HARYANA STATE, ETC. Vs. SAVITRI DEVI AND ORS.

JUDGEMENT

(1.) TEN Sales Tax References Nos. 20 to 29 of 1971 came up before the First Division Bench on 19th February, 1973 and were directed to be heard with Regular Second Appeal No. 669 of 1972. That is how all these cases were put up before us and have been heard together. These can be conveniently disposed of by one judgment without prejudice to any of the parties concerned.

(2.) A shop in Hissar in which commission agents' business in ghee was being carried on, was raided and inspected by the staff of the Sales Tax Department under the supervision of the Excise and Taxation Officer of the district on 29th June, 1966. Shri Budh Ram who was present on the premises could not explain a number of entries in the books of account lying inside the shop and these books were, therefore, taken into possession against a clear receipt delivered to Shri Budh Ram and he was directed to appear before the Assessing Authority on 1st July, 1966. He failed to appear on the said date and notices under Section 11(6) of the Punjab General Sales Tax Act, 1948 (hereinafter briefly referred to as 'the State Act' to distinguish it from the Central General Sales Tax Act which would hereinafter be referred to as 'the Central Act') were, therefore, issued to him. Shri Budh Ram, represented by two Chartered Accountants, put in an application dated 4th July, 1966 on 5th July, 1966 before the Assessing Authority which was signed by him as the proprietor (Malik) of Messrs Budh Rani Desi Ghee Store. No reason was assigned in the application for his non -appearance on the 1st instant and a prayer was made that the account books should be inspected in his presence. Shri Budh Ram was directed to produce the passbook of a current account relating to the ghee business and the books of account for earlier years which had not been found inside the shop. In another application made a few days later, Shri Budh Ram described Shrimati Rukmani Devi, the widow of his maternal uncle, Girdhari Lal son of Raghunath Rai, to be the proprietor of Messrs Budh Ram Desi, Ghee Store while he claimed that he had been carrying on his own business under the name and style of Messrs Bhim Raj Budh Ram. Some partnership deeds were produced but as no steps had been taken to get these firms registered under the Indian Partnership Act or the State or Central Sales Tax Acts, there is nothing to suggest that these deeds were not mere paper transactions or that these had been acted upon. Besides the two firm names mentioned above, there were references to another firm, named and styled "Messrs Girdhari Lal Raghunath Rai" not only on an engraved stone tablet outside the shop but also in a number of documents and books taken into possession from inside the shop. On the basis of Shri Budh Ram's interrogation and the entries in the books of account and other documents, the Assessing Authority issued notices on 17/18th August, 1966 for the appearance of certain other members of the two family branches of Rukmani Devi and Budh Ram who appeared to be associated in the ghee business being carried on in the shop. The said association of persons comprised of the three daughters of Rukmani Devi or their husbands and a son of one of these daughters who had been adopted by Shrimati Rukmani Devi. Shri Budh Ram's son and daughter -in -law who also appeared associated in this business were sent similar notices for personal appearance on 20th August, 1966 before the Assessing Authority. One of the sons -in -law of Shri Rukmani Devi appeared on the said date and was examined by the Assessing Authority. Many of the other persons to whom notices had been sent, put in appearance through counsel who promised that their clients would be produced in person on the next date. The case was accordingly adjourned to 23rd August, 1966 and then to 25th August, 1966 but the Presiding Officer happened to be on sick leave on both these dates. The Assessee had filed an application which came up before the Presiding Officer on 27th August, 1966 and the case was adjourned to 29th August, 1966 when the Assessee and the counsel for the members of the suspected association of persons were present. A prayer had been made in this application that the Assessee may be given time to apply for settlement under Section 10(2) of the State Act. The application was dismissed on the ground that it was belated and was an attempt to delay the proceedings as the last date for the return of the account books was drawing near. These persons had failed to appear in person but .their counsel had filed affidavits in which all connections with the above -mentioned Firms were denied and further time was prayed for production of evidence. Because of the failure of these members of the association to appear in person, assessment orders were passed against all of them on 30th August, 1966. These orders relate to assessment years 1962 -63 to 1966 -67. As the entries In the books and the statement made by Budh Ram disclose that inter -State transactions had also been going on during these years, best judgment assessments were made under the Central Act for some of these years for which account books had not been made available by the Assessees. A total liability of about Rs. 2,18,000 has been imposed on this association of persons as sales tax and penalty due under the State Act and the Central Act. The Assessees have been taking recourse to their remedies of appeals and references to the High Court under these Acts simultaneously with the filing of a writ petition in the High Court and a regular suit in the subordinate Civil Court at Hissar. Civil Writ No. 2056 of 1966 was filed in the High Court on 24th September, 1966 and the Motion Bench while admitting the petition had stayed recovery subject to the Petitioners furnishing bank guarantee in respect of the amount in dispute. Even though it was brought to the notice of the Sub Judge at Hissar who tried the civil suit, that the writ petition was still pending and that the High Court had granted interim relief on certain conditions, the Sub Judge had granted an all -embracing relief on permanent basis without any reservations on the grounds, inter alia, that the assessment and demand raised by the Sales Tax authorities was without jurisdiction. The Senior Subordinate Judge on appeal had affirmed the judgment and decree of the Sub Judge after holding, inter alia, that there was not an iota of evidence that the Plaintiffs were in any manner associated in the business in which the Sales Tax authorities had found a taxable turnover justifying the assessment and demand. The Plaintiffs apparently found the civil suit to be a more convenient or pliable, if not the cheaper, remedy in spite of the nominal court fee paid on a plaint challenging the assessment and demand to an amount running into a few lakhs of rupees, it may further be observed that Budh Ram and Rukmani Devi had joined the Plaintiffs in filing the writ petition contesting the assessment and demand in the High Court but they had only been shown as -proprietors or representatives of the Assessee Firms which were impleaded as Defendants Nos. 3 to 5 in the civil suit. In the meantime in early August, 1966, Budh Ram and Rukmani Devi are said to have made transfers of their immovable property in favour of their relatives under circumstances which strongly suggest that this was an attempt to save the property from being seized in satisfaction of the demand for arrears of Sales Tax and penalty. The inclusion by the Sales Tax authorities of the family members, who were the transferees of the property without any consideration, in the association of persons which has been treated as the dealers or the Assessees of the ghee business would defeat the very purpose of this device.

(3.) THE next Privy Council ruling which has been the subject -matter of discussion in a large number of later rulings of the Supreme Court of India was in the case of Raleigh Investment Company Ltd. v. The Governor -General in Council, A.I.R. 1947 P.C. 78 :, 74 I.A. 50. This was a case under the (Indian) Income Tax Act, 1922. Section 67 of that Act created an express bar to the filing of any civil suit to set aside or modify an assessment made under this Act. Even though the vires of the taxing provision (Section 45) of the Act had been challenged, it was observed that a duty arose to pay the amount of tax -demanded on the basis of the assessment made under the Act and jurisdiction to question the assessment otherwise than by the use of the machinery expressly provided by the Act would appear to be inconsistent with the statutory obligations to pay arising by virtue of the assessment. The only doubt in their Lordships' mind was whether an express provision was at all necessary in order to exclude the jurisdiction of the civil Court to set aside or modify the assessment. Here again a special Bench of the High Court of Calcutta in its ordinary original jurisdiction had held Section 67 of the Income Tax Act and Section 226 of the Government of India Act, 1935 to be ultra vires and had. decreed the suit but the Federal Court had upset the decision of the High Court and the decision of the Federal Court had been maintained on appeal by the Judicial Committee of the Privy Council.