9911796707
TMI Blog1980 (6) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... . It also holds a manufacturing licence for tyres and rubber products. On 4th May, 1960, the petitioner-company entered into a contract with Dunlop India Limited, the third respondent herein. Under the said contract, Dunlop India Limited agreed to manufacture on behalf of the petitioner-company tyres and rubber products. It is further agreed that in all matters relating to purchase of raw materials, engagement of labour, conducting of such operations as may be incidental to or necessary for the manufacture of the said goods in the factory of Dunlop India Limited, the latter shall be acting on behalf of the petitioner-company. Under the terms of the said contract, Dunlop India Limited would be entitled to be reimbursed the actual cost of production together with incidental expenses at the rate of 5 per cent of such raw materials and production costs. The petitioner had also covenanted to bear and pay all actual charges and expenses incurred in connection with the said goods. It is the petitioner's case that the nature of the transactions under which Dunlop India Limited agreed to manufacture tyres and rubber products for the petitioner-company is a works contract. The petitionercomp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t itself impleaded in Appeal No. 891 of 1976 filed by Dunlop India Limited; and W.P. Nos. 1449, 1450 and 1451 of 1978 are filed to restrain the second respondent from taking up and considering Appeals Nos. 892, 893 and 894 of 1976. Counter-affidavits have been filed on behalf of respondents Nos. 1 and 2. According to the counter-affidavit, Dunlop India Limited is an assessee on the file of the first respondent. The first respondent revised the assessments for the years 1969-70 to 1972-73 by the order dated 10th November, 1975, by which it was held that the transactions between the assessee and the petitioner-company were sales exigible to single point tax at the assessee's hands. Against these orders, the assessee filed appeals before the Appellate Assistant Commissioner and the appellate authority concurred with the assessing authority in its finding as regards the liability of Dunlop India Ltd. to tax, but remanded the case for determination of the correct turnover. Against the said orders of the appellate authority, Dunlop India Limited have preferred Appeals Nos. 891 to 894 of 1976. Dunlop India Limited themselves have preferred petitions purporting to be under section 36(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia Limited will be entitled to recover the amount of sales tax that might be levied against them from the petitionercompany. The amount involved will come to about Rs. 62,00,000. Therefore, the petitioner-company is aggrieved by the order of the assessing authority and the appellate authority and will have even a right of appeal against the order of assessment passed by the Appellate Assistant Commissioner under section 36 of the Act as a person aggrieved. If that is so, then certainly the petitionercompany will be a proper party in the appeals pending before the Tribunal. The real persons who will be affected by any order that might be finally passed by the Tribunal will be the petitioner-company and that, consequently, the petitioner-company has got a right to be heard in the appeals filed by Dunlop India Limited. The question for consideration is whether the contentions of the learned counsel for the petitioner are sustainable. Though Mr. Parasaran, at the first instance, contended that the impugned order was liable to be set aside on the ground of violation of the principles of natural justice, in view of the fact that the petitioner was not heard before the order was pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other legal representative shall be deemed to be the dealer for the purposes of the Act and the provisions of the Act shall apply to him in respect of the business of the said deceased dealer and the liability of the executor, administrator or other legal representative is confined to the extent of the assets of the deceased dealer in his hands. Section 16 provides for assessment of escaped turnover. Section 18 deals with liability to tax of persons not observing restrictions and conditions notified under section 17. Section 20 provides for registration of dealers. Section 22 deals with collection of tax by a dealer. Section 23 provides for levy of penalty in certain cases. Sections 24 to 26 deal with payment and recovery of tax as well as recovery of penalty and mode of recovery. Section 31 provides that any person objecting to an order passed by the appropriate authority under section 4-A, section 12, section 14, section 15, sub-sections (1) and (2) of section 16, section 18, sub-section (2) of section 22, section 23 or section 27 may within a period of thirty days from the date on which the order was served on him in the manner prescribed, appeal against such order to the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing authority to make a fresh assessment after such further inquiry as may be directed; or (iii) pass such other orders as it may think fit; or (b) in the case of any other order, confirm, cancel or vary such order." Section 37 provides for appeal to the High Court against an order of the Board of Revenue passed under section 34. Section 38 confers power of revision on the High Court against the orders of the Deputy Commissioner. It is therefore seen that only a dealer is affected either by an order of assessment or an assessment of escaped turnover under section 16. A dealer is given a right of appeal under section 31 to the Appellate Assistant Commissioner. In a dispute between the dealer and the commercial tax authorities regarding the correctness of the original assessment or assessment of escaped turnover, a third party has no interest at all to intervene. The question involved is purely one between the dealer concerned and the commercial tax authorities. Any assessment order that might be passed by the assessing authority or the various appellate or revisional authorities provided for in the Act will not be binding on any person other than the dealer. It is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on who is not a registered dealer shall collect any amount by way of tax or purporting to be by way of tax under the Act and no registered dealer shall make any such collection except in accordance with the provisions of the Act and the Rules made thereunder. Section 22(2) provides that if any person or registered dealer collects any amount by way of tax or purporting to be by way of tax in contravention of the provisions of subsection (1), whether or not any tax is due from such person or dealer under the Act in respect of the transaction in which he collects such amount, the assessing authority may after giving such person or dealer a reasonable opportunity of being heard, by order in writing impose upon him by way of penalty a sum not exceeding one and a half times such amount. It is seen from this section that not only a registered dealer but also a person other than a registered dealer shall be subject to penalty if he contravenes the provisions of sub-section (1) of section 22. Section 31 similarly provides for an appeal against an order passed under section 23. Section 23 provides that if any person purchasing goods is guilty of an offence under clause (e) of sub-section (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P.C., must be a person who is bound by the decree or order or he is aggrieved by it or is prejudicially affected by it. In Maharaj Singh v. State of U.P.(2), it is stated: "The test whether a person is 'an aggrieved person' is to see whether he has a genuine grievance because an order has been made which prejudicially affects his interests." A person can be said to be aggrieved by an order only if that order directly affects or prejudices his interest. Decisions under section 96 have laid down that as a general rule a decision cannot be said to adversely affect a person unless it will operate as res judicata against him in any future suit. Therefore, under section 96, a person, who is not a party to the suit or his legal representative but cannot be affected by the decision of the court in any way, cannot file an appeal. It has been observed by a Bench of this Court in Kasi Chettiar v. Secretary of State(3) that "a right of appeal is not a mere matter of procedure. It is a substantive right and is primarily a creature of statute. As such, it can be (1) A.I.R. 1974 S.C. 994. (3) A.I.R. 1941 Mad. 577. (2) A.I.R. 1976 S.C. 2602. exercised only by those in whom the power vests either e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r under the agreement entered into between the two are in the nature of sale and not works contract will be to render the petitioner liable to pay to Dunlop India Limited the amount of sales tax levied on them on the said turnover. So far as the commercial tax authorities are concerned they are interested in realising the legitimate taxes from Dunlop India Limited. They are not concerned with the fact that, as a result of the order, Dunlop India Limited would be compelled to call upon the petitioner to reimburse the amount. The agreement between Dunlop India Limited and the petitioner itself does not make any reference to the petitioner's liability to pay the sales tax on the tyres and rubber products to be supplied by Dunlop India Limited if the transactions are found to be sale by the authorities concerned. Clause (c) of the agreement states that the petitioner would reimburse Dunlop India Limited with the cost of raw materials obtained by them for the manufacture of the goods. It is further agreed that the petitioner would pay a sum at the rate of 5 per cent of such cost of raw materials and production to cover incidental expenses to Dunlop India Limited. It is also further ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts the power of doing all such acts, or employing such means, as are essentially necessary to its execution. Cui jurisdictio data est, ea quoqe concessa esse vindentur, sine quibus jurisdictio explicari non poluit." The principle is thus stated in articles 5401 and 5402 of Sutherland Statutory Construction, III Edition: "It is a firmly established rule that an express grant of statutory power carries with it by necessary implication the authority to use all reasonable means to make such grant effective. " In Domat's Civil Law, Cushing's Edition, Vol. I, at page 88, it has been stated thus: "It is the duty of the Judges to apply the laws, not only to what appears to be regulated by their express dispositions but to all the cases where a just application of them may be made, and which appear to be comprehended either within the consequences that may be gathered from it." Craies observes: "One of the first principles of law with regard to the effect of an enabling act is that if a legislature enables something to be done, it gives power at the same time, by necessary implication, to do everything which is indispensable for the purpose of carrying out the purpose in view" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration which is incidental and necessary to effectively utilise the appellate power conferred upon him. Therefore no statutory authority has unlimited inherent powers. They have only such implied or incidental powers as are necessary for an effective exercise of the powers granted to them under the statute. In this particular case, the appellate power of the Tribunal under section 36(1) of the Act must be deemed to include by necessary implication all powers and duties incidental to and necessary for the effective exercise of its appellate jurisdiction. It cannot be (1) A.I.R. 1962 S.C. 486 at 494. (3) [1975] 1 M.L.J. 407. (2) A.I.R. 1969 S.C. 430. contended that a power to implead third parties who are neither necessary parties nor proper parties for the effective disposal of the appeals preferred by Dunlop India Limited, the assessee, is also covered by necessary implication within its appellate jurisdiction. The nature of the incidental or implied powers held by a statutory authority for the effective exercise of its powers under the statute will vary from statute to statute and depend upon the particular context. Viewed in this light, I have no hesitation to repel the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilasam, J., in that case was entirely different. There the question that directly arose was whether the accident happened due to the negligence of the driver of the bus or due to the negligence of the gateman of the railways employed at the level-crossing. Naturally therefore the railways were not only proper parties but also necessary parties to rebut any evidence that might be let in by the bus owner and the insurance company to throw the negligence on the part of the railways. In this particular case, there could be no competition between the petitioner and Dunlop India Limited in the proceedings pending before the Tribunal. (1) A.I.R. 1970 S.C. 759. (2) [1974] 87 L.W. 670. It is open to the dealer, i.e., Dunlop India Limited, to produce all evidence and advance all necessary contentions before the Tribunal to show that the transaction by which they made supplies of tyres and rubber products to the petitioner would constitute a works contract and not a sale. I am therefore of the view that the above decision is distinguishable on its own facts. The decision in Martin Burn Ltd. v. R.N. Banerjee(1) relates to the power of the Labour Appellate Tribunal to set aside an ex Parte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res, tubes and accessories. According to the appellant, the transaction was in the nature of works contracts whereby Dunlop would apply labour and skill in the material of the appellant and would supply the product with the brand name of the appellant to be sold by the appellant in the open market. The further case of (1) [1958] S.C.R. 514. *Page 275 supra. the appellant was that under the terms of the contract Dunlop would be entitled to be reimbursed the actual cost of raw materials obtained on behalf of the appellant and the cost of production together with incidental expenses at the rate of 5 per cent of the cost of such raw materials and production costs, and the appellant had covenanted to bear and pay all actual charges and expenses incurred in connection with the said goods. It is the case of the appellant that the nature of the transaction under which Dunlop agreed to manufacture tyres and rubber products for the appellant-company was works contract and the appellant-company had been submitting returns under the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as the Act), and the sales tax authorities had been finalising the assessments on the basis that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Venugopal, the learned counsel for the appellant, contended that once the assessment on Dunlop becomes final, the appellant will have to pay the tax to Dunlop and, consequently, the appellant will be really affected by any order the Tribunal may pass in rejecting the appeals preferred by Dunlop and, therefore, the appellant has sufficient interest in the matter pending before the Tribunal and to have itself impleaded as a party to the appeals. The learned counsel for the appellant further contended that the principles of natural justice would be violated if the appeals preferred by Dunlop are dismissed, because, in such an event, Dunlop would claim the amount from the appellant and the appellant would have no answer to the claim, with the result, the appellant would be rendered liable to pay the amount without the appellant having an opportunity to sustain its contention as well as the contention of Dunlop that the nature of the transaction entered into between the parties was one of works contract. The learned counsel further drew our attention to sections 48 and 51 of the Act for the purpose of contending that in view of these statutory provisions, the appellant will have no rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion. From the very nature of the case, the provisions of the Sales Tax Act are intended to deal with procedure for assessment and recovery of tax from a dealer who is liable to pay sales tax to the Government. The enactment is a taxing statute pure and simple and it does not purport to deal with any other claim by any other person against the assessee. The commercial taxes department is not concerned with the effect which the assessment made on a dealer may have on somebody else. All that the commercial taxes department is concerned with is to assess the dealer according to the provisions contained in the Act and realise the tax from him. Any claim between the assessee and a third party is totally foreign to the scheme of the provisions of the Act. A reading of the entire provisions of the Act makes it clear that it is a matter exclusively between the dealer who is liable to pay the tax under the Act and the authorities who are competent to levy the tax and collect the same, and there is no scope whatever for anybody else entering the arena either in support of the assessee or against the assessee. As we have pointed out already, the learned counsel's contention was that sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aving the assessment challenged according to the procedure prescribed by the Act itself. If a person does not have the competency to challenge the assessment according to the procedure prescribed by the Act, we do not think that the bar provided for in sections 48 and 51 will come into operation, provided such a person has got the necessary cause of action for initiating the other proceedings. Therefore, in our opinion, simply because sections 48 and 51 impose a bar on questioning the validity of an assessment order in other proceedings it cannot be inferred that the scope of the jurisdiction of the officers and authorities functioning under the Act dealing with an assessment made under the Act should be enlarged. Let us now take up section 36 itself which is the section under which Dunlop had preferred appeals before the Tribunal. Sub-section (1) of section 36 of the Act reads as follows: "36. Appeal to the Appellate Tribunal.-(1) Any person objecting to an order passed by the Appellate Assistant Commissioner under sub-section (3) of section 31, or an order passed by the Deputy Commissioner under sub-section (1) of section 32 may, within a period of sixty days from the date on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the simple reason that the statute itself contemplates persons other than a dealer being subjected to certain liabilities and since it is the intention of the statute that those persons also must be in a position to take up the matter further, the sections mentioned above use the expression "any person objecting to an order". In fact, the learned Judge refers to sections 22 and 23 for instance and from those sections, it is seen that there are persons other than the dealers who are subjected to some liability under the Act and those persons also are enabled to take up the matter further and that is why the expression "any person" occurs in those sections. The learned Judge states: "Under section 22 no person who is not a registered dealer shall collect any amount by way of tax or purporting to be by way of tax under the Act and no registered dealer shall make any such collection except in accordance with the provisions of the Act and the Rules made thereunder. Section 22(2) provides that if any person or registered dealer collects any amount by way of tax or purporting to be by way of tax in contravention of the provisions of sub-section (1), whether or not any tax is due from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agination in this case it can be said that the statute has imposed any liability or obligation on the appellant herein with reference to the assessment to tax on the transactions of Dunlop. Therefore, we are clearly of the opinion that the appellant cannot be said to be a person who is competent to prefer an appeal under any of the provisions. We are dealing with the above question only because Mr. K.K. Venugopal contended that in view of the interest which the appellant has in sustaining the contention of Dunlop that the transaction constituted only a works contract, even if Dunlop did not prefer an appeal, the appellant would be entitled to prefer an appeal and, therefore, the appellant would be justified in getting itself impleaded as a party to the appeals preferred by Dunlop. There are certain other circumstances also which will indicate that a person like the appellant, who is not directly and immediately concerned with the assessment made under the Act and on whom the Act itself has not imposed any liability or obligation, cannot prefer an appeal or get himself impleaded as a party to the appeal preferred by the dealer or the assessee. In dealing with the period of limitat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to put forward his own case and the principles of natural justice require such a procedure to be followed. In fact, he went to the extent of contending that under the Sales Tax Act, a dealer who is liable to pay tax is entitled to pass his tax to the purchaser and each one of the purchasers will have a real interest in the liability of the seller to pay tax, because when the seller is not liable to pay tax, he could not collect it from the purchaser and each one of the purchasers is a person entitled to file an appeal against the order of assessment made on the seller or entitled to intervene in an appeal preferred by the seller. We are clearly of the opinion that it is impossible to subscribe to any such proposition of law by converting the authorities or Tribunals created under the statute into a regular court for the purpose of deciding all disputes inter se between the dealer and other parties and certainly the authorities constituted under the statute do not have any such power and their powers are limited by the functions assigned to them and by the rules of procedure framed therefor. It may also be pointed out that section 54 of the Act itself provides as to what powers t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is enacted to secure a complete and full disclosure of all materials relevant to the assessment from the assessee. If the flood-gate is wide open galore, and every purchaser would come on record and intervene in the appeal it will be totally opposed to the spirit and purpose behind the provision referred to above, namely, the desirability and necessity for treating the materials as confidential. There is one other circumstance also to which we would like to draw attention. Padmanabhan, J., in his order, has expressly pointed out: "On the face of the agreement there is no term by which the petitioner had unconditionally undertaken that it would pay whatever amount that Dulop India Limited might be called upon to pay by way of sales tax if it is found by the commercial tax authorities that the transactions covered by the agreement constitute a sale." The necessity for making these observations arose because the appellant repeatedly contended before us as he had done before the learned Judge also that the moment Dunlop is assessed to sales tax, the appellant would be liable to the same by way of reimbursing Dunlop under the terms of the agreement. It is in view of this only the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to section 64A of the Sale of Goods Act. Sub-section (1) of that section provides: "Unless a different intention appears from the terms of the contract, in the event of any tax of the nature described in sub-section (2) being imposed, increased, decreased or remitted in respect of any goods after the making of any contract for the sale or purchase of such goods without stipulation as to the payment of tax where tax was not chargeable at the time of the making of the contract, or for the sale or purchase of such goods tax-paid where tax was chargeable at that time,- (a) if such imposition or increase so takes effect that the tax or increased tax, as the case may be, or any part of such tax is paid or is payable, the seller may add so much to the contract price as will be equivalent to the amount paid or payable in respect of such tax or increase of tax, and he shall be entitled to be paid and to sue for and recover such addition; and (b) if such decrease or remission so takes effect that the decreased tax only, or no tax, as the case may be, is paid or is payable, the buyer may deduct so much from the contract price as will be equivalent to the decrease of tax or remitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Provincial or a Regional Transport Authority to grant a permit or by any condition attached to a permit granted to him,' and under sub-section (f) 'any person....who, having opposed the grant of a permit, is aggrieved by the grant thereof.....' 'may, within the prescribed time and in the prescribed manner, appeal to the prescribed authority who shall give such person and the original authority an opportunity of being heard'." The question which came to be considered by that Bench was that as the statute contemplated giving of an opportunity of being heard in the disposal of the appeal only to the person who preferred the appeal and the original authority who passed the order, what should happen to the person in whose favour the original order came to be passed. Only in that context, the court held that the person who succeeded before the original authority must be given an opportunity to sustain the order of the original authority, because, the allowing of the appeal only on hearing the appellant and the original authority will result in an order detrimental to or adverse to the claim or interest of the other person referred to above and that would violate the principles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sted" occurring in section 18(1) of the Land Acquisition Act. After extracting section 18(1) of the said Act, the Supreme Court observed: "It seems to us that the definition of 'a person interested' given in section 18 is an inclusive definition and must be liberally construed so as to embrace all persons who may be directly or indirectly interested either in the title to the land or in the quantum of compensation. In the instant case, it is not disputed that the lands were actually acquired for the purpose of the company and once the land vested in the Government, after acquisition, it stood transferred to the company under the agreement entered into between the company and the Government. Thus it cannot be said that the company had no claim or title to the land at all. Secondly, since under the agreement the company had to pay the compensation, it was most certainly interested in seeing that a proper quantum of compensation was fixed so that the company may not have to pay a very heavy amount of money. For this purpose, the company could undoubtedly appear and adduce evidence on the question of the quantum of compensation." In our opinion, this decision also is not of any ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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