The United Industries Ltd. vs The Agricultural Income Tax and Sales Tax Commr. and Another

Subramania Iyer, J.—This is an application by the United Industries (Cochin) Ltd., against two Respondents viz., (1) The Agricultural Income Tax and Sales-tax Commissioner, Travancore- Cochin State and (2) The Chief Secretary to the Government of Travancore-Cochin, asking the Court to

quash the Sales-tax Assessment Proceedings STM. 852/50-51 of the Municipal Sales-tax Officer, Mattancherry dated 7-9-1951 and further issue a writ of prohibition or other appropriate writ, order or direction to the counter-Petitioners, prohibiting the collection of the sales tax called for in the demand notice

mentioned in para 7 of the application wherein the Petitioners are asked to pay an amount of Rs. 5,360-13-0 within 21 days from its receipt which was on 16-10-51. The Petitioners were assessed on a turn-over of Rs. 4,01,417-0-6 which was the aggregate of 8 items detailed in para 2 of the petition of which items 2, 5 and 6 are exports outside India to Rangoon. The complaint of the Petitioner is that in so far as those exports are concerned, they are immune from being assessed to sales tax and in so far as the aggregate amount of the said three items, viz., 3,50,507-8-0 is concerned, the sales tax assessment thereon at 3 pies in the rupee namely Rs. 5,476-10-9 was illegal and it was beyond the competence of the authorities to impose sales tax on the said sum.

The application was presented before this Court on 1-11-1951 supported by an affidavit. The Respondents received notice on 13-11-51 and after obtaining the copies, presented a counter-affidavit on 23-3-1952. Meanwhile on 10-1-1952 this Court decided the case reported in ''Bombay Company Ltd. v. State'' AIR 1952 Tra 83 (A), that sales tax cannot be levied on exports outside India. That decision was appealed against but the Supreme Court upheld it in the case reported in ''State of Travancore Cochin v. Bombay Company Ltd. AIR 1952 SC 366 (B) which was pronounced on 16-10- 1952. After the abovesaid decision of the Supreme Court, the matter is being taken up only today, though there had been a few occasions on which the case was posted.

Learned Advocate General appearing for the Respondents conceded today before me that in view of the aforesaid decision of the Supreme Court, the asessment of sales tax upon the exports that is complained of in the application cannot be sustained, that the application is not opposed so far as the exports are concerned and that the counter-affidavit filed is not pressed to that extent.

The question then is whether the proceeding for recovery of sales tax should be quashed in its entirety as prayed for in the petition or should be quashed only to the extent it relates to the exports. The same question arises as regards the writ of prohibition asked for in the application. We have the high authority of Lord Blackburn in ''Mackonochie v. Lord Penzance'' (1881) 6 AC 424 at page 444 (C).

Where part is within the jurisdiction and part not, a prohibition is awarded against doing what is in excess of jurisdiction, and a consultation as to the rest.

The proceedings complained of in STM. 852/ 50-51 should, therefore, be quashed in so far as they relate to the Sales tax assessment on the exports outside India. They can be maintained as regards the rest. Indeed the grievance of the Petitioners in the petition relates only to the sales tax upon the exports, though in the prayer portion the quashing of the entire proceedings is asked for. The prohibition asked for, however, relates only to the prohibiting of the recovery of the amount asked for in the demand notice which, as already stated, is only Rs. 5,360-13-0 which is smaller than the amount of sales tax assessment of now admitted to be void which is Rs. 5,476-10-9 as stated in para 6 of petition.

The result is that the proceedings complained of are quashed to the extent that they relate to the exports outside India and recovery of the tax mentioned in the demand notice is prohibited.

There remains the question of costs, There was a somewhat heated argument upon this question. Learned Counsel for the Petitioners contends that the opposition to the petition was entered after this Court pronounced against the validity of the impost of sales tax in a similar matter and that even after the confirmation of this Court''s decision by the Supreme Court the State did not appear and concede until today that the petition may be allowed. Learned Advocate General on the other hand brings to the notice of the Court the fact that in the return submitted by the Petitioners, the amount of turnover admitted was ridiculously low in that against a turnover of 4 lakhs odd, the amount admitted in the return was only Rs. 13 thousand odd. This it is contended by the Respondents disentitles the party to claim costs.

It is no doubt true that in deciding the question of costs, the conduct of the parties in the proceedings leading up to the litigation as well as in the course of it should be considered. These proceedings, however, were not necessitated on account of any false return submitted by the Assessees. After assessment, realising the inadequate and perhaps the unsupportability of the return made by them, the Assessees conceded their liability to pay sales- tax upon a much larger amount of turnover than was admitted by them in their return and took exception only to the levy of sales tax upon the exports outside India. He however sought in his application the cancellation of the entire proceedings relating to the sales tax. In view of these conflicting circumstances, I consider it proper not to disallow costs altogether to the Petitioners but to make the burden of the Respondents very light.

Under the circumstances I allow the petition and quash the sales tax proceedings to the extent above indicated and give the prohibition asked for with costs and advocate''s fee which I fix at Rs. 25/-.