Madras High Court
M/S.J.P.R.Textiles vs The Deputy Commercial Tax Officer on 7 September, 2021
W.A.No.2241 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 07.09.2021
CORAM :
THE HON'BLE MR. JUSTICE T.S. SIVAGNANAM
AND
THE HON'BLE MR. JUSTICE SATHI KUMAR SUKUMARA KURUP
W.A.No.2241 of 2021
and
C.M.P.No.14194 of 2021
M/s.J.P.R.Textiles,
Rep.by its partner – M.Jaganathan,
No.195/4-C, Vadugampalayam,
Pollachi Road,
Palladam,
Tirupur District. ... Appellant
Vs.
The Deputy Commercial Tax Officer,
Palladam,
Tirupur District. ... Respondent
Writ Appeal has been filed under Clause 15 of the Letters Patent to set
aside the order dated 05.10.2020 passed in W.P.No.9861 of 2006.
Page 1/17
https://www.mhc.tn.gov.in/judis/
W.A.No.2241 of 2021
For Appellant : Mrs.R.Hemalatha
For Respondent : Mr.M.Venkateswaran
Government Advocate
JUDGMENT
(Judgment was delivered by T.S. SIVAGNANAM, J.)
This Writ Appeal filed by the writ petitioner is directed against the
order, dated 05.10.2020, passed in W.P.No.9861 of 2006.
2.The appellant is a registered dealer under the provisions of the Tamil
Nadu General Sales Tax Act, 1959 ("the Act" for brevity), engaged in the
business of manufacture of cloth. The appellant had filed their returns for the
Assessment Year 2002-03 and the returns were accepted and the assessments
were completed. The appellant had claimed deduction on 2nd sales of clothes,
which was allowed. Subsequently, the Assessing Officer issued notice to the
appellant under Section 16 of the Act stating that, on verification, it revealed
that the sellers at the other end were not the actual dealers in Yarn and were
non-existing dealers. Therefore, the Assessing Officer stated that the appellant
has effected the purchase of Yarn from unregistered dealers or Registration
Page 2/17
https://www.mhc.tn.gov.in/judis/
W.A.No.2241 of 2021
Certificate canceled dealers. Therefore, there was a proposal to revise the
turnover and assess the Tax at 4%, after adding 10% towards Freight and
Gross Profit.
3.The appellant submitted their objections to the notice by letter, dated
27.04.2002, which was received by the Assessing Officer on 16.06.2005.
Even earlier, the appellant had submitted that their sellers are M/s.Shree
Anjaneya Textiles, Pollachi, and they have valid Registration Certificate under
the Act and they produced a copy of the renewal of the Registration
Certificate, copies of the bills, payment details and other details about the
seller to enable the Assessing Officer to cause verification. The Assessing
Officer did not accept the stand taken by the appellant and completed the
assessment by order dated 02.01.2006. This order was put to challenge by
filing the writ petition, which was filed during the year 2006 and an order of
interim stay was granted. The respondent/Department, represented by the
State Tax Officer, Palladam, had filed their counter affidavit sometime in
February, 2019, reiterating the stand taken in the Assessment Order, stating
that the Cotton Yarn purchase of the petitioner had not suffered Tax already,
Page 3/17
https://www.mhc.tn.gov.in/judis/
W.A.No.2241 of 2021
as the seller was non-existent and had not paid the legitimate tax dues to the
Government on the sale of Cotton Yarn, and therefore, the appellant is deemed
to be the first purchaser of the Cotton Yarn and liable to pay Tax to the
Department.
4.The learned Writ Court, by the impugned order, dismissed the Writ
Petition, taking note of the memo filed by the respondent, stating that the
Assessment Order was passed on 02.01.2006 and served on the appellant on
12.01.2006 and if the appellant had filed an appeal before the first Appellate
Authority in terms of Section 31(1) of the Act, they should have filed it by
10.02.2006 or atleast by 12.03.2006 and the writ petition was filed only on
06.04.2006. It appears that the respondent had placed reliance on the decision
of the Hon'ble Supreme Court in the case of Assistant Commissioner (CT)
LTU, Kakinada v. Glaxo Smith Kline Consumer Health Care Limited [Civil
Appeal No.2413 of 2020 dated 06.05.2020].
5.The appellant filed a reply memo before the learned Writ Court,
contending that the decision in Glaxo Smith Kline Consumer Health Care
Page 4/17
https://www.mhc.tn.gov.in/judis/
W.A.No.2241 of 2021
Limited is distinguishable on facts and in the said case, the Assessment Order
was challenged by filing a statutory appeal along with petition to condone the
delay in filing the appeal and the Appellate Authority was not satisfied with
the reasons given for the delay and refused to condone the delay, which was
put to challenge by filing the writ petition. The appellant placed reliance on
the decision of the Hon'ble Supreme Court in the case of Superintending
Engineer v. Excise & Taxation Officer reported in (2019) 71 GSTR 1 (SC),
wherein, it was held that the express exclusion of the provisions of the
Limitation Act, particularly Section 5 thereof, should be expressly provided to
oust the powers of the High Court under revisional jurisdiction under Section
48 of the Himachal Pradesh Value Added Tax Act, 2005. Therefore, it was
submitted that, in the absence of any express exclusion of Section 5 of the
Limitation Act, the said provision would apply and this aspect has not been
dealt with in the decision in the case of Glaxo Smith Kline Consumer Health
Care Limited. Therefore, the appellant prayed the Writ Court to consider the
case on merits.
Page 5/17
https://www.mhc.tn.gov.in/judis/
W.A.No.2241 of 2021
6.The learned Writ Court, by the impugned order, has dismissed the
writ petition, solely by placing reliance on the decision in the case of Glaxo
Smith Kline Consumer Health Care Limited, as the appellant had challenged
the order of assessment by filing the writ petition beyond the period of
limitation stipulated under Section 31(1) of the Act.
7.We find from the impugned order that the contentions raised by the
appellant on distinguishing the decision in Glaxo Smith Kline Consumer
Health Care Limited, have not been dealt with.
8.Questioning the correctness of the order passed in the writ petition,
the appellant is before us.
9.We have heard Mrs.R.Hemalatha, learned counsel for the appellant
and Mr.M.Venkateswaran, learned Government Advocate, accepting notice
for the respondent.
Page 6/17
https://www.mhc.tn.gov.in/judis/
W.A.No.2241 of 2021
10.The first issue to be considered is whether, the writ petition, which
was admitted and pending before this Court from 2006 and interim stay was
operating against the respondent, could have been rejected on the ground
mentioned by the learned Writ Court in the impugned order. Parallelly, the
other issue would be whether, there is an absolute bar for the Writ Court to
entertain a challenge to an Assessment Order and is there any such specific
observation in the decision in Glaxo Smith Kline Consumer Health Care
Limited.
11.Identical issue came up for consideration before this Court in the
case of Mahindra & Mahindra Ltd. v. The Joint Commissioner (CT)
Appeals, Chennai and another [W.A.No.493 of 2021 dated 18.02.2021]. In
the said case also, the writ petition was dismissed by the learned Single Bench
by placing reliance on Glaxo Smith Kline Consumer Health Care Limited and
the Division Bench, to which one of us (TSSJ) was a party, had interfered with
the said order and entertained the writ petition and decided the matter on
merits. The following paragraphs of the said judgment would be of relevance.
“4. The learned Single Judge placed reliance on the
Page 7/17
https://www.mhc.tn.gov.in/judis/
W.A.No.2241 of 2021
decision of the Hon'ble Supreme Court in the case of ACCT,
LTU, Kakinada Vs. Glaxo Smith Kline Consumer Health care
Ltd. [reported in 2020 (36) GSTL 305] and in the said decision,
it was emphatically laid down that the High Court, in exercise
of power under Article 226 of The Constitution of India, ought
not to have entertained the writ petition assailing the order
passed by the Statutory Authority, which was not appealed
against within the maximum period of limitation before the
concerned Appellate Authority.
5. In our respectful view, the decision of the Hon'ble
Supreme Court in the said decision has not held that a writ
petition under Article 226 of the Constitution of India is an
absolute bar. We are of the said view after noting the
observations/findings rendered by the Hon'ble Supreme Court
in the following paragraphs :
“11. In the backdrop of these facts, the central
question is: whether the High Court ought to have
entertained the writ petition filed by the respondent?
As regards the power of the High Court to issue
directions, orders or writs in exercise of its
jurisdiction under Article 226 of the Constitution of
India, the same is no more res integra. Even though
the High Court can entertain a writ petition against
any order or direction passed/action taken by the
State under Article 226 of the Constitution, it ought
not to do so as a matter of course when the aggrieved
person could have availed of an effective alternative
remedy in the manner prescribed by law (see
Page 8/17
https://www.mhc.tn.gov.in/judis/
W.A.No.2241 of 2021
Baburam Prakash Chandra Maheshwari vs. Antarim
Zila Parishad now Zila Parishad, Muzaffarnagar
[AIR 1969 SC 556] and also Nivedita Sharma vs.
Cellular Operators Association of India & Ors. [2011
(14) SCC 337]. In Thansingh Nathmal & Ors. vs.
Superintendent of Taxes, Dhubri & Ors. [AIR 1964
SC 1419], the Constitution Bench of this Court made
it amply clear that although the power of the High
Court under Article 226 of the Constitution is very
wide, the Court must exercise self imposed restraint
and not entertain the writ petition, if an alternative
effective remedy is available to the aggrieved
person.....
15. ........ The High Court may accede to such a
challenge and can also non suit the petitioner on the
ground that alternative efficacious remedy is
available and that be invoked by the writ petitioner.
However, if the writ petitioner chooses to approach
the High Court after expiry of the maximum
limitation period of 60 days prescribed under Section
31 of the 2005 Act, the High Court cannot disregard
the statutory period for redressal of the grievance
and entertain the writ petition of such a party as a
matter of course. Doing so would be in the teeth of
the principle underlying the dictum of a three Judge
Bench of this Court in Oil and Natural Gas
Corporation Limited (supra). In other words, the fact
that the High Court has wide powers, does not mean
that it would issue a writ which may be inconsistent
with the legislative intent regarding the dispensation
explicitly prescribed under Section 31 of the 2005
Act. That would render the legislative scheme and
intention behind the stated provision otiose. ......
19........ Pertinently, no finding has been
recorded by the High Court that it was a case of
Page 9/17
https://www.mhc.tn.gov.in/judis/
W.A.No.2241 of 2021
violation of principles of natural justice or non -
compliance of statutory requirements in any manner.
Be that as it may, since the statutory period specified
for filing of appeal had expired long back in August,
2017 itself and the appeal came to be filed by the
respondent only on 24.9.2018, without substantiating
the plea about inability to file appeal within the
prescribed time, no indulgence could be shown to the
respondent at all.”
6. On a reading of the above extracted paragraphs, it is
seen that the Hon'ble Supreme Court, after referring to the
decision of the Constitution Bench in the case of Thansingh
Nathmal, held that although the power of the High Court
under Article 226 of the Constitution is very wide, the Court
must exercise self imposed restraint and not entertain the writ
petition. Further, in paragraph 15, the Hon'ble Supreme Court
observed that the High Court may accede to such a challenge
and can also non suit the petitioner on the ground that
alternative efficacious remedy is available and that be invoked
by the writ petitioner. In addition, in paragraph 19, the Hon'ble
Supreme Court took note of the fact that when the High Court
refuses to exercise the jurisdiction under Article 226 of The
Constitution of India, it would be necessary for the Court to
record that there was no case of violation of the principles of
natural justice or non compliance of statutory requirements in
any manner.
Page 10/17
https://www.mhc.tn.gov.in/judis/
W.A.No.2241 of 2021
7. Therefore, there are certain broad parameters, within
which, the Court has to exercise its jurisdiction under Article
226 of The Constitution of India, which read as hereunder :
(i) if there is unfairness in the action of the Statutory
Authority;
(ii) if there is unreasonableness in the action of the
Statutory Authority;
(iii) if perversity writs large in the action taken by the
Authority;
(iv) if the Authority lacks jurisdiction to decide the issue
and
(v) if there has been violation of the principles of natural
justice,
the Court will step in and exercise its jurisdiction under Article
226 of The Constitution of India.
8. Further, it would be highly beneficial to refer to the
celebrated decision of the Constitution Bench of the Hon'ble
Supreme Court in the case of Mafatlal Industries Ltd. Vs.
Union of India [reported in 1997 (5) SCC 536] wherein it was
held that the jurisdiction of the High Courts under Article 226
and that of the Hon'ble Supreme Court under Article 32 of The
Constitution of India could not be circumscribed by the
provisions of the Enactment (Central Excise Act) and they
would certainly have due regard to the legislative intent
Page 11/17
https://www.mhc.tn.gov.in/judis/
W.A.No.2241 of 2021
evidenced by the provisions of the Act and would exercise their
jurisdiction consistent with the provisions of the Act. Further,
the Court directed that the writ petition would be considered
and disposed of in the the light of and in accordance with the
provisions of Section 11B of the Central Excise Tax Act and for
such a reason, the power under Article 226 of The Constitution
of India has to be exercised to effectuate rule of law and not for
abrogating it.
9. In the light of the above, we have no hesitation to hold
that the observation of the learned Single Judge to the effect
that there is absolute bar for entertaining a writ petition does
not reflect the correct legal position. Hence, we are inclined to
interfere with the observation made in the impugned order.”
12.The above decision would be equally applicable to the case on hand,
as the applicant's case before the learned Writ Court was that the Assessing
Officer lacks jurisdiction to tax the transactions in the hands of the assessee, as
the appellant cannot be made liable for non-payment of the tax by the selling
dealer and it is not necessary for the appellant to prove that the first sale has
suffered tax at the hands of the selling dealer. Further, the appellant had
challenged the Assessment Order on the ground of unfairness in the action of
Page 12/17
https://www.mhc.tn.gov.in/judis/
W.A.No.2241 of 2021
the statutory authority and on the other grounds of violation of principles of
natural justice and non-consideration of the documents which were placed
before the authority. If these were the grounds raised by the appellant, then it
goes without saying that the correctness of the Assessment Order could be
tested in a writ petition under Article 226 of the Constitution of India. Thus,
we hold that the writ petition was maintainable.
13.With regard to the merits of the matter, the appellant's specific case
was that the selling dealer is an existing dealer, to prove the stand, the
appellant produced a copy of the renewal of the Registration Certificate of the
selling dealer, the bill copies, payment details, etc. However, the Assessing
Officer, though accepts the production of these documents, would state that
the same are not sufficient to decide the issue before him. The Assessing
Officer continues to maintain the stand that the whereabouts of the selling
dealer are not known and sale bills alone have been issued. This finding is not
supported by any document or any report, which was called for and obtained
by the Assessing Officer. In such circumstances, it has to be held that the
Assessing Officer did not enquire into the matter, particularly, with regard to
Page 13/17
https://www.mhc.tn.gov.in/judis/
W.A.No.2241 of 2021
the aspects pointed out by the appellant that the selling dealer's registration
was valid and sale bills have been issued and payments have also been
effected by the appellant.
14.If such is the factual position, we need to take note of the legal
position as to whether, the appellant is required to prove that the selling dealer
had paid taxes. This issue is no longer res integra and one of the earlier
decisions on the said issue is the decision of the Hon'ble Division Bench of
this Court in Govindan and Co. v. State of Tamil Nadu reported in 1975 (35)
STC 50 (Mad). The facts are more or less identical and it was held in the said
decision that the purchasing dealer need not show that the sellers have in fact
paid tax and it is enough for them to show that the earliest sales are taxable
sales and that the tax is really payable by their sellers. This decision was
followed in the case of State of Tamil Nadu v. Chamundeeswari Enterprises
reported in (1983) 52 STC 124. In Deputy Commissioner (CT) Trichy
Division v. V.R.Kuppusamy Gounder & Sons reported in (1995) 98 STC
408, a similar issue arose for consideration, wherein, the Revenue took a stand
that the bills issued by the alleged sellers were bogus and they were non-
Page 14/17
https://www.mhc.tn.gov.in/judis/
W.A.No.2241 of 2021
existent and therefore, the purchasing dealer had to pay tax. The Revenue
stated that the assessee therein have not proved the movement of goods, but
the assessee had produced certain documents before the Tribunal to establish
that the goods moved pursuant to the sale transaction. The Hon'ble Division
Bench pointed out that, admittedly, the Registration Certificates of the selling
dealers were in force and their services were not canceled and there is no
explanation on the side of the Revenue for not examining the selling dealers.
Further, dealing with the issue that the bills were bogus, the Division Bench
pointed out that, in the bills, the Registration Number and names of the sellers
were given, but the Department failed to identify the sellers and make them
available for cross-examination. In the case on hand also, the Assessing
Officer took no steps to enquire into the matter, pursuant to the objections
filed by the appellant.
15.Thus, for all the above reasons, we are of the clear view that the
revision of assessment made on the appellant is not sustainable in law. In the
Page 15/17
https://www.mhc.tn.gov.in/judis/
W.A.No.2241 of 2021
result, this Writ Appeal is allowed and the order passed in the writ petition is
set aside. Consequently, the Writ Petition is allowed and the revision of
assessment by the respondent, by order dated 02.01.2006, is set aside. No
costs. Connected Miscellaneous Petition is closed.
(T.S.S., J.) (S.S.K., J.)
07.09.2021
mkn
Internet : Yes
Index : Yes / No
Speaking order / Nonspeaking order
To
The Deputy Commercial Tax Officer,
Palladam,
Tirupur District.
T.S. SIVAGNANAM, J.
and
SATHI KUMAR SUKUMARA KURUP, J.
Page 16/17
https://www.mhc.tn.gov.in/judis/
W.A.No.2241 of 2021
mkn
W.A.No.2241 of 2021
07.09.2021
Page 17/17
https://www.mhc.tn.gov.in/judis/
