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TMI Blog1964 (10) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... ----------------- The judgment of the Court was delivered by BERI, J.- This is a petition under Article 226 of the Constitution of India wherein the petitioner has prayed for a writ of certiorari or direction in the nature thereof for quashing the order of assessment dated 20th December, 1956, and consequent demand notice by the Sales Tax Officer, City Cirle, Jaipur, the respondent No. 1. The circumstances which give rise to this petition, briefly stated, are these: The petitioner is a public limited company with its head office at Calcutta and it carries on business for the supply of coal throughout India. It has a branch office at Jaipur. This office at Jaipur, besides supervising the supply of coal made directly by the collieries to the consumers through the petitioner, also carries on the business of selling coal in retail. For the purposes of retail sale the petitioner is registered with the Sales Tax Officer, Jaipur. On 2nd September, 1948, the petitioner entered into an agreement with the Equitable Coal Company Ltd., (hereinafter called the "collieries") whereby monopoly was granted to the petitioner for arranging the sale of their coal in the specified area. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consignee, through the petitioner, so that he might take delivery of the coal from the railways. The bill for the sale of coal supplied to the State of Rajasthan along with the copies of railway receipts through the petitioner's head office at Calcutta reached their Jaipur office and the latter office collected the sale price from the State for the supply made to the State of Rajasthan by the collieries. The above arrangement is not disputed by the Sales Tax Department or the State. The petitioner submits that the aforesaid arrangement had the effect of making the petitioner vis-a-vis the collieries a broker and vis-a-vis the State a del cre dere agent. For the year 1955-56 the petitioner submitted its return to the Sales Tax Officer, Jaipur. In its return the petitioner furnished information regarding its turnover under two heads: (1) Regarding the supplies it made as a retail dealer, and (2) the supplies it made to the power houses in the State of Rajasthan, which sum the petitioner showed under the heading "turnover of goods exempted without fee". The Sales Tax Officer on the basis of that return submitted on 20th December, 1956, for the assessment year 1955-56 passed an o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... angements made between the petitioner and the collieries. The Colliery Control Order, 1945, according to them merely regulates sales of coal and does not prescribe the procedure as alleged by the petitioner. They dispute the interpretation put by the petitioner on the Control Order. They contend that the petitioner alone is the contracting party with the State of Rajasthan. It is admitted that permits had to be obtained by the Government in getting supply of coal. The collieries according to them did not supply coal directly to them. It is the petitioner-company which made the supply. On the approval of the supply made by the petitioner a bill used to be submitted and the price was paid as per agreement with the Government. The Government had nothing to do with the collieries. The respondents further submitted that the petitioner itself had placed before the Sales Tax Officer a consolidated statement of its turnover, including the price of the coal sold by it to the State of Rajasthan and it was on the basis of this consolidated statement that the Sales Tax Officer proceeded to assess the petitioner. A copy of the consolidated statement has been submitted with the reply. The petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitations is a fundamental right and the matter has to be enquired into. Kalish Nath v. State of U.P. A.I.R. 1957 S.C. 790; 8 S.T.C. 358., has been cited as an authority for the proposition that where fundamental rights are involved the existence of an alternative remedy is no ground for the refusal to issue an appropriate writ. In Himmatlal v. State of M.P. A.I.R. 1954 S.C. 403; 5 S.T.C. 115., also, it was pointed out that, "the contention that because a remedy under the impugned Act was available to the appellant it was disentitled to relief under Article 226 stands negatived by the decision of this Court in State of Bombay v. United Motors (India) Ltd. [1953] 4 S.T.C. 133; A.I.R. 1953 S.C. 252." The existence of an alternative remedy is no bar to a party who comes to this Court with an allegation that its fundamental right has been infringed without the authority of law. In an appropriate case it may be the duty of the superior court to issue a writ of certiorari to correct the errors of an inferior court or tribunal called upon to exercise judicial or quasi-judicial functions and not to relegate the petitioner to other legal remedies available to him. If it is held that the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he effect on 10th January, 1958, but since the papers were not submitted through the Finance Depart- ment the decision of the Council could not be implemented. This decision was verbally communicated to the petitioner and, therefore, the petitioner did not move this Court earlier. In our opinion, in view of these uncontroverted facts, the petitioner was justified in not rushing to this Court. So far as the plea of acquiescence is concerned we might refer to a decision in Sales Tax Officer v. Kanhaiya Lal. A.I.R. 1959 S.C. 135; 9 S.T.C. 747. This was also a case under the Sales Tax Act where the petitioner had deposited the sales tax for three years. Later the High Court of Allahabad held the levy of sales tax on forward transactions to be ultra vires. Thereupon, the assessee asked for a refund of the amount of the sales tax paid. The same was refused. The assessee moved the High Court of Allahabad praying for a writ of certiorari for quashing the aforesaid assessment orders and for a writ of mandamus requiring the Sales Tax Authorities to refund the aforesaid amount paid by the assessee. The High Court held that the State was bound to refund the moneys unlawfully received by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plain that tax can only be levied and collected on the authority of law. In this view of the matter the preliminary objections raised by the learned Government Advocate, in our opinion, have no substance and must be overruled. Mr. Tyagi, learned counsel for the petitioner, submits that unless the transaction between the petitioner and the State of Rajasthan is regarded as one for sale or purchase of coal no liability for payment of tax would arise under the Sales Tax Act. According to the learned counsel in view of the provisions of the Colliery Control Order, 1945, (hereinafter referred to as the Control Order), the petitioner was a mere broker entitled to commission and the transac- tion between the petitioner and the State could in no sense be characterised as sale. This is borne out, urged the learned counsel, by the agreement dated 28th April, 1955, between the State of Rajasthan and the petitioner (exhibit P-3), wherein the petitioner was described as a mere contractor. Price for the sale as per clause(6) of the agreement was to be at the controlled rate. In point of practice as well the railway receipts, a sample copy of which is exhibit P-8, the consignor was Ranipur Col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f two sales one by the collieries to the petitioner and the other by the petitioner to the State. In either case the petitioner was liable to pay tax. Before we examine the respective contentions of the parties it will be appropriate to briefly review the provisions of the Control Order in so far as they affect the case before us. These provisions have an important bearing in the solution of the controversy. Clause 4 of the Control Order provides that the Central Government may by notification in the Gazette of India fix the price at which coal may be sold by colliery owners. Clause 5 prohibits a colliery owner from selling or agreeing to sell, or offering to sell, coal at a price different from the price fixed under clause 4 of the Control Order. No agreement to the contrary shall be operative unless the same is modified in regard to price as fixed under clause 4. Clause 6 of the Control Order inter alia provides that where a colliery owner has signified to the Deputy Coal Commissioner (Distribution) in writing his willingness to sell direct to consumers and an allotment is made by the Deputy Coal Commissioner (Distribution) to a consumer with his consent for such direct sale, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould despatch any coal except under the authority and in accordance with the conditions contained in a general or special sanction granted by the Central Government. It is not disputed that the Executive Engineer (Generation) Electrical and Mechanical Department, Rajasthan, Jaipur, used to be granted sanction to obtain coal for the power house by the Deputy Coal Commissioner (Distribution). A sample copy of such sanction has been placed before us (exhibit P-4). The Government of India, Central Water and Power Commissioner, (Power Wing) Simla, used to allot certain quota of coal to the Executive Engineer (Generation) of the Rajasthan State (exhibit P-5). A sample railway receipt admittedly indicated that the consignee used to be the Executive Engineer, Power House, Jaipur. This railway receipt, in practice, was sent to the consignee through the petitioner. The bill for the sale price of the coal supplied along with the copies of railway receipts were sent by the head office to its Jaipur office of the petitioner for collection of the price. Respondents' contention in their reply that they had nothing to do with the collieries does not appear to be correct. In this state of facts w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it went into the furnace of the power house at Jaipur or Kota, the petitioner, in view of the agreement and the Control Order, had any right or title to transfer by way of sale in the coal supplied to the State. Therefore, it could not purport to sell the coal. If no sale could be or was effected by the petitioner, no liability to sales tax arose against the petitioner. The words, sale and supply, go together and the tax operates upon sales and not on any other kind of supply where the person and through whom the supply is made has no title in the goods at all. Under the constitution also the State can legislate for imposing tax on the sale of goods, other- wise the imposition would be illegal. In this connection we might refer to the decision in State of Bombay v. Ratilal Vadilal Bros. [1961] 12 S.T.C. 18., which is a case very much in point. The facts were that Ratilal Vadilal Bros., were commission agents through whom 22 tons of coal were obtained by a brick manufacturer. The colliery supplied the coal to the brick manufacturer directly. The consignment was in the name of the brick manufacturer. The bill was sent by the colliery to Ratilal Vadilal Bros., to collect the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Bihar Sales Tax Act, 1944, was practically identical with the definition as given in the Rajasthan Sales Tax Act. The majority opinion expressed in the case is by Ramaswami and Das, JJ. Ramaswami, J., observed: "In my opinion, the word 'supply' cannot be interpreted in its literal absolute sense, but must be given a limited and qualified sense. In a case of this description, the rule of interpretation is noscitor a sociis. The words, as they were, take colour and meaning from their context, that is to say, the more general word is restricted to a sense analogous to the less general word. In the present case, therefore, I hold that the word 'supply' in section 2(c) of the Act must be interpreted so as to include the conception of sale". To the same effect is the view of Das, J. In Karamchand Thapar Bros. v. The State of Bihar [1956] 7 S.T.C. 58., the word "supply" in the Bihar Sales Tax Act again came to be considered and Das, C.J., and Kanhaiya Singh, J., held that the word "supply" in the definition of dealer in section 2(c) of the Bihar Sales Tax Act was not to be given its literal meaning but must be interpreted in a qualified sense. "Supply" is merely a form of sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessees entered into an agreement with third parties by which they charged something extra from them and handed over to the third parties delivery orders. The mills delivered the goods againt these delivery orders along with an invoice and a bill, and collected the sales tax from the third parties. The assessees contended that there was only one transaction of sale between the mills and the third parties and that the transaction between the assessees and the third parties could not be treated as a sale. The Supreme Court held that there were two transactions of sale and sales tax was payable on both these points. We have already noticed that the agreement of sale and purchase was between the assessees and the mills. The mills refused to recognise the third parties as contracting parties. That transaction which took place between the assessees and the third parties was again a transfer of property in the goods and constituted sale. In the case before us there was no sale at any point of time by the collieries to the petitioner. The certificate of allotment was granted to the Executive Engineer, Rajasthan, Jaipur; the Engineer was designated as the consignee in the railway receipt; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the coal has been mentioned in the agreement. The quantity of the coal used to be regulated by allotment orders. All that the Rajasthan State reserved up to itself was the right to reject if the quality other than the one specified in the agreement was supplied, then it would refuse to accept the same. Thus the contract before us is not one for sale of unascertained goods. Moreover, the petitioner not only acted as the agent for the collieries but had also acted as the agent for the State of Rajasthan. Broker's position according to Wharton in this Law Lexicon is in the following terms: "The engagement of a broker is like that of a proxy, a factor, and other agent; but with this difference, that the broker, being employed by persons who have opposite interests to manage, he is, as it were, agent both for the one and the other, to negotiate the commerce or affair in which he concerns himself. Thus his engage- ment is twofold, and consists in being faithful to all the parties, in the execution of what each one of them entrusts him with. And his power is not a trust, but to explain the intentions of both parties, and to negotiate in such a manner as to put those who employ him i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were entered into later for the regular supply of coal to the said power house at Jaipur and Kotah power house. The petitioner supplied coal under these agreements until May, 1958. It is necessary to set out the terms of the agreement dated April 28, 1955, as the effect of the agreement has been the subject of much debate before us. "Articles of agreement made this twenty eighth day of April, one thousand nine-hundred and fifty five between His Highness the Rajpramukh of the State of Rajasthan, of the one part, and Messrs Karamchand Thappar and Bros. (Coal Sales) Ltd. of 5, Royal Exchange Place, Calcutta, hereinafter called the 'Contractor' of the other part. The contractor shall supply the coal to the Rajasthan Government Power House at Jaipur in accordance with the specifications and terms as follows, for a period of one month- 1.. Rubble Coal, selected grade A, double screened, size " to 1 " fusion point of ash 1250 F, from Bejdih, Dhamomain and Jamuria West Collieries and as per coal analysis mentioned in their letter No. CS/4844 dated 11-2-1955. 2.. The contractor shall deposit a sum of Rs. 10,000 (Rupees ten thousand only) as security for due performance of the contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be noticed that para. 1 of clause 6 enables a colliery owner failing within this para. to give brokerage to a broker not exceeding six annas per ton. The petitioner claims that it was getting this brokerage from the Equitable Coal Company, whose coal was supplied to the Jaipur Power House. Clause 8 empowered the Central Government to give directions to a colliery "regulating the disposal of his stock of coal.....including directions as grade, size and quantity of coal which may be disposed of and persons or class or description of persons to whom coal shall or shall not be disposed of....." If a direction is given, the colliery owner is obliged by clause (9) to dispose of coal in accordance therewith. Clause 12-E directs that- "No person shall acquire or purchase or agree to acquire or purchase any coal from a colliery and no colliery owner or his agent shall despatch or agree to despatch or transport any coal from the colliery except under the authority and in accordance with the conditions contained in a general or special authority of the Central Government." The actual procedure adopted for the supply as stated by the petitioner and not disputed by the appellant bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made to the power house under the heading "turnover of goods without fee". By order dated February 12, 1957, the Sales Tax Officer, Jaipur City, included the sales to power houses amounting to Rs. 7,11,941-13-3 in the taxable turnover. The petitioner complained in the petition that the Sales Tax Officer did not dispose of its contention raised before him that the sales to the power houses could not be included in the taxable turnover. The company did not file any appeal but approach- ed the Government and the Sales Tax Commissioner for relief but without success. It appears that though on December 30, 1957, the Council of Ministers passed a resolution exempting sales of coal to the Electrical and Mechanical Department this could not be implemented because the papers were not submitted through the Finance Department. This decision was, however, orally communicated to the petitioner. In the meantime the petitioner submitted the returns for the assessment year 1956-57, showing therein the supply of the coal to the power houses under the head "turnover of goods exempt without fee on Form STV." The company alleged that it feared that the Sales Tax Officer would tax the said turnover a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as per specifications at the Jaipur power house. The petitioner had to arrange transport and safe delivery of coal and pay railway freight in the first instance. The security of Rs. 10,000 was deposited by the petitioner to secure due performance of the contract. Mr. Sastri in reply submits that this agreement is to be read in the light of the Colliery Control Order, and if there is inconsistency between the contract and the Colliery Control Order, 1945, the latter will prevail: According to him, no property in the coal ever passed or could pass to the petitioner and it was a case of a direct sale by the colliery to the State Government. This is evident, he says, from clause (6) and the direction given by the Coal Controller under clause (8) of the Colliery Control Order. Under the direction coal could only be supplied to the State of Rajasthan. It seems to us that the petitioner is not a dealer within the defini- tion of the word "dealer" in the first para. of section 2(f), set out above. The petitioner did not sell or supply coal. What it did was to procure the supply of coal. Under the direction issued under clause (8) of the Colliery Control Order, it is the Equitable Coal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o an agent of the Government, but we are unable to agree with him. Apart from the fact that the petitioner was charging no remuneration from the Government, the agreement dated April 28, 1955, read as a whole is clearly between two principals. Accordingly, we hold that the petitioner is an agent within the explanation to section 2(f), and, therefore, he is deemed to be a "dealer " for the purposes of the Act. We may mention that Mr. Sastri has not contended that assuming that the supply of coal amounted to sale the Equitable Coal Company was not carrying on the business of selling or supplying goods within Rajasthan. We may now deal with the point raised by Mr. Tewari that the High Court should not have granted relief under Article 226. He does not dispute that the High Court had the jurisdiction, but he says that on the facts of the case, the High Court should not have interfered. We are unable to agree with him. The High Court has given good reasons for interfering. The High Court observed that "the petitioner had challenged the authority of the State of Rajasthan to enact a law whereby tax on the sale of goods outside the State of Rajasthan could be levied and the application ..... X X X X Extracts X X X X X X X X Extracts X X X X
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