COMMISSIONER OF INCOME-TAX, CALCUTTA A v.

RAI BAHADUR HARDUTROY MOTILAL CHAMARIA

April 1, 1967

[J. C. SHAH, S. M. S!KRI AND V. RAMASWAMI, JJ.]

Indian Income-tax Act, 1922, s. 31-Powers of Appellate Assistant CommisJioner in tippeal-Whether can enhance income of assessee in respect of sources of Income not considered by Income-tax Officer for purpose of taxation.

The account books of the respondent for the assessment year 1952-53 showed three swns of Rs. 2,50,000, Rs. 1,50,000 and Rs. 30,000 as borrowed from parties in Nepal. The income-tax. Officer added these amounts to the total income of the assessee as secret income falsely shown as loans. The Income-tax.

Officer noted that the assessee bad withdrawn at Calcutta <in March 31, 1952 a sum of Rs. 5,30,000 from a Calcutta Bank and had sent a sum of Rs. 5,85,000 to bis Forbesganj branch on the same day to enable that branch to pay Rs. 2,50,000 to one of the creditors. The transfer of the money from Calcutta to Forbesganj on the same day was considered by the Income-tax Officer to be a physical impossibility. When the matter was in appeal before the Appellate Assistant Commissioner, the latter not only confirmed the addition of the aforesaid loan amounts to the income of the assessee but also held that the swn of Rs. 5,85,000 transferred from Calcutta to the Forbesganj branch was also unexplained income of the assessee and after making allowance for an earlier withdrawal added a further sum of Rs. 4,05,000 on this account to the assessed income of the resoondent. The Tribunal held that the Appellate Assistant Commissioner had power to enhance the income as he did but reduced the enhancement to Rs. 1,55,000.

The High Court however held, in reference, that the Appellate Assistant Commissioner had no power to make the addition as tlie sum of Rs. 5,85,000 had not been considered by the Income-tax Officer for the purpose of assessment. In appeal to this Court,

 HELD : The High Court was right. The power of enhancement given to the Appellate Assistant Commissioner by s. 31 (3) of the Income-tax Act, 1922 is restricted to the sources of income which have been the subject-matter of consideration by the Income-tax Officer from .the point of vie~· of taxabilitv.

Jn this context" 'consideration' does not 1nean 'incidental' or 'collaterai' examination of any matter by the Income-tax Officer in the pwcess of assessment. [516 G1 In the oresent case it was manifest that the Income-tax Officer had not considered the entry of Rs. 5,85,000. from the point of view of ita taxabilitv and therefore the Appellate Assistant Commissioner had no jurisdiction in an appeal under s. 31 of the Act to enhance the assess. ment [516 F]

Con11niss1ont•r of Jnco111e-tax. Bon1hay. v. Shapoorji Pt1llonji Mistry, 44 I. T. R 89 l fo!iowccl.

Narrondas Manordass, Bo1nbay v. Conunissioner of Jnco1ne-tax, Cen.

H trcil, Bon1bay, :Jf J.T.R. 909, Com1nissioner of lnconie-tax v. '!vf/s. Mc- Millan & Co., [1958] S.C.R. 689, Commissioner of lncone.tax, Punjab v.

Nawab Sllall Nawaz Khan, 6 I.T .R. 370 and The K111g v. Jncomelax .Special Investigation Commissioners, [1936] 1 K.B. 487, considered.

A CIVIL APPELLATE JURISDICTION : Civil Appeal No. 535 of ( 1966.

Appeal by special leave from the judgment and order dated March 26, 1964 of the Calcutta High Court in Income-tax Reference No. 29 of 1961.

T. V. Vishwanath Iyer, A. N. Kirpal, S. P. Nayyar for R. N.

Sachthey, for the appellant.

S. T. Desai and R. C. Prasad, for the respondent.

The Judgment of the Court was delivered by Ramaswami, J. This appeal is brought, by special leave, from the judgment of the Calcutta High Court dated March 26, 1964 in Income-tax Reference No. 29 of 1961.

The respondent (hereinafter called the 'assessee') is an indivir dual carrying on business in Jute, Cloth and Films.

The assessment year is 1952-53, the corresponding accounting year being the calendar year 1951 for all business except Katihar Cloth Importing Co. and the Jute Mills for which the accounting year is financial year ending March 31, 1952.

During the year of account the assessee claimed that he had borrowed three sums of Rs. 2,50,000, 1,50,000 and Rs. 30,000 from three parties from Nepal, Kharag Bahadur Nepali, Jiwanmal Santockchand and Sohanlal Subhkaran respectively.

The Income-tax Officer added these amounts to the total income of the assessee on the ground that the assessee had inflated the purchase of raw jute. The Income-tax Officer was not satisfied that these three loans were. genuine loans but considered that they represented secret profits made by the assessee by inflating the purchase of raw jute.

The Income-tax Officer noted that the assessee had withdrawn at Calcutta on March 31, 1952, a sum of Rs. 5,30,000 from a Calcutta bank and had sent a sum of Rs. 5,85,000 to hi~ Forbesganj branch on the same day to enable that branch to make payments including the repayment of Rs. 2,50,000 to Sri Kharag Bahadur one of the alleged creditors noted above.

The Incometax Officer discussed the in1possibility of the aniount having reached Forbesganj branch in Bihar on the very sanie day in order to enable discharge of the creditors there on March 31 1952 In regard to this aniount of Rs. 5,85,000 the Income-tx officer observed as follows :

"On 31-3-1952 the Calcutta Office has withdrawn Rs. 5,30,000 from the Bank and has sent Rs. 5,85,000 to Forbesganj, How the cash has reached Forbesganj (in remote corner in North Bihar) on the same day to enable the branch to make payments (including the sum of Rs. 2,50,000 to Kharag Bahadur) is something diffi-

"5 l 0

SUPREME COURT REPORTS

11967] 3 S.C.R

cult to understand even in these days of fast travel.

Lloyds Bank in Calcutta would not have obliged the assessee by paying out cash before 10 A.M. on 31-3- 1952 and the only available train leaves in the night.

The journey including the ferry trip over the broad ganges takes over 24 hours. Hence the entries in the book cannot be taken to be genuine."

The assessee took the matter in appeal to the Appellate Assistant Conunissioner and contended that the Income-tax Officer should not have added the three items of Rs. 2,50,000, Rs. 1,50,000 and Rs. 30,000 to the total assessable income. The Appellate Assistant Commissioner did not agree with this contention and confirmed the addition of Rs. 4,30,000.

At the same time, the Appellate Assistant Commissioner noticed the fact of the alleged transfer of Rs. 5,85,000 from Calcutta to Forbcsganj on March 31, 1952 and its credit in the account~ books of the latter branch Oil the same date.

The Appellate Assistant Commissioner considered tjiat the amount of Rs. 5,85,000 should also be included in the total income of the assessee, but before doing so he gave the assessee a deduction of Rs. l,~0,000 being the amount withdrawn earlier from the accounts of the two creditors, namely, Jiwanmal santokchand and Sohanlal Subhkaran and added the balance of Rs. 4,05,000.

This addition by the Appellate Assistant Commissioner amounted to an enhancement of the income which the Income-tax Officer had assessed.

The assessee took the matter in further appeal to the Appellate Tribunal which held that the Appellate Assistant Commissioner was justified in coming to the conclusion that the cash credits in the accounts were not explained satisfactorily and some of the payments made at Forbesganj branoh on March 31, 1952 were not made from the remittance from Calcutta but from secret funds.

The Appellate Tribunal pointed out that out of the payments claimed to haveocen made at Forbesganj payments to Kharag Bahadur Nepali amounting to Rs. 2,50,000 must also be excluded because it had been held by the Income-tax Officer and the Appellate Assistant Commissioner that the loan was not genuine; and since the loan was not genuine it was not logical to say that it required repayment from secret funds.

The Appellate Tribunal accordingly reduced the enhancement to Rs. 1.55,000.

Jn doing so the Appellate Tribunal rejected the contention of the assessee that the Appellate Assistant Commissioner had no authority to enhance the income on the oround that it was not the subject-matter of the assessment made by the Income-tax Officer.

The Appellate Tribunal took the view that the subject-matter in respect of which the enhancement was made was, in fact, considered by the Income Tax Officer and accordingly the Appellate Assistant Commissioner had jurisdiction to make the enhancement.

At the instance of the assessee th~

.,_

C.l.T. v. MOTJLA.J, CHA.MARIA (Ramaswami, /.) 511

Appellate Tribunal referred the following question of law for the opinion of the High Court under s. 66( l) of the Incomr tax Act, 1922 (hereinafter called the 'Act') :

"Whether on the facts and in the circumstances of the case the Appellate Assistant Commissioner was within his authority in enhancing the assessment of the assessee by Rs. 1,55,000 for the assessment vear 1952-53 ?" By its judgment dated March 26, 1964, the High Court answered the question in the negative and in favour of the assessee.

Section 31 of the Act is to the following effect :

"31. (I ) The Appellate Assistant Commissioner shall fix a day and place for the hearing of the appeal, and may from time to time adjourn the hearing.

( 2) The Appellate Assistant Commissioner my before disposing of any appeal, make su.ch f_urther mquiry as he thinks fit, or cause further mqu1ry to be made by the Income-tax Officer ..... .

( 3) In disposing of an appeal the Appellate Assistant Commissioner may, in the case of an order of assessment,-

( a) confirm, reduc1i, enhance or annul the assessment, or

(b) set aside the assessment and direct the Incometax Officer to make a fresh assessment after making such turther inquiry as the Income-tax

Officer thinks fit or the Appellate Assistant Commissioner may direct, and the Income-tax Officer shall thereupon proceed to mak~ such fresh assessment and determine where necessary the amount of tax payable on the basis of such fresh assessment ...... "

In Commissioner of Income-tax, Bombay v. Shapoorii Pallonji Mistry(') it was held by this Court that in an appeal filed by the assessee the Appellate Assistant Commissioner has no power to

enhace th~ assessment by discovering new sources of income not mentioned m the return of the assessee. or considered by the Income-tax Officer in the order appealed against.

In that case, the assessee had received a sum of Rs. 40,000. In the proceedings for the assessment year 1946-4 7, this came to the notice of the Income-tax Officer.

Since the receipt fell within the accounting year relative to the assessment, year 1947-48, the Income-tax

(1)44 I.T.R. 891.

SUPREME COURT

REPORTS

(1967] 3 S.C.R.

Officer did not assess the amount, making a note, "The question will however be considered again at the time of 194 7-48 assessment." In the return for the assessment year 1947-48, this amount was not shown by the assessee.

The Income-tu Officer also overlooked the note at the end of his order in the previous year's assessment, with the result that this item was omitted from the assessment order.

The assessee appealed to the Appellate Assistant Commissioner against his assessment for the year 1947- 48.

While the appeal was pending, the Income-tax Officer wrote a letter to the Appellate Assistant Commissioner requesting him to assess the amount of Rs. 40,000.

The Appellate Assistant Commissioner, after issuing notice, assessed the amount and included it in the original assessment.

The question which was debated before this Court was whether in an appeal filed by an assessee, the Appellate Assistant Commissioner can find a new source of income not. considered by the Income-tax Officer and assess it under his powers granted by s. 31 of the Income-tax Act. It was held by this Court that the powers of enhancement conferred on the Appellate Assistant Commissioner under s. 31 only extended to matters considered by the Income-tax Officer and if a new source has to be considered then the power of remand may be exercised and the Income-tu Officer should be required to deal with that new source of income. At page 895 of the Report, Hldayatullah, J. speaking for the Court stated as follows :

"The only question is whether in enhancing the assessment for any year he can travel outside the record, that is to say, the return made by the assessee and the assessment order passed by the Income-tax Officer with a view to finding out new sources of income, not disclosed in either.

It is contended by the Commissioner of Income-tax that the word 'assessment' here means the ultimate amount which an assessee must pay, regard being had to the charging section and his total income.

In this view, it is said that the words 'enhance the assessment' are not confined to the assessment reached through a particular process but the amount which ought to have been computed if the true total income had been found. There is no doubt that this view is also possible.

On the other hand, it must not be overlooked that there are other provisions like sections 34 and 33B, which enable escaped income from new sources to be brought to tax after following a special procedure.

The assessee contends that the powers of the Appellate Assistant Commissioner extend to matters considered by the Income-tax Officer, and if a new source is to be considered, then the power of remimd should be exercised.

By the exercise of the power to assess fresh sources of

income, the assessee is deprived of a finding by two tri bunals and one right of appeal.

The question is whether we sold acept the interpretation suggested by the Comnussmner m preference to the one, which has held the field for nearly 37 years.

In view of the provisions of sections 34 and 33B b.Y which escaped income can be brought to tax, there IS reason to think that the view expressed uniformly about the limits of the powers of the Appellate Assistant Commissioner to enhance the assessment has been accepted by the legislature as the true exposition of the words of the section."

Reference may be made, in this connection, to the decision in Narrondas Manordass, Bombay v. Commissioner of Income-tax, Central, Bombay(') in which the scope of the power of the Appellate Assistant Commissioner under s. 31 ( 3) was considered by the Bombay High Court In that case, the asses.see carried on usi ness at Rajkot and at Bombay, the accounting years at Ra1kot and Bombay being different.

With regard to the profits of Rajkot, the Income-tax Officer assessed them proportionately at Rs. 1,17,643.

He also found that there were remittances to the extent of Rs. 4,00,000 from Rajkot to Bombay, but in view of the concession allowed by the Part B States Taxation Concession Order he did not include this amount in the assessable income.

The assessee appealed with respect to the sum of Rs. l, 17 ,643 contending that the Rajkot business had no profits at all but only loss.

The Appellate Assistant Commissioner thereupon set aside the assessment . and remanded the matter to the Income-tax Officer for reassessment after enquiring into the matters contained in the second report.

It was held by the Bombay High Court that the power conferred upon the Appellate Assistant Commissioner was not confined to the matter of Rs. l, 17 ,643 in respect of which the assessee had appealed, but he had power to revise the whole process of assessment once an appeal had been preferred, and the order remanding the case was not invalid in law.

The decison of this case was approved by this Court in The Commissioner of Income-tax v. M/s McMillan & Co.(') The question to be considered in that case was whether it was open to the Appellate Assistant Commissioner in exercise of his powers under s. 31 ( 3) of the Act to reject the method of accounting followed by th~ asscssee and accepted by the Ihcome- !ax Officer, under the proviso to s. 13 of the Act, and compute the mcome, profits or gams of the assessce under Rule 33 of the Rules.

It was held by this Court that the question must be answered in the affirmative and there was nothing in s. 31 read

(1) 31 I. T. R. 909.

(2) [19581 S. C.R. 689.

L7S,, p.C.T..'67-3

514 SUP.REUB ooua:r UPOl.TS

[1967) 3 S.C.R.

with the provisions of s. 13 of the Act which prevented the Appellate Assistant Commissioner, in an appeal preferred by .the assessee from exercising the powers which the Income-tax Officer could exercise under the proviso to s. 13 of the Act and to enhance the taxable income of the assessee.

At page 70 I of the Report, S. K. Das, J. quoted with approval the following passage from the judgment of Chagla, C.J. in Narrondas's case{1) :

"It is clear that the Appellate Assistant Commissioner has been constituted a revising authority against the decisions of the !ncome-tax Officer~ a ri:vlsing authority not in the narrow sense of revising what is the subject-matter of the appeal, not in the sense of revising those matters about which the assessee makes a grievance, but a revising authority in the sense that once the appeal is before him he can revise not only the ultimate compu- tation arrived at by the. Income-tax Officer but he can revise every process which led to the ultimate computation or assessment.

In other words, what he can revise is not merely the ultimate amount which is liable to tax, but he is entitled to revise the various decisions given by

the Income-tax Officer in the course of the assessment and also the various incomes or deductions which came in for consideration of the Income-tax Officer."

It is necessary to bear in mind, in this connection, that it .is (11111}

the assessee who has a right. conferred under s. 31 to prefer ea appeal against the order of assessment made by the Income-tax Officer. If the assessee does not choose to appeal, the -order 1'f assessment becomes final subject to any power of revision that the Commissioner may have under s. 33B of the Act.

Therefore, it would be wholly erroneous to compare the powers of the Apptillate Assistant Commissioner with. the powers possessed by a court of appeal, under the Civil Procedure Code.

The Appellate Assistant Commissioner is not an ordinary cc; mrt of appeal. It is impossible to talk of a court of appeal when only one party to the original decision is entitled to appeal and not the other party, and in view of this peculiar position the statute has conferred very wide powers upon the Appellate Assistant Commissioner once an appeal is preferred to him by the assessee. It is necessary also to emphasise that the statute provides that once an assessment comes before the Appellate Assistant Commissioner, his competence is not restricted to examining those aspects of the assessment which are complained of by the assessee; his competence ranges ver the whole assessmt'-nt and it is open to him to correct the Income-tax Officer not oniv with regard to a matter raised by the assessee but a1so with regard to a matter which has been considered by the

(I) 31 l.T.R. 909 ..

-" Income-tax Officer and determined in the course of the a5$CSS

ment.

It is also well-established that an assessee having once filed an appeal cannot withdraw it.

In other words, the . assessee having filed an appeal and bniugbt the machinery of the Act into .working, cannot prevent the Appellate Assistant Comnlissioner from ascertaining and settling the real sum to be assessed, by .inti B mation of bis withdrawal of the appeal.

Even if the ~, re fuses to appeal at the hearing, the Appellate .Assistant Conunis sioner can proceed with the enquiry and if be finds that there has

been an under-assessment, he can enhance the assessment i[see Commissioner of Income-tax, Punjab v. Nawab Shah.·· Nawaz Khan(')]. In this context refrence may be made to the. deci&jon of the Court of Appeal in The King v. Income Tax Special Come missioners(') in which the .taxpayer sought to withdraw a notice of , appeal which had been given on his :behalf against an additional assessment under Sch. D. The Commissioners of Inland Revenpe were not satisfied that the assessment was adequate. The. Special Commissioners then proposed to proceed with the hearing. Of . the appeal in the ordinary way.

At that stage the taxpayer sought a

I> writ of prohibition to prohibit the Special Commissioners 1rom bearing the appeal. It was held by the Court of Appeal tllat notice of appeal having once been given, the Commissioners .were bound to proceed in accordance with the Income Tax Acts and determine the true amount of the assessment.

At page 493 of the Report Lord Wright observed as follows : E

" .... in making the assessment and in dealing with the appeals, the Commissioners are exercising statutory authority and a statutory duty which they are bound to carry out They are not in the position of judges decid ing an issue between two particular parties.

Their obli gation is wider than that. It is to exercise their judgment on such material as comes before them and to obtain any material which they think is necessary and which they ought to have, aud on that material to make the assessment or the estimate which the law requires them to make. They are not deciding a case interparties; they are assessing or estimating the amount on which, in the interests of the country at large, the taxpayer ought to be taxed."

The principle that emerges as a result of the authorities of this Court is that the Appellate Assistant Commissioner has no jurisdiction, under s. 31(3) of the Act, to assess a source of H income which has not been processed by the Income-tax Officer and which is not disclosed either in the returns filed by the assessee

(!) 61_ T. R. 370.

<2) [ 1936] L K. B_ 487.

516 SUPREME COURT RBPOllTS (1967] 3 S.C.ll.

or In the assessment order, and therefore the Appellate Assistant Commissioner cannot travel beyond the subject-matter of the assessment. In other words, the power of enhancement under s. 31 (3) of the Act is restricted to the subject-matter of assessment or the sources of income which have been considered expressly or by clear implication by the Income-tax Officer from the point of view of the taxability of the assessee.

It was argued by Mr. Vishwanath Iyer on behalf of the appellant that by applying the principle to the present case, the Appellate Assistant Commissioner had jurisdiction to enhance the quantum of income of the assessee.

It was pointed out that the fact of alleged transfer of Rs. S,85,000 to Fcirbesganj branch was noted by the Income-tax

Officer and also the fact that it did not reach Forbesganj on the same day. So, it was argued that in the appeal the Appellate Assistant Commissioner had jurisdiction to deal with the question of the taxability of the amount of Rs. 5,85,000 and to hold that it was taxable as undisclosed profits in the hands of the assessee.

We are unable to accept the argument put forward on behalf of the appellant as correct. It is true that the Income-tax Officer has referred to the remittance of Rs. 5,85,000 from the Calcutta branch, but the Income-tax Officer considered the despatch of this amount only with a view to test the genuineness of the entries relating to Rs. 4,30,000 in the books of the Forbesganj branch.

It is manifest that the Income-tax Officer did not consider the remittance of Rs. 5,85,000 in the process of assessment from the point of view of its taxability. It is also manifest that the Appellate Assistant Commissioner has considered. the amount of remitl; uice of Rs. 5,85,000 from a different aspect, namely, the point of view of its taxabi!ity.

But since the Income-tax Officer has not aeplie4 his mind to the question of the taxability or nontaxability of the amount of Rs. 5,85,000, the Appellate Assistant Commissioner had no Jurisdiction, in the circumstances of the present case, to enhance the taxable income of the assessee on the basis of this amount of Rs. 5,85,000 or of any portion thereof. As we have already stated, it is not open to the Appellate Assistant Commissionar to travel outside the record, i.e., the return made by the assessee or the assessment order of the Income-tax Officer with a view to find out new sources of income and the power of enhancement. under s. 31 ( 3) of the Act is restricted to the sources of income which have been the subject-matter of consideration by the Income-tax Officer from the point of view of taxability.

In this context "consideration" does not mean "incidental" or "collateral" examination of any matter by the Income-tax Officer in the process of assessment.

There must be something in the assessment order tci show that the Income-tax Officer applied his mind to the particular subject-matter or the partii:ular source of income with a view to its taxability or to its non-taxability d not to any incidental connection. In the present case it is manifest that the

A Income-tax Officer has not considered the entry of Rs. 5,85,000 from the point of view of its taxability and therefore the Appellate Assistant Commissioner had no jurisdiction, in an appeal under s. 31 of the Act, to enhance the assessment.

For these reasons we hold that the High Court rightly answer- B ed the question in favour of the assessee and this appeal must be dismissed with costs.

G.C.

Appeal dismissed.

COMMISSIONER OF INCOME-TAX, CALCUTTA

RAI BAHADUR HARDUTROY MOTILAL CHAMARIA

April 1, 1967

C. SHAH

V. RAMASWAMI, JJ.

Indian Income-tax Act, 1922

s. 31

Nepal

Calcutta

March 31, 1952

Calcutta Bank

Forbesganj

Assistant Commissioner

s. 31

Income-tax Act, 1922

s. 31

Nawab Sllall Nawaz Khan

T. V. Vishwanath Iyer

A. N. Kirpal

S. P. Nayyar

R. N.

Sachthey

S. T. Desai

R. C. Prasad

Ramaswami

Katihar Cloth Importing Co.

Jute Mills

Kharag Bahadur Nepali

Jiwanmal Santockchand

Sohanlal Subhkaran

Kharag Bahadur

Bihar

Lloyds Bank

31-3- 1952

Forbcsganj

Jiwanmal santokchand

s. 66( l)

Incomr tax Act, 1922

March 26, 1964

Section 31

s. 31

Income-tax Act

s. 31

Hldayatullah

sections 34 and 33B

sections 34 and 33B

s. 31

Bombay High Court

Rajkot

Bombay

Rajkot

Rajkot business

s. 31

s. 13

s. 31

s. 13

s. 13

S. K. Das

Chagla

Narrondas

s. 31

s. 33B

Wright

s. 31(3)

s. 31

Vishwanath Iyer

Fcirbesganj

s. 31

s. 31


KRISHNA KUMAR NARULA ETC. v.

THE STATE OF JAMMU

AND KASHMIR & ORS.

March 1, 1967

[K. SuBBA RAo, C.J., J. C. SHAH, S. M. SUCRI, V. RAMASWAMI

AND C. A. VAIDIALINGAM, JJ,)

Co11!Jtit11tion of India, 1950, Art. 19(1) (g):__R/ght to ctlfry on busi ness In liquor-If fundamental right.

The Jammu and Kashmir Excise Act, 1958, s, 20-Lfcence for Cllfl'1 ing on business in liquor-Objections by lnhoblrants for location of barc Applicant asked to shift premises as condition for ls.•ue of llcenc~ Validity of order under A.rt. 19(6) of the Constitution.

The appellant, who was carrying on business in liquar in his hotel under an annual licence issued by the Excise and Taxation Commissioner under s. 20 of the Jammu and Kashmir Excise Act, 1958, had applied for a fresh licenoe for another year. Meanwhile, the Excile Dcpartmebt received complaints from the inhabitants of tho locality objoctinjl to the D location of the bar in that locality. The complaints were inquired Into and the appellant was informed by the Commissioner that the licence would not be issued unless he shifted the premises of his hotel : to some other approved locality. A writ petition filed by the appellant for quashing the order was dismissed by the High Court.

In appeal to this Court,

HELD : ( i) Dealing in liquor is liusiness, and a citizen has a funda mental right to do that business under Art. 19(1) (g) of the Constitution. But the State can make a law imposing reasonable restrictlona on the right, in public interests, under Art, 19(6). [S7 DEJ

Dealing in noxious and dangerous goods does not oease to be business, though the nature of the goods may be a ground for imposing a restriction on the activity. (53 P; 54 CJ

T. B. Ibrahim v. Regional Transport Authority, Tan/ore, [1953) S.C.R. 290, Coover/ee B. Bharucha v. The Excise Commissioner and the Chief Commissioner, A/mer, [1954J

S.C.R. 873, State of Assam v. A. N.

KldwaJ, Commlsrioner of Hills Division and Appeals, Shillong,

[19S7J S.C.R. 295, Nagendra Nath v. Commissioner of H/11.r Div/sion and Appeals, Asram, (1958) S.C.R. 1240, explained.

Narain Swadesh Weaving Mills v. The Commissioner of Excess Profits Tax, (1955] I S.C.R. 952, State of Bombay v. R. M. D. Chomarbaugwala, [1957] S.C.R. 874 and Ranchhorlalfl v. Revenue j)ivlslonai 9ommissloner, Northern Division, Sambalpur, A.I.R. 1960 Otissa 88, referred to. .

Since the instant case was one of issuing a licence, s. 20 of the Excise Act applies.

As the Excise and Taxation Commissioner bad made a bona fide onquiry and carlie to the conclusion that the locality was not suitable far carrying on business in liquor, for relevant ...-.

it could not be said that his order was arbitra:ry or unreasonable. [SS BJ

(ii) Section 22 of the Act deals with cancellation of a licence and does not control s. 20. [58 CJ

A C1v1L APPELLATE JURISDICTION : Chil Appeals Nos: 65 and

66 of 1967.

Appeals from the judgment and order dated September 16. 1966 of the Jammu and Kashmir High Court in Writ Petitions Nos. 2 and 4 of 1966.

S. T. Desai, S. K. Dholakia, Vineet Kumar and Inder Das Grover, for the appellants (in both the :ippeals).

Raja Jaswant Singh, Advocate-General, Jammu and Kashmir, R. N. Sachthey for S. P. Na.vyar, for the respondents (in both the appeals).

The Judgment of the Court was delivered by Subba Rao, C.J.

These two appeals arise out of a common judgment of a Division Bench of the High Court of J ammu & Kashmir dismissing the two petitions filed by the appellants for the issuance of a writ quashing the order passed by the Taxing and Excise Officer, Jammu, refusing to renew their licences for the year 1966-67 in respect of their liquor shops.

The facts giving rise to these two appeals may be briefly and separately stated.

Civil Appeal No. 65 of 1967 relates to Glory Restaurant situ ated in Moti Bazaar, Jammu. The appellant in the said appeal, who is the proprietor of the said restaurant, after taking the requisite licence from the Government, had been carrying on for the last 7

y~.ars the business of retail sale of country and foreign liquor in the said restaurant. The licence was an annual licence and it was. being renewed from .year to year.

On December 11, 1965, the Deputy Excise and Taxation Commissioner, J ammu, issued a notice to the appellant ordering the shifting of the premises of the said retaurant to. some other locality on the ground that the inhabitants of the locality had complained against the location of the appellant's bar and restaurant there. As the licence for 1965-66 would expire on March 31, 1966, the appellantapplied for a fresh licence for 1966-67 and deposited the prescribed licence fee in the Government treasury.

The appellant in Civil Appeal No. 66 of 1967 was carrying on business in liquor in his hotel, named Bliss Hotel and Bar, situated in Parade Ground, Jammu, under a licence issued by the Government of the said State. He obtained a licence for the first time in 1964. After obtaining the licence, it is alleged, he had spent about Rs. 70,000/ • in furnishing the Hotel and Bar, but for unavoidable reasons he could not do business during the financial year 1964-65. For the year 1965-66 he made an application for the renewal of the licence and on December 11, 1965, he received a letter from the Deputy Excise and Tllltation Commis sioner, Jammu, desiring the appellant to shift the premises of his

Hotel and Bar to some other suitable place after getting it approv A ed by the Department on the ground that he had received com plaints from the inhabitants of the locality gainst the location of the bar there; At the. instance of the 2nd respondent, the Bxcise and Taxation Commissioner, J ammu, his licence, along with those of other licensees, was co:Iected by the 3rd respondet.

As he was not given a licence to do business in liquor in the same loca- B lity, this appellant also filed a writ petition in the High Court for a relief similar to that claimed by the appellant in Civil Appeal I No. 65 of 1967. ·

To both the petitions, the State of Jammu and Kashmir, through its Cliief Secretary, the Excise and Taxation Commissioner, Jammu & Kashmir, and the Deputy Excise and Taxation Commis sioner, Jammu, were made respondents 1, 2 and 3 respectively.

The respondents opposed the petitions and pleaded, inter alia, that the localities wherein the petitioners were carrying on the business were the most congested and frequented parts of the city and that, as complaints were made against their carrying on the business in the said localities, the respondents refused to renew their licences to carry on the said buiiness in the said localitie.~.

They also pleaded that under The Excise Act, 1958, hereinafter called the Act, the issuing of licence was at the discretion of the Excise Commissioner and he had, having regard to the complaints received, bona fide. in exercise of his discretion, refused to give licence to the appellants to carry on business in the said localities.

 In the High Court the Writ petitions, along with others, were decided by a Division Bench consisting of Chief Justice and Justice Syed Murtaza Faz! Ali. They gave concurrent but separate judg ments.

Both the Judges agreed on merits in dismissing the peti tions, but expressed different views on the question whether the petitioners had fundamental right to do business in liquor. Hence the appeals.

Mr. Desai, learned counsel for the appellants, contended as follows :-( 1) If s. 20 of the Act was construed as conferring an absolute discretion on the Commissioner of Excise and Taxation to issue or not to issue a licence to do business in liquor, it would be void on the ground that it infringed Art. 19 of the Constitution.

(2) The licence being renewable as a matter of course, the Commissioner of Excise and Taxation could not refuse to renew the same on a ground other than those similar to the grounds contained in s. 22, els. (a), (b), (c) and (d) of the Act. ( 3) In any case, as the licences were renewable as a matter of course, the appellants were entitled to notice and an opportu nity to explain why the licence should be renewed. ( 4) The ground relating to objections as to locality was not in substance accepted by the High Court.

The first point, namely, the constitutional validity of s. 20 of the Act was not raised in the High Court. We cannot permit the appellant to raise that question for the first time before us. But we should not be understood to have expressed our view one way or other on the said question.

As we have pointed out earlier, the learned Chief Justice and Ali, J., expressed different views on the question whether the appellants had a fundamental right to do business in liquor. To avoid further confusion in the inatter it is necessary to make the position clear. Article 19 of the Constitution qua the right to do business reads thus :

(i) All citizens shall have the right-

(g) to practise any profession, or to carry on any occupation, trade or business.

I ( 6) Nothing in sub-clause ( g) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any Jaw imposing, in the interests of the general public, reasonable restrictions on the exercise of the right conferred by the said sub-clause, ....... .

A combined reading of els. (1) and ( 6) of Art. 19 makes it clear that a citizen has a fundamental right to carry on any trade or business, and the State can make a law imposing reasonable restrictions on the said right in the interests of the general public. It is, therefore, obvious that unless dealing in liquor is not trade or business, a citizen has a fundamental right to deal in that commodity. The learned Advocate General contended that dealing in liquor was not business or trade, as the dealing in noxious and dangerous goods like liquor was dangerous to the community and subversive of its morals. The acceptance of this broad argument involves the position that the meaninJ!: of the exparticular point of time in our country. Such an approach leads general acceptance of the standards of morality obtaining at a particular point of. time in our country. Such an approach leads to incoherence in thought and expression. . Standards of morality can afford a guidance to impose restrictions, but cannot limit the scope of the right. So too, a Legislature can impose restrictions on, or even prohibit the carrying on of a particular trade or business and the Court, having regard to the circumstances obtaining at a -particular time or place may hold the restrictions or prohibition reasonable. The question .. therefore. is. what is trade or business ? Though the word "business" is ordinarily more comprehensive than the word "trade", one is used as synonymous with the other.

It is not necessary to bring put the finer points of distinction between the said two concepts in this case. In the words of S. R. Das, J., as he then was, in Narain Swadeshi Weav-

Lg Mills v. The Commissioner of Excess Profits Tax('), the word

"business" connotes some real, substantial and systematic or organised course of activity or conduct with a set purpose. Even accepting this test, if the activity of a dealer, say, in ghee is business, then how does it cease to be business if it is in liquor ?

Liquor can be manufactured, brought or sold like any other commodity. It is consumed throughout the world, though some cc,>Untries restrict or prohibit the same on economic or moral , grounds. The morality or otherwise of a deal does not affect the quality of the. activity _though i~ may be a ground for imposing a restriction on the said activity.

The illegality of an activity does not affect the character of the. activity but operates as a restriction on it. If a law prohibits dealing in liquor, the dealing does not cease to be business, but the said law imposes a restriction on the said dealing. But it is said that the decisions of this Court have held that.dealing in liquor is not a business or trade within the meaning of Art. 19 of the Constitution. In T. B.

Ibrahim v. Regional Transport Authority, Taniore( 2 ) it was held that restriction placed upon the use of the bus-stand for the purpose of picking up or setting down passengers to or from outward journeys could not be considered to be an unreasonable restric~

tion on the righ~ to carry on any profession, trade or business of the appellant and, therefore, Art. 268 was not in any way repugnant to Art. 19 (1) ( g) of the Constitution. In that context, Ghulam Hasan, J., speaking for the Court, observed :

"There is no fundamental right in a citizen to carry on business wherever he chooses and his right must be subject to any reasonable restriction imposed by the executive authority in the interest of public convenience." This Court did not say that there was no fundamental right to do business but only held that a citizen could not claim that his fundamental right could not be restricted in public interests. Nor did the decision in Cooveriee B. Bharucha v. The Etcise Commissioner and the Chief Commissioner Ajmer(8 ) !av down any such proposition.

There the question was whether the Excise Regulation 1 of 1915 imposed a reasonable restriction . within the meaning of Art. 19(6) of the Constitution on the right given under Art. 19 (I )(I?) thereof to carrv on the business in intoxicating liquors.

This Court held that the said Regulation was a Teasonable restriction within the meaning of Art. 19 ( 6) of the

(I) (1955] I S.C.R. 952, 961.

(2) (1953] S.C.R. 290, 299.

(3) (1954] S.C.R. 873, 880.

Constitution. But in the course of the judgment Maha.ian, C. J .. who spoke for the Court, gave an extract from the judgment of Field, J., in Crowley v. Christensen(').

In that extract the following passage is found :-

"The police power of the State is fully competent to regulate the business to mitigate its evils or to suppress it entirely.

There is no inherent right in a citizen to thus sell intoxicating liquors by retail; it is not a privilege of a citizen of the State orof a citizen of the United States.

As it is a business attended with danger to the community, it may, as already said, be entirely prohibited, or be pennitted under such conditions as will limit to the utmost its evil."

After citing the entire passage, this Court concluded thus :

"These observations have our entire concurrence and they completely negative the. contention raised on behalf of the petitioner.

The provisions of the regulation purport to regulate trade in liquor in all its different spheres and are valid."

It will be seen that the said passage from the judgment of Field, J., has nothing to do with the construction of Art. 19 ( l )( g) of the Constitution of India.

The learned Judge was considering the scope of the "police power" and in that context the said observations were made.

This Court applied those observations in considering the reasonableness of the restrictions imposed on the fundamental rights.

Indeed, a perusal of the entire judgment shows that the Court conceded the fundamental right but held that the said regulation operated as a reasonable restriction on the said right.

The decision of this Court in The State of Assam v.

A. N. Kidwai, Commissioner of Hills Division and Appeals, Shillong( 2 ) has no relevance to the present enquiry. The following passage from the said judgment is relied upon :

"A perusal of the Act and rules will make it clear that no person has any absolute right to sell liquor and that the purpose of the Act and the rules is to control and restrict the consumption of intoxicating liquors, such control and restriction being obviously necessary fo[ the preservation of public health and morals, and to raise revenue.''

This Court only said that on the provisions of the Act no absolute right to sell liquor was given to any person and that the said right was controlled by the provisions of the said Act.

These observations have nothing to do with the question whether a person has a fundamental right to do business in liquor.

Nor can the

(I) 34 L.Ed. 62", 623.

(2) [19S7J S.C.R, 295, 301,

respondents draw any supp01t from the de,; ision of this Court in Nagendra Nath v. Commissioner of Hills Division and Appeals, Assam('). There, the question was in regard to the scope of Arts. 226 and 227 of the Constitution vis-a-vis the orders passed by the appropriate authorities under the East Bengal and Assam Excise Act, 1910. There incidentally two decisions of this Court, namely, Cooveriee B. Bharucha v. The Excise Commissioner and the Chief Commissioner, Ajmer(') and The State of Assam v.

A. N. Kidwai, Commissioner of Hills Division and Appeals, Shillong( 8 ) were noticed and it was observed that there was no inherent right to the settlement of liquor shops .. No question of fundamental right under Art. 19 ( 1) arose in that case.

This Court in The State of Bombay v. R. M. D. Chamarbaugwa/a(') upheld the validity of the Bombay Lotteries and Prize Competition Control and Tax Act, 1948 (Born. LIV of 1948), as amended by the Bombay Lotteries and Prize Competition Control and Tax (Amendment) Act (Bombay Act XXX of 1952). One of the questions raised was whether gambling was business or trade or commerc_e within the meaning 9£ Art. 19(1)(g) of the Constitution or Art. 301 thereof. Das, C. J., after considering the various decisions, observed thus :

"We find it difficult to accept the contention that those activities which encourage a spirit of reckless propensity for making easy gain by lot or chance, which lead to the loss of the hard earned money of the undiscerning and improvident common man and thereby lower his standard of living and drive him into a chronic state of indebtedness and -eventually disrupt the peace and happiness of his humble home could possibly have been intended by our Constitution makers to be raised to the status of trade, commerce or intercourse and to be made the subject-matter of a fundamental right guaranteed by A1i. 19(1)(g)." This decision only lays down that gambling is not business or trade.

We are not concerned in this case with gambling.

A division Bench of the Orissa High Court in Rnnchhor/alji

v. Revenue Diviional Commissioner, Northern Division, Sambalpur ( •) maintained the validity of the provisions of the Orissa G Cinema (Regulation) Act. 1954, on the ground that it did not infringe th.e fundamental right guaranteed under Art. 19(1 )(g), read with Art. 19(6) of the Constitution.

The learned Judges observed:

"It is only when no policy or prindple has been ____ laid don eithe_!__in _the Preamble or in the other provi- H

(I) [!958] S.C.R. 1240,

(21 [1954] S.C.R. 873

(3) [!957] S.C.R. 295.

(4) [1957] S.C.R. $74_ 925.

(5) A.l.R. 1960 Orisa 88, 92.

sions of the statute or statutory rules, and the impugned provision confers arbitrary or excessive powers on the authority, that it is liable to be struck down.

The nature of the restrictions imposed will necessarily vary with the nature of the business.

Restrictions on the carrying on of business in respect of 'normally available' commodities should not be as drastic as those in respect of a business or occupation which is likely to cause nuisance or danger to the public."

This decision also does not say that there is no fundamental right to do business which is likely to cause nuisance or danger to the public, but stated that the nature of the restrictions would depend upon the nature of the trade.

A scrutiny of these decisions does not support the contentien that the courts held that dealing in liquor was not business or trade. They were only considering the provisions of the various Acts Which conferred a restricted right to do business.

None of them held that a right to do business in liquor was not a fundamental right.

We, therefore, hold that dealing in liquor is business and a citizen has a right to do business in that commodity; but the State can make a jaw imposing reasonable restrictions on the said right, in public interests.

The next question is whether s. 20 of the Act infringes the fundamental right under Art. 19 of the Constitution.

This question, as we have said earlier, was not raised before the High Court.

We do not, therefore, allow the learned counsel to raise this question before us for the first time.

We assume, therefore, without deciding !bats. 20 of the Act does not infringe Art. 19(l)(g) of the Constitution.

Even so it was contended that the order of the Commissioner of Excise and Taxation was arbitrary and in violation of the principles of natural justice and,_ therefore, it operated as an unreasonable restriction on the appellant's fundamental right to do business.

This argument was sought to be sustained on the following grou'!ds : .( 1) Though under the Act yearly leases were issued, in practice-renewal was a matter of course.

(2) On the basis of the tssuance of a licence heavy expenditure had been incurred by the

appelants. (3) No pportunitY, was given to the appellants to estabhsh that the locahty was smtable for carrying on the said business and that the complaints made against them were false.

An~ ( 4) Even the High Court held that in regard to licensees agamst whom there were no complaints a further inquiry should M4 Sup. Cl/67-S

58 SUPllEME COUil T llEPOll TS

[1967) 3 S.C.R.

be held.

In support of the contention we were taken through all the necessary correspondence.

The learned Judges on a conside ration of the entire material placed before them, held that the Commissioner of Excise and Taxation made a bona fide enquir>' and foun~ that the locality was not suitable for carrying on business in liquor in view of the various circumstances mentioned in the counter-affidavit.

We do not think we are justified in inter fering with the finding of fact arrived at by the High Court on the material placed before it.

On the said finding it cannot be held that the order of the Commissioner was arbitrary or unreasonable.

We cannot agree with the learned counsel that s. 22 controls s. 20 of the Act for the former deals with the cancellation of a licence and the latter with the issuance of a fresh licence : they deal with two different subject-matters.

Lastly, the learned counsel for the appellants contended that the order was mala fide.

But this point was not pressed before the High Court and we cannot allow it to be raised for the first

time before us.

 D

In the result the appeals fail and are dismissed with costs.

V.P.S.

Appeal dismissed.

KRISHNA KUMAR NARULA ETC

THE STATE OF JAMMU

AND KASHMIR & ORS

K. SuBBA RAo, C.J.

C. SHAH

V. RAMASWAMI

Art. 19(1)

Jammu and Kashmir Excise Act, 1958

s. 20

Jammu and Kashmir Excise Act, 1958

Art. 19(1)

s. 20

Section 22

s. 20

S. T. Desai

S. K. Dholakia

Vineet Kumar

Inder Das Grover

Raja Jaswant Singh

R. N. Sachthey

S. P. Na.vyar

Subba Rao

High Court of J ammu & Kashmir

Glory Restaurant

Jammu

December 11, 1965

March 31, 1966

State of Jammu and Kashmir

Jammu & Kashmir

Syed Murtaza Faz! Ali

Desai

s. 20

Art. 19

s. 22

s. 20

Ali

Article 19

Art. 19

S. R. Das

Art. 19

Art. 268

Art. 19

Ghulam Hasan

Art. 19(6)

Art. 19

Art. 19

Maha.ian

Field

United States

Art. 19

Constitution of India

Arts. 226 and 227

Art. 19

Bombay Act XXX of 1952

Art. 19(1)(g)

Art. 301

Das

Orissa High Court

Art. 19(1 )(g)

Art. 19(6)

s. 20

Art. 19

Art. 19(l)(g)

S

58

s. 22

s. 20


SALES TAX OFFICER

K. I. ABRAHAM

April, 7, 1967

[J. C. SHAH, S. M. SlKRl AND V. RAMASWAMI, JJ.]

Central Sales Tax Act, 1956 (74 of 1956) Ss. 8(4), 13(') 011d (4)- Declaration Forms filed after prescribed time under Rules-If s. 8(4) complied with.

Central Salts Tax (Kerala) Rules, 1957-Rule 6(1) 1hlrd pr<YViso, validity.

Sales-tax under s. 8 of the Central Sales-tax Act at the rate of 7% wa.. imposed on assessee's sales, for which declaration forms 'C' was fiietl after the prescribed date but before the order of assessment was made. The assessee filed a writ petition a1:ainst the assessment, which the High Court allowed. In appeal, this Court, HELD : The third proviso to Rule 6(1) of the Central Sales Tax (Kerala) Rules, is ultra vlres of s. 9(4) read with s. 13(3) and (4) of the Central Sales Tax Act. Tho phrase "in the prescribed manner" occurring in s. 8(4) of the Act only confers power on the rule malting authority to prescribe a rule stating what particulars are to be mentioned in the prescribed form, the nature and value of the ll; OOds sold, the par ties to whom they are sold .. and to which authority the form is to be furnished. But the phrase "in the prescribed manner" in s. 8(4) does not take in the time-element. In other words, the section doe's not authorise the rule-making authority to prescribe 'a time-limit within which the declaration is to be filed by the registered dealer. This view is supported by the language of s. 13 ( 4 )(g) of the Act which states that the State Government may make rules for "the time within which, the manner in which and the authorities to whom any change in the ownership of any business or in the name, place or nature of any business earned on by any d,:aler shall be furnished." This makes it clear that the Legislature was conscious of the fact that the expression "in the manner" would donote only the mode in which an act was to be done, and if any timolimit was to be prescribed for the doin11 of the act, specific w.ords such as "th'> time within which" were also necessary to be put in the statute.

Therefore the assessee was not bound to furnish declarations in Form 'C' be.fore the prescribed time in the present case. In the absence of any such time-hmit it was the duty of the assessee to furnish the declarations in Form 'C' within a reasonable time and in the present case it is the admitted position that the assessee did furnish the declarations befono the order of assessment was made. (522 F-523 A; 524 D-EJ

Acrama11 v. Herniman 117 E.R. 1164, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 404 of 1966.

Appeal by special leave from the judgment and order dated November 29, 1963 of the Kerala High Court in 0.P. No. 2165 H of 1962.

B. R. L. Iyengar and M, R. Krishna Pillai, for the appellants.

A The respondent did not appear.

The Judgment of the Court was delivered by Ramaswami, J. Tiris appeal is brought, by special leave, from the judgment of the High Court of Kerala dated November 29, 1963 in Writ Petition, O.P. No. 2165 of 1962.

The respondent (hereinafter called tlie 'assessee') was a dealer in Cocoanut oil business having inter-State sales.

For the year 1959-60 the assessee was assessed to sales-tax under s. 8 of the Central Sales Tax Act (Act 74 of 1956), hereinafter called the 'Act'.

Out of a total turnover of Rs. 2,30,990 and odd determined by the Sales Tax Officer, only a sum of Rs. 1,89,734 and odd c was supported by proper declaration Form 'C'.

Tax was there fore imposed by the Sales Tax Officer at the rate of 1 % on the turnover of Rs. 1,93,346 and at 7% on the balance, namely Rs. 37,645.

The assessee did not file the declaration forms on or before the prescribed date, i.e., February 16, 1961 but he actually filed the declaration forms on March 8, 1961 before the order of

D assessment was made, the delay being explained as due to late receipt of the declaration fonns from the purchaser in Madras.

The assessee preferred an appeal to the Appellate Assistant Commissioner but the appeal was dismissed.

The assessee took the matter in revision before the Deputy Commissioner of Sales-tax but the revision petition was dismissed.

Thereafter, the assessee moved the Kerala High Court for grant of a writ under Art. 226 E of the Constitution for quashing the orders of the Sales Tax Officer dated June 13, 1961 and the order of the Appellate Assistant Commissioner dated December 13, 1961.

By its order dated November 29, 1963, the High Court allowed the Writ petition of the assessee and quashed the orders of assessment of sales-tax and directed the Sales Tax Officer to make a fresh order of assessment F after taking into consideration the declaration forms furnished the assessee on March 8, 1961.

Section 8 of the Act, as it stood on the material date was to fue following effect : '

"8. ( 1) Every dealer, who in the course of inter- State trade or commerce--

(a) sells to the Government any goods; or ( b) sells to a registered dealer other than the Government goods of the description referred to in sub-section ( 3) ;

shall be liable to pay tax under this Act which shall be one per cent. of his turnover. '

(~) The tax payable by any dealer on his turnover m so far as the turnover or any part thereof relates

520 . SUPREMB COURT 11.BPOllTS (1967] 3 s.c.11. .

to the sale of goods in the course of inter-State trade or • commerce not falling within sub-section ( 1 )-

(a) in the case of declared goods, shall be calculated at the rate applicable to the sale or purchase of such goods inside the appropriate S!ate; and

(b) in the case of goods other than declared goods, B shall be calculated at the rate of seven per cent. or at the rate applicable to the sale or purchase of such goods inside the appropriate State, whichever is higher; and for the purpose of making any such calculation any such dealer shall be deemed to be a dealer liable c to pay tax under the sales tax law of the appropriate State, notwithstanding that he, in fact, may not be so liable under that law.

( 4) The provisions of sub-section ( 1) shall not apply to any sale in the course of inter-State trade or o commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner- ( a) a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed fom1 obtained from the prescribed • authority; or

(b) if the goods are sold to the Government, not being a registered dealer, a certificate in the prescribed form duly filled and signed by a duly authorised officer of the Governllient." Section 13 states : r " ( 1 ) 'The Central Government may, by notification in the Official Gazette, make rules providing for- ( a) the manner in which applications for registration may be made under this Act, the particulars to be contained therein, the procedure for the grant G of such registration, the circumstances in which registration may be refused and the form in which the certificate of registration may be given;

(b) the period of turnover, the manner in which the turnover in relation to the sale of any goods II under this Act shall be determined, and the deductions which may be made in the process of such determination;

( c) the cases and circumstances in which, and the conditions subject to which, any registration granted under this Act may be cancelled; ( d) the fonn in which and the particulars to be contained in any declaration or certificate to be given under this Act;

.•: ... ( 3) The State Government may make rules, not inconsistent with the provisions of this Act and the rules made under sub-section (I), to carry out the purposes of this Act. ( 4) In particular and without prejudice to the powers conferred by sub-section ( 3) , the State Government may make rules for all or any of the following purposes, namely :-

(e) the authority from whom, the conditions subject to which and the fees subject to payment of which anyform of declaration prescribed under sub section ( 4) of section 8 may be obtained, the manner in which the form shall be kept in custody and records relating thereto maintained, the manner in which any such form may be used and any such declaration may be furnished;

(f) in the ase of an undivided Hindu family, association, club, society, firm or company or in the case of a person who carries on business as a guardian or trustee or otherwise on behalf of another person, the furnishing of a declaration stating the name of the person who shall be deemed to be the manager in relation to the business of the dealer in the State and the fonn in which such declaration may be given;

(g) the time within which, the manner in which and the authorities to whom any change in the ownership of any biness or in the name, place or nature of any business carried on by any dealer shall be furnished." Rule 6 of the Central Sales Tax (Kerala) Rules 1967 read as follows: '

"6. (1) Every dealer registered under section 7 of the Act an? every dealer liable to pay under the Act shall ubm1t a return of all his transaction including those m the_ cc; urse of export of the goods out of the territory of India m Form II together with connected decla-

522 SUPllBMB COURT llBPOllTS [1967) 3 s.c.a.

ration forms so as to reach the assessing authority on or before the 20th of each month showing the turnover for the preceding month and the amount or amounts collected by way of tax together with proof for the payment of tax due thereon under the Act.

Provided that in cases of delayed receipt of declaration forms, the dealer may submit the declaration forms at any time before the assessment is made :

Provided further that the delay in submitting the declaration forms shall not exceed three months from'the date of sale in question :

Provided also that all declaration forms pending submission by dealers on 2-5-1960 shall be submitted not later than 16-2-1961."

The first proviso to Rule 6 was inserted by n.otification dated January 3, 1958, the second by notification dated April 26, 1960 and the third by notification dated January 16, 1961

It was contended on behalf of the appellants that the assessee had not filed the declarations in form 'C' before February 16, 1961 according to the third proviso to Rule 6(1) and in view of the breach of this Rule the assessce was not entitled to take advantage of the lower rate of assessment under s. 8 ( 1 ) of the Act.

The opposite view-point was put forward on behalf of the assessee and it was argued that the third proviso to Rule 6 (l ) was ultra vires of s. 8 ( 4) read with s. 13 ( 4 )( e) of the Act.

The qecision of the question at issue therefore depends on the construction of the phrase "in the prescribed manner" in s. 8 ( 4) read with s. 13 of the Act.

In our opinion, the phrase "in the prescribed manner\' occurring in s. 8 ( 4) of the Act only confers power on the rule-making authority to prescribe a rule stating what particulars are to be mentioned in the prescribed form, the nature .and value of the goods sold, the parties to whom they are sold, and to which authority the form is to be furnished.

But the phrase "in the prescribed manner" in s. 8 ( 4) does not take in the timeelement.

In other words, the section does not authorise the rulemaking authority to prescribe a time-limit within which the (teclaration is to be filed by the registered dealer.

The view that we have taken is supported by the language of s. 13 ( 4 )(g) of the Act which states that the State Government may make rules fr "the time within which, thi:i manner in which and the authorities to whom any change in the ownership of any business or in the name, place or nature of any business carried on by any dealer shall be furnished." This makes it clear that the Legislature was conscious of the fact that the expression "in the manner" ould denote only the mode in which an act was to be done, and 1f any

S, T.o. v. ABRAHAM (Ramaswami, I.) si3;

time-limit was to be prescribed for the doing of the act, specific words such as "the time within which" were also necessary to be put in the statute. In Stroud's Judicial Dictionary it is said that the words "manner and form" refer only "to the mode in which the thing is to be done, and do not introduce anything from the Act referred to as to the thing which is to be done or the time for B doing it".

In Acraman v. Herniman(') the plaintiffs had become the assignees in bankruptcy proceedings against Garret who had executed on March 4, 1850 a warrant of attorney to the defendant Herniman on the strength of which the latter had obtained: judgment against him and sold his goods. A copy of the warrant of attorney was filed with the officer acting as clerk of the docc

quets and judgments in the court of Queen's Bench on March 11, 1850, but no affidavit of the time of execution of such warrant of attorney was filed at any time: Stat. 12 and 13 Viet. c. 106. s. 136 provided that any warrant of attorney given by a trader to confess judgment i.n a personal action, not filed within twenty one days after execution in the manner and form provided by

Stat. 3. G.4. c.39 should be deemed fraudulent, null and void.

Section 1 of Stat. 3 G.4. c.39 required that such warrant of attorney should be filed together with an affidavit of the time of execution thereof, within twenty-one days of the execution of the warrant of attorney. Section 2 provided that if, after twenty-one days, the giving such warrant of attorney shall be declared a bankrupt, then, unless the warrant or a copy thereof shall have been filed as E aforesaid within 21 days from the execution or unless judgment shall have been signed or execution issued thereon within the same period, such warrant of attorney and the judgment and execution thereon, shall be med fraudulent and void against the assignees. ~y stated; iudgment had been signed on March 11, 1850,

1.e., within twenty-one days of the execution of the warrant of I' '~omey, and it w_as contnded 01;1 behalf of the defendant that the

JU gme1;1t was valid notwithstanding the failure to file the affida 't

~1rb~ e; tihlJ ~~ i:\Ju;:~1~ ~!~h ~~~:~;~~ nees i!\ankrud:de~ thereon were .vid as against the assigbell C. J. observed 'as fllo:s ourse of his Judgment, Lord Camp-

"Th s 136 enactmet of stat. 12 & 13 Viet c 106

nstrci;:r;;/~

1 ?i an~~ clnn?t1 agree to Pt a

0 forced that a egis ature has said there judgm~t!~eo~rne~ given by a trad.er ; to confess

~st~~~~ ~~execution aln ~~~.!~~ ~!~ ;;::::np=~~ and void Th c. 39• shll be deemed fraudulent, nun '"7.\7.=--=--=-·:__.:::e'.....m'.'.'.'.'.:anner directed by that Act iS fili

(I) 117 E. R. 1164. • ng.

524 SUPUMB OOUl.T uroan [1967) 3 s.CJl.

the warrant or copy, with an affidavit of the time of A execution.

Here are a judgment and execution on a warrant of attorney given by a trader, and the warrant filed, but without an affidavit.

The plain meaning of the late Act is that such a warrant shall be null and void agaiust the assignees. The words 'in manner and fonn,' refer only to the mode in which the thing is to be done, B and do not introduce anything from the Act referred to, as to the thing which is to be done or the time for doing it. n

The view that we have expressed as to the interpretation of s. 8 ( 4) of the Act is also supP.orted by the 'Note' to the form of declaration-Form C-prescnbed by Rule 12 of the Central Sales Tax (Registration & Turnover) Rules, 1957. The Note states that the form is 'to be furnished to the prescribed authority in accordance with the rules framed under section 13 ( 4 )( e) b; v

the appropriate State Government'.

For the reasons expressed, we hold that the third proviso to Rule 6(1) is ultra vire5 of s. 8(4) read withs. 13(3) and (4) of the Act.

It follows therefore that the asscssee was not bound to furnish declarations in Form 'C' before February 16, 1961 in the present case.

In the absence of any such time-limit it was the duty of the assessee to furnish the declarations in form C within a reasonable time, and in the present case it is the admitted posi tion that the assessee did furnish the declarations on March 8,

1961 before the order of assessment was made by the Sales Tax Officer.

We are accordily of the opinion that the assessee has furnished the declarations in Form C in the present case within a reasonable time and there has been a compliance with the requirements of s. 8 ( 4) (a) of the' Act. It follows that the High Court was right in quashing the order of assessment made by the Sales Tax Officer and directing him . to make a fresh order of assessment after taking into consideration the declaration forms furnished by the assessee on March 8, 1961.

We accordingly dismiss this appeal, but as the respondent has not appeared there will be no order as to costs.

Y.P.

Appeal dismissed.

SALES TAX OFFICER

K. I. ABRAHAM

April, 7, 1967

C. SHAH

V. RAMASWAMI, JJ.

Central Sales Tax Act, 1956

Ss. 8(4), 13(')

s. 8(4)

s. 8

s. 9(4)

s. 13(3)

Central Sales Tax Act

s. 8(4)

s. 8(4)

s. 13

B. R. L. Iyengar

R. Krishna Pillai

Ramaswami

s. 8

Central Sales Tax Act

February 16, 1961

March 8, 1961

Madras

Kerala High Court

Art. 226

Section 8

Section 13

Central Government

section 8

section 7

India

January 3, 1958

April 26, 1960

January 16, 1961

s. 8

s. 8

s. 13

s. 8

s. 13

s. 8

s. 8

s. 13

Stroud

Garret

March 4, 1850

Herniman

March 11, 1850

s. 136

Section 1

Section 2

s 136

s. 8

Form C-prescnbed by Rule

section 13

s. 8(4)

March 8,

1961

s. 8