may be placed on the decision of the Supreme Court in the case of Ram Kanai Pal v. Board of Revenue A.I.R. 1976 S.C. 1545. It was then contended that in this case the order passed on 19th November, 1973, by the Commercial Tax Officer was passed at the direction of the Assistant Commissioner and, therefore, the Commercial Tax Officer was not competent to pass the impugned order dated 24th June, 1974, in the manner he has done ignoring the directions given by the Assistant Commissioner in his order dated 4th February, 1969. It was contended that the Assistant Commissioner in his order dated 4th February, 1969, had held that the sales in respect of which exemptions were claimed by the petitioner were sales in the course of import on the ratio of the decision of the Supreme Court in the case of K. G. Khosla & Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes [1966] 17 S.T.C. 473 (S.C) and the Commercial Tax Officer was merely directed to find out the details of the transactions. It was, therefore, urged that the Commercial Tax Officer by the process of review could not set aside the directions given by the Assistant Commissioner of Commercial Taxes and re-examine the question whether the sales in question were in fact sales in the course of import. In my opinion, this submission proceeds upon a misconception of the order of the Assistant Commissioner of Commercial Taxes. I have set out hereinbefore the order of the Assistant Commissioner. It is not correct to state that he found that the sales in question were actual sales in the course of import. He has observed in his order dated 4th February, 1969, that the Commercial Tax Officer was cryptic and the observations of the Commercial Tax Officer in his order dated 29th August, 1967, were cryptic. Then the Assistant Commissioner noted that the contracts stipulated that the goods were to be manufactured by Siemens in West Germany and (sic) some other features of the contracts. He then examined the ambit or the scope of the expression 'occasion the movement of the goods' and then he further, relying on the Supreme Court's observation, observed that if the parties had agreed that goods were to be made by the foreign country and then imported into India for the buyer, there was no possibility of they being diverted by the seller for any other purposes and the sales must be treated as one in the course of import. He, therefore, directed the Commercial Tax Officer to examine the facts in the light of the decision of the Supreme Court- in the case of Khosla & Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes, Madras [1966] 17 S.T.C. 473 (S.C.) and make a fresh assessment in accordance with law. In my opinion, the direction upon the Commercial Tax Officer to make a fresh assessment in accordance with law implied that it was for the Commercial Tax Officer to make a fresh assessment in accordance with law; that it was for the Commercial Tax Officer to examine the details of the transactions and to find out whether the transactions in question were in the course of import as explained by the Supreme Court in the decision referred to hereinbefore. Such a direction, in my opinion, cannot be construed as a finding that the sales mentioned by the petitioner and claimed by the petitioner were, in fact, sales in the course of import and, as such, this finding was concluded by the direction of the Assistant Commissioner of Commercial Taxes. Such was not the position. The Commercial Tax Officer was free to examine the transactions in the light of the ratio of the decision of the Supreme Court. As a matter of fact, in the order dated 19th January, 1973, the Commercial Tax Officer did re-examine the transaction in the light of the ratio of the Supreme Court decision. I have set out the relevant portion of the said order of the Commercial Tax Officer. In that view of the matter, in my opinion, it is not possible to accept the contention urged in support of this application that inasmuch as the order dated 19th November, 1973, was an order passed by the Commercial Tax Officer on the direction of the Assistant Commissioner of Commercial Taxes, the Commercial Tax Officer could not go into the question whether the transactions of sales claimed by the petitioner to be exempt were in fact sales in the course of import. The second contention urged in support of this application, therefore, must also be rejected.

8. The next contention urged in support of this application is that the impugned order was invalid and the sales in question were actual sales in the course of import and the Commercial Tax Officer was in error in holding that the sales were not sales in the course of import. This contention raises the question as to how far and to what extent this court in an application under Article 226 of the Constitution can examine the propriety of the findings made by an authority empowered to make a finding. The Commercial Tax Officer has undoubtedly under the law the jurisdiction to determine whether the particular sale is a sale within the course of import or not. The moment a dealer is a registered dealer and files a claim for exemption in respect of certain transactions the Commercial Tax Officer is empowered by the provisions of the Act to determine and adjudicate that question. His authority and jurisdiction are not dependent upon any other factor. He, therefore, has jurisdiction to decide whether a particular sale is a sale in the course of import or not. It was then contended however that inasmuch as there was constitutional prohibition against imposing duty on the sales in the course of import the Commercial Tax Officer by erroneously finding that the sales were not in the course of import cannot impose tax. In the case of Smt. Ujjam Bai v. State of Uttar Pradesh A.I.R. 1962 S.C. 1621, the Supreme Court held that an order of assessment made by an authority under a taxing statute which is intra vires and in the undoubted exercise of its jurisdiction cannot be challenged on the sole ground that it is passed on a misconstruction of a provision of the Act or of a notification issued thereunder. Nor can the validity of such an order, according to the Supreme Court, be questioned in a petition under Article 32 of the Constitution. There it was contended that the taxing authority had misconstrued the terms of the notification which was issued by the State Government (U.P.) on 14th December, 1957, under Section 4(1)(b) of the United Provinces Sales Tax Act, 1948 and as a result of such misconstruction the authority had assessed the petitioner to sales tax a sum of Rs. 4,71,541.75, which action it was submitted had violated the fundamental right guaranteed to the petitioner under Article 19(1)(f) and (g) and Article 31 of the Constitution. S.K. Das, J., observed that:

Jurisdiction means authority to decide. Whenever a judicial or quasi-judicial tribunal was empowered or required to enquire into a question of law or fact for the purpose of giving a decision on it, its findings thereon could not be impeached collaterally or on an application for certiorari but were binding until reversed on appeal. Where a quasi-judicial authority had jurisdiction to decide a matter, it did not lose its jurisdiction by coming to a wrong conclusion, whether it was wrong in law or in fact. The question whether a tribunal had jurisdiction depended not on the truth or falsehood of the facts into which it had to enquire, or upon the correctness of its findings on these facts, but upon their very nature and it was determinable, 'at the commencement and not at the conclusion, of the enquiry'. The jurisdiction of an inferior tribunal might depend upon the fulfilment of some condition precedent or upon the existence of some particular fact. Such a fact is collateral to the actual matter which the tribunal has to try and the determination whether it exists or not is logically prior to the determination of the actual question which the tribunal has to try. The tribunal must itself decide as to the collateral fact: when at the inception of an enquiry by a tribunal of limited jurisdiction, a challenge is made to its jurisdiction, the tribunal has to make up its mind whether it will act or not and for that purpose to arrive at some decision on whether it has jurisdiction or not.

9. In this case it is true that the liability to pay the Central sales tax is in respect of sales which are not in the course of import but the jurisdiction is of the Commercial Tax Officer concerned to decide whether a particular sale was in the course of import or not. That jurisdiction is not dependent on any other collateral fact or condition precedent. The jurisdiction to tax is in respect of transactions not in the course of import but the jurisdiction to decide whether a particular sale was in the course of import or not is of the officer concerned not dependent upon any particular fact being found or particular condition being fulfilled. Counsel for the petitioner, however, drew my attention to the observations of the Supreme Court in the case of S. T. Corporation of India v. State of Mysore A.I.R. 1963 S.C. 548. There the Supreme Court referred to the observations in the case of Smt. Ujjam Bai v. State of U.P. A.I.R. 1962 S.C. 1621 and observed that the taxing officer in the case before the Supreme Court had no jurisdiction to tax inter-State sales, there being constitutional prohibition against taxing inter-State sales. It was held, therefore, that the taxing officer could not give himself jurisdiction to do so by deciding a collateral fact wrongly. There the Supreme Court found that the taxing officer had wrongly decided a collateral fact and had usurped the jurisdiction to tax inter-State sales. In other words, the position seems to be that where an officer commits an error within the jurisdiction there is no scope of interference in an application under Article 226 of the Constitution unless the authority has proceeded on an erroneous proposition of law or there are questions of violation of the fundamental right or of the principles of natural justice involved in the order in question. But where the authority deciding a question has committed an error of jurisdiction and thereby exceeded his jurisdiction, the writ court is competent to decide the propriety of the findings made by the authority concerned. The difficulty of drawing proper distinction between error within the jurisdiction and error in excess of jurisdiction has been felt by many and as the Supreme Court observed in the case of M.L. Sethi v. R.P. Kapur A.I.R. 1972 S.C. 2379 at 2385, referring to the observations of the House of Lords in the case of Anisminic Ltd. v. Foreign Compensation Commission [1969] 2 A.C. 147:

The effect of the dicta in that case is to reduce the difference between jurisdictional error and error of law within jurisdiction almost to vanishing point.

10. The practical effect of the decision is that any error of law can be reckoned as jurisdictional and the Supreme Court observed this was perilously close to saying that there was jurisdiction if the decision was right in law but none if it was wrong. Though the dividing line between lack of jurisdiction and erroneous exercise of it has become thin it cannot be said that the same has been completely wiped out. There is difficulty in formulating exhaustive rules to tell when there is lack of jurisdiction and when there is erroneous exercise of jurisdiction. The problem of deciding the concept of jurisdiction for the purpose of judicial review is one of public policy rather than one of logic.

11. In an application under Article 226 of the Constitution this court is not exercising appellate jurisdiction. Therefore, unless the competent authority has acted in excess of jurisdiction or has committed an error which amounts to jurisdictional error or there is an error of law apparent on the face of the order, this court is not competent to interfere with the order passed. Whether in a particular case the error amounts to an error in excess of jurisdiction or merely an error within the jurisdiction is difficult to determine. It is really a question of how far latitude the court is prepared to allow in the end to the error in question. Where the error is vital the court considers often the error to be an error in excess of jurisdiction. See the discussion on this aspect of the matter in the Supreme Court decision in the case of M. L. Sethi v. R. P. Kapur A.I.R. 1972 S.C. 2379 at 2385 and also the decision of the Supreme Court in the case of Hariprasad Mulshankar Trivedi v. V.B. Raju (1974) 3 S.C.C. 415.

12. Bearing the aforesaid principles in mind the impugned order has to be judged. It was held by the Commercial Tax Officer on 19 th November, 1973, in the order passed pursuant to the direction of the Assistant Commissioner of Commercial Taxes that the claims for exemption for Rs. 47,46,477.69 had to be allowed because they represented sales in the course of import. In the impugned order the Commercial Tax Officer has held otherwise. In the former order reliance was placed on the Supreme Court decision in the case of K. G. Khosla & Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes [1966] 17 S.T.C. 473 (S.C). In the subsequent decision, the Commercial Tax Officer has relied on the decision of the Supreme Court in the case of Binani Bros. (P.) Ltd. v. Union of India [1974] 33 S.T.C. 254 (S.C.). The test that has to be applied is that the sale must be in the course of import. It is not enough that the sale is for the purpose of import. The importation must be as a result of the sale and must be occasioned by the sale in respect of which exemption is being sought for. The act of importation and the sale in question must form an integrated transaction. How a particular sale and importation should be considered to have formed an integrated transaction depends upon the facts and circumstances of each case. No one test or combination of tests can be decisive in all cases. The fact that there are two different contracts-one a contract of purchase from the foreign seller and another a contract of sale to a buyer in India-may pro-vide good indication of the fact that the sale in question was in the course of importation. Again, in my opinion, the fact that for effecting the sale the goods were imported or prior to the importation there was specification by the buyer or use of the actual user's licence of the buyer are not decisive of the matter. The important factor to be determined is whether the importation and the sale formed an integrated transaction. That requires detailed examination of the transactions in question. In the impugned order the Commercial Tax Officer has observed: 'It appears that each transaction claimed for deduction under Section 5(2) of the Central Sales Tax Act, 1956, consisted of two distinct sales'. The Commercial Tax Officer has not discussed the evidence on record and how he has come to the conclusion. He has further gone on to observe that one transaction was the purchase of the dealer from the foreign supplier. Then after taking delivery of the goods in India there was another sale being sale by the dealer to the customer. He has not considered whether these two operations formed an integrated transaction. Judged from that point of view, in my opinion, he has not applied the correct principles as laid down in the latest judgment of the Supreme Court in the case of Mod. Serajuddin v. State of Orissa [1975] 36 S.T.C. 136 (S.C) and that is an error of law which is apparent on the face of the record. It was further more necessary for the Commercial Tax Officer to have indicated precisely the grounds why he was taking a view different from the view taken by the Commercial Tax Officer originally. Review means a re-examination of the previous order. Therefore, such re-examination must be based upon reasons and the order must indicate the reasons for reviewing the previous decision.

13. I, therefore, hold that the Commercial Tax Officer had jurisdiction to review the order in question. I further hold that his jurisdiction is not in any way curtailed by the fact that there is no error apparent on the face of the record or that there is no new evidence disclosed. I further hold that the officer, concerned was not debarred from reviewing the order because the original order which was sought to be reviewed was the order passed pursuant to direction of the Assistant Commissioner of Commercial Taxes. But the order actually passed contains an error of law by non-application of the correct principles as laid down by the Supreme Court and the order also does not indicate the detailed reasons for coming to the conclusions he has done. For the aforesaid reasons, I set aside the order dated 24th June, 1974, passed under Section 9 of the Central Sales Tax Act read with Section 20(4) of the Bengal Finance (Sales Tax) Act, 1941 and direct the officer concerned to pass a fresh review order in accordance with law after giving the parties reasonable opportunity and in accordance with the principles indicated above.

14. With the aforesaid directions the rule is made absolute to the extent indicated above. There will be no order as to costs.


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