Gujarat University, 11hmedabad v. Krishna Rangariath

32 ·does not in any way impair or affect the content of the fundamental rights guaranteed to the citizens of India. regulate the It only seeks manner in which the said rights could be successfully asserted and vindicated in courts of law. The question in the present appeals, however, is somewhat different. The notices which are chal lenged 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 l!J;)8 which were the subject-matter of August 23, (The Amalgamated the earlier writ proc_eedings Coalfields Ltd. (')). Where the liability of a 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 In a sense, the liability to pay tax from year 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 deter mining· the liability for a given year, they can generally be deemed to have been considered and decided in a collateral and incidental way.

The (1) [1962) l S. C.R. 574. (2\ [1962) l S. C. R. I. 1962 The Ama/gamat, Coalfields Ltd. v. The Janapada .Sab Chhindwara Gajendragadkar1 , 1 S.C.R. SUPREME COURT REPORTS 185 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 assessments 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 though in the result, some exptctations may be frustrated and some time wasted. " (vide Society of Jlediwl Officers oj flcrilth v. Hope l'alnation O.fficer (')). The basis for this view is that generally, questions of liability to pay ta/( are determined by Tribunals wilh 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 judicata while similar questions create a bar of re8 of liability for subsequent years are being examined.

In that connection, it would be interesting to refer to four English decisions. In the case of Brol:en Hill Proprietnry Co. Ltd. rmd Jlunicipal Cowncil of Broken Hill, (') the question which fell for decision was how the average annual value of a mine for rating purposes had to be determined, and it was held by the Privy Council that the said value was to be ascertained by dividing the value of the output during the three years by three, not by multiplying it by 205 Jnd dividing it by 305. One of the points which the Privy Council had to consider was whether a the High Court of contrary decision reached by Australia between the parties as to the valuation for a previous year, operated as res judicata. In reject. ing the plea that the principle of res judicata applied, Lord Carson observed that "the decision: of the High Court related to a valuation and a liability to a tax in a previous year, and no doubt as regards that year, the decision could not be disputed.

The present case relates to a new question, viz., the valuation for a different year and the liability for that year. It is not (l) [1960] A. C. 551, 563. (2) (1926] A. a. 94; 1962 The Amalgamated Coalfields Ltd. v. The Janapada Sabha, Chhindwara Gajendragadkar, J. lSG SUPREME COURT REPORTS [19G3] SUPP. eadem questio, and therefore, the principle of res judicata cannot apply. " (p. 100). It, however, appears that in the same year, the Privv Council came to a somewhat contrarv decision in the case of Hoystead v. Commissioner of Taxation. (1) In that case, the question which arose for decision was about the deduction claimable under ther elevant provision of the Land Tax Assessment Act, 1\JlG (Aust.) Upon the assessment for 1919-20, the allowed only one deduction of Commissiouer 5,000 lbs. contending that the beneficiaries were not joint owners within the meaning of the Act. The case was then stated to the full Bench which upheld the Commissioner's view and rejected the argument that the Commissioner was estopped from coming to that conclusion in view of his decision in a previous year.

When the Privy Council, it reversed the decision of the Full Court, because it held that the Commissioner was estopped, even though in the previous litigation no express decision had been given whether the beneficiaries were joint owners, it being assumed and admitted that they were, and the Privy Council thought that the matter so admitted was fundamental to the decision then given. It would thus be seen that this decision applied the principle of res judicata even where there was no express decision on the point, but the point had been conceded in the earlier proceedings. the matter went before In 19GO, the House of Lords had occasion to in the case of Society of consider this question illedical Ojjicers of Health ('). \Ve have al ready quoted one statement of the law from the speech of Lord Radcliffe in that case. In that case, the main reason given for repelling the application of the principle of res judicatq, in rating cases, was that the jurisdiction of the Tribunal which deals with those cases is limited, in that its function begins with and ends with deciding the assessment or liability of a person for a terminable period.

Besides, it was (1) fl926] A. C. 155. (2j [1960] A. C. 551, 563. 1962 The Amal,~amated CotJlfitfdJ Ltd. v. The Janapada 'labl1a, Chhindwara Gojendragadkar, J. l S.C.R. SUPREME COURT REPORTS 187 held that the position of a valuation officer is that of a neutral official charged with the recurring duty of bringing into existence a valuation list, and he can not properly be described as a party so as to make In coming to the the proceedings a !is inter partes. conclusion that the doctrine of res Judimtu would not apply in such cases, Lord Radcliffe was influenced by the consideration that if decisions in rating cases are to be treated as conclusive for all time that would be to impose a needlessly heavy burden upon the administration of (p . .';fi6). This decision purported to approve of the view taken in 1 he case of the Broken Hill Proprietnry Co. Ud.(') and to distinguish the view taken in the lloy8teiid mse.

(') rating Lord Radcliffe had occasion to return to the same subject again in Oaffoor v. Incnme-ttix Commi"siuncr. ( 3 ) Speaking for the Privy Council, Lord Radcliffe consi dered the problem of the application of res J11rliml<• to taxation cases, examined it in detail and came to the conclusion that the said doctrine did not apply to tax cases in the sense that the decision for the levy of a tax for one year docs not operate as res J nd i1;nl11 in dealing with the question of a tax for the subse quent year. On this occasion, emphasis was not placed so much on the limited nature of the jurisdic tion of the Tribunal that deals with tax cases, but it was held that even if the matter goes to a High Court on :1 statement of the case, the decision of the High Court would also not create a bar of res Jnrliwtu in dealing with the tax claim for a subsequent year. "The critical thing," said Lord Radcliffe, "is that the dispute which alone can be determined by any decision given in the course of these proceedings is limi tcd to one subject only, the amount of the assessable income for the year in which the assessment is challenged.

" He, no doubt, recognised that in the process of arriving at the necessary decision, it was likely that the consi deration of questions of law turning upon the construction of the ordinance or of other statutes or (1) [1926] A.C. 94. (2) [1926) A.C. 155. (3) ll9Gl] 2 W.L.R. 794. 19G2 The Amalgamated' C,,/ftelds Ltd. v. The Jana/Jada Sabha, Chhi11d11·ara Gajendragadkar, J. 188 SUPREl\IE COURT REPORTS [1963] SUPP. the general law, may he involved, but he thought that the decision of those questions should be treated as collateral or incidental to what is the only to determination (pp. 800-801). This decision would, therefore, support the appellants' contention' that the High Court was in error in dismissing their writ petitions on the preliminary ground that they were barred by res jttdicaltb. truly submitted ' 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 1}Jedical Officers of llealtl!, (1) that the effect of legal decisions establishing If, for instance, law would be a different matter. the validity of a taxing statute is impeached by an assessee who is called upon to pay a tax for a parti cular 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, iiuliwta against the assessee for a subsequent year.

That, however, is a matter on which it is unnecessary 'for us . to pronounce a definite 9pinion in the present case. In this connec tion, it would be relevant to add that, even if a direct decision of this Court 011 a point bf law does not operate as res Jud·icata 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 courts in India as a precedent in which the law is declared by this Court. The question about the applicability of res ,iiidicata to such a decision would thus be a matter of merely academic significance. In the present appeals, the question which arises directly for our decision is : does the principle (I) [196D] A.C. 551, 563. 1962 The Amalgamated Coalfields Ltd. v. 1 he Janaprula Sabha 1 Chhindwara c .. ijrndra_r;adkar, J. 1 S.C.R. SUPREME COURT REPORTS 189 of constructive res judicata apply to petitions under Art.

32 or Art. 226 where the dispute raised is in respect of a year different from the year involved in a prior dispute decided by this Court ? w· e have already noticed the points actually decided by this Court against the appellants on the earlier occasion (vide 'l.'he Amalgamated Coa~fields Ltd. (1)). One of the points sought to be raised was in regard to the validity of the increase in the rate of tax from 3 pies to 9 pies per ton; and since this point had not been taken in the petition and relevant material was not available on record, this Court refrained from expressing any that the opinion on it. The appellants contend order passed by this Court refusing permission to the appellants to raise this point on the earlier occasion docs not mean that this Court has decided the point on the merits against the appellants; it may mean that the appellants were given liberty to raise this point later: but even otherwise. the point has not been considered and should not be held to be barred bv constructive res fudiwta.

It is significant that th~ attack against the validity of the notices in the present pi; oceedings 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 arc entirely distinct, and so, the decision of the High Court can be upheld only if the principle of constructive res jndicatci can be said to apply to writ petitions filed under Art. 32 In our opinion, constructive resJnd·icnta or Art. 226. which is a special and artificial form of res .fudicata, enacted by section 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 t8 apply this principle ro the present appeals all the more because we arc dealing with cases where the In impugned tax liability is dismissing the appellants' petitions on the ground of res )uclicata, the High Court has no don bt referred to for different years.

(!) (1962] 1. S. C.R. !. 1962 Tht Amalgamated CD"/jie/d; Ltd. v. The J,znaj1ada Sabha, Ch!tindU"ara Gajendragadkar, J, 190 SUPREME COURT REPORTS [1963] SUPP. 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 bv 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 n:pressly 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 based. The first ground urged by the appellants on the merits is that the levy authorised to be imposed by the Act and the Rules framed thereunder violates the fundamental rights guaranteed to the citizens under Art. l!l (1) (f) of the Constitution, and in support of this argument, reliance is placed on the decision of this Court in Kunootlu1t Thathunni 11loopil .N11ir v.

The 8t11tc of Il.emla (1). In that case, the impugned Act was struck down because it suffered from several serious infirmities; it was confiscatory in character and its provisions in regard to the levy of the impost were so arbitrary and unreasonable that the Court took the view that the Legislature had completely ignored the legal position that the assess ment of a tax on person or property was at least of a quasi-judicial character. This conclusion was based on the examination of the relevant statutory pro In the present case, we are not satisfied that visions. 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 different. At this stage, it is necessary to refer to the re levant statutory provisions and the Rules. Section 51 of the Act (which, in substance, corresponds to section 90 of the Act of 1948) reads thus :- (!) [1961]3 S.·C. R. 77.

1962 7 h~ A1Pa!gamattd Car:lfields l.td. v. Tht J nnafw-ln Sa Aha, Chhind<1·am i s.c.R. SUPREME COURT REPORTS 191 "51. (1) Subject to the provisions of any law or enactment for the time being in force, a District Council may, by a resolution passed by a majority of not less than two-thirds of the members present at a special meeting convened for the purpose, impose any tax, toll or rate other than those specified in sections 2+, +8, +!l and 50. (:!) The first imposition of any or rate under sub-section (l) shall be subject to the previous sanction of the Provincial Govern ment. tax, x x x x". Sub-section (3) and the proviso are uot relevant for our purpose. Then we go to section /fl which confers power on the Provincial Government to make Rules. Sec tion 79 (l)(xv) is relevant for our purpose. It provides that: "The Provincial Government may make rules consistant with this Act and with reference, if necessary, to the varying circumstances of dif ferent local areas, as to the assessment and collection of the cases and rates specified in sectiom 48, 4fl & 50 and of any tax, toll or rate imposed under section 51, as to the maximum amounts or rates at which any of them may he imposed, as to the prevention of evasion of assessment or payment thereof, as to the agency by which they shall be assessed and collected, and as to the manner in which account thereof shall be rendered by District Councils.

" In pursuance of the powers conferred on the local Government by s. 79, rules have been framed on December 16, 1935. Rules 3 to l 0 deal with the question of the impost of tax and provide how deci sions made in that behalf by appropriate authorities 1962 The Afnalgcmattd Coalfields Ltd. v. The Jmw/1ada Sabh'l, Chhiridwara Gajendragadkar, J. 192 SUPREME COURT REPORTS [1963] SUPP. become final. Rule 3 prescribed the rate at 3 pies per ton, Rule 4 provides that the figures reported by the concessionaires and the Railway companies half yearly to the Dy. Commissioner, shall be the basis for the assessment of the tax. Under Rule 5, every mining lessee has to submit a statement half yearly. On receipt of the statement, the assessment has to be made by the Chairman of the Independent Mining Local Board under Rule G. A notice of demand follows under rule 7. Fifteen days' period is given for filing objections under Rule 8.

Rule !l provides for the consideration and disposal of the objections, and Rule 10 lays down that if no objection is filed, the Chairman's assessment shall be final, if any ob jection is received, the Independent Mining Local Board's decision shall be final and shall be communi cated to the assesscc as soon as possible. It would thus be seen that the scheme of these Rules provides ample opportunity to the asscssees to object to the notice of demand served on them and in fact, demand notices arc substantially based on the figtircs the conces supplied by the railway companies <md sionaires and the statements submitted hv the asscssces themselves. Therefore. it would be idle to suggest that the impost of the tax authorised by the relevant statutory provisions and the Rules is a capricious administrative or executive affair and so, should be held to violate Art. Hl(l)(f) of the Constitution. Then it is urged that the demand of the tax @fl pies pPr ton is invalid, because it is inconsistent with Rule;{ which has prescribed the maximum rate permissible to be levied against the assessees.

Vv e have already noticed thats. 7fl( l )(XV) autho rised 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 Hl33 by C.P. Act VII of Hl33, and so, the argu ment is that Rule :~ which provides that the tax shall be levied @ :l pies per tnn must be deemed to pro- 1962 The Amalgamated Coalfields Ltd. v. The Janapada Sabha, Chhindwara Gajendragadkar, J, 1 S.C.R. SUPREME COURT REPORTS 193 vide 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 Rule 3 will have to be read in the light of the power conferred on the local Government by s. 79(XV) and that would mean that the rate of 3 pies per ton has been prescribed by the Rule of the maximum rate permissible. But this argument ignores the fact that this Rule has been subsequently deleted by a notification on Septem ber 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 Rule 3 was not av'ailable to them. Therefore, the contention that Rule 3 prohibits the levy at a rate higher than 3 pies cannot succeed since the Rule itself has been subse quently deleted and was not a part of the Rules at the relevant time when the impugned notices were issued. It is then argued that the impo!!t of the tax at the rate of 9 pies per ton is not valid, because it does not comply with the requirements of s. 51 (2) of the Act, and that raises the question of the construction of the said section. Section 51(1) authorises the im position of the tax, provided, of course, the procedure prescribed by it and the requirements laid down by it are satisfied. Sub-section (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 im position" means not only imposition in the sense of an initial imprnition, but it includes increased rate. On the other hand, the respondent Sabha con tends that the first imposition means only the initial levv or impost and cannot take in subsequent imposts or levies. In this connection, it is relevant to remem ber that sub-section (2) was added by the same Amending Act by which s. 79(XV) was amended, and imposition levied at an 1962 The Amalgamated Coalfields Ltd. v. TM Janapada Sabha, Chhindu:ara Gajendra:adkar, /, 194 SUPREME COURT REPORTS [1963] SUPP. respondent's construction 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-section (2) ins. 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 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 un reasonable 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 rMes are increased and levy is sought to be imposed on the altered rates, these altered rates the imposition of the levy at 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 @ 9 pies has re ceived the previous sanction of the local Government.

During the course of hb arguments, Mr. Sastri for the respondent attempted to suggest that sanction had been obtained for the increase in the rates from time to time and a typed summary of the notifica tions issued in that -behalf was supplied to us at the time of arguments. This summary to the increments made in 1943, 1946 and 1947 respectively to which we have already referred. The summary read as if the increments had been sanction the State Government. But Mr. Sachin ed by the appellants contended that the Choudhury for refers 1962 The Amalgamated C•aljidds Ltd. v. The Jan•Pada So/;h-, Chhindwara Gajrndragadk1<r .. /. I S.C.R. SUPREME COURT REPORTS 195 summary supplied by the respondent vvas incomplete and inaccurate and that the examination of the Gazette in which the notifications were published, would show that the amendments in the rates had been made not with the previous sanction of the Government, but by the Mining Local Board itself.

Two of these notifications were then produced before us by the respondent, and they supported the conten· tion made by Mr. Choudhury. Therefore, the argu ment 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 @ a 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 tax. There is yet another point on which the appel lants arc entitled to succeed, and that has reference to 1he fact that the respondent is seeking to reopen some of the ;.sscssments made by it against the appel lants.

The argument is that once an assessment is made for a specific period, it becomes final and it is not open to the respondent to demand additional amount by way of tax in respect of the said period. It The genesis of the tax is somewhat interesting. appears that roads were constructed by the Indepen dent .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 the~e roads, the Legislature thought of levying a tax on coal, and that is the origin of the tax. When the first notifica tion was issued on December 16, it autho rised and sanctioned the imposition by the Independent l 9H5 1962 The Amalgamated Coa(fields Ltd. v. ·he Jana~ada Sabha, Chhindwara Gajendragadkar1 J. 196 SUPREME COURT REPORTS [1963] SUPP. Mining Local Board at Chhindwara 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 Indepen· dent 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 Chhjndwara or sold outside the district of Chhindwara In or even outside the State of Madhya Pradesh. 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 reco':'ering 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 expendi ture in that behalf.

Subsequently, however, this ques tion 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 Sabhas 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 M'adhya Pradesh. In fact after this judgment was pronounced by the High Court on August 6, 1958, the Provincial Govern ment withdrew respon dent not to levy tax on exported coal. That is how the respondent has issued notices against the appel lants 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 instructions , 1 1962 The Amalgamottd Coalfields Ltd. v. The J anapada Sabha: Chhiniwara Gajendragadkar, J. 1 S.C.R. SUPREME COURT REPORTS 197 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. tax has This contention appears to be well-founded.

We have already seen the scheme of the Rules and we have noticed that Rule 10 provides that if no objection is filed, the Chairman's assessment shall be final and if an objection is received, the decision In other words, of the Mining Board would be final. the scheme clearly provides that at the end of each to be assessed, six monthly period, the notices to be issued to the asscssee, his objections to be considered and the tax to be ultimately determined in the light of the decision on the said objections; and under Rule 10, the two decisions specified there in become final. It may be that the Rules do nqt limitation within which these steps prescribe any have to be taken by the respondent for each period, but that is another matter. In view of the provisions of Rule 10, it is difficult to hold that the respon dent is entitled to reopen assessments already made and rendered final under the said Rule.

There is no other provision for reopening assessment as we lrave under sections 34 & 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 Rule IO will work as much against the respondent as against the assessees. In support of the appeals, another argument was sought to .be raised against the increase of the It was urged that the tax is in the nature of rates. 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 1962 The Amalgamated Coalfoelds Ltd. v, The Janapada Sabha, Ch hindwara Gajtndrngadkar, J. 198 SUPREME COURT REPORTS [1963] SUPP. issued on September 6, 1943, the notification of December 16, 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 require It appears that by ments of s. 51 (2) of the Act. notification 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 the original notification have not been made in itself. We have already noticed that latter notification deleted Rule 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.