The State of Andhra Pradesh and Another vs Madras Wine Mart and Others

A. Ramamurthi, J.—The unsuccessful defendants 1 and 2 in O.S.No. 467 of 1984, O.S.No. 324 of 1984 and O.S.No. 466 of 1984 on the

file of Principal Subordinate Judge''s Court, Pondicherry, have preferred the second appeals aggrieved against the dismissal of A.S.No. 127 of

1985, 104 of 1985 and 126 of 1985 on the file of Additional District Judge, Pondicherry, confirming the judgments and decrees of the trial court

by the common judgment dated 15.11.1985.

The case in all the appeals in brief is as follows:

The plaintiff is the respective suits filed a suit for declaration that the plaintiff is a dealer as per the licence given by the 3rd defendant only in

Pondicherry and not a dealer in Andhra Pradesh and, therefore, the authorities other than, under the Pondicherry General Sales Tax Act have no

jurisdiction over the plaintiff or his business and the notices dated 18.6.1976 and 27.8.1986 issued by the first defendant are without jurisdiction

and ultra vires and void and also for permanent injunction against defendants 1 and 2 from taking any further proceedings on the basis of these

notices. They possessed valid licence under the provisions of Pondicherry Excise Act, 1970 and Rules framed thereunder to possess, sell and deal

in liquor. They carried on business as a wholesale or retail in Indian and made foreign liquor, having their place of business at Pondicherry. They

have no other place of business elsewhere. They were registered as a dealer in Pondicherry both under Pondicherry General Sales Tax Act and

Central Sales Tax Act. The first defendant viz., sales tax authorities in Andhra Pradesh have jurisdiction only in respect of dealers in Andhra

Pradesh or sales within Andhra Pradesh. Since the plaintiffs are not dealers in Andhra Pradesh, they have no manner of jurisdiction or authority

over them claiming sales tax.

Defendants 8 and 9 are licensees at Yanam or Mahe in the sale in liquor under retail licence which are part of union territory of Pondicherry.

They after observing necessary statutory formalities and after producing copies of the invoices obtained from the competent authorities and after

getting necessary endorsements on the transport permit, transported the liquor from Pondicherry to Yanam or Mahe. They had valid permits to

transport and they placed orders with the plaintiffs and purchased the permitted quantity and paid the price including sales tax at Pondicherry, took

delivery of the consignments in the godown of Pondicherry and transported the same through lorries engaged by them. The plaintiffs delivered the

intoxicants to defendants 8 and 9 or their agents at their godown at Pondicherry on the production of the duly endorsed permits. The permit has to

be returned to the transporter to he carried. The plaintiffs ceased to have any right or control ever the commodities sold from the moment of the

delivery at their godown at Pondicherry. Defendants 8 and 9 became the owners of the liquor from that moment and transported them at their own

risk and responsibility. The single point sales tax is levied on the first sales in Pondicherry. The admitted taxes on the first sale have already been

paid to the proper authorities and there are records to support the same.

The 2nd defendant came to Pondicherry, checked the accounts of the plaintiffs through the office of the 4th defendant and even after

verification, they issued notice on 27.3.1976, calling upon the plaintiffs to show cause against the proposed assessment by best of judgment u/s

14(3) of the Andhra Pradesh General Sales Tax Act, 1957 (hereinafter referred to as ""A.P.G.S.T. Act"") read with Rule 15(5) of the Andhra

Pradesh General Sales Tax Rules fixing the gross and net turnover. After receiving the notice, the plaintiffs, filed writ petition on the file of this

Court against defendants 3 and 4, praying for issue of writ of prohibition. The impugned notice states that the plaintiff retained Hen on the goods

and sold them again in Andhra Pradesh and it is an impossibility. The proceedings of the second defendant are based on suspicion and not

supported by any proof. The writ petition was dismissed and they also filed writ appeal before this Court. There was a direction in the writ appeal

itself that the Excise authorities of the 3rd defendant should produce the records when called for by the sales tax authorities of Andhra Pradesh and

thereupon, the plaintiff can have adequate opportunity to show cause before the sales tax authorities of Andhra Pradesh. However, the 2nd

defendant again issued notice on 4.10.1983, calling upon them to produce the accounts. Again another notice was also sent subsequently, a

detailed reply was also sent, pointing out the relevant portion in the order passed in the writ appeal. Hence, the necessity for filing these suits.

Defendants 1 and 2 alone mainly contested the suit, stating that the Civil Court at Pondicherry has no territorial jurisdiction to entertain the suit,

Defendants 3 to 11 have been unnecessarily impleaded in the case only for the purpose of giving jurisdiction to that court. They are not necessary

parties to adjudicate the issues. Defendants 1 and 2 are the competent authorities to decide the issue. The entire matter has been set at rest by this

Court in the writ petition as well as in the writ appeal and, as such, the plaintiffs are estopped from challenging the jurisdiction and competency of

the 2nd defendant to adjudicate and assess. The suit is also hit by Section 11 of the CPC read with Explanations 4 and 8 under the principles of

constructive res judicata to raise the very same issue, which was already adjudicated, in the writ appeal. The assessment notice was issued only to

facilitate a fair enquiry in exercise of the powers conferred under A.P.G.S.T. Act. When the 2nd defendant had reasonable evidence on record

that the plaintiffs had effected sale of I.M.F.L. goods in the territory over which they have jurisdiction or conferred jurisdiction under the said Act,

they have got power to summon the plaintiffs to his office and enquire about the sales and adjudicate the necessary issues. The settled principle of

law is that the civil courts jurisdiction is ousted impliedly when the plaintiff has got local remedies available under the special enactment called the

said Act. As per the final assessment order, the 2nd defendant after going through the evidence available, gave a finding that the I.M.F.L. goods in

issue were sold by the plaintiffs in the territorial jurisdiction of the 2nd defendant and, therefore, the plaintiffs are liable to pay the sales tax as

claimed by them. The matter is now concluded at the end of the 2nd defendant and, therefore, the suits are in fructuous. The casual trade without a

place of business and domicile by the plaintiffs can also confer jurisdiction to the Commercial Tax Officer over the plaintiffs to assess them u/s 15

of the said Act. Once the assessment is over and final orders are passed, only an appeal lies to the Deputy Commissioner of Commercial Tax

(Appeal) Kurnool, who is not a party to this proceedings.

The other defendants contended that the suits are not maintainable against them and they are unnecessary parties to the suits. The licencee is a

wholesale I.M.F.L. dealer only at Pondicherry and is not a transporter to any of the place like Yanam and Mahe and they are holding any licence.

The licencee is empowered to possess and sell liquor in wholesale to F.L.2 licence holders of Pondicherry, Karaikal, Mahe and Yanam. The

plaintiffs have only the place of business i.e., at Pondicherry and he did not carry out at any time any business in Andhra Pradesh. Any transport of

liquor from one region to another region is considered as a transport and the transport permits are issued by the Deputy Commissioner (Excise) of

the area, where the dealer is carrying on the business. While obtaining such transport permit, the dealer has to indicate the name of the dealer of the

other region from whom be intends to procure liquor on the basis of the permit issued by the competent authority either the lessee or his power of

attorney comes to Pondicherry and purchase liquor from various wholesale dealers of Pondicherry and then applies to the Deputy Commissioner

(Excise) Pondicherry for authorisation/endorsement for transport of liquor. While applying for authorisation/endorsement, he encloses the purchase

bills along with the application. Deputy Commissioner (Excise), Pondicherry after verifying the purchase made at Pondicherry, authorities the retail

dealer from Karaikal/Mahe/Yanam to transport the goods from Pondicherry to his licenced premises. They after taking the goods from the

business premises, applies to the Deputy Commissioner (Excise) of the concerned areas for verification and release of the goods for sale.

The trial court framed four issues and Exs.A-1 to A-11 were marked on the side of the plaintiffs and one document was marked as Ex.B-1 in

O.S.No. 324 of 1984. No oral evidence was let in by any of the parties. The trial court decreed the suits and aggrieved against this, defendants 1

and 2 in the respective suits preferred A.S.No. 104 of 1985, A.S.126 of 1985 and A.S.No. 127 of 1985 on the file of II Additional District

Judge, Pondicherry and the appeals were also dismissed with costs and aggrieved against this, defendants 1 and 2 have prefers the aforesaid three

second appeals.

At the time of admission of the above second appeals, the following substantial question of law was framed:

(1) Whether the orders of this Court in W.A.Nos. 81, 93 to 96 of 1977 dated 25.11.1982 bars the jurisdiction of the civil court to entertain a suit

by the plaintiff u/s 11 of the Civil Procedure Code?

Although the plaintiff company is different, the defendants are one and the same. Since identical question of law is involved, the lower appellate

court pronounced a common judgment and under the circumstances, a common judgment is pronounced in the second appeals also.

The points that arise for consideration are: (1) whether the plaintiffs are entitled to declaration and permanent injunction 7 (2) Whether Section

36 of A.P.G.S.T. Act bars the jurisdiction of the Civil Court? (3) whether the suits filed by the plaintiffs are barred by constructive res judicata and

(4) To what relief?

Points: There is no dispute that the respective plaintiffs in the three suits possessed valid licence under the provisions of the Pondicherry Excise

Act to possess, sell and deal in liquor. It is also not in dispute that they carry on business as wholesale or retail licensees in Indian made foreign

liquor, having their place of business at Pondicherry. They are registered as dealers in Pondicherry both under Pondicherry General Sales Tax Act

as well as Central Sales Tax Act. They have sold the liquor under a retail licence at Yanam or Mahe, which are parts of Union Territory of

Pondicherry under proper documents. The purchasers after observing necessary statutory formalities, purchased the intoxicants from the plaintiffs

company by producing the copies of the invoices obtained from the Deputy Commissioner (Excise), Pondicherry and after getting the transport

permits, transported the intoxicants from Pondicherry to Yanarn or Mahe. Defendants 8 and 9 had valid permit to transport intoxicants from

Pondicherry to Yanam of Mahe. They only placed orders with the plaintiffs and purchased the permitted quantity from the plaintiffs and paid the

price including the local sales tax at Pondicherry. They took delivery of consignments in the godowns of the plaintiffs at Pondicherry and

transported the liquor through their lorries engaged by them.

The learned Counsel for the plaintiffs contended that the plaintiffs companies ceased to have any right or control over the sold goods from the

moment of delivery at the godown and the purchasers alone transported them at their own risk and responsibility and the plaintiffs had nothing to

do with the goods so delivered. However, defendants 1 and 2 would contend that the plaintiffs companies had lien over the goods and these are

transported through the territory of Andhra Pradesh and they have got reliable evidence to show that these intoxicants were sold in the territory of

Andhra Pradesh and because of this only, the show cause notice was issued. Simply because the tax on the first sales was paid by the plaintiffs,

they cannot escape from the payment of tax in accordance with the provisions of the said Act relating to the sales carried out in the territory of

Andhra Pradesh. The learned Counsel for the appellants further contended that already the plaintiffs filed writ petition as well as writ appeal before

this Court and they were dismissed and under the circumstance, they are barred under the principle of constructive res judicata from raising the

very same plea again. Further more, u/s 36 of the A.P.G.S.T. Act, the civil court has no jurisdiction to entertain any suit in respect of a matter

covered under the said Act.

The trial court as well as the lower appellate court came to the conclusion that there was no bar in filing the suit and there was no constructive

res judicata in respect of the finding given in the writ petition as well as in the writ appeal. Both the courts below also came to the conclusion that

the goods were sold by the plaintiffs companies and they had already paid the tax in respect of the first sale of Pondicherry and there is no record

to show that they have got anything to do with the goods after the sale and under the circumstance, the relief of declaration and injunction as

prayed for by the plaintiffs in the respective suits were granted.

The learned Counsel for the appellants mainly contended that the courts below have failed to appreciate the scope of Section 36 of the Act

which expressly oust the jurisdiction of the civil suit. The lower courts have also failed to appreciate the scope of the judgment of the Apex Court in

Dhulabhai and Others Vs. The State of Madhya Pradesh and Another, and Kamala Mills Ltd. Vs. State of Bombay, with regard to the jurisdiction

of the civil courts in matters regarding assessment. They have also failed to consider that the judgment of this Court in the writ petition as well as in

the writ appeal concludes the issue and it is not open to the respective plaintiff to agitate the matter in a suit because they are clearly barred u/s 11

of the Code of Civil Procedure.

The first defendant is the State of Andhra Pradesh, represented by the Secretary to Government, Revenue Department, having its office at

Hyderabad. The 2nd defendant is the Commercial Tax Officer, Chittoor, having office at Chittoor, Andhra Pradesh. As adverted to, there is no

dispute that the plaintiffs companies have sold the liquor to defendants 8 and 9 after observing statutory formalities and also on verification of the

permits issued by the competent authorities. How, admittedly defendants 1 and 2 have issued a notice to these companies on various dates and the

show cause notice Was admittedly questioned by the plaintiffs companies in the writ petition before this Court. The writ petitions were dismissed

on 7.3.1977 and the common Order clearly stated that it is not for this Court to cause an investigation into the factual aspects and decide the

matter either way....

That question has to be decided on evidence and this Court exercising jurisdiction under Article 226 of the Constitution cannot evaluate any such

evidence more so, when there are authorities constituted under the Act who are well entitled to decide that question. This would only give a clue

that the dismissal of the writ petition is not on merit but only on technical ground. Not satisfied with that, the plaintiffs companies preferred a writ

appeal before this Court and a direction was given that if the sales tax authorities of Andhra Pradesh called for any record being produced, they

should be produced if they are available with the excise authorities of Pondicherry and subject to this direction, the writ appeals are dismissed.

Hence, it is clear that no issue has been decided on merit and, hence, there is no basis to come to the conclusion that the dismissal of the writ

petition as well as writ appeal would operate as constructive res judicata u/s 11 of the CPC is not proper and correct. In fact, both the courts

below also came to the conclusion that there was no res judicata u/s 11 of the Code of Civil Procedure.

The next contention put forward by the learned Counsel for the appellants is that the jurisdiction of the civil court is barred u/s 36 of the

A.P.G.S.T. Act. For proper appreciation, it is just and necessary to extract Section 36 as follows:

Bar of jurisdiction of courts: Save as otherwise expressly provided in this Act, no court shall entertain any suit, or other proceedings to set aside or

modify, or question the validity of any assessment, order or decision made or passed by any officer or authority under this Act or any rules made

thereunder, or in respect of any other matter falling within its or his scope.

Section 21-E of the said Act is also necessary to appreciate the rival contentions of the parties and the section reads as follows:

Bar of jurisdiction of all courts except the Supreme Court: Notwithstanding anything contained in any other law, the jurisdiction of all courts except

the Supreme Court, is excluded with respect to any matter which is by or under this act required to be decided or dealt under by the assessing

authority, the Assistant Commissioner, the Appellate Deputy Commissioner, the Joint Commissioner of Commercial Taxes, the Commissioner of

Commercial Taxes, the Appellate Tribunal or the Special Appellate Tribunal.

It is, therefore, clear from Sections 21-E as well as 36 of the A.P.G.S.T. Act that there is a clear bar of jurisdiction of all courts except the

Supreme Court. In my view, both the courts below have not rightly appreciated the legal position with reference to Section 21-E as well as 36.

Unfortunately, both the courts below have entertained the suits based on the reasoning that the notice was also issued by the 2nd defendant only

from Pondicherry and because the other defendants also are within the territorial jurisdiction of Pondicherry. Defendants 3 to 11 are absolutely

unnecessary parties and they were impleaded only to give jurisdiction for the court at Pondicherry. Defendants 1 and 2 alone are the main

contesting defendants and they alone issued the show cause notice, calling upon the plaintiff in the respective suit and reproduce their records with

reference to the sale of intoxicants on the basis that they have sold in the territories of Andhra Pradesh. It is also made clear from the said Act that

there are provisions for filing and appeal or revision in respect of the finding given by the officers and the only course open to the plaintiffs is to

approach the competent authorities provided under the Act and exhaust the remedy before filing writ petition either in the High Court or in the

Supreme Court. But, however, instead of taking recourse to any of these provisions under the Act, they have filed writ petitions as well as writ

appeals before this Court and after dismissal, they have filed the suits, ignoring the provisions u/s 21-E as well as Section 36. There is a clear bar

of jurisdiction of the Courts and the language employed is also mandatory. There is also a non-obstante clause in Section 21-E and under the

circumstances, I am of the view that the finding given by the courts below relating to the maintainability of the suits in the civil court is not proper

and correct. There is erroneous application of law and, as such, on this ground alone the finding given by the courts below is liable to be set aside.

The learned Counsel for the appellants also relied upon so decision in Kamala Mills Ltd. Vs. State of Bombay, wherein it is observed as

follows:

The jurisdiction of a civil court can be excluded even without an express provisions. In every case, the question about the exclusion of the

jurisdiction of civil courts either expressly or by necessary implication must be considered in the light of the words used in the statutory provision on

which the plea is rested, the scheme of the relevant provisions, their object and their purpose.

Similar view has also been reiterated in Dhulabhai and Others Vs. The State of Madhya Pradesh and Another, . There is no dispute about this

proposition. Considering the legal position enunciated in Section 21-E as well as Section 36 of the A.P.G.S.T. Act, there is no difficulty in coming

to the conclusion that the jurisdiction of the civil court is barred.

The learned Counsel for the respondents contended that on and after the sale of the intoxicants by the plaintiffs, they have no lien over the

goods and there is no material to come to the conclusion that they are liable to pay any sales tax to Andhra Pradesh. No doubt, the A.P.G.S.T.

Act is applicable only in respect of the sale or purchase of the goods in the State of Andhra Pradesh. The question whether any sales or purchases

were effected in the territory of Andhra Pradesh is a matter of evidence. Now the show cause notice has been issued and is seen from the records

that provisional assessment orders have also been passed by the competent authority. There is inbuilt provision in the said Act itself enabling the

affected parties to file appeal or revision before the competent authority and only after exhausting these remedies, they will have right to move the

higher forums. Unfortunately, the plaintiff companies instead of exhausting the remedies provided under the said Act, have resorted to the filing of

the writ petitions as well as writ appeal and after dismissal, they again filed the suits, ignoring the bar provided u/s 21-E as well as 36 of the said

Act. Both the courts below have misdi7 reeled itself and came to a wrong conclusion that the civil court at Pondicherry has got jurisdiction to

entertain the suits and on a erroneous application of law, the decree was granted in favour of the plaintiffs. Since the findings given by the courts

below are perverse based on erroneous application of law and as there was miscarriage of justice, I am of the view that interference is called for in

the second appeals even though it is a concurrent finding of both the courts below. It is, however, open to the plaintiff companies to give a suitable

reply to the show cause notices or the orders passed by the competent authorities under the Act and exhaust their remedies provided under the

A.P.G.S.T. Act and work out their rights.

For the reasons stated above, all the second appeals are allowed and the judgments and decrees of the courts below are set aside and the suits

are dismissed. In the peculiar circumstances of the case, however, there will be no order as to costs. The plaintiffs are directed to work out their

remedies in accordance with the provisions under A.P.G.S.T. Act.