Case: Bhopal Sugar Industries Ltd.,Madhya Pradesh Vs. D. P. Dube, Sales Tax Officer, Bhopal Region, Bhopal

vehicles. Against the order dismissing the petition this appeal is preferred with special leave. 5. In our judgment the High Court was in error in proceeding to decide the petition on a ground which was not set up in the affidavit of the Sales Tax Officer. The Company claimed relief on the assumption that motor spirits and lubricants used by it for its own vehicles were of its ownership, and appropriation by a retail dealer of the stock-in-trade owned by him for his own use does not constitute sale within the meaning of the Act. The Sales Tax Officer submitted that the consumption of motor spirits and lubricants by the Company amounted to sale, because there was transfer of property from one establishment of the retail dealer to another. On the pleadings, two questions arose for determination. (a) Whether the appropriation of goods amounted to transfer of property by the retail dealer to another person: and (b) Whether such transfer amounted in law to sale. The Legislature has set up an elaborate and self-contained machinery for investigating whether a transaction is liable to be taxed because it is of the nature of a retail sale within the meaning of the Act. The taxing Officer is invested with authority to determine the nature of the transaction and its libility to tax, and against his decision there is an appeal to the appellate authority and a further right of revision to the Commissioner. It is true that the jurisdiction of the High Court under Art. 226 is extensive, but normally the High Court does not exercise that jurisdiction by entertaining petitions against the order of taxing authorities, when the statute under which tax is sought to be levied provides a remedy by way of an appeal or other proceeding to a party aggrieved and thereby by-pass the statutory machinery. That is not to say that the High Court will never entertain a petition against the order of the taxing Officer. The High Court has undoubtedly jurisdiction to decide whether a statute under which a tax is sought to be levied is within the legislative competence of the Legislature enacting it or whether the statute defies constitutional restrictions or infringes and fundamental rights, or whether the taxing authority has arrogated to himself power which he does not possess, or has committed a serious error of procedure which has affected the validity of his conclusion or even where the taxing authorities threatens to recover tax on an interpretation of the statute which is erroneous. The High Court may also in appropriate cases determine the eligibility to tax of transactions the nature of which is admitted but the High Court normally does not proceed to ascertain the nature of a transaction which is alleged to be taxable. The High Court leaves it to the tax payer to obtain an adjudication from the taxing authorities in the first instance. 6. In the present case the Company invoke the jurisdiction of the High Court on question of fact as well as on the constitutionality of the taxing statute and breach of fundamental rights. The High Court instead of determining the Constitutional questions, on which alone the petition could normally be entertained, proceeded to investigate the correctness of an assumption made by the Company, and thereby decided the case which was not expressly raised by the other party. In doing so the High Court fell into an error as it assumed jurisdiction to decide the dispute which had to be decided by resort to the machinery provided under the Act after ascertainment of the true nature of the transaction in the light of the agreement and surrounding circumstances. The order passed by the High Court cannot therefore be upheld. 7. The next question is about the order to be passed in this appeal. For that purpose we must consider the two grounds set up in the petition by the Company. The challenge to the action of the Sales Tax Officer on the plea of infringement of fundamental rights must fail. It is common ground that the State of Madhya Pradesh had power to levy tax on sale or purchase of motor spirits and such power could be exercised only in respect of sales traditionally so understood. State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd., 1959 SCR 379 : (AIR :1958 SC 560) . Section 2 (k) of the Act defines a retail sale as meaning a sale of motor spirit by a retail dealer for the purpose of consumption by the person by whom or on whose behalf it is or may be purchased, and the expression sell in retail shall he construed accordingly. But there is nothing in the definition of S. 2 (k) retail sale nor in the charging Section (S. 3) which indicates that the Legislature had enacted legislation beyond its competence. If the taxing authority had sought to bring to tax a transaction Which is made taxab1e by a competent enactment it would not he open to the High Court exercising power under Art. 226 of the Constitution to consider whether the taxing authority was justified in taxing the transaction. Levy of a tax lawfully imposed under a Stature within the competence of the legislation cannot be deemed to infringe the fundamental rights guaranteed by Art. 19 (1) (f) and (g), and whether the tax is properly levied in respect of a transaction is for the taxing authority to determine and not for the High Court. 8. The levy and collection of the sales tax motor spirits and lubricants consumed by the Company cannot therefore he regarded as illegal unless it is found that the goods were of the ownership of the Company, and for reasons already set out the question whether the goods consumed belonged to the Company must be left to be determined under the Act. The first question raised in the petition cannot therefore be determined by this Court as it could not be determined by the High Court.

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

Explanation:
0[ds]5. In our judgment the High Court was in error in proceeding to decide the petition on a ground which was not set up in the affidavit of the Sales Tax Officer. The Company claimed relief on the assumption that motor spirits and lubricants used by it for its own vehicles were of its ownership, and appropriation by a retail dealer of the stock-in-trade owned by him for his own use does not constitute sale within the meaning of the Act. The Sales Tax Officer submitted that the consumption of motor spirits and lubricants by the Company amounted to sale, because there was transfer of property from one establishment of the retail dealer to another. On the pleadings, two questions arose for determination(a) Whether the appropriation of goods amounted to transfer of property by the retail dealer to another person: and(b) Whether such transfer amounted in law to saleThe Legislature has set up an elaborate and self-contained machinery for investigating whether a transaction is liable to be taxed because it is of the nature of a retail sale within the meaning of the Act. The taxing Officer is invested with authority to determine the nature of the transaction and its libility to tax, and against his decision there is an appeal to the appellate authority and a further right of revision to the Commissioner. It is true that the jurisdiction of the High Court under Art. 226 is extensive, but normally the High Court does not exercise that jurisdiction by entertaining petitions against the order of taxing authorities, when the statute under which tax is sought to be levied provides a remedy by way of an appeal or other proceeding to a party aggrieved and thereby by-pass the statutory machinery. That is not to say that the High Court will never entertain a petition against the order of the taxing Officer. The High Court has undoubtedly jurisdiction to decide whether a statute under which a tax is sought to be levied is within the legislative competence of the Legislature enacting it or whether the statute defies constitutional restrictions or infringes and fundamental rights, or whether the taxing authority has arrogated to himself power which he does not possess, or has committed a serious error of procedure which has affected the validity of his conclusion or even where the taxing authorities threatens to recover tax on an interpretation of the statute which is erroneous. The High Court may also in appropriate cases determine the eligibility to tax of transactions the nature of which is admitted but the High Court normally does not proceed to ascertain the nature of a transaction which is alleged to be taxable. The High Court leaves it to the tax payer to obtain an adjudication from the taxing authorities in the first instance6. In the present case the Company invoke the jurisdiction of the High Court on question of fact as well as on the constitutionality of the taxing statute and breach of fundamental rights. The High Court instead of determining the Constitutional questions, on which alone the petition could normally be entertained, proceeded to investigate the correctness of an assumption made by the Company, and thereby decided the case which was not expressly raised by the other party. In doing so the High Court fell into an error as it assumed jurisdiction to decide the dispute which had to be decided by resort to the machinery provided under the Act after ascertainment of the true nature of the transaction in the light of the agreement and surrounding circumstances. The order passed by the High Court cannot therefore be upheldThe challenge to the action of the Sales Tax Officer on the plea of infringement of fundamental rights must fail. It is common ground that the State of Madhya Pradesh had power to levy tax on sale or purchase of motor spirits and such power could be exercised only in respect of sales traditionally so understood. State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd., 1959 SCR 379 : (AIR :1958 SC 560) . Section 2 (k) of the Act defines a retail sale as meaning a sale of motor spirit by a retail dealer for the purpose of consumption by the person by whom or on whose behalf it is or may be purchased, and the expression sell in retail shall he construed accordingly. But there is nothing in the definition of S. 2 (k) retail sale nor in the charging Section (S. 3) which indicates that the Legislature had enacted legislation beyond its competence. If the taxing authority had sought to bring to tax a transaction Which is made taxab1e by a competent enactment it would not he open to the High Court exercising power under Art. 226 of the Constitution to consider whether the taxing authority was justified in taxing the transaction. Levy of a tax lawfully imposed under a Stature within the competence of the legislation cannot be deemed to infringe the fundamental rights guaranteed by Art. 19 (1) (f) and (g), and whether the tax is properly levied in respect of a transaction is for the taxing authority to determine and not for the High Court8. The levy and collection of the sales tax motor spirits and lubricants consumed by the Company cannot therefore he regarded as illegal unless it is found that the goods were of the ownership of the Company, and for reasons already set out the question whether the goods consumed belonged to the Company must be left to be determined under the Act. The first question raised in the petition cannot therefore be determined by this Court as it could not be determined by the High Court.