M. N. Cl11bwala

Fida Hussain

Salieb

Mudholkar I.

Ft!bruary, 4

SUPREME COURT REPORTS

could not be effectively carried out by the landlord by parting with possession in favour of the stail-holders by reason of which the performance by the landlords of their duties and obligations could easily be rendered impossible if the stall-hoiders adopted an unreasonable attitude. If the landlords failed to perform their obligations they would be exposed to penalties under the Act and also >too<l in danger of having their licences revoked.

Could, in such circumstances, the landlords have ever intended to part with possession in favour of the stall-holders and thus place themselves at the mercy of these people? We are, therefore, of the opinion that the intention of the parties was to bring into existence merely a licence and not a lease and the word 'rent' was used loosely for 'fee'.

UjJon this view we must allow the appeal, set aside the decree of the High Court and dismiss the suit of the respondents in so far as it relates to reliefs (ii) (e), (f) and (g) granted by the High Court against the appellants are concerned.

So far as the remaining reliefs granted by the High Court are concerned, its decree will stand.

In the result we allow the a?peal to the extent indicated above but in the particular circumstances of the case we order costs throughout will be borne by the parties as incurred.

Appeal partly allowed.

THANSINGH NA THMAL AND ORS.

A. MAZID, SUPERINTENDENT OF TAXES

(P. B. GAJENDRAGADKAR, C.J., K. N. WANCHOO, K. C. DAS

GUPTA, J.C. SHAH AND N. RAJAGOPALA AYYANGAR JJ.)

Sale& Tax-Assessments made by Superintendent of Taxes-Appeab

reiected by As, fistant Commissioner of Taxes and Revisions re; ected by Commissioner of Taxes, Assam-No reference to High Court

demanded although provided for in the Assam Sales Tax Act, 1947- 1964 Writ Pelitions filed in High Court under Art. 226-EUect of- Than Sinth Scheme of the Act-Tax on sales whether ultra vires-When can v. new points other than those on which certificate was granted by Supdt. of Taus the High Court, be allowed to be raised in Supreme Court- Extent of jurisdiction of High Court under Art. 226-Constitution of India, Art. 226--Assam Sales Tax Act, 1947 (Act 17 of 1947).

Explanation to s. 2(12).

The <ti)pellants who are merchants carrying on business as dealers in jute in Calcutta, submitted returns of turnover for purposes of salestax due under the Assam Sales Tax Act, 1947, but as they did not comply with the requisition of the Superintendent of Taxes to produce their books, the latter made a ''best judgment assessment" under s. 17 ( 4) of the Act. Their appeals to the Assistant Commissioner of Taxes and revision petitions to the Commissioner of Taxes, Assam were dismissed. The appellants then moved the High Court of Assam by petitions under Art. 226 and contended that Explanation to s. 2 ( 12) of the Act was ultra vires the Assam Legislature and that the tax could not be levied on sales irrespective of the place where the contracts were made. They also contended that the finding of the Commissioner that the goods were actually in the State of Assam at the time when the contract was made was based on mere speculation.

The writ petitions were dismissed by the High Court and the appellants appealed to the Supreme Court with certificate under Art. 13 2 ( 1 ) of the Constitution.

Before the Supreme Court the appellants applied for leave under Art. 132(3) of the Constitution to challenge the correctness of the decision of the High Court that the goods were actually within the State of Assam when the contracts were made.

Held: (i) Leave under Art. 132(3) be refused and the appeal must be restricted to the question of Jaw as to the interpretation of the Constitution, certified by the High Court.

If these questions were desired to be raised the appellants ought to have moved the Commissioner to refer the case to the High Court under s. 32 of the Act. They could have moved the High Court if the Commissioner refused to refer the case to the High Court.

The Act provided machinery for obtaining relief and the same had to be re.sorted to and could not be allowed to be by-passed.

Ordinarily, the High Court does not entertain a petition for a writ under Art. 226, where the petitioner has an alternative remedy, which without being unduly onerous, provides an equally efficacious remedy~ The High Court does not generally enter upon questions which demand an elaborate examination of evidence to establish the rights to enforce which the writ is claimed. The High Court does not in exercise of its jurisdiction under Art. 226 act as a court of appeal against tbe decision of a court or Tribunal correct errors of fact.

1964 The scheme of the Assam Sales Tax Act iS that all questions of rAiat Silllll fact are to be decided by the taxing authorities. The opinion of the Y.

High Court can be obtained on questions of law arisiog out of the s.,41. of Tazt1 decisions of the taxing authorities. The High Court has under the Act no power to decide questions of fact which are exclusively within the campetence of the taxing authorities.

Sliah /.

(ii) Explanation to s. 2(12) of the Act is not ultra virt1 tho Assam Legislature.

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 86 to 97 of 1962.

Appeals from the judgment and order dated July 25, 1955, of the Assam High Court in Civil Rule Nos. 94-97, 105, 106, 114 and 175 to 179 of 1953.

M. C. Setalvad, Sohan Shroff, P. K. Kapi/a and Sukumar Ghosh, for the appellants.

Naunit Lal, for the respondents.

February 4, 1964. The Judgment of the Court was delivered by

SHAH J .-These appeals have been filed with certificates granted by the High Court of Assam undt:r Art. 132 of the Constitution against orders passed in certain petitions filed by the appellants praying for writs of certiorari or other appropriate writs quashing orders relating to assessment of sales-tax, and prohibiting the Superintendent of Taxes, Dhubri and other officers from taking action in enforcement of the said orders. The appeals raise common question> and may be disposed of by a common judgment.

The appellants are merchants carrying on business as dealers in jute, and have their principal place of business at Calcutta. The appellants have a branch office at Dhubri in the State of Assam and are registered dealers under the Assam Sales Tax Act, 1947 (17 of 1947). The appellants purchased jute at Dhubri and other r,:>laces in the State of Assam and despatched bales of jute to diverse factories outside the Province of Assam.

The appellants submitted returns of turnover for purposes of sales-tax before the Superintendent of Taxes, Dhubri, under the Assam Sales Tax Act in respect of transactions of sale during the period

6 S.C.R.

SUPREME COURT REPORTS 657 . ' between.March 1948 to March l9SO. The Superintendent 1964 of Taxes called upon:the a:;>pellants under s.17(2)"'of"the ·-r,; a-;;5, nh Act to pro:lt, ce thdr !:>ooks of account and other evidence v. ' - Supdt. of Tqxes in support°<Ji thcit rrp_::-as and granted them time to enable them to cor!'ply ,.,.;,;, the.· requisition, . but the appellants ::1iah 1• failed to do so.

The Superintendent of Taxes . then made "best judgment assessments" exercising his powe~. under s. 17 ( 4) of the Act and issued demand notices for the tax . determined.

Against the orders passed by the Superintendent of Taxes appeals were preferred to the Assistant Commissioner of Taxes.

Before the. appellate authority the appellants produced some but not all their books of account and documents in support of their returns.

Before the appellant authority it was contended, inter alia, that the definition of "sale" in s. 2 ( 12) of the Act was beyond the legislative competence of the Provincial Legislature, that tax was sought to be levied on sales effected outside the State, and that imposition of sales tax on the transactions of the appellant amounted to levying an "export tax" which was not open to the Provincial Legislature. It was however not contended before the Assistant Commissioner of Taxes that the jute bales, sale price of which was included in the turnover were not at the time of the contracts in the form of jute bales actually within the State of Assam and therefore the Explanation to s. 2(12) did not make that sale price liable to be included in the turnover of the appellants.

The Assistant Commissioner of Taxes', Assam, dismissed the appeals.

' In the revision applications preferred to the Commissioner of Taxes, Assam, against the order of the Assistant Commissioner of Taxes it was contended for the first time that the price of jute included in the turnover under the orders passed by the Superintendent of Taxes was not liable to be taxed because within the meaning of the Explanation to s. 2 ( 12) the goods were not at the time of the contracts actually .. in the Province of Assam.

The Commissioner rejected the contention after examinmg what he called the "time-table of cultivation". He observed that the usual time for marketing jute of the new crop was between July and June of the following year, jute being planted in or

134-159 S.C.'-42.

SUPREME COURT REPQRTS

1964 about February and being ready for marketing some time Than Singh about the month of June.

The Commissioner further

S d

•1 T observed that the contracts were made on diverse dates up t. o axes . . - between March and September and deliveries under the Shah J. contracts were made after the month of July when the new crop was brought into the market.

The contracts between the months of March and July were therefore in respect of the last year's crop and tJ\e goods sold must actually have been in the Province of Assam at the date of the contracts.

The Commissioner made certain modifications in the assessment order, but with those modifications we are not concerned in these appeals.

Against the order passed by the Commissioner, !Petitions under Art. 226 of the Constitution were filed by the appellants for writs of certiorari and prohibition.

Amongst the grounds urged before the High Court were the following two grounds, which alone survive for determination in these appeals:

(1) that the Explanation to s. 2 ( 12) of the Act was ultra vires the Assam Legislature under the provisions of the Government of India Act, 1935, and therefore tax could not be levied on sales irrespective of the place where the contracts were made merely relying upon the circumstance that at the time of the contracts of sale the goods contracted to be sold were actually in the Province of Assam; and ( 2) that the finding recorded by the Commissioner

that the goods were actually in the Province of Assam at the time when the contracts were made was "speculative".

The High Court held 1that the Explanation to s. 2 ( 12) was, in respect of the 11eriod prior to the Constitution, not ultra vires the authority of the Provincial Legislature, and that no attempt was made to establish before the appellate authority that the books of account supported the contention that the goods were not actually in existence in the State of Assam at the time of the contracts of sale.

Holding that the reasons which the Commissioner had given in support of his finding were not "altogether unjustified" and that tho taxing

authorities being "fully conscious'" that one of the essential ingredients of tax liability was that the goods must be actually in existence in the Stiite of Assam at the time of the contracts of sale, the High Court declined to consider whether the conclusions of , foe taxing authorities on questions of fact wer:: correct. But the High Court held that the plea about the vires of s. 2 (12) and the Exiplanation thereto raised a substantial question as to the interpretation of the Constitution, and accordingly granted certificates of fitness under Art. 132 of the Constitution.

At the hearing of these appeals counsel for the appellants sought leave to challenge the correctness of the decision that the goods were when the contracts were made actually within the Province of Assam. We have heard counsel for the appellants at great length upon this application for leave to appeal on grounds other than constitutional on which the certificates were granted by the High Court. After carefully considering the arguments, we are of the view that no case has been made out for acceding to that request.

A person arppealing to this Court under Art. 132 of the Constitution may not challenge the correctness or propriety of the decision appealed against on grounds other than those on which the certificate is granted, unless this Court grants him leave to raise other questions. Such leave is generally granted where the trial before the High Court has resulted in grave miscarriage of justice or where the appeal raises such substantial questions that on an application made to this Court under Art. 136 of the Constitution leave would be granted to the applicant to appeal against the decision on those questions.

The Assam Sales Tax Act, 1947, was enacted in 1947.

By s. 2 ( 3) the expression "dealer" is defined as meaning any person who carries on the business of selling or supplying goods in the Province, and by the Explanation the manager or agent of a dealer who resides outside the . Province and carries on the business of selling or supplying

goods in the Province is in respect of such business to be deemed a dealer for the pUI1pOSC of the Act. Clause (12) of s. 2 defines 'sale'. Section 3 is the charging section and s. 4 prescribes the rates of tax. The sales-tax authority may,

Supdt. of Taus

Shah /.

1964 if he is not satisfied that the return furnished by the dealer nan Singh is correct and complete, serve on the dealer a notice v. 1 requiring him either to attend in person and to produce or upa1. of axes . • __ cause to be produced any evidence on which he may rely Shah .r. in support of his return [sub-s. (2) of s. 17], and may make an assessment to the best of his judgment if the dealer fails to make a return or fails to comply with the terms of the notice issued under sub-s. ( 2) of s. 17.

Section 30 confers a right of appeal to an aggrieved dealer to the authority prescribed by the rules, and by s. 31 revisional jurisdiction may be exercised by the Commissioner of Sales Tax against the order of the sales-tax authorities. By s. 32, within sixty days from the date of service of any order in appeal or revision, the dealer may, by application in writing, require the Board of Revenue or the Commissioner, as the case may be, to refer to the High Court any question of law arising out of such order, and if the Board or the Commissioner decline to state the case, the dealer may apply to the High Court calling upon the Board or the Commissioner to state the case, and the High Court may if it be not satisfied with the correctaess of the decision of the Commissioner, require the authority concerned to state the case and refer it and on receipt of any such requisition, such. authority shall state and refer the case.

The High Court upon hearing any such case decides the question of law raised on the reference and delivers its judgment thereon containing the grounds on which such decision is founded [sub-s. (8)].

The Act therefore provides a hierarchy of taxing tribunals competent to decide question as to the liability of the tax-qiayer under the Assam Sales Tax Act, with a right to have questions of law arising out of the order decided by the High Court of the Province.

Primarily it is the Superintendent of Taxes who assesses the liability to pay tax. An appeal against the order of the Superintendent lies to the Assistant Commissioner of Taxes and against the order of the Assitant Commissioner a revision application lies to the Commissioner. Against the order of the Commissioner a reference may be demanded on questions of law to the High Court and if reference is refused the High Court may be moved to call for a reference.

The scheme evolved by the Legislature for determination

of tax liability is that all questions of fact are to be decided 1964

by the taxing authorities and on questions of law arising Than Singh out of the decision of the taxing authorities the opinion of , ,1

•·, T •• upu . .J a,.eL High Court may be obtained. The High Court has however - no power to decide questions of fact, which are exclusively

SW J. within the competence of the taxing authorities. The High Court is again not an appellate authority over the decision of the Commissioner; it has merely to give its opinion on questions of law arising out of the order of the Commissioner.

Whether the decision of the Commissioner is not su, pported by any evidence, or is based upon a view of facts which could never be reasonably entertained, is a question of law which arises out Qf the order.

Against the order of the Commissioner an order for reference could have been claimed if the appellants satisfied the Commissioner or the High Court that a question of law arose out of the order. But the procedure provided by the Act to invoke the jurisdiction of the High Court was bypassed. The appellants moved the High Court challenging the competence of the Provincial Legislature to extend the concept of sale, and invoked the extraordinary jurisdiction of the High Court under Art. 226 and sought to reopen the decision of the taxing authorities on questions of fact. The jurisdiction of the High Court under Art. 226 of the Constitution is couched i.n wide terms and the exercise thereof is not subject to any restrictions except the territorial restrictions which are exipressly provided in the Article. But the exercise of the jurisdiction is discretionary; it is not exercised merely because it is lawful to do so. The very amplitude of the jurisdiction demands that it will ordinarily be exercised subject to certain self-imposed limitations. Resort to that jurisdiction is not intended as' an alternative remedy for relief which may be obtained in a suit or other mode prescribed by statute. Ordinarily the Court will not entertain a petition for a writ under Art. 226, where the petitioner has an alternative remedy which, without being unduly onerous, provides a.n equally efficacious remedy. Again the High Court does not generally enter upon a determination of questions which demand an elaborate examination of evidence to establish the right to enforce which the writ is

1961 claimed. The High Court does not therefore act as a court Than Singh of appeal against the decision of a court or tribunal, to .\upat. ~I Taz., correct errors of fact, and does not by assuming jurisdiction -· under An. 226 trench upon an alternative remedy provided S/utlt J. by statute for obtaining relief.

Where it is o; ien to the aggrieved petitioner to move another tribunal, or even itself in another jurisdiction for obtaining redress in the manner provided by a statute, the High Court normally will not permit, by entertaining a petition under Art. 226 of the Constitution, the machinery created under the statute to be by-passed, and will leave the party applying to it to seek resort to the machinery so set up.

In the present case the appellants had the right to move the .Commissioner to refer a case to the High Court under s. 32 of the Act, and to move the High Court if the Com missioner refused to refer the case.

But they did not do so and moved the High Court in its jurisdiction under Art.

22,6 of tl!e Constitution, and invited the High Court to re-open the decision of the taxing authorities on questions of fact, which jurisdiction by the statute constituting them is exclusively vested in the taxing authorities.

This they did, without even raising the questions before the Superintendent of Taxes and the Assistant Commissioner.

The appellants who are dealers registered under the Assam Sales Tax Act submiNed their returns to the Superintendent of Taxes, but failed when called upon to produce their books of account and other evidence in support of their returns.

Even before the Assistant Commissioner, they produced some but not all their books of account and evidence demanded by the Superintendent. By the Explanation to s. 2(12) of the Act the expression 'sale', notwithstanding anything contained in the Indian Sale of Goods Act, 1930, includes sale of any goods which are actually in the Province at the time when the contract of sale in respect thereof iiL made, irrespective of the place where the said contract is made and such sales are deemed for the purposes of. the Act to have taken place in the Province. Under the Indian Sale of Goods Act, a sale takes

place when property in the goods passes.

But, for the purposei of the Assam Sales Tax Act situation of the goods

6 S.C.R.

SUPI{EME COURT REPORTS

is seized by the Legislature for the purpose of fictionally regarding the sale as having taken place within the Province of Assam if at the time of the contract of sale the goods are within the Province. Liability to sales tax in respect of the goods where the transfer in the property of the goods has taken place outside the Province of Assam undoubtedly arose if the conditions prescribed by the Explanation, exist : viz. the goods are actually in the Province when the contract of sale is made, and not otherwise. But the question whether the goods at the date of the contract of sale were actually in the Province is a question of fact which had to be determined by the sales tax authorities. Before the Superintendent of Taxes liability to pay tax was challenged but it does not

<1; ipear to have been contended that at the time of the contract of sale, the goods were not actually within the Province, and no such contention appears to have been even raised before the Assistant Commissioner of Taxes.

Before the Commissioner in the revision application filed by the appellants it was urged that part of the goods the price of which was sought to be included in the turnover were not within the Province at the time of the contract of sale and therefore the price of those goods could not be taken into account in computing the taxable turnover. The Commissioner held having regard to the "time-table of cultivation of jute" and the time when the jute is brought into the market for sale, that the goods sold were within the Province on the dates of the contracts and therefore the price thereof was liable to be included in the taxable turnover. The High Court, as we have already observed, took the view that the finding of the Commissioner was not "altogether unjustified", nor could it be said that the Commissioner and the other taxing authorities "were not quite conscious of" the requirements which attracted the UQplication of the Explanation to s. 2(12) and declined to enter upon a reappraisal of the evidence which in the view of the High Court the taxing authorities alone were competent to enter upon.

In these appeals Mr. Setalvad oil behalf of the appellants contends that there is clear evidence on the record to show tbat even ap; ilying the test laid down by the Commissioner

Supdt. of Taxes

Shah J.

Supdt. of Taxes

S/!ah J.

some ot the contracts of sale were made before the goods were marketable and therefore the view taken by the taxing authorities that the goods were at the date of the contract in existence within the Province of Assam was "without any foundation".

Counsel also submitted that some of the contracts related to jute grown in Pakistan and with respect to those contracts also the assumption made by the Commissioner that the goods were within the State of Assam at the date of the contraot of sale could not be warranted.

Counsel then said that the description of the goods in the contracts of sale indicated that they related to bales whereas the contracts for purchase by the appellants were in respect of loose jute and as the goods purchased were not identical or ascertainable with reference to the contracts of sale made by the appellants, liability to 1; iay tax was not attracted under s. 2 ( 12) of the Act. We are unable to entertain these pleas because they were never raised before the Superintendent of Taxes and the Assistant Commissioner and no evidence was produced by the appellants to support those pleas.

Before the Commissioner it was broadly urged that the goods in respect of the contracts could not have been in existence within the Province at the date of the reSQective contracts of sale but that argument was for reasons already mentioned rejected by the Commissioner and the High Court declined to allow the question whether the findings of the Commissioner were "speculative" to be agitated.

The appellants now seek to plead that the taxing authorities were in error in holding that the goods conformed to the conditions as to the situs of the goods at the dates of the contracts of sale, prescribed by s. 2 (12) so as to make the price liable to be included in the taxable turnover.

The Legislature has entrusted power to ascetain facts on which the price received on sales becomes taxable, to the authorities appointed in that behalf with right of recourse to the High Court on questions of law arising out of the order of the Commissioner of Taxes.

It is therefore contemplated by the Legislature that all material evidence on which a tax-payer relies to justify his claim that his transactions are not taxable, should be placed before the taxing authorities so that they may have an opportunity to adjudicate upon the claim. If after a proper trial, the claim is negatived,

because the facts on which it is founded are not proved, 196' the proceeding must end.

If, however, the adjudication of Than Singh the Commis_sioner. is_ vitiated because. there is no .eidence Supdt. : 1 iu., to support Jt or 1t 1s based on con1ectures, susp1c1ons or - irrelevant materials, or the proceedings of the taxing autho- Shah J. rities are otherwise vitiated so that there has been no fair trial, the High Court may undoubtedly advise the Commissioner on questions properly referred to it in the manner provided by the Act. But the High Court can.not be asked to assume the role of an appellate authority over the decision of the Commissioner on questions of fact or even of law.

Assuming that there is some substance in the contention that the adjudication by the Commissioner proceeded on grounds which the appellants characterised as "speculative", it was open to them to resort to the machinery provided by the Act, and having failed to do so, they could not ask the High Court to act as an agpellate authority in clear violation of the statutory provisions and to bypass the machinery provided by the Act.

We accordingly decline to entertain the applicittion to raise questions other than those raised by the certificate granted by the High Court, because the questions sought to be raised are questions of fact which were not canvassed at the appropriate stage before the taxing authorities and the machinery provided under the Act for determination of questions relating to liability to tax is arttempted to be bypassed.

The constitutional question on which certificate was granted does not need consideration in any detail. By the Explanation to s. 2 ( 12) of the Act notwithstanding anything to the contrary contained in the provisions of the Indian Sale of Goods Act, 1930, a sale is deemed to be complete when the goods which are actually within the State of Assam at the time when the contract of sale is made, irrespective of the place where the contract is made.

Under the Sale of Goods Act, 1930, in the absence of a contract to the contrary a sale is complete when property in the goods passes, but by the Assam Sales Tax Act the Legislature has attempted to locate the situs of sale for the purpose of levy

1964 of sales-tax by fixing upon the actual situation of the goods

Than Singh within the Province at 1the date of the contract, for the .. .. v.f T purposes of levying tax on sales. The Legislature has thereby ... qJt:o. o axes - not overstepped the limits of its authority : The Tata Iron Shah J. & Steel Company Ltd. v. The State of Bihar('). No argument has therefore been advanced before us to support the plea of unconstitutionality.

February, 4

All the appeals fail and are dismissed with costs. One hearing fee.

Appeals dismissed.

H. R. S. MURTHY

COLLECTOR OF CHITTOOR AND ANOTHER

(P. B. GAJENDRAGADKAR, C.J., K. N. WANCHOO, K. c. DAS

GUPTA, J. C. SHAH AND N. RA.TAGOPALA AYYANGAR JJ.)

Mining Lease-Notice of demand for payment of land cess-Validity- Land cess, if recoverable as an arrear of land revenue-If a tax on mineral rights-Expression ''Royalty'', 1ne1111ing of-If include.s royalty payable under a mining lease-Madras District Boards Act (Mad. Act No. XIV of 1920), ss. 78 and 79-Mines and Minerals (Regulation and Development) Act, (Lill of 1948), and Act LXV/l of [957, Entry 49 of the State List.

Under the terms of a mining lease the lessee worked the mines and won iron ore in a tract of land in a village in Chittor district and bound himself to pay a dead rent if he used the leased land for the extraction of iron ore, to pay a royalty on iron ore if it Were used for extraction of iron and in addition to pay a surface rent in respect of the surface area occupied or used. The lessee working the mines extracted ore and marketed it. After separation from Madras in 1953, the District of Chittoor became part of the Andhra State. In 1955 a demand was made for the payment of land cess under ss. 78 and 79 of the Madras District Boards Act and including in the computation of the ''annual rent value", the amounts payable to Government in each year under the mining lease both as surface rent and royalty. On challenge to the validity of this notice by the lessee, the High Court quashed the notices.

(I) [19S8] S.C.R. !3S5.

THANSINGH NA THMAL AND ORS

MAZID, SUPERINTENDENT OF TAXES

P. B. GAJENDRAGADKAR

K. N. WANCHOO

K. C. DAS

GUPTA

J.C. SHAH

N. RAJAGOPALA AYYANGAR

Sale& Tax-Assessments

Art. 226

EUect of- Than Sinth Scheme of the Act

Supreme Court-

Art. 226

Constitution of India

Art. 226

Assam Sales Tax Act, 1947

s. 2(12)

Calcutta

Assam Sales Tax Act, 1947

s. 17

Assam

High Court of Assam

Art. 226

s. 2

Supreme Court

Art. 13

Art. 132(3)

Art. 132(3)

s. 32

Art. 226

Art. 226

s. 2(12)

M. C. Setalvad

Sohan Shroff

P. K. Kapi

Sukumar Ghosh

Naunit Lal

SHAH

Art. 132

Dhubri

s. 17

s. 2

s. 2(12)

s. 2

Art. 226

s. 2

s. 2

s. 2

Art. 132

Art. 132

Art. 136

Assam Sales Tax Act, 1947

s. 2

s. 2

Section 3

s. 4

nan Singh

s. 17

s. 17

Section 30

s. 31

s. 32

Art. 226

Art. 226

Art. 226

Art. 226

s. 32

Art.

22

s. 2(12)

Indian Sale of Goods Act, 1930

Sale of Goods Act

s. 2(12)

Setalvad

Pakistan

s. 2

s. 2

Than Singh

If, however, the adjudication of Than Singh the Commissioner.

s. 2

Sale of Goods Act, 1930

Sale of Goods Act, 1930

H. R. S. MURTHY

COLLECTOR OF CHITTOOR

K. c. DAS

GUPTA

J. C. SHAH

N. RA.TAGOPALA AYYANGAR

Madras District Boards Act

ss. 78 and 79

Chittor district

Madras

Chittoor

Andhra State

ss. 78 and 79


SUPREME COURT REPORTS

1964 of sales-tax by fixing upon the actual situation of the goods

Than Singh within the Province at 1the date of the contract, for the .. .. v.f T purposes of levying tax on sales. The Legislature has thereby ... qJt:o. o axes - not overstepped the limits of its authority : The Tata Iron Shah J. & Steel Company Ltd. v. The State of Bihar('). No argument has therefore been advanced before us to support the plea of unconstitutionality.

February, 4

All the appeals fail and are dismissed with costs. One hearing fee.

Appeals dismissed.

H. R. S. MURTHY

COLLECTOR OF CHITTOOR AND ANOTHER

(P. B. GAJENDRAGADKAR, C.J., K. N. WANCHOO, K. c. DAS

GUPTA, J. C. SHAH AND N. RA.TAGOPALA AYYANGAR JJ.)

Mining Lease-Notice of demand for payment of land cess-Validity- Land cess, if recoverable as an arrear of land revenue-If a tax on mineral rights-Expression ''Royalty'', 1ne1111ing of-If include.s royalty payable under a mining lease-Madras District Boards Act (Mad. Act No. XIV of 1920), ss. 78 and 79-Mines and Minerals (Regulation and Development) Act, (Lill of 1948), and Act LXV/l of [957, Entry 49 of the State List.

Under the terms of a mining lease the lessee worked the mines and won iron ore in a tract of land in a village in Chittor district and bound himself to pay a dead rent if he used the leased land for the extraction of iron ore, to pay a royalty on iron ore if it Were used for extraction of iron and in addition to pay a surface rent in respect of the surface area occupied or used. The lessee working the mines extracted ore and marketed it. After separation from Madras in 1953, the District of Chittoor became part of the Andhra State. In 1955 a demand was made for the payment of land cess under ss. 78 and 79 of the Madras District Boards Act and including in the computation of the ''annual rent value", the amounts payable to Government in each year under the mining lease both as surface rent and royalty. On challenge to the validity of this notice by the lessee, the High Court quashed the notices.

(I) [19S8] S.C.R. !3S5.

After this decision the lessee died.

On March 10, 1955, two notices 1964 were issued to the appellant demanding payment of cess for the years H. R. s. Murthy 1952-54 and 1955-57 respectively and threatening coercive proceedv. ings, for their recovery in the event of non-compliance.

Impugning Collector of the validity of the earlier notices of demand, the appellant filed a writ Chittoor petition in the High Court and a similar petition challenging the validity of the notice of demand for the later period. Pending these petitions a further notice of demand for payment of cess for the years 1958-59 was served on the appellant in August 29, 1960 and to obtain a similar relief in respect of this notice and the proceedings for recovery thereof, the appellant filed a writ petition in this Court and contended: (I) that the expression "royalty" under s. 79(1) does not signify royalty as commonly understood but is confined to the rent payable for the beneficial use of the surface of the land; (2) assuming that royalty in the sense mentioned in point No. l is within ss. 78 and 79, of the Act, the provision imposing the land cess quoad royalty under the mining leases must be held to be repealed by the Central Acts of 1948 and 1957; (3) is the land cess demanded by the impugned notices dated March 10, 1958 and August 29, 1960 recoverable as an arrear of land revenue under the law? (4) s. 221 of the Act which made the provision for the recovery of sums due as taxes had, by reason of the changes effected in the rules, ceased to be applicable to the recovery of land cess under s. 78.

Held: (i) Where the land is held On lease, as in the present case, the lease amount is specifically referreU to in s. 79 of the Act as one of the components for the complltation of the annual rent value.

It i1 therefore obvious that 'royalty' which follows the expression 'lease amount' is something other than the return to the lessor or licenser for the use of the land surface and represents as it normally connotes the payment made for the materials or minerals won from the land.

(ii) There is no connection between the regulation and development of mines and minerals dealt with in the Central Acts and the levy and collection of land cess under ss. 78 and 79 of the Act. There is therefore, nothing in common between the Act and the Central Acts of 1948 and 1957 so as to require any detailed examination of the enactments for discovering whether there is any overlapping.

Hingir Rampur Coal Co. v. State of Orissa, [1961] 2 S.C.R. 537 and State of Orissa v. M. A. Tullock, A.LR. 1964 S.C. 1284, distinguished.

(iii) In the context of ss. 78 and 79 of the Act and the scheme >f those provisions it is clear that the land cess is in truth a 'tax on lands' within the entry 49 of the State List.

Where the land is held under lease it is the lease amount mat forms the basis. Where land is held under a mining lease, that which the occupier is willing to pay is accordingly treated a8 the ''annual rent value" of the property; such rent value would, therefore, necessarily

H. R. S. Murthy v.

Collector of Chittoor

include not merely the surface rent but the dead rent, as well as the royalty payable by the licensee, lessee or occupier for the user of the :iroperty.

(iv) The cess under s. 78 would be "a cess lawfully imposed upon land" under s. 52 of the Madras Revenue Recovery Act and woufd therefore be covered by its terms.

The legality of the procedure, which the respondents proposed to adopt for the recovery of the sums could not, therefore, be successfully challenged.

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 316-A and 316-B of 1962.

Appeals by special leave and by certificate from judgment and order dated March 25, 1960, of the Andhra Pradesh High Court in Writ Petitions Nos. 534 and 535 of 1958.

AND

Writ Petition No. 302 of 1960.

Petition under Art. 32 of the Constitution of India for the enforcement of Fundamental Rights.

P. Ram Reddy, for the appellant (in C.A. No. 316A and 316B of 1962) and the petitioner (in petition No. 302 of 1960).

T. V. R. Tatachari and B. R. G. K. Achar, for the respondents (in both the appeals and the peti1tion).

February 4, 1964. The Judgment of the Court was delivered by

Ayyangar I.

AYYANGAR J.-The two Civil Appeals and the Petition under Art. 32 of the Constitution which have been heard together raise a common point rega,-ding the validity of notices of demand for the payment. of land cess under the Madras District Boards Act (Madras Act XIV of 1920) which for shortness we shall call the Act, and the legality of the procedure for the recovery of the amount of the said cess.

The impugned notices made a demand also for education cess but as this cess is merely a proportion of the land-cess, and as the validity of that demand stands or falls with that of the land-cess, it is sufficient if we refer to and consider the challenge to the demand of land-cess

alone, as that will determine the validity of the entire sum demanded.

The appellant's father obtained a mining lease from the Government of Madras dated September 15, 1953 under which he was permitted to work and win iron ore in a tract of land in a village in Chittoor district.

The terms upon which the lessee was to work the mines are not very relevani but what is material is that under this instrument the lessee bound himself to pay a dead rent of Rs. 1,140/2 per year if he used the leased land for the extraction of iron ore and a higher amount if used for other purposes.

Besides, he also bound himself to pay a royalty of 8 annas per ton of iron ore if the ore were used for extraction of iron and if the iron ore was used for any other punpose such as for sale in specie, at Re. l /- per ton. In addition, the lease also stipulated for the payment of surface rent at Rs. 1-8-3 per acre per annum in respect of the surface area occupied or used. The lessee worked the mines, extracted ore and marketed i.t.

To raise finances for carrying on the local administration in the District Boards, several taxes are leviable.

Among them section 78 of the Act imposes a land-cess on lands in the district in these terms :

"78. The land-cess shall be levied on the annual rent value of ali occupied lands on whatever tenure held and shall consist of a tax of two annas in the rupee of the annual rent value of all such lands in the district."

The "annual rent value" on the basis of which the land-cess to be levied was to be computed in the manner laid down in s. 79 and this section ran :

"79. The annual rent value shall, for the purposes of section 78, be calculated in the following manner:

(i) In the case of lands held direct from Government on ryotwari tenure or on lease or licence, the assessment, lease amount, royalty or other sum payable to Government for the lands,

H. R. s. Murthy

Collector of Chittoor

Ayyangar J.

H R. S. Murthy v.

Collector of Chittoor

A.yvangar !.

together with any water-rate which may be payable for their irrigation, shall be taken to be the annual rent value.

(ii) In the case of inam lands or lands held wholly or partially free from assessment, the full assessment which such lands would bear if they were I).ot inam, together with any water-rate which may be payable for their irrigation, shall be taken to be the annual rent value; and such full assessment and water-rate shall be determined by the district collector under the general orders of the Board of Revenue.

(iii) In the case of lands held on any other tenure, the annual rent payable to the landholder, sublandholder or any other intermediate landholder holding on an under-tenure created, continued or recognized by a landholder or sub-landholder, as the case may be, by his tenants, together with any water-rate which may be payable for their irrigation, shall be taken to be the annual rent value; and where such lands are occupied by the owner himself or by any person holding the same from him free of rent or at a favourable rent, the annual rent value shall be calculated according to the rates of rent usually paid by occupancy ryot for ryoti lands in the neighbourhood with similar advantages, together with any water-rate which may be payable for the irrigation of the lands so occupied.

(iv) In the case of lands, the assessment of rent of

whkh is paid in kind, the aooual rent value shall be calculated according to the rates of rent established or paid for neighbouring lands of a similar description and quality, together with any water-rate which may be payable for the irrigation of the lands first mentioned, or if such method of calculation is, in the opinion of the Board of Revenue, impracticable in any

' particular case, according to any method which 1964 the Board of Revenue may approve for that H. R. S.-Murtltv case :

Provided that, where any landholder or sub-landholder has obtained under the provisions of sections 30 (iii) and 3 3 of the Madras Estates Land Act, 1908, a decree empowering him to increase his rent in consequence of any additional payment by way of water-rate made by him 'to Government, the annual rent value shall !le the balance remaining after deducting such increase of rent up to the amount of the waterrate from the sum ascertained as aforesaid."

When the State of Andhra was separated from Madras in October, 1953 the district of Chittoor became part of the State of Andhra.

Tn 1955 a demand was made upon the father of the appellant for the payment of land cess calculated in accordance with the provisions of ss. 7 6 and 79 of the Act and including in the computation of the "annual rent value", the amounts payable to Government in each year under the mining lease both as surface rent and royalty. The validity of this notice was objected to on grounds which are no longer material and the objections being upheld. the notices were quashed on writ petitions filed to the High Court. Andhra Pradesh by the appellant's father.

After the decis10n by the High Court in his favour the appellant's father died.

On March 10, 1958 two notices were issued to the appellant demanding the payment of the sums specified therein as being the cesses for the years 1952 to 1954 and 1955 to 1957 resrpectively and threatening coercive proceedings for their recovery in the event of the demand not being complied with.

Impugning the validity of the notices of demand for the earlier triennuim, the appellant filed writ petition 534 of 1958 in the High Court of Andhra Pradesh and a similar petition No. 535 of 1958 challenging the validity of the notice of demand for the later period. While these petitions were pending before the High Court a further notice of demand claiming the payv.

Collector of Chittoor

Ayyangar J.

1964 ment of cess for the years 1958 and 1959 was served on

H. R. ·-;-Murthy the appellant in August 1960 and to obtain a similar relief

v. in respect of this notice and the proceedings for the recovery Collector of Chittoor thereof, the appellant has filed writ petition 302 of 1960

A.yyangar .1. in this Court. To complete the narrative it is only necessary to mention that both the writ petitions 534 and 535 of 1958 were dismissed by the High Court and when the appellant sought to obtain certificates of fitness the learned Judges granted a certificate in respect of their judgment in writ petition 535 of 1958 on the ground that the value of the claim made against the appellant was over Rs. 20,000, but refused a similar certificate in writ petition 534 of 1958 where the amount demanded was less than that figure-it was Rs. 15,000 and odd. The appellant thereupon moved this court for special leave in respeot of the dismissal of his writ petition 534 of 1958 and the same having been granted all these three matters have been heard together.

The matter in controversy in the appeal is very limited and the point involved very narrow.

Mr. Ram Reddylearned counsel for the appellant raised three points in support of the appeal : ( 1) What is the meaning of the expression 'royalty' in s. 79 ( 1) of the Act? Does it include the royalty payable under a mining lease on the ore won by the lessee. (2) Assuming that royalty in the sense mentioned in point No. I is within ss. 78 and 79, of the Act the provision imposing the land cess quoad royalty under mining leases must be held to be repealed by the Mines & Minerals (Regulation & Develo; Jment) Act, 1948 (Central Act LITI of 1948) or in any event, by the Mines & Minerals (Regulation & Development) Act, 1957 (Central Act L.XVII of 1957). so that after the date when these Central enactments came into force the land cess that could be levied under s. 78 must be exclusive of royalty under a mining lease.

(3) Is the land cess which was demanded by the impugned notices dated March 10, 1958 and August 29, 1960 recoverable as an arrear of land revenue under the law?

We shall examine these submissions in thrut order. The first contention that the expression 'royalty' under s. 79 ( l)

does not signify royalty as commonly unrlerstood but is

confined to the rent payable for the beneficial use of the surface of the land, scarcely deserves serious consideration.

Where the land is held on lease, as in the present case, the lease amount is specifically referred to in s. 79 of the Act as one of the components for the computation of the annual rent value.

It is therefore obvious that "royalty" which follows the expression "lease amount" is something other than the return to the lessor or licensor for the use of the land surface and represents as it normally connotes the payment made for the materials or minerals won from the land.

The argument is therefore without substance and is rejected.

The second i; ioint has 'not, in our opinion, more merit The en.tirety of the argument on this head is based on two decisions of this Court in which this Court had to consider the continued operation of the Orissa mining areas !Development Fund) Act, (Act XXVIT of 1952)-The Hinglr- Rampur Coal Co. Ltd. and Others v. The State of Orissa and Others(') and State of Orissa v. M. A. Tullock & Co. (2).

As a matter of fact it migM be mentioned that the present appellant intervened in State of Orissa v. M. A. Tullock & Co. and there was a direction by this Court that the present appeals and ; petition might be heard ater the judgment was pronounced in the Orissa appeals. We are, however, clearly of the opinion that neither of the two decisions, the later one really following the earlier in respect of the matter now relevant, really help the appellant in these ap; ieals. In Hingir-Rampur Coal Co.'s case(') the decision rendered on writ petitions filed in this court under Art. 32 of the Constitution challenging the validity of the Orissa

Mining Areas (Development Fund) Act.

A cess had been levied under that enactment and it was the validity of the imposition of the cess that was the subject of debate in the petition.

One of the points urged in support of the petition was that on the enactment of the Mines & Minerals (Regulation and Development) Act, 1948 (Central Act LITI of 1948) the Orissa Act stood repealed and the cess leviable under its provisions was not thereafter capable of

134-159.SC-43

(2) A.l.R. 1964 S.C. 1284.

H. R. S. Murthy v.

Co/ltctor ol

Chittoor

Ayyangar I.

196.f being enforced, with the result that the demand for the cess s. R. S.-1111rthy could not be sustained. This Court on a detailed comparison

eoik:i 1 of the provisions of the Orissa Act and the Central Act of Chin°.:,,° 1948 came to the conclusion that 'the Central Act covered the same field as the Orissa enactment.

An examination

_.,,,,..,,,.., J. of the scheme of the Orissa Act disclosed that it had been passed for the purpose of the develQ;>ment of 'mining areas' in the State and this was affected by constituting "mining areas" and making provision for the development of such areas by improving communications by the construction of roads, by providing means of transport, supply of water, electricity and other amenities for sanitation as also for the edm; ation of the labour force to attract workmen to these 'mining areas'.

The cess which was there impugned was levied and collected for meeting the cost of this development of tJie "mining areas". An examination of the Central enactment which was also passed to provide for the conservatibn of minerals was held to cover the same field as the Orissi Act.

The Orissa State enactment had been passed m pursuance of the legislative power conferred by Entry 23 of the State List in the 7th Schedule reading :

"Regulation of mines and mineral development subject to the provisions of List I with respect to regulation and development under the control of the Union."

The provision in List I referred to here is Entry 54 in the Union List reading :

"Regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by law made by Parliament to be expedient in public interest."

It was argued on behalf of the State that the Central Act of 1948 though it contained a declaration that the Regulation and Development of mines and mineral development was expedient in the public interest, still such a declaration was not by "Parliament" as required by Entry No. 54, but by the Dominion legislature and could not on the terms of item 23 of List II affect the State power of legislation. This

argument was accepted and the State Act was, therefore, held to be competently enacted, and to remain unaffected H. R. s. Murthy by the Central Legislation.

It was the same enactment of the Orissa legislature that came up for consideration in State of Orissa v. M.A. Tullock & Co.( 1 ). By that date however Parliament had legislated and had enacted Central Act LXVII of 1957 which contained, if anything, more comprehensive provisions for the regulation and development of mines and minerals throughout the country.

The Central Act also contained a declaration that "it was expedient in the public interest that the Union should take under its control the regulation of mines and the development of minerals to the extent hereinafter provided." This Court held that having regard to the comprehensive provisions contained in the several sections of the Act which were examined, "the extent provided" included those which fell within the scope of the State Act of Orissa which was, as stated earlier, for the regulation and development of "mining areas" within the State. For these reasons it was held that the Orissa Act must be deemed to have been impliedly repealed and rendered ineffective by the Central Act.

It will be seen that there is no resemblance, whatever, between the provisions of the Orissit Act considered in the two decisions and the provision for the levy of the land cess under ss. 78 and 79 of the Act with which we are c-oncerned. Sections 78 and 79 have nothing to do and are not concerned with the development of mines and minerals or their regulation. The proceeds of the land cess are, under s. 92 of the Act, to be credited to the District fund, into

v1hich, under the terms of the Finance Rules in Sch. V to t!he Act, the land-cess as well as several other taxes, fees and receipts are directed to be credited. This fund is to be used under Ch. VTT of the Act with which s. 112 starts ''for everything necessary for or conducive to the safety, health, convenience or education of the inhabitants or the amenities of the local area concerned and everything incidental to the administration" and include in particular the several natters which are mentioned in those sections. It will thus le seen that there is no connection between the regulation

(!) A.l.R. 1964 S.C. 1284.

CoUtctor at

Chittoor

Ayyangtll' J.

and development of mines and minerals "dealt with in the

H. R. s. Murzhy Central Acts and the levy and collection of Jand-cess for

•· which provision is made by ss. 78 and 79 of the Act. There Col/tctor of Chlttoor is therefore no scope, at all, for the argument that there is anything in common between the Act and the Central Acts of 1948 and 1957 so as to require any detailed examination of these enactments for discovering whether there is any over-lapping.

It was next urged that the land-cess was really a tax on mineral rights falling within Entry 50 of the State List reading

"Taxes on mineral rights subject to any limitation imposed by Parliament by law relating to mineral development"

and that the Central Acts under which also taxes and fees might be levied brought into play the last portion of this Entry and that as a result the wer to impose this ta'"C was not available after the Central Acts of 1948 and 1957 came into force. In this connection Mr. Ram Reddy pointed out that as the impugned Iand-cess was payable only in the event of the mining lessee winning the mineral and so paying the royalty and nut when no minerals were extracted, it was in effect a tax on the minerals won and therefore on mineral rights.

We are unable to accept this argument.

When a question arises as to me precise head of legislative power under which a taxing statute has been passed, the subject for enquiry is what in truth and substance is the nature of the tax.

No doubt, in a sense, but in a very remote sense, it has relationship to mining as also to the mineral won from the mine under a contract by which royalty is payable on the quantity of mineral extracted. But that, does not stamp it as a tax on either the e.'"Ctraction of the mineral or on the mineral right. It is unnecessary for the rpurpooe of this case to examine the question as to what exactly is a tax on mineral rights seeing that such a tax is not leviable by Parliament but only by the State and the sole !imitation on the State's power to levy the tax is that it must not interfere with a law made by Parliament as regards mineral development. Our attention was not invited to the provision of any such law enacted by Parliament. In

the context of ss. 78 and 79 and the scheme of those provi- 1964 sions it is clear that the land .cess is in truth a "tax on s. R. s. Miln/11 lands" within Entry 49 of the State List.

Coll.;;,,, °'

Under ~. 78 of the Act the cess is levied on occupied land on whatever tenure held. The basis of the levy is the "annual ren.t value" i.e., the value of the beneficial enjoyment of thi: property. This being the basis of the tax and disclosing its true nature, s. 79 provides for the manner in which the "annual rent value" is determined i.e., what is the amount for which the land could reasonably be let, the benefit to fie lessor representing the rateable value "or the annual rent value". In the case of ryotwari lands it is the assessment which is payable to the Government that is taken as the rental value being the benefit that accrues to the Government. Where the land is held under lease it is the lease amount that forms the basis. Where land is held under a mining kase, that which the occwpier is willing fo pay is accordingly treated as the "annual rent value" of the property.

Such a rent value would, therefore, necessarily include not merely the surface rent, but the dead rent, as well as the royalty payable by the licensee, lessee or occupier for the user of the property. The position then is that the rent which a tenant might be expected to pay for the property is, in the case of leas1>-hold interests, treated as the statutory "annual rent value". It is therefore not possible to accept the contention, that the faot that the lessee or licensee pays a royalty on the mineral won, which is in excess of what he would pay if his right over the land extended only to the mere use of the surface land, places it in a category different from other types where the lessee uses the surface of the land alone. In each case the rent which a lessee or licensee actually pays for the land being the test, it is manifest that the land-cess is nothing else except a land tax.

Learned counsel pointed out that in the case of inam lands and other lands dealt with in els. (ii), (iii) and (iv) of s. 79 the royalty payable by the lessee or licensee did not figure in the computation of the annual rent value.

That, however, ap; iears to us to be wholly irrelevant, for

ChltlOM

Ayyon"" /.

1964 what we are concerned with is whether on the terms of

11. R. T M 11rthy sub-cl. (i) the land cess is not in truth a tax on land. v.

Collector of Chittoor The last of the points raised relates to the threat on the part of the Government to recover the impugned demands as an arrear of land revenue. Learned counsel pointed out that s. 221 of the Act which made provision for the recovery of sums due as taxes had, by rea>on of the changes effected in the rules, ceased to be applicable for the recovery of land cess under s. 78.

The learned Judges of the High Court upheld this submission and, in our opinion, correctly, but this is of no assistance to the appellant because of s. 52 of the Madras Revenue Recovery Act which enacts:

"52. All arrears of revenue other than land-revenue

due to the State Government, all advances made by the State Government for culitivation or other urposes connected with the revenue, and all fees or other dues payable by any person to or on behalf of the village servants employed in revenue or police duties, and all cesses lawfully imposed upon land and all sums due to the State Government, including compensation for any loss or damage sustained by them in consequence of a breach of contract, may be recovered in the same manner as arrears of land-revenue under the provisions of this Act, unless the recovery thereof shall have been or may hereafter be otherwise specially provided for."

lit was not disputed that the cess under s. 78 would be "a cess lawfully imposed upon land" and would therefore be covered by its terms. The legality of the procedure, which the respondents proposed to adopt for the recovery of the sums could not, therefore, be successfully challenged.

The appeals and the writ petition fail and are dismissed with costs----<me hearing fee.

Appeals and petition dismised.

H. R. S. MURTHY

COLLECTOR OF CHITTOOR AND ANOTHER

P. B. GAJENDRAGADKAR, C.J.

K. N. WANCHOO

GUPTA, J.

N. RA.TAGOPALA AYYANGAR JJ.

Madras District Boards Act

ss. 78 and 79

Chittor district

Madras

Chittoor

Andhra State

ss. 78 and 79

March 10, 1955

August 29, 1960

s. 79(1)

ss. 78 and 79

March 10, 1958

s. 221

s. 78

s. 79

ss. 78 and 79

[1961] 2 S.C.R. 537

ss. 78 and 79

s. 78

s. 52

Revenue Recovery Act

CIVIL APPELLATE JURISDICTION

Andhra Pradesh High Court

Art. 32

Constitution of India

T. V. R. Tatachari

B. R. G. K. Achar

Ayyangar

AYYANGAR

Art. 32

Madras Act XIV of 1920

Government of Madras

September 15, 1953

Chittoor district

section 78

s. 79

section 78

H. R. s. Murthy

H. R. S.-Murtltv

sections 30

Madras Estates Land Act, 1908

Andhra

ss. 7

High Court. Andhra Pradesh

High Court of Andhra Pradesh

A.yyangar

Ram Reddylearned

s. 79

ss. 78 and 79

s. 78

s. 79

s. 79

Hingir-Rampur Coal Co.

Art. 32

Parliament

H. R. s. Murthy

Orissa legislature

Central Act LXVII of 1957

ss. 78 and 79

Sections 78 and 79

s. 92

s. 112

Ayyangtll

Murzhy Central Act

ss. 78 and 79

Ram Reddy

ss. 78 and 79

s. 79

s. 79

Collector of Chittoor

s. 221

s. 78

s. 52

Revenue Recovery Act

s. 78


6 S.C.R.

SUPREME COURT REPORTS

STATE OF UTTAR PRADESH

KARTAR SINGH

(P.B. GAJBNDRAGADKAR, C.1., A.

WANCHOO, K. C. DAS GUPTA

AND

AYYANGAR, JJ )

SARKAR, K . . N.

N. RAJAGOPALA

Constitution of India-Prevention of Fsod Adulteration-Fization of Reichert value of ghee for different State• of India-If un7'tuoMbk or discriminatory-Constitution of India, Art. 14-Prevention of Food Adulterations Act, 1954, ss. 1, 16(l)(a) (i), 23-Prevtntion of Food Adulteration. Rules, 1955, r. 5, Appendix B All, iltm 14.

The respondent was tried for the commission of an offence under s. 7 read with s. 16(1 )(a)(i) of the Prevention of Food Adulteration Act, 1954 for selling adulterated ghee.

The analysis of the ghce bad disclosed that it bad a Reichert Value of only 22·5 whereas tho minimum Reichert value fixed for Uttar Pradesh, where the respondent sold tho ghoe, was 28. The defence of the respondent was that he bad obtained the ghee which ho sold from Jodhpur where the Reichert value fixed was only 22 and that the sample must be held not to be adulterated on the basis of the decision of the Allahabad High Court in State v.

Malik Ram, A.I.R. 1962 All. 156.

This decision laid down that a distinction should be made between gbee obtained from cattle in the hill districts and gbee obtained from cattle in the plains and that ghce obtained from the hill districts of U.P. cannot be held to be adulterated if its Reiehert value was equal to that prescribed for Himachal Pradesh which is a hilly area.

It was the contention of the respondent that bis ghee was admittedly pahadi ghee and therefore this decision would apply.

The First Class Magistrate rejected these contentions and convicted him and sentenced him to six months' R.I. and a fine of Rs. 500. On appeal the Sessions Judge concurred in the findings of the trial court but reduced the sentence. The respondent thereupon filed a Criminal Revision Petition before the High Court. The High Court agreed with the courts below that the ghee was not Jodhpur ghee but it was produced locally. But it held that the Reichert values as fixed were not based on any reasonable classification and therefore it was sufficient if a vendor satisfied the minimum standard prescribed for any area in tho country and since the minimum prescribed for certain areas is 21 and since the ghee in question had 22 2 the respondent was not guilty of the olfence charged. The State thereupon appealed to this Court by way of a certificate under Art. 134(l)(e) of the Constitution.

It was uried by the appellant that tho High Court was wrong in striking down or re-drafting the mies framed by the Central Government in the manner in which the High Court has done purportina to invoke

I964

Ftbruary 6,

Pradesh

artar Singh

Art. 14 of the Constitution and virtually setting up what the High Court considered was the reasonable standard.

Held: (i) Where the Government have prescribed certain standatds after taking into considerations various factors the court cannot strike down these standards as unreasonable or discriminatory merely on some apriori reasoning.

It can do so only by basing its decision on materials placed before it by way of scientific analysis. The party invoking Art. 14 must make averments with details to sustain such l plea and lead evidence to establish his allegations.

In the absence of such plea and evidence the court cannot accept the statement of a party as to the unconstitutionality of a rule and refuse to enforce that rule as it stands merely because in its view the standards are too high and for this reason the rule is unreasonable.

(ii) Applyin2' these principles it is found that the case State v.

Malik Ram (A.l.R. 1962 All. 156) was wrongly Jeci<lcd by the Allahabad High Court. In the case under appeal the High Court took the matter a step further and adopted the lowest Reichert value prescribed for any area in the country as what should be adopted for every other area in the country disregarding the rules.

Hence the High Court was wrong in allowing the revisions.

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 164 of 1962.

Appeal from the judgment and order dated May 2, 1962, of the Allahabad High Court in Criminal Revision No. 1579 of 1961.

0. P. Rana and C. P. Lal, for the appellant.

Harnam Singh Chadda and Harbans Singh, for the respondent.

February 6, 1964. The Judgment of the Court was delivered by

AYYANGAR J.-This appeal which comes before us on a certificate of fitness .granted by the High Court of Allahabad under Art. 134(1) (c) of the Constitution, is against a judgment of that Court acquitting the respondent Kartar Singh of an offence under s. 7 read withs. 16(1)(a)

(i) of the Prevention of Food Adulteration Act, 1954 which may be conveniently referred to as the Act.

The facts giving rise to the prosecution are briefly these: 1964 The respondent runs a shop at Haldwani and among the State of Uttar products sold by him is ghee.

On March 19, 1960 a Pradesh quantity of the ghee was purchased by the Food Inspector Karta;· Singh' of the area and he put samples of the purchase into three - phials which were sealed in the respondent's presence. It Ayyangar 1•

may be mentioned that even in the seizure memo the Food Inspector noted the ghee purchased by him as "pahadi ghee".

One of the samples was forwarded to the Public Analyst to the Government of Uttar Pradesh for analysis for ascertaining whether the said ghee was adulterated.

The analysis disclosed that in several respects the sample was sub-standard and that in particular it had a Reichert V aluc of 22 5 as against the prescribed minimum of 28 for ghee in Uttar Pradesh.

After setting out the details of the analysis, the Public Analyst expressed the opinion that the sample "contained a small proportion of vegetable fat or oil foreign to pure ghee".

On receipt of this report, the Medical Officer of Health, Haldwani sanctioned the prosecution of the respondent and a complaint was thereafter laid before the Magistrate Ist Class by the Food Inspector.

The respondent pleaded not guilty and entered on his defence. Subsequently, the second sample was got analysed by the Director, Central Food Laboratory, who reported that his analysis disclosed a Reichert Value of 21·7 as against 22 5 of the Public Analyst. The opinion expressed by him as regards the sample of ghee which he analysed was the same as that of the Public Analyst, viz., that the sample was adulterated.

The defence of the respondent who admitted that he had sold the ghee, samples of which were the subject of analysis, but denied it was adulterated, was two-fold:

(I) He had obtained the ghee which he sold from Jodhpur, ( 2) The sample must be held not to be adulterated on the basis of the decision of the Allahabad High Court m State v.

Malik Ram(').

The plea by the respondent regarding the ghee sold having come from Jodhpur was made because if this were established under the rules framed unde; the Act, to which

(I) A.I.R. 1962 All. 156.

State of U liar

l'rad,.lt

' v.

Kartar Singh

Ayyangar I.

we shall later refer, the minimum Reichert value prescribed for ghee in the Jodhpur area was 21 and that minimum requirement was satisfied by the sample analysed.

The respondent led evidence to prove his purchase from Jodhpur but the learned Magistrate did not accept this case.

The other defence was a point of law relying on the decision of a Division Bench of the Allahabad High Court reported as State v.

Malik Ram('). The learned Judges who decided that case drew a distinction between ghee obtained from cattle in the hill clistricts of Uttar Pradesh and those from cattle in the plains.

This decision was relied on by the respondent because the ghee sold by him was noted as 'pahadi ghee' by the Food Inspector. The learned Judges held that notwithstanding the terms of the rules to which we shall later refer, ghee obtained from hilly areas of Uttar Pradesh like Kumaun hills, could not be held to be adulterated if its Reichert value was equal to that prescribed for Himachal Pradesh which was mostly a hilly area.

They therefore held that though the rules under the Food Adulteration Act prescribed a minimum Reichert value of 28 for ghee for the entire State of Uttar Pradesh, still if ghee from hill areas of the Uttar Pradesh State reached a minimum of 26 Reichert value, such ghee would not be "adulterated ghee".

We shall consider the correctness of this decision after completing the narrative of the proceedings.

The learned Magistrate held that this decision did not affect the present case because the Reichert value of the respondent's ghee was less than 26.

The Magistrate therefore convicted the respondent and sentenced him to rigorous imprisonment for a period of six months and a fine of Rs. 500 and in default to further imprisonment for three months.

The respondent preferred an appeal to the Sessions Judge Kumaon, and raised the same pleas and defences as he put forward before the learned Magistrate.

The Sessions Judge concurred/ in the finding of the Magistrate regarding the story of the respondent having bought the ghee from Jodhpur, and he also agreed with the Magistrate about the effect of the decision of the Division Bench of the High Court which was also relied on before him. The

(l), A.l.R. 1962 All. U6.

6 S.C.R.

SUPREME COURT PEPORTS

Sessions Judge, however, while upholding the conviction 1educed the sentence of imprisonment from six months to one month and the fine to Rs. 200.

The respondent thereupon filed a Criminal Revision petition to the High Court under ss. 435 and 439 of the Criminal Procedure Code.

The learned Judge of the High Court agreed with the Courts below on the finding of fact as regards the Jodhpur origin of the ghee observing "as the file stands I am satisfied that this ghee was of local origin". 1 here was, of course, no point raised before him as regards the correctness of the analysis.

The learned Judge, however, held that the basis on which the Reichert value had been prescribed for the several areas in the country was not based on any rational classification and he therefore held that it was sufficient if any vendor of ghee in the country satisfied the minimum standards prescribed for any area under these rules.

As there were areas in the country in regard to which a minimum Reichert value of 21 had been prescribed, he held that the respondent was not guilty of adulteration and so directed his acquittal.

It is from this decision that the present appeal has been filed by the State.

Before considering the point about the standards prescribed under the Food Adulteration Act being violative of Art. 14, an Article which though not specifically mentioned, is apparently the ground upon which the learned Judge has held that the prescription of the Reichert value of 28 for Uttar Pradesh was unenforceable, it would be necessary to set out the statutory provisions on which the decision of the present appeal turns.

The preamble to the Act describes it as one "to make provision for the prevention of adulteration of food". Section 2 defines the word 'adulterated' as follows :

"An article of food shall be deemed to be adulterated-

(i) if the quality or purity of the article falls below the prescribed standard or its constituents are present in quantities which are in excess of the prescnbed limits of variability;"

Prade1h

v, Kartar Singh

Ayyangar I.

Slate of Uttar

Pradesh

Kartar Singh

Ayyanaar J.

to read only the portion that is material. Section 3 enables the Central Government to constitute a committee for food standards and it runs :

"3. (1) The Central Government shall, as soon as may be after the commencement of this Act, constitute a Committee called the Central Committee for Food Standards to advise the Central Government and the State Governments on matters arising out of the administration of this Ai:t and to carry out the other functions assigned to it under this Act.

(2) The Committee shall consist of the following members, namely:-

( a) the Director General, Health Services, exo!Jicio, who shall be the Chairman;

(b) the Director of the Central Food Laboratory, ex officio;

( c) two experts nominated by the Central Gov- ·

ernment;

(d) one representative each of the Central Ministries of Food and Agriculture, Commerce and Industry, Railways and Defence nominated by the Central Government;

( e) one representative each nominated by the Government of each State;

(f) two representatives nominated by the Central Government to represent the Union territories;

( g) two representatives of Industry and Commerce nominated by the Central Government;

(h) one representative of the medical profession nominated by the Indian Council of Medical

Research".

Section 7 which prohibits the manufacture and sale of adulterated food reads:

"No person shall himself or by any person on his behalf manufacture for sale, or store, sell or distribute- ( i) any adulterated food; ...... " Section 8 makes provision for State Governments appointing

Public Analysts and s. 9 for the appointment of Food Inspectors.

The next material provision is that contained in s. 13 which deals with the reports of the analysis of food for the purpose of ascertaining whether there are adulterated or sub-standard etc.

Its first sub-section directs the Public Analyst to make a report and under sub-s. ( 3) the Certificate issued by the Director of the Central Food Laboratory under sub-s. ( 2) is to supersede the report given by a Public Analyst under sub-s. (I). Section 16 provides for the penalties for offences under the Act.

Section 23 confers on the Central Government power to make rules but these rules have to be framed after consultation with the Committee established under s. 3 and among the rules which might be made are- Section 23 (I )(b )--defining the standards of quality for, and fixing the limits of variability permissible in respect of, any article of food;. . . . . ...... .

"23. (2) All rules made by the Central Government under this Act shall as soon as possible after they are made be laid before both Houses of Parliament." Under the power conferred by s. 23, the Prevention of Food Adulteration Rules, 1955, were promulgated.

Rule 5 which occurs in Part III of the rules--headed "Definitions and Standards of quality"-specifies that "the standards of quality of the various articles of food specified in Appendix B to these rules are as defined in that appendix." Ghee is one of the articles of food whose standards are prescribed in Appendix B, milk and milk products being listed under head A'.-11.

Ghee is dealt with in item 14 of A-11 and the standard prescribed for it runs: Ghee means the pure clarified fat derived solely from milk or from curds or from cream to

Prad<sh ..

Kartar Singh

A.yyangar I.

Prad••h

Kartar Singh

Ayyangar J,

which, no cok>uring matter or preservative has been added. It shall conform to the following specifications--

In Punjab, Uttar Pradesh, Bhopal, ............... .

Vindhya Pradesh, Bihar, West Bengal (except Bishnupur) and PEPSU (except Mahendragarh) :

(a) ............... .

(b) Reichert Value Not less than 28.

(c)

(d)

In Madras, Andhra, Travancore-Cochin, Hyderabad, Mysore, Orissa, Assam, Tripura, Manipur, Madhya Bharat, Bombay, Himachal Pradesh, Mahendragarh District of PEPSU, Madhya Pradesh (except cotton tract areas) and Ra jasthan (except Jodhpur) the specifications will be the same as above except that Reichert value shall be not less than 26·0.

In Saurashtra, Kutch, cotton tract areas of Madhya Pradesh, Jodhpur Division of Rajasthan and Bishnupur Sub-division of West Bengal the Reichert value shall not be less than 21 and the Butyro refractometer reading at 40°C shall be between 41 5 to 45·0. The limits for free fatty acids and moisture shall be the same as for ghee in Punjab, PEPSU etc. given above ..

Explanation.-By cotton tract is meant the areas in Madhya Pradesh where cotton seed is extensively fed to the cattle.

The learned counsel for the 'State has urged before us that the learned Judge was not justified in striking down or re-drafting the rules framed by the Central Government in the manner in which he has done, purporting to invoke Art. 14 of the Constitution, and in virtually setting up what he considered was the reasonable standard of quality which should detennine whether the ghee sold by the respondent was adulterate.d or not.

We entirely agree with this submission.

Now, it is common ground that if the rules were valid and the standards prescribed enforceable, the ghee

sold by the respondent was 'adulterated' with the result that 1964 the respondent was guilty of an offence under s. 7 read with State of Uttar s. 16 of the Act.

The only question is whether there was Prad••h •• any material placed before the Court for refusing to apply Kartar Singh the rules for determining the standards of quality.

The standards themselves, it would be noticed, have been prescribed by the Central Government on the advice of a Committee which included in its composition persons considered experts in the field of food technology and food analysis.

In the circumstances, if the rule has to be struck down as imposing unreasonable or discriminatory standards, it could not be done merely on any apriori reasoning but only as a result of materials placed before the Court by way of scientific analysis.

It is obvious that this can be done only when the party invoking the protection of Art. 14 makes averments with details to sustain such a plea and leads evidence to establish his allegations.

That where a party seeks to impeach the validity of a rule made by a competent authority on the ground that the rules offend Art. 14 the burden is on him to plead and prove the infirmity is too well established to need elaboration.

If, therefore, the respondent desired to challenge the validity of the rule on the ground either of its unreasonableness or its discriminatory nature, he had to lay a foundation for it by setting out the facts necessary to sustain such a plea and adduce cogent and convincing evidence to make out his case, for there is a presumption that every factor which is relevant or material has been taken into account in formulating the classification of the zones and the prescription of the minimum standards to each zone, and where we have a rule framed with the assistance c, Z a committee containing experts such as the one constituted under s. 3 of the Act, )hat presumption is strong, if not overwhelming. We might in this connection add that the respondent cannot assert any fundamental right under Art. 19 (l ) to carry on business in adulterated foodstuffs.

Where the necessary facts have been pleaded and established, the Court would have materials before it on which it could base findings, as regards the reasonableness or otherwise or of the discriminatory nature of the rules. In

.4.yyangar /,

Pradesh

Kartar Singh

Ayyangar /,

the absence of a pleading and proof of unreasonableness or arbitrariness the Court cannot accept the statement of a party as to the unreasonableness or unconstitutionality of a ruie and refuse to enforce the rule as it stands merely because in its view the standards are too high and for this reason the rule is unreasonable. In the case before us there was neither pleading nor proof of any facts directed to that end.

The only basis on which the contention regarding unreasonableness or discrimination was raised was an apriori argument addressed to the Court, that the division into the zones was not rational, in that hilly and plain areas of the country were not differentiated for the prescrip- tion of the minimum Reichert values.

That a distinction should exist between hilly regions and plains, was again based on apriori reasoning resting on the different minimum Reichert values prescribed for Himachal Pradesh and Uttar Pradesh and on no other.

It was, however, not as if the entire State of Himachal Pradesh is of uniform elevation or even as if no part of that State is plain country but yet if the same minimum was prescribed for the entire area of Himachal Pradesh, that would clearly show that the elevation of a place is not the only factor to be taken into account.

At this stage it might be pointed out that the test for Reichert or Re1chert-Meissl value of ghee is one of the important tests for detecting adulteration with certain vegetable oils by determining the proportion of the volatile soluble acids in the ghee.

The presence of the adulterant disturbs the ratio existing in normal butter fat or ghee between soluble and insoluble acids and volatile and nonvolatile acids. The Reichert value of pure ghee is not constant, but is dependent on several factors-among them the breed of the cattle to be found in an area, whether the cattle are pasture fed or stall fed, and the nature of the additional feed given, the nature of the terrain, the rain-fall and climatic conditions etc.

That the feed available for the cattle is a very material and determining factor is apparent even from the rules, for a distinction ;. drawn between different areas of Madhya Pradesh depending on cotton seed being available for feeding the cattle. It is on the basis oi the conjoint effects of these and other factors which

6 S.C.R.

SUPREME COURT RI~.PORTS 689

obtain in the different areas, some pointing to a higher Reichert value and others neutralising it and after extensive survey conducted from samples collected and analysed during various seasons, that the country has been divided into zones under the rule in Appendix 'B' and the minimum Reichert value ascertained and prescribed for each. From the fact that certain areas includen in some of the zones are hilly, it does not automatically follow that that was the potent factor or the only factor which was taken into consideration for prescribing the standard for that region.

Without appreciating the several factors which bear upon the Reichert value of the ghee produced in a locality and the value attributed to each o, f these several relevant factors, it would not be possible fo pronounce upon the reasonablenciss or correctness of the classification of the areas and tbe prescription e>f different standards to each of them.

In State v. Malik Ram(') a Division Bench of the High Court held that because certain areas of Uttar Praoe,.., \\ere hilly, the Reichert value prescribed for the hilly areas like those in Himachal Pradesh should be adopted and be given effect to notwithstanding there was no ambiguity in the rules .., regards the area where the prescribed standards should be applicable.

Except a principle which the Court deduced from the rules themselves there was no material before the Court Illat the minimum standard prescribed for Uttar Pradesh was defective in any respect. The approach adopted by the learned Judges in Malik Ram's case appears to us to be a reversal of the well-recognised principle that it is for those who challenge the constitutionality of a statute or a statutory rule to allege and prove the grounds of invalidity and the adoption of the contrary rule that when a party makes such a challenge it is for those who seek to support it to sustain it by positive evidence of its reasonableness and legality.

The Court evolved from a reading of the rules a principle that the standards vary with the elevation of the place, without having before it any materials for such a conclusion save what it considered was the rationale underlying the division into zones.

As already explained, even in Himachal Pradesh the elevation of every place is not the same and there are areas which

(I) A.I.R. 1962 All. 156.

134-159 S, C,-44

19/U

Stat• of u-

Praduli ...

X.artar Siltllli

Ayya- 1.

196"

Sta< of Ut:ar

Pradt1h ...

Lutar Slnzh

A.7Y•n1ar I.

are higher !hail others and so the test adopted does not even satisfy logic.

We do not consider that the Court was justified in practically legislating and laying down what the rules should be rather than give effect to the law by adherence to the rules as framed.

In the case now under appeal the learned Judge tc0k the matter a step further and he adopted the lowest Reichert value prescribed for any area in the country as that which he would adopt for every other area in the country disregarding the rules.

We find no justification for this eit'1er and, in fact, if the learned Judges in Malik Rams case(') were in error in applying the Himachal standard to hilly areas of Uttar Pradesh, the judgment now under appeal discloses even more error. We might add that if one could legitimately discard the standard prescribed in the rules, as the learned Judge has done, we do not see any principle in hdlding, as he seems to indicatt. that where the Reichert value is below 21 the ghee should be treated as adulterated.

We, therefore, hold that the _learned Judge was not justified in allowing the revision of the respondent and acquitting him.

The result is that the appeal is allowed, the acquittal of the respondent is set aside and his conviction restored.

It was stated to us on behalf of the respondent that of the imprisonment for one month to which the sentence passed on him by the Magistrate was modified by the Sessions Judge, he had already undergone a sentence of 18 days.

He has been on bail practically since the ad1.:ission of his Revision Petition in the High Court.

In the circumstances, we consider that the sentence of imprisonment passed on him might be reduced to the period already undergone.

The sentence of fine imposed will, however, stand.

Appeal allowed.

1) /..I.R. 1962 All. 156.

STATE OF UTTAR PRADESH

KARTAR SINGH

WANCHOO

K. C. DAS GUPTA

AYYANGAR, JJ

SARKAR

Constitution of India

Constitution of India

Art. 14

ss. 1, 16(l)(a)

s. 7

s. 16(1 )(a)(i)

Jodhpur

Allahabad High Court

U.P.

Himachal Pradesh

Art. 134(l)(e)

Central Government

artar Singh

Art. 14

Art. 14

P. Rana

C. P. Lal

Harnam Singh Chadda

Harbans Singh

AYYANGAR

Art. 134(1)

Kartar Singh

s. 7

Haldwani

19, 1960

Karta;· Singh

Government of Uttar Pradesh

Uttar Pradesh

Central Food Laboratory

State of U liar

State of Uttar Pradesh

Uttar Pradesh State

Kumaon

ss. 435 and 439

Art. 14

Section 2

Ayyanaar

Section 3

Section 7

Section 8

s. 9

s. 13

Section 16

Section 23

s. 3

Section 23

Parliament

s. 23

Kartar Singh

A.yyangar

Bhopal

PEPSU

Madras

Andhra

Travancore-Cochin

Hyderabad

Mysore

Saurashtra

Kutch

Madhya Pradesh

Rajasthan

Bishnupur

West Bengal

Punjab

Art. 14

s. 7

s. 16

Kartar Singh

Art. 14

Art. 14

s. 3

Art. 19

S.C.R.

SUPREME COURT

Uttar Praoe

Malik Ram

Malik Rams