HIMMATLAL HARILAL MEHTA v. THE STATE OF MADHYA PRADESH

In this appeal it was argued by Shri Noshirwan that an an illegal right; Engineer, learned counsel for the appellant, illegal and unjust restraint on imposition operates trade and violates fundamental 1954 Himmatlal H arilal Mehta v. Tht State of Afadh'J!a Pradesh and Others. Mahajan C. J. S.C.R. SUPREME COURT REPORTS 1125 that the High Court having held that the Constitution by article 286 thereof made delivery of the goods consumption the decisive factor for determining which State should have the right of taxing such sales, having thus found the provision of the Explanation should have the definition of "sale" unconstitutional, issued a writ of mandamus restraining respondent State from enforcing that part of the Act. To appreciate the contentions of the learned counsel it is necessary to set out the relevant provisions of the Act which the High Court has declared ultra vires the State Legislature. Act XXI of 1947 defines the ex in section 2(g) of the Act in these pression "sale" terms:- " 'Sale' with all its grammatical variations cognate expressions means any transfer of property goods for cash or deferred payments or other valuable consideration, including a transfer of property in goods made in the course of the execution of a contract, but does not include a mortgage, hypothecation, charge or pledge". "Explanation (I)-"A transfer of goods on hire shall, purchase or other instalment system of payment notwithstanding to any goods as security for payment of the price, be deemed to be a sale." that the seller retains a title anything Explanation ( II)-"Notwithstanding the contrary in the Indian Sale of Goods Act, 1930, the sale of any goods which are actually in the Central Provinces and Berar at the time when the contract of sale as defined in that Act in respect thereof is made, sale is made, be shall, wherever the said contract of deemed for the purpose of this Act to have place in the Central Provinces and Berar." This provision was amended by the Central Provinces and Berar Act XVI of 1949 which came into force on the 11th of April, 1949, by which Explanation II of section 2(g) was amended as follows :- (II)_:_"Notwithstanding Explanation the Indian Sale of Goods Act, 1930, the contrary in the sale or purchase of any goods the purposes of this Act, to have taken place in this shall be deemed anything 1954 Himmatlal Harilal Mehta v. The State of Madhya P1 adesh and Others. Mahajan C. J. 1126 SUPREME COURT REPORTS [1954] Province-wherever might have been made- contract of sale or purchase . (a) If the goods were actually in this Province at the time when the contract of sale or purchase in res pect thereof was made, or (b) In case, the contract was for the sale or pur chase of future goods by description, then, if the goods are actually produced or found in this Province at any sale or purchase in respect time after thereof was made." the contract of J Certain amendments were made in the Act by Act IV of 1951 which came into force on the 1st of April, 1951, but present mqmry. are not relevant As pointed out above, the High Court held that the new Explanation II was ultra vires the State Legis lature and that the mere production of goods was not enough to make the tax payable unless the goods were appropriated to a particular contract. The correct ness of this view can no longer be questioned by reason this court in The State of of the majority decision of Bombay v. The United Motors (India) Ltd.(1), wherein it was held that article 286 ( 1) (a) of the Constitution read with the Explanation the light of article 301 and article 304 prohibits taxation of inter-State elements, by all States except the State in which the goods are delivered for the purpose of consumption therein and that the view that the Explanation does not deprive the State, in which the property in the goods passed, of its taxing power and that consequently both the State in which the the goods are delivered passes and the State in which the goods is not tax, correct. thereto and construed sales or purchases consumption have property in the power involving The learned Advocate-General of the State did not this situation, and very properly, challenge correctness of the decision of the High Court on this that the Explanation was clearly point, and conceded ultra vires the State Legislature. He however tended that ·on the principle enunciated by the Privy (1) [1953]'8.C.R. rn6g. S.C.R. SUPREME COURT REPORTS 1127 inconsistent with the liability to pay the sales Council in Raleigh Investment Co. v. The Got1ernor General-in-Council('), to question assess jurisdiction ment otherwise than by use of the machinery expressly provided by the Act, was statutory obligation to pay, arising by virtue of the assessment and that under the Act is a special liability created by the Act itself which at the same time gives a special and parti cular remedy which ought to be therefore the remedy by a writ ought not to be allowed to be used for evading the provisions of the Act, It was also said that the con especially a fiscal Act. issue of a writ of mandamus ditions requisite for the were not present in the case it was not within the scope and purpose of article 226 of the Constitution to decide an academic question. resorted to, 19'4 Himmatlal Harilal M1Alo Y. Th• Stat1 •f Madhya Prade1l and Others. Mahajan C. :J. the State evinced an if it failed intention that In our opinion, the contentions raised by the learned Advocate-General are not well founded. It is plain it could certainly proceed to apply the penal provisions of Act against the appellant to make to escape return or to meet the demand and in order threatened without from such serious consequences rights, fundamental authority of law, and infringing relief by way of a writ of mandamus was clearly appropriate relief. In Mohd. Yasin v. The Town Area Committee("), it was held by this court licence fee on a business not only takes away the property of the licensee but also operates as a restriction on his and there~ fundamental right to carry on his business is without the imposition of a licence authority of law it can be challenged by way of an also under application under article 32, a apposite appli article 226. These observations cation case. present circumstances of the Explanation II to section 2(g) of the Act having been declared ultra vires, any imposition of sales tax on the appellant in Madhya Pradesh is without the authority threat by the State by of law, and using the coercive machinery of the impugned Act to that being so a fortiori that a (1) 741.A.50. (2) [1952] S.C.R. 572. \-~l\ S.G, ludi~(~S •. 19M Himmatlal Hmilal Mehl• .v. Thi Statt of Mad~va Pradeih and Others. Mahajan C.J. 1128 SUPREME COURT REPORTS [19541 contention the appellant is a sufficient realize it from infringe• ment of his fundamental right under article 19(1) (g) and it was clearly entitled to relief under article 226 of that because a the Constitution. The remedy under the impugned Act was available appellant it was disentitled to relief under article 226 stands negatived by the decision of this court in The State of Bombay v. The United Motors (India) Ltd.('}, above referred to. There it was held that the principle that a court will not issue a prerogative writ when an adequate alternative could not apply where a party came to the court with an allega tion that his fundamental tight had been infringed and sought remedy provided by the Act is of an onerous and burdensome character. Before the appellant can avail of it he has to deposit the whole amount of the tax. Such a provision as an can hardly adequate alternative remedy. relief under article 226. Moreover, remedy was available be described For the reasons given above, we are of the opm1on that the High Court, having held that the Explana tion II to section 2(g) of the Act Was ultra vires, was in error in dismissing the application on the ground that it was not entitled to relief under the provisions of article 226 of the Constitution. In the result there fore we 11llow this appeal with costs and direct an appropriate writ to issue restraining the first respond· imposition of a tax ent from imposing or authorising in exercise of its authority under on the appellant Explanation II held void. Appeal allowed; (1) (1953] S.C.R. 1069.