Case: Amalgamated Coalfields Ltd. &amp; Anr Vs. Janapada Sabha Chhindwara

origin of the tax. When the first notification was issued on the 16th December, 1935 it authorised and sanctioned the imposition by the Independent Mining Local Board at Chhindwara in the Chhindwara District "of a tax at 3 pies per ton on coal, coal dust or coke, manufactured at the mines, sold for export by rail or sold otherwise than for export by rail, within the jurisdiction of the Independent Mining Local Board." This tax was recovered by the Board and thereafter by the respondent in respect of coal whether sold inside the district of Chhindwara or sold outside the district of Chhindwara or even outside the State of Madhya Pradesh. In other words, the total coal produced by each mining lease-holder substantially came to be taxed. But after the Constitution came into force, doubts arose as to whether Art. 286 of the Constitution did not preclude the respondent from recovering tax in respect of coal exported out of the State of Madhya Pradesh, and in view of the advice given to the respondent by the Government of Madhya Pradesh, the respondent did not collect the tax in respect of coal which was exported by rail outside the State of Madhya Pradesh from about 1952. The respondent wanted to consult legal opinion on this point, but the State Government refused permission to the respondent to incur expenditure in that behalf. Subsequently, however, this question came to be decided by the High Court of Madhya Pradesh in a writ petition filed by M/s. Newton Chickli Collieries (Pvt.) Ltd. (No. 265 of 1957). The High Court held that the tax levied by the Janapada Sabha under S. 51 of the Act did not amount to a sales tax nor to an excise duty, and so, the respondent thought that it could levy tax even on coal exported by rail outside the State of Madhya Pradesh. In fact, after this judgment was pronounced by the High Court on August 6, 1958, the Provincial Government withdrew its instructions to the respondent not to levy tax on exported coal. That is how the respondent has issued notices against the appellants in respect of coal exported by rail out of the State of Madhya Pradesh in regard to the years for which assessment has already been levied against the appellants for the coal not so exported, and the contention of the appellants is that this reopening of the assessment is not permissible under the Rules.33. This contention appears to be well founded. We have already seen the scheme of the Rules and we have noticed that R. 10 provides that if no objection is filed, the Chairmans assessment shall be final and if an objection is received, the decision of the Mining Board would be final.In other words, the scheme clearly provides that at the end of each six monthly period, the tax has to be assessed notices to be issued to the assessee, his objections to be considered and the tax to be ultimately determined in the light of the decision on the said objections; and under R. 10, the two decisions specified therein become final. It may be that the Rules do not prescribe any limitation within which these steps have to be taken by the respondent for each period, but that is another matter. In view of the provisions of R. 10 it is difficult to hold that the respondent is entitled to reopen assessments already made and rendered final under the said Rule. There is no other provision for reopening assessment as we have under Ss. 34 and 35 of the Indian Income-tax Act, and so, the respondent is not justified in issuing notices for the years which are covered by assessment orders already passed. The finality provided for by R. 10 will work as much against the respondent as against the assessee. 34. In support of the appeals, another argument was sought to be raised against the increase of the rates. It was urged that the tax is in the nature of an excise duty or a sales-tax and, therefore, any increase in the said tax beyond the limit of 3 pies - the continuance of which has been saved by the provisions of Art. 143 of the Government of India Act, 1935 and Art. 277 of the Constitution - will be invalid. This argument is based on the terms used in the notification of the 16th December, 1935. Since coal is described as manufactured at the mines, the argument is that it is in the nature of an excise duty and since the notification also refers to coal sold for export by rail or sold otherwise than for export by rail, it is argued that it is a sales-tax. On the other hand, the respondent contends that it is neither a sales-tax nor an excise duty and as such, the rate can be increased subject, of course, to the requirements of S. 51 (2) of the Act. It appears that by notification issued on September 6, 1943, the preamble of the Rules was modified by substituting for the words "coal, coal dust or coke" by "coal and dust coal" and by deleting the words "manufactured at the mines". Curiously enough these amendments have not been made in the original notification itself. We have already noticed that this latter notification deleted R. 3. Some arguments were urged before us by learned counsel on both sides as to the effect of this notification which modified the preamble to the Rules. We do not, however, think it necessary to consider these arguments in the present appeals because of our conclusion that the impugned notices levying the tax @ 9 pies per ton are invalid for two reasons : the increase in the rates has not been sanctioned by the State Government under S. 51 (2) and an attempt to recover at the increased rate the tax for the years already covered by assessment orders passed in that behalf, is bared by R. 10.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]18. The question in the present appeals, however, is somewhat different. The notices which are challenged by the appellants in the present proceedings are in respect of the tax levied for a period different from the period covered by the notices issued on the 23rd August, 1958 which were the subject-matter of the earlier writ proceedings Amalgamated Coalfields Ltd., 1962-1 SCR 1   : (AIR 1961 SC 964  ).Where the liability of a tax for a particular year is considered and decided, does the decision for that particular year operate as res judicata in respect of the liability for a subsequent year ?In a sense, the liability to pay tax from year to year is a separate and distinct liability; it is based on a different cause of action from year to year, and if any points of fact or law are considered in determining the liability for a given year, they can generally be deemed to have been considered and decided in a collateral and incidental way. The trend of the recent English decisions on the whole appears to be, in the words of Lord Radcliffe, "that it is more in the public interest that tax and rate assessment should not be artificially encumbered with estoppels (I am not speaking, of course, of the effect of legal decisions establishing the law, which is quite a different matter), even through in the result some expectations may be frustrated and some time wasted." (Vide Society of Medical Officers of Health v. Hope, 1960 AC 551   at p. 563). The basic for this view is that generally, questions of liability to pay tax are determined by Tribunals with limited jurisdiction and so, it would not be inappropriate to assume that if they decide any other questions incidental to the determination of the liability for the specific period, the decisions of those incidental questions need not create a bar of res judicata while similar questions of liability for subsequent years are being examined23. In considering this question, it may be necessary to distinguish between decision on questions of law which directly and substantially arise in any dispute about the liability for a particular year, and questions of law which arise incidentally or in a collateral manner, as Lord Radcliffe himself has observed in the case of the Society of Medical Officers of Health, 1960 AC 155   that the effect of legal decisions establishing the law would be a different matter. If, for instance, the validity of a taxing statute is impeached by an assessee who is called upon to pay a tax for a particular year and the matter is taken to the High Court or brought before this Court and it is held that the taxing statute is valid, it may not be easy to hold that the decision on this basic and material issue would not operate as res judicata against the assessee for a subsequent year. That, however, is a matter on which it is unnecessary for us to pronounce a definite opinion in the present case. In this connection, it would be relevant to add that even if a direct decision of this Court on a point of law does not operate as res judicata in a dispute for a subsequent year, such a decision would, under Art. 141, have a binding effect not only on the parties to it, but also on all counts in India as a precedent in which the law is declared by this Court. The question about the applicability of res judicata to such a decision would thus be a matter of merely academic significanceIt is significant that the attack against the validity of the notices in the present proceedings is based on grounds different and distinct from the grounds raised on the earlier occasion. It is not as if the same ground which was urged on the earlier occasion is placed before the Court in another form. The grounds now urged are entirely distinct and so, the decision of the High Court can be upheld only if the principle of constructive res judicata can be said to apply to writ petitions filed under Art. 32 or Art. 226. In our opinion, constructive res judicata which is a special and artificial form of res judicata enacted by S. 11 of the Civil Procedure Code should not generally be applied to writ petitions filed under Art. 32 or Art. 226. We would be reluctant to apply this principle to the present appeals all the more because we are dealing with cases where the impugned tax liability is for different years. In dismissing the appellants petitions on the ground of res judicata, the High Court has no doubt referred to Art. 141 under which the law declared by this Court is binding on all Courts within the territory of India. But when we are considering the question as to whether any law has been declared by this Court by implication, such implied declaration, though binding, must be held to be subject to revision by this Court on a proper occasion where the point in question is directly and expressly raised by any party before this Court. Therefore, we are inclined to hold that the appellants cannot be precluded from raising the new contentions on which their challenge against the validity of the notices is basedIn the present case, we are not satisfied that this decision can assist the appellants at all, because the nature of the statutory provisions and the Rules framed under the Act in the present appeals is entirely different29. We have already noticed that S. 79 (1) (xv) authorised the making of a rule as to the maximum amounts or rates at which any of the articles can be taxed.This was introduced by an amendment made in 1933 by C. P. Act VII of 1933, and so, the argument is that R. 3 which provides that the tax shall be levied @ 3 pies per ton must be deemed to provide for the maximum rate which can be levied and that is 3 pies per ton and no more. This argument is no doubt well founded, because R. 3 will have to be read in the light of the power conferred on the local Government by S. 79 (1) (xv) and that would mean that the rate of 3 pies per ton has been prescribed by the Rule as the maximum rate permissible. But this argument ignores the fact that this Rule has been subsequently deleted by a notification on September 6, 1943 published in the Government Gazette on September 10, 1943. When this notification was cited before us the appellants conceded that the argument based on the construction of R. 3 was not available to them. Therefore, the contention that R. 3 prohibits the levy at a rate higher than 3 pies cannot succeed since the Rule itself has been subsequently deleted, and was not a part of the Rules at the relevant time when the impugned notices were issuedSection 51 (1) authorises the imposition of the tax, provided of course, the procedure prescribed by it and the requirements laid down by it are satisfied, sub-s. (2) then lays down that the first imposition of any tax shall be subject to the previous sanction of the Provincial Government. The appellants contend that in the context, the "first imposition" means not only the first imposition in the sense of an initial imposition, but it includes every fresh imposition levied at an increased rate. On the other hand, the respondent Sabha contends that the first imposition means only the initial levy or impost and cannot take in subsequent imposts or levies. In this connection, it is relevant to remember that sub-sec. (2) was added by the same Amending Act by which S. 79 (1) (xv) was amended, and so, it would not be unreasonable to assume that when the legislature gave power to the local Government to prescribe by rules the maximum rates permissible to be levied; it introduced sub-s. (2) in S. 51 because it was thought necessary that whenever the rates were changed, the imposition of the tax at the increased rates should receive the previous sanction of the Government. If the respondents construction is accepted, it would mean that the respondent should obtain the previous sanction of the Government at the initial levy and thereafter may go on increasing the rate of the levy to any extent without securing the sanction of the Government in that behalf. Now that Rule 3 has been deleted and no maximum has been or can be prescribed by the Rules, it would be unreasonable to hold that the respondent is given an unfettered and unguided authority to levy the impost in question at any rate it likes. Since no ceiling has been placed by the Rules in that behalf, it would, we think, be fair to hold that if the rates are increased and levy is sought to be imposed on the altered rates the imposition of the levy at these altered rates should be deemed to be included in the expression "first imposition" under S. 51 (2). We are, therefore, inclined to accept the appellants construction of S. 51 (2). That being so, it is necessary to enquire whether the imposition of the tax at the rate of 9 pies has received the previous sanction of the local GovernmentTwo of these notifications were then produced before us by the respondent, and they supported the contention made by Mr. Choudhury. Therefore, the argument that the imposition @ 9 pies per ton has received the sanction of the Government must fail, and so, the impugned notices which seek to recover the tax from the appellants @ 9 pies per ton must be held to be invalid. The respondent is entitled to levy tax only @ 3 pies per ton because that levy has received the sanction of the Government, but if the respondent intends to increase the rate of the said tax, it must follow the procedure prescribed by S. 51 (2), provided of course, it is open to the respondent to increase the said taxThe genesis of the tax is somewhat interesting. It appears that roads were constructed by the Independent Mining Local Board at enormous cost at the request of the Mining interests and even debt had to be incurred by the Board for completing the work of the construction of roads. Since the mining companies received substantial benefit from these roads, the Legislature thought of levying a tax on coal, and that is the origin of the tax. When the first notification was issued on the 16th December, 1935 it authorised and sanctioned the imposition by the Independent Mining Local Board at Chhindwara in the Chhindwara District "of a tax at 3 pies per ton on coal, coal dust or coke, manufactured at the mines, sold for export by rail or sold otherwise than for export by rail, within the jurisdiction of the Independent Mining Local Board." This tax was recovered by the Board and thereafter by the respondent in respect of coal whether sold inside the district of Chhindwara or sold outside the district of Chhindwara or even outside the State of Madhya Pradesh. In other words, the total coal produced by each mining lease-holder substantially came to be taxed. But after the Constitution came into force, doubts arose as to whether Art. 286 of the Constitution did not preclude the respondent from recovering tax in respect of coal exported out of the State of Madhya Pradesh, and in view of the advice given to the respondent by the Government of Madhya Pradesh, the respondent did not collect the tax in respect of coal which was exported by rail outside the State of Madhya Pradesh from about 1952. The respondent wanted to consult legal opinion on this point, but the State Government refused permission to the respondent to incur expenditure in that behalf. Subsequently, however, this question came to be decided by the High Court of Madhya Pradesh in a writ petition filed by M/s. Newton Chickli Collieries (Pvt.) Ltd. (No. 265 of 1957). The High Court held that the tax levied by the Janapada Sabha under S. 51 of the Act did not amount to a sales tax nor to an excise duty, and so, the respondent thought that it could levy tax even on coal exported by rail outside the State of Madhya Pradesh. In fact, after this judgment was pronounced by the High Court on August 6, 1958, the Provincial Government withdrew its instructions to the respondent not to levy tax on exported coal33. This contention appears to be well founded. We have already seen the scheme of the Rules and we have noticed that R. 10 provides that if no objection is filed, the Chairmans assessment shall be final and if an objection is received, the decision of the Mining Board would be final.In other words, the scheme clearly provides that at the end of each six monthly period, the tax has to be assessed notices to be issued to the assessee, his objections to be considered and the tax to be ultimately determined in the light of the decision on the said objections; and under R. 10, the two decisions specified therein become final. It may be that the Rules do not prescribe any limitation within which these steps have to be taken by the respondent for each period, but that is another matter. In view of the provisions of R. 10 it is difficult to hold that the respondent is entitled to reopen assessments already made and rendered final under the said Rule. There is no other provision for reopening assessment as we have under Ss. 34 and 35 of the Indian Income-tax Act, and so, the respondent is not justified in issuing notices for the years which are covered by assessment orders already passed. The finality provided for by R. 10 will work as much against the respondent as against the assesseeIt appears that by notification issued on September 6, 1943, the preamble of the Rules was modified by substituting for the words "coal, coal dust or coke" by "coal and dust coal" and by deleting the words "manufactured at the mines". Curiously enough these amendments have not been made in the original notification itself. We have already noticed that this latter notification deleted R. 3. Some arguments were urged before us by learned counsel on both sides as to the effect of this notification which modified the preamble to the Rules. We do not, however, think it necessary to consider these arguments in the present appeals because of our conclusion that the impugned notices levying the tax @ 9 pies per ton are invalid for two reasons : the increase in the rates has not been sanctioned by the State Government under S. 51 (2) and an attempt to recover at the increased rate the tax for the years already covered by assessment orders passed in that behalf, is bared by R. 10.