Supreme Court: Decisions of Higher Authorities Ought to be Followed to Avoid Chaos in Administration of Tax

Supreme Court: Decisions of Higher Authorities Ought to be Followed to Avoid Chaos in Administration of Tax

The Supreme Court while adjudicating an appeal filed in the case of M/s. Godrej Sara Lee Ltd. vs. The Excise and Taxation Officer Cum Assessing Authority and others observed that in order avoid utter chaos in administration of tax laws, decisions made by higher authorities ought to be followed. The division bench comprising of Justices S. Ravindra Bhat and Justice Dipankar Datta remarked in their decision, "unless the discipline of adhering to decisions made by the higher authorities is maintained, there would be utter chaos in administration of tax laws apart from undue harassment to assesses."

An appeal was filed to challenge the order passed by the High Court of Punjab and Haryana dated 12th October, 2009, which dismissed a writ petition on the ground of maintainability, relegating the petitioner (now appellant/assessee) to the remedy of an appeal under Section 33 of the Haryana Value Added Tax Act, 2003 (in short 'VAT Act'). The petitioner had challenged the jurisdiction of the Deputy Excise and Taxation Commissioner (ST)-cum-Revisional Authority (hereafter 'the Revisional Authority,' for short) to reopen proceedings, in exercise of suo motu revisional power conferred by Section 34 of the VAT Act.

When the returns were filed by the appellant/assessee for the assessment years 2003-04 and 2004-05, the Assessing Authority had issued notice as to what greater tax liability should not be imposed on it in view of reclassification of the goods in the tax statute. After hearing the assessee, authority accepted the lower rate of tax returns. Subsequently, the Revisional Authority called for the assessment records of the assessee and determined that it should pay the higher rate of tax. The assessee approached the High Court challenging the jurisdiction of Revisional Authority to issue show cause notice.

The question that emerged for decision on this appeal before the Apex Court was whether the High Court was justified in declining interference on the ground of availability of an alternative remedy of appeal to the appellant under section 33 of the VAT Act, which it had not pursued. The appellant had questioned the jurisdiction of the Revisional Authority, to reopen proceedings, in exercise of suo motu revisional power conferred by section 34 of the VAT Act, and to pass final orders holding that the two assessment orders, both dated 28th February, 2007 passed by the ETO-cum-Assessing Authority, (hereafter 'the Assessing Authority', for short) for the assessment years 2003-04 and 2004-05 suffered from illegality and impropriety as delineated therein, viz. that the Assessing Authority erred in levying tax on mosquito repellant (a product manufactured by the appellant) at four per cent instead of ten per cent.

The Apex Court noted the having come across certain orders passed by the High Courts with respect to the exercise of writ powers conferred by Article 226 of the Constitution holding writ petitions as "not maintainable" merely because the alternative remedy provided by the relevant statutes which has not been pursued by the parties desirous of invocation of the writ jurisdiction emphasized the need to address that the power to issue prerogative writs under Article 226 is plenary in nature.

The bench opined that, "Article 226 does not, in terms, impose any limitation or restraint on the exercise of power to issue writs. While it is true that exercise of writ powers despite availability of a remedy under the very statute which has been invoked and has given rise to the action impugned in the writ petition ought not to be made in a routine manner, yet, the mere fact that the petitioner before the high court, in a given case, has not pursued the alternative remedy available to him/it cannot mechanically be construed as a ground for its dismissal. It is axiomatic that the high courts (bearing in mind the facts of each particular case) have a discretion whether to entertain a writ petition or not. One of the self-imposed restrictions on the exercise of power under Article 226 that has evolved through judicial precedents is that the high courts should normally not entertain a writ petition, where an effective and efficacious alternative remedy is available."

The Court stated that it must be remembered that mere availability of an alternative remedy of appeal or revision, which the party invoking the jurisdiction of the high court under Article 226 has not pursued, would not oust the jurisdiction of the High Court and render a writ petition not maintainable.

The Apex Court with respect to the jurisdiction issue stated that it should have been considered on merit and the petition ought not to have been dismissed at the threshold. The Court expressed that that under the scheme of the relevant Act, there is a hierarchy of authorities before which the appellant can get adequate redress against the wrongful acts complained of and that since the authority of the concerned officer to make an assessment was not in question, recourse ought to be taken by initiating proceedings thereunder. The High Court by dismissing the writ petition committed a manifest error of law for which the order under challenge was unsustainable discerned the bench.

"The purpose Section 34 seeks to serve, to take exception to a decision on the ground of lack of propriety of any proceedings or order passed in such proceedings, it essentially ought to relate to a procedural impropriety. It is incumbent for the accuser to show that the decision maker has failed to observe the standard procedures applicable in case of exercise of his power," observed the Court.

Thus, the Apex Court found nothing on record to justify either illegality or (procedural/moral) impropriety in the proceedings before the Assessing Authority or the orders passed by him, as such. It observed, "once the issue stands finally concluded, the decision binds the State, a fortiori, the Revisional Authority. The decision of the Tribunal may not be acceptable to the Revisional Authority, but that cannot furnish any ground to such authority to perceive that it is either not bound by the same or that it need not be followed," while allowing the appeal.