Bishnupur Enterprises Vs. State of Manipur and anr. - Court Judgment

1. I have heard Mr. N. Kotiswer Sigh, learned counsel appearing for the petitioner and Mr. HNK Singh, learned Sr. counsel assisted by Mr. Somerjit Singh, learned counsel appearing on behalf of therespondents.

2. On request of the counsel of the parties the entire matter has been taken up for final disposal when the matter is listed in order column on 11.1.2001 for deciding a Misc. Case being C.Misc. Appeln. No. 623- of 2000 arising out of the present W.P.(C) No. 1559/ 2000 praying for vacation, alteration or modification of the interim order dated 1.12.2000. Both the parties have agreed that the matter may be finally heard and disposed of instead of deciding the Misc. Application as mentioned above considering the urgency of the matter. Accordingly the entire matter has been heard on merit.

3. The sole issue involved in this application under Article 226 of the Constitution pertains to the legality and validity of the office Memorandum dated 27.9.2000 issued by the Commissioner of Taxes, Manipur, by which all traders dealing in cement, iron and steel of all sizes and chemical fertilizers are required to pay lump sum advance sales tax as detailed in the said office Memorandum.

4. The facts briefly, as stated in the writ petition, are that the petitioner is a sole proprietorship firm engaged with the retail sale of iron rod and cement having its registered office at Bishnupur Bazar, Bishnupur, Bishnupur District, Manipur. The petitioner firm is registered under the Central Sales Act as well as under the Manipur Sales Tax Act, 1990, hereinafter referred to as 'Act' whichis applicable to the petitioner.

5. It is stated that a notification dated 5.1.1999 was issued by the State Government after causing due publication in the Official Gazette as required under sub-section (2) of Section 6 and subsection (2) of Section 7, the provisions of which will be discussed below for convenience, by which certain amendments were made in the rates in Schedule I, III and IV of the Act and the same is annexed as Annexure-A/4 to the writ petition. The said notification was issued by the Principal Secretary (Finance) Govt. of Manipur with due publication in the Official Gazette fn conformity with the provisions of the Act.

6. The petitioner being a dealer in iron rod and cement had been engaged in the trade of purchasing and selling of the said items, bringing the goods from outside the State and regularly paying the sales tax at the rate mentioned in the said notification dated 5.1.1999 as per provision of the Act.

7. Surprisingly an impugned office Memorandum bearing No. Tax/ 3(27)/IMP/94(Pt-l) dated 27.9.2000 was issued by the Commissioner of Taxes, Manipur imposing advance tax as well as manner of levy of sales tax by certain lump sum amount on the basis of truck load items only on the items namely iron and steel of all sizes, cement and chemical fertilizers. It is contended that the said impugned office Memorandum was issued without any prior notification as required under Section 6(2) of the Act and also without any authority and jurisdiction. Hence this writ petition.

8. The contentions of Mr. N. Kotiswar Singh, learned counsel for the petitioner are of two folds. The first contention is that the impugned office Memorandum is ex facie viotative of the provision of the Act as well as against the mandate of the Constitution, and the second contention of Mr. Kotiswer Singh is that the impugned office Memorandum dated 27.9.2000 was issued by the Commissioner of Taxes who has no authority and jurisdiction to issue such memorandum. Taking into accounts all these two points alone, the impugned office Memorandum is liable to be quashed and set aside.

9. On the other hand, challenging the contentions of the learned counsel for the petitioner, Mr. N. Kotiswar Singh, Mr. HNK Singh, the learned senior counsel for the Revenue has strongly defended the impugned office Memorandum and stated that the matter relates to the fiscal policy of the Government of Manipur. Due to uncontrollable or undetectable malpractices or such other practices accepted by the businessmen, dealers in the state for avoiding payment of sales taxes under the Act, the state respondents are constraint to resort to such office order thereby adopting a system to recover or otherwise to collect the tax at the first instance of instantaneously. It is contended that the said impugned office Memorandum is permissible within the parameter and jurisdiction of the Act.

10. Mr. HNK Singh, learned Sr. counsel, further, submits that the writ petitioner being a dealer under Sales Tax Registration No. CST/ M/7977 is liable to pay sales tax in a manner at the rate of 4% of the value of the goods, namely Iron and steel and as regards cement, sales tax at the rate of 8% of the value of the goods is liable to be paid by every dealer. Mr. HNK Singh urged that the State respondents have to resort to such office Memorandum only on the ground that if the sales tax are not recovered or taken either at the gate or at the godown, the tax so liable to be paid cannot be recovered from the dealers. It is, further contended that the impugned office Memorandum being the official instruction, is not contrary power conferred under the Act and the Rule is practically supplementary and as such it is quite legal, valid and enforceable. Moreover, it is submitted that the petitioner is not at all prejudiced by the said impugned office Memorandum inasmuch as what is the petitioner paying as sales tax in terms of the earlier office Memorandum/notification dated 5.1.1999, the same would be exactly the same amount of sales tax to be recovered from the petitioner as per the present office Memorandum dated 27.9,2000. As such, there is no discrimination or any sort of arbitrariness attributed towards the petitioner.

11. In order to examine the rival contentions, it would be pertinent to refer the relevant provisions of the Act. The provisions of Section 5,6 and 7 of the Act relevant for the purpose of this case are quoted below:

'5. Liability to Tax:- (1) Subject to the other provisions of this Act, every dealer liable to pay tax under any of the earlier laws shall, with effect from the appointed day for the purpose of this section, be liable to pay tax under this Act on all sales or purchases of goods other than goods specified in Schedule III.

(2) Subject to the other provisions of this Act, every dealer to whom sub-section (1) does not apply shall be liable to pay tax under this Act on all sales or purchases of goods other than goodsspecified in Schedule-III with effect from the date immediately following the date on which his turnover calculated from the commencement of any year ending after the appointed day first exceeds the taxable quantum at any time within such year;

Provided that such dealer shall not be liable to pay any tax under this Act during such year in respect of his turnover upto the taxable quantum.....'

'6. Charge of tax and rates:- (1) The tax leviable under section 5 for any year shall be charged -

(a) in respect of goods specified in Schedule-I attached to this Act liable to tax under sub-section (1), (2), (3) or (6) of that section, at the first point of sale within the State, at the rate or rates specified in that Schedule on the net turnover of such sales during such year;

(b) in respect of goods specified in Schedule II attached to this Act liable to tax under sub-section (1), (2), (3) or (6) of that section, at the point of last sale within the State, at the rates or lates specified in that Schedule on the net turnover of such sales during such year;

(2) The State Government, after giving in the Official Gazette such previous notice as may be considered reasonable may, by like notification add to or omit from any Schedule any entry of entries or transpose any entry or entries from one Schedule to another or modify or vary any entry or entries of the rate or rates specified in any Schedule and, thereupon, such Schedule or Schedules shall be ceased to have been amended accordingly.

(3) Notwithstanding anything contained in sub-section (1) or subsection (2), the State Government, after giving in the Official Gazette such previous notice as may be considered reasonable of its intention so to do any, by like notification provide that, in respect of goods specified in such notification, tax shall be levied at any point of sale within the State other than the first point or the last point or at any one or more points of sale or purchase within the State and also the rate or rates for such levy and deductions that may be allowed while determining the net turnover liable to tax.

7. Exemption.-(1) Subject to the conditions and exceptions, if any, set out in Schedule 111 attached to this Act, the sales of goods specified therein shall be exempted from taxation under this Act.

(2) The State Government, after giving in the Official Gazette such previous notice as may be considered reasonable of its intentionso to do may, by like notification, add to, amend or otherwise modify, the said Schedule and thereupon the said Schedule shall be deemed to have been amended accordingly.'

12. A bare perusal of these provisions it clearly indicates that any tax to be imposed upon the dealers shall be done by the State Government only and for such purpose, Govt. has to notify such change or modification in the Official Gazette for inviting objections and suggestions from the public and only after such publication and in consideration of the provisions. Govt. may make such change/modification. But in the instant case no such notification has been published, nor is there prior information to the public regarding such imposition of advance tax. Moreover, it is the State Govt. who has only authority to give effect to such imposition of taxes, a Commissioner of Taxes being only the departmental head, ex facie, has no authority to issue such office notification. It is the command of the Constitution that no taxes shall be levied or collected except by the authority of law as enshrined in Article 265 of the Constitution of India. It is settled law of the land that all financial enactments are to be construed strictly and therefore no tax can be imposed by any law or rales and regulations unless the statute under which the said law is made, specifically authorises some authority. The Apex Court in State of Kerala v. Madras Rubber Factory Ltd. reported in (1998) 1 SCC 616 in dealing a case relating to payment of cess Kerala General Sales Tax Act 1963 held that charge under a taxing statute can only be under the Act not even under rules. Therefore, levying of taxes whether in the nature of advance taxes or otherwise imposed by executive instructions of the Govt. Department without valid authority of law, cannot be accepted as legal and valid. Moreover unless the executive is specifically empowered by the law to impose such advance taxes, the authority has no power whatsoever to issue such office memorandum.

13. The controversy being with regard to the payment of advance tax by the dealer in pursuance of the impugned office Memorandum, I hope it would be not out of place to mention that income Tax Act, 1961 provides specific provisions for payment of advance tax under the provisions of Chapter-XVII-C. Advance tax means a tax to be paid before the assessment. The true nature of such payment is that they are payments o account, made under the compulsion of State, towards the discharge of an instant liability for liquidating other charges, the purchased goods of which is to be determined at a later date. Thus, the stark reality is that when the authorities going to touch any taxing provisions, it must be acted upon within the permissible limit of a specific provision under the statute, but in the instant case the Act itself is very silent as regards the imposition of the advance tax.

14. In an effort to justify the issuance of this impugned office Memorandum in total absence of any statutory sanction, Mr. HNK Singh, learned counsel for the revenue has drawn attentions of this court to an authority of the Apex Court reported in (1999) 8 SCC 449 (Dr. Sandhya Jain v. Dr. Subhash Garg and another) saying that the executive decision/instruction is permissible in the absence of any specific provision in that regard. The said case relates to service matter dealing promotional aspect from Lecturer to Reader under Madhya Pradesh Medical Education (Gazetted) Service Recruitment Rules, 1987. Mr. Singh, the learned counsel for the Revenue further submits that as the Act is silent in the present case, the executive instruction by way of the said impugned office Memorandum can be accepted in the light of Dr. Sandhya Jain's case (Supra). I am disinclined to accept the said submission of the learned Sr, counsel for the Revenue and I safely agree to disapprove the same. It is well settled that the tax law shall always be strictly construed and cannot be interpreted in the manner so contended by the learned counsel for the Revenue. There must be a statute for such imposition of tax and any imposition of such tax must be in compliance with the said statute enacted for this purpose.

15. Countering the said submission made on behalf of the Revenue, on the other hand, Mr. N. Kotiswar Singh, learned counsel for the petitioner has relied on a decision of the Apex Court in Municipal Council, Khurai v, Kamal Kumar and another reported in AIR 1965 SC 1321 which is said to be the basic case on the authority of the imposition of tax law. In the said case the Apex Court dealt with the concept of Article 265 in elaboration. It was held that the failure to comply with any mandatory provision prescribed in the procedure for imposing tax would vitiate the tax. The Hon'ble Supreme Court also had the occasion to accept the ratio of this in another case reported in AIR 1973 SC 1041 (The Dhrangadhra Chemical Works Ltd v. State of Gujarat and others). In the said case also it was reiterated that the mandatory provision of a particular Act for imposing tax must be complied with. Deviation of which shall make the imposition of tax illegal and invalid.

16. Mr. HNK Singh, learned Sr. counsel for the Revenue, as regardsto the second contention of the petitioner, has forcefully submitted that the Commissioner of Tax is the competent authority to issue the impugned office memorandum. That apart by the said office memorandum dealers are directed only to pay the advance tax and the same can be easily adjusted at the time of assessment as per clause (3) of the said office memorandum itself.

17. At this stage the learned counsel for the petitioner, Mr. N. Kotiswar Singh, also submits that by the said impugned office Memorandum a clear discrimination is made by choosing only items of goods, namely iron and steel, cement, chemical fertilizers leaving other items from the purview of the said advance tax and the same is arbitrary and violative of Article 14. This submission carries weightage. I have perused the impugned office memorandum and it is seen that only those items namely iron and steel, cement, chemical fertilizers are taken to be the subject matter for imposing advance tax. I am of the view that the authority has only singled out these items leaving the other item and such action suffers from arbitrariness and deserves to be discouraged.

18. I have found force on the submissions made on behalf of the petitioner and accordingly I am inclined to accept the same. Taking into account of the provisions of law as mentioned herein above and materials on record made available in the case in hand, it would clearly show that the impugned office memorandum was issued without any authority of law inasmuch as there is no provision in the Act for imposing of such advance tax. Therefore, it can be safely held that the present executive instruction in the shape of this impugned office memorandum deserves to be quashed and set aside. More so, the Commissioner of Tax has no power, authority or jurisdiction to issue such office memorandum. Being a departmental head, the Commissioner of Tax is not authorised by the statute to issue such office memorandum. It is within the exclusive domain of the State Govt. to impose advance tax, if any, under the provision of existing statute. In that view of the matter, the impugned office memorandum not being issued by the State Government that too without the sanction of any statute, is liable to be quashed and set aside.

19. I have given thoughtful consideration to the arguments advanced by the learned counsel of the parties and on perusal of the relevant provisions of law placed before this Court, I hereby set aside and quash the impugned office memorandum dated 27.9.2000.

20. For the reasons, observations and discussions made above, this writ petition is allowed; however considering the facts and circumstances of the case in hand, parties are to bear their own costs.