1970 (9) TMI 101 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Preliminary objection regarding alternative remedy.
2. Binding nature of previous assessment findings.
3. Classification of "hume pipes" as sanitary fittings.
4. Consideration of evidence and material by the Sales Tax Officer.
5. Interpretation of the term "sanitary fittings" in the context of the U.P. Sales Tax Act.

Detailed Analysis:

1. Preliminary Objection Regarding Alternative Remedy:
The learned counsel for the department raised a preliminary objection, arguing that an alternative remedy by way of appeal was available to the petitioner, and thus, the court should not exercise its jurisdiction under Article 226 of the Constitution. The petitioner countered that the issue involved the interpretation of a notification under the U.P. Sales Tax Act, which was of a recurring nature, causing significant financial liability. The court acknowledged that although jurisdiction under Article 226 is typically not exercised when an adequate alternative remedy exists, special circumstances in this case warranted such intervention. The court found the appeal remedy not efficacious due to the substantial additional liability and potential adverse effects on the petitioner's business.

2. Binding Nature of Previous Assessment Findings:
The court pointed out that while each assessment year is a separate unit, the findings of the revising authority (the highest tribunal in the sales tax department hierarchy) should generally be followed in subsequent assessments unless new material justifies a different view. The court cited the Bombay High Court's rulings in H.A. Shah & Co. v. Commissioner of Income-tax and Burmah Shell Refineries Ltd. v. G.B. Chand, Income-tax Officer, emphasizing that earlier decisions should not be reopened without fresh facts. The Sales Tax Officer's disregard for the revising authority's decision for the assessment year 1961-62 was deemed improper and potentially illegal.

3. Classification of "Hume Pipes" as Sanitary Fittings:
The primary dispute was whether "hume pipes" manufactured by the petitioner fell within the category of "sanitary fittings" taxable at 7% under the notification issued under section 3-A of the U.P. Sales Tax Act. The court noted that the term "sanitary fittings" was not defined in the Act or Rules and should be interpreted in a popular and commercial sense. Referring to the Supreme Court's rulings in Commissioner of Sales Tax, Madhya Pradesh, Indore v. M/s. Jaswant Singh Charan Singh and Ramavatar Budhaiprasad v. Assistant Sales Tax Officer, Akola, the court emphasized that terms in sales tax statutes should be construed according to their popular meaning.

4. Consideration of Evidence and Material by the Sales Tax Officer:
The court found that the Sales Tax Officer had disregarded the substantial material presented by the petitioner, including affidavits, opinions from dealers, and official communications, which indicated that "hume pipes" were not considered sanitary fittings in the commercial world. The court held that quasi-judicial orders must consider all material on record, and failure to do so renders the order arbitrary and perverse, justifying intervention under Article 226.

5. Interpretation of the Term "Sanitary Fittings":
The court concluded that "sanitary fittings" in common parlance referred to items used in bathrooms and lavatories, such as washbasins and commodes. While concrete pipes might be used for drainage and sewage disposal, they were also used for various other purposes. The court determined that the term "sanitary fittings" should be restricted to articles commonly understood as such in everyday language and commercial practice. The court found that the pipes manufactured by the petitioner did not fall within this category and were, therefore, unclassified goods taxable at the general rate under section 3.

Conclusion:
The court allowed the petition, quashing the impugned assessment orders for the years 1962-63 and 1965-66, which had levied tax at 7% on the turnover of pipes. The court held that the pipes were unclassified goods and taxable at the general rate specified under section 3. The petitioner was entitled to costs.