Gulab Chand vs State of U.P.and others

T.S. Misra, J.

The plaintiff appellant filed the suit against the State of U.P. and five others for injunction restraining the State of U.P. from recovering the alleged amount of sales tax for the assessment year 195758 and for refund of Rs. 300/ which had been realised by the State of U.P. from him. It was alleged by the plaintiff that the father of the defendant No. 3, namely, Bhola Ram, had taken a contract for sale of liquor and Bhang for the period commencing from April 1, 1957 to March 31, 1958. An assessment notice was issued to Bhola Ram by the Sales Tax Officer in respect of the business done by him. Bhola Ram did not file any objection. He was ultimately assessed to salestax and a sum of Rs. 895.94 was claimed by way of salestax from him. He did not file any appeal against the assessment order nor paid the amount of sales tax. Consequently a recovery certificate was issued against him. During the proceedings of recovery Bhola Ram died. The defendants Nos. 3 to 6 are the heirs of Bhola Ram. They filed an objection before the Sales Tax Officer contending, inter alia, that Bhola'' Ram was not the proprietor of the business in question and was not liable to pay the sales tax. On the contrary, the plaintiff Gulab Chand was liable to pay the same in view of an agreement dated December 13, 1957. It appears that the recovery certificate was then issued in the name of Gulab Chand and the amount was sought to be recovered from him. In the course of that proceedings an attachment order was issued. So also .a warrant of arrest was issued against Gulab Chand. Further a sum of Rs. 300/ was also realised from Gulab Chand. The appellant then filed the suit which has given rise to this appeal. That suit was contested by the State of U.P. on a number of grounds. It was alleged by the State of U.P. that the plaintiff was the proprietor of the business of liquor and Bhang in pursuance of an agreement dated December 21, 1957 Which was entered into between him and Bhola Ram deceased. Hence, the recovery certificate issued in the name of the plaintiff was valid and binding. It was further alleged that the said recovery certificate was issued after due notice to Gulab Chand. The State of U.P. further pleaded that the plaintiff was bound to pay tax under Section 3C (2) of the Sales Tax Act and that the suit was barred by Section 17 of the U.P. Sales Tax Act and the Court had no jurisdiction to try the same. The heirs of Bhola Ram, namely, defendants Nos. 3 to 6, also contested the suit alleging, Inter alia, that Bhola Ram was not the proprietor of the business in question but was an employee of the plaintiff, that the plaintiff was the proprietor of the said business and that the agreement dated December 13, 1957 absolved Bhola Ram from the liability of the salestax. In rejoinder, the plaintiff contended that he had become the owner of the. shop in question from December 1. 1957 and as the sales proceeds from December 1, 1957 to December 31, 1958 were not over Rs. 3,000/ he was not liable to pay any salestax inasmuch as the turn over was not assessable. He denied his liability to any salestax for any period prior to December 1, 1957. On these pleadings a number of issues were framed.

The trial Court held that H had jurisdiction to try the suit, that the defendant State of U.P. was not entitled to realise Sales Tax from the plaintiff as no notice of assessment was given to him, that the plaintiff was entitled to recover the amount of tax deposited by him and that the defendants Nos. 1 and 2 were liable to be restrained from recovering the sales tax in question. On these findings the suit was decreed. Against that decision, the State of U.P. preferred an appeal. The appellate Court below reversed the findings of the trial Court with regard to jurisdiction. It held that the civil Court had no jurisdiction to try the suit and the suit was not maintainable. The appeal was accordingly allowed and the suit was dismissed. Aggrieved, the plaintiff has now come up to this court on second appeal.

For the appellant, it was urged that the appellate Court erred in holding that the suit was not cognizable by the civil Court. The submission was that the plaintiff appellant was not assessed to salestax with regard to the period in question. No notice was given to him for assessing him for salestax and that no demand was made for making payment of the salestax dues in question. Hence the recovery certificate issued against him was without jurisdiction and the entire proceedings of recovery were also unauthorised and without jurisdiction. The learned counsel for the State, however, submitted that the suit was barred by the provisions of Section 17 of the U.P. Sales Tax Act, that it was within the competence of the Sales Tax Officer to amend the recovery certificate, that the recovery certificate was in fact amended after due notice to the plaintiff and the order amending the recovery certificate as also the recovery certificate itself were within jurisdiction and could not, therefore, be questioned in a court of law in a suit.

This appeal was heard by me at some length on December 19, 1974. It was noticed that the defendant respondent No. 1 in its written statement had alleged that after due notice to the plaintiff fresh recovery certificate was issued in the name of the plaintiff. No document was, however, filed to indicate the circumstances in which the fresh recovery certificate was issued in the name of the plaintiff except a certified copy of s notice dated February 23, 1960 given by the Assistant Sales Tax Officer, Azamgarh to the plaintiff, Ex. A8. The learned counsel for the State then sought time to produce and file the relevant documents indicating the circumstances in which the recovery certificate was issued against the plaintiff. The hearing of the appeal was, therefore adjourned. At the hearing of the appeal today the learned counsel for the State of U.P. stated that there is no order of the Sales Tax Officer on the file of the Sales Tax Department whereby the recovery certificate was ordered to be amended and to be issued in the name of the plaintiff. He, however, stated that there is a note by the Assistant Sales Tax Officer on the file of the Sales Tax Department wherein the Assistant Sales Tax Officer had stated that recovery certificate be issued in the name of Gulab Chand and the recovery certificate in the name of Sri Bhola Ram be withdrawn as per order of the S.T.O. The order of the S.T.O. referred to in the said note of the Assistant Sales Tax Officer was, however, not produced before me and the learned counsel for the State of U.P. stated that the said order of the S.T.O. is not on the file of the Sales Tax Department.

It appears that a notice dated January 14, 1960, copy of which is Ex. A6, was given to Gulab Chand informing him that Nand Lal son of Bhola Ram had filed an application along with an agreement intimating that the business of liquor done in the name of Bhola Ram in the assessment year 195758 was not the business of Bhola Ram but that Gulab Chand was the proprietor thereof. Gulab Chand was, therefore, called upon to show cause as to why the arrears of salestax be not recovered from him. It further appears that this notice was refused by Gulab Chand. Consequently, another notice dated February 24, 1960, Ex. A8 was given to Gulab Chand asking him to show cause within three days. This notice appears to have been served on Gulab Chand on March 23, 1960. Ex. A4 is a letter of the Assistant Sales Officer, Azamgarh, to the Sales Tax Officer, Ghazipur in which it was stated, inter alia, that in response to the notice dated February 24, 1960 Sat Narain Gupta, Vakil, appeared on behalf of Shri Gulab Chand before the Assistant Sales Tax Officer on March 25, 1960 and argued the case. He was asked to file the objections in writing but he did not do so and left the office without submitting any written objection. With these remarks the Assistant Sales Tax Officer submitted the papers before the Sales Tax Officer, Ghazipur for necessary orders. It is not known what orders were actually passed by the Sales Tax Officer, Ghazipur and the learned counsel for the State of U.P. could not produce before me any document showing that any order was passed by the Sales Tax Officer concerned on the said report of the Assistant'' Sales Tax Officer except the noting of the Assistant Sales Tax Officer. The learned counsel for the State has further stated that the order of the Sales Tax Officer referred to in the noting of the Assistant Sales Tax Officer was not on the file of the Sales Tax Department. The facts stated heretofore disclose that the plaintiff was not originally assessed to sales tax for the period with regard to which the recovery certificate was issued. The original assessee was Bhola Ram in whose name the liquor business was being carried on during the period in question. In the circumstances, the recovery certificate was also originally issued in the name of Bhola Ram. However, on his demise the sons of Bhola Ram filed an application stating, inter alia, that in view of an agreement dated December 13, 1957 the plaintiff was liable to pay the spies tax in question and the amount should be recovered from him But, the salestax could not be demanded from the plaintiff nor could any recovery certificate be issued to him without amending the assessment order and without taking proper proceedings. The sales Tax Officer did issue two notices to the plain tiffappellant to show why the salestax should not be realised from him. No objection was, however, filed by the plaintiff. The recovery Certificate was amended and issued in the name of the plaintiff. Incidentally the order of the Sales Tax Officer passed on the report of the Assistant Sales Tax Officer was not filed. It was also not produce before me today. In fact, it is not on the file of the Sales Tax Department as stated by the learned counsel for the State of U.P. It is, therefore, not known whether the Sales Tax Officer had actually passed any order directing the recovery to be made from the plaintiff. At any rate, it was not established by the documents on the record that the Sales Tax Officer passed any order for amendment of the assessment order and also the recovery certificate In the absence of this evidence it is not possible to hold that the recovery certificate was issued against the plaintiff in pursuance of any valid order passed by a competent authority under the provisions of the U.P. Sales Tax Act. There is nothing on the record to show that any finding was recorded by the Sales Tax Officer that the plaintiff appellant was the real proprietor of the business in question for any period prior to December 31, 1957. The learned counsel for the State, however, urged that there is a letter of the Sales Tax Officer to the AssistantCommissioner in which he had stated that the recovery of the salestax dues in question be made from the plaintiff. This letter cannot take the place of the order which might have been actually passed by the Sales Tax Officer on the proceeding initiated by the notice Ex. A6 and also by the notice dated February 24. 1960. There is nothing on the record of this case that any notice of demand was served on the plaintiff. That being so, the plaintiff could not be said to be a defaulter and the recovery proceedings against him were unwarranted and without jurisdiction. In Sant BUX Singh v. Sales Tar Officer 1974 (34) S.T.C. 289 the petitioner was not an assessee and, as such, recovery certificate could not be issued against him, even though subsequently the Sales Tax Officer came to believe that the petitioner was a partner. It was held that the tax could not be demanded from the petitioner nor could any recovery certificate be issued against him without amending the assessment order by taking appropriate proceedings. It was also observed that not only that there was no finding with regard to the petitioner being a partner, but even notice of demand" had not been, served on him. In the circumstances the petitioner, could not be said to be a defaulter and recovery proceedings against him were wholly without jurisdiction. It was therefore, declared that the recovery proceedings against the petitioner in respect of the assessment years in question were unauthorised and wifhout jurisdiction. The facts of the present case are similar to those of Sant Bux Singh''s case (supra). In the instant case, the plaintiff was not an assessee and as such recovery certificate could not be issued against him even though subsequently the Sales Tax Officer came to believe that the plaintiff was the proprietor. The tax could not be demanded from the plaintiff nor could any recovery be made from him without amending the assessment order or without taking appropriate proceedings. It was not proved that the assessment order in the instance case was amended. It was also not proved that there was any finding with regard to the plaintiff being he proprietor of the business during the period in question, It was also not established that any notice of demand had been served on the plaintiff. In these circumstances, the plaintiff could not be said to be a defaulter and the recovery proceedings against him were unauthorised and without jurisdiction. Section 17 of the U.P. Sales Tax Act would, in these circumstances, not bar the suit inasmuch as the Sales Tax Officer had not acted in conformity with the fundamental principles of judicial procedure. It is a settled law that the civil court would have jurisdiction to try the suit where it was pleaded and proved that the statutory tribunal had not acted in conformity with the fundamental principles of judicial procedure. See Dhuldbhai v. State of M. P., A.I.R. 1969 S.C. 78. The appellate Court below was, therefore, not correct in holding that the civil Court had no jurisdiction to try the suit.

In the result, the appeal is allowed with costs. The judgment and decree passed by the appellate Court below are set aside and the judgment and decree passed by the learned Munsif are restored.