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Indian Hume Pipe Company Ltd. vs The State Of Uttar Pradesh And Ors.

High Court Of Judicature at Allahabad|29 September, 1970


JUDGMENT R.L. Gulati, J.
1. M/s. Indian Hume Pipe Company Ltd., Aish Bagh, Lucknow, hereinafter referred to as the petitioner, has filed this petition under Article 226 of the Constitution, praying for a. writ of certiorari against the assessment orders passed against the petitioner under the U.P. Sales Tax Act for the assessment years 1962-63 and 1965-66, both dated 22nd January, 1970.
2. The petitioner is engaged in the manufacture and supply of pipes which are marketed under the trade name "hume pipes". The basic raw material used in the manufacture of pipes is cement and steel fabrication. The bulk of the pipes produced by the petitioner is reinforced cement concrete pipes but it also manufactures high quality and high pressure pipes like prestressed concrete pipes for water supply, R.C.C. pressure pipes, penstock pipes used in hydro-electric projects, etc. The reinforced cement concrete pipes are used mainly for drainage and sewage disposal. The petitioner has stated that bulk of the stock of pipes is supplied to various Government departments both Central and State such as Irrigation, Public Works, Local Self-Government Engineering, Railways and Ministry of Petroleum etc., and the main use to which they are put is for culverts and other irrigation purposes as outlet for channels etc. In hydro-electric works, they are used for carrying water from reservoir to generator turbine, from dam site or source of supply to treatment works, for distribution of water, for use for underground electric cables etc. They are also used as tunnels and for transmitting petroleum from one place to another.
3. In respect of the assessment year 1961-62, a dispute arose between the petitioner and the sales tax department as to the rate of tax on the sale of pipes manufactured by the petitioner. The Sales.Tax Officer treated them as sanitary fittings and assessed their turnover at 7 per cent, while the assessee contended that the pipes manufactured and supplied by it were not sanitary fittings, but were unclassified goods taxable at the rate specified under the charging Section 3 of the Act. On appeal, the assessee's contention was accepted and it was held that the pipes manufactured and supplied by the petitioner were not sanitary fittings but were unclassified items. This finding of the appellate authority was confirmed by the Judge (Revisions) before whom the matter went in revision at the instance of the Commissioner of Sales Tax.
4. For the assessment years 1962-63, 1963-64 and 1964-65 the Sales Tax Officer once again taxed the turnover of pipes at 7 per cent, with the result that the petitioner had to file appeal against the assessment orders for those three years also. The assessment order for the year 1962-63 was set aside by the Assistant Commissioner (Judicial) who remanded the case to the Sales Tax Officer for fresh assessment. The remaining appeals relating to the assessment years 1963-64 and 1964-65 are still pending before the Assistant Commissioner (Judicial), Sales Tax, Lucknow. The petitioner has further alleged that during the remand proceedings before the Sales Tax Officer in respect of the assessment year 1962-63, the petitioner filed an affidavit dated 25th April, 1968, along with the opinion of different dealers in sanitary wares and sanitary fittings of different places and States to show that in the commercial and business world, those pipes were not recognised or treated as items of sanitary wares or sanitary fittings. The petitioner also filed copies of the judgment of the Assistant Commissioner (Judicial) and the Judge (Revisions), Sales Tax, relating to the assessment year 1961-62. Besides, the petitioner filed a certificate of the Chief Engineer, Local Self-Government Engineering Department, to show that pipes supplied to his department were not used as sanitary fittings. The petitioner also filed before the Sales Tax Officer a letter dated 11th May, 1961, written by the Commissioner of Sales Tax to the effect that the cement pipes not meant for sanitation or electrical fittings, would continue to be liable to tax at the rate of 2 per cent. The petitioner also pointed out to the assessing authority that almost all the dealings of the petitioner were either with the State or Central Government departments and the petitioner had realised tax from the various Government departments at the rate of 2 per cent. The petitioner further brought to the notice of the Sales Tax Officer the fact that the Director-General of Supplies and Disposals, New Delhi, while publishing the Central Government rates in the official gazette relating to concrete pipes mentioned the rate of sales lax in Uttar Pradesh at 2 per cent, alone and even in the contract rates published by the U.P. Government for supply of these pipes in the official gazette, the State Government also mentioned the rate of sales tax at 2 per cent. It has been averred by the petitioner that in spite of all this material placed before the Sales Tax Officer, the latter framed a fresh assessment for the assessment year 1962-63 on 22nd January, 1970, treating the pipes again as sanitary fittings and levied tax at the rate of 7 per cent. He simultaneously completed the assessment for the year 1965-66 levying tax at the rate of 7 per cent. The petitioner has challenged these assessment orders in this petition.
5. The learned counsel for the department has raised a preliminary objection. According to him, an alternative remedy by way of appeal is open to the petitioner and this court should not exercise its jurisdiction under Article 226 of the Constitution permitting the petitioner to by-pass the statutory remedy. The petitioner has submitted that the question involved in this petition relates to the interpretation of an entry in the notification issued under the U.P. Sales Tax Act. The dispute raised by the department is of a recurring nature. The petitioner has stated in paragraph 16 of the writ petition that on account of the extra amount by way of tax which the petitioner is called upon to pay every year as a result of wrong interpretation placed by the Sales Tax Officer on the notification in question, the petitioner is being saddled with an additional liability running into several lacs. It has been stated that the additional liability for the year 1962-63 comes to Rs. 78,272 ; for the year 1965-66 the additional liability comes to Rs. 2,10,144, thus the total additional liability for the two assessment years alone comes to Rs. 2,88,416. Similarly for the remaining two assessment years, namely 1963-64 and 1964-65, the additional liability comes to Rs. 2,87,000. The petitioner submits that it is unable to meet this heavy demand and unless the dispute is expeditiously decided, the petitioner's business is likely to be adversely affected. The petitioner further submits that the assessment orders, impugned in this writ petition, are clearly arbitrary and perverse being contrary to the materials on record including the judgment of the Judge (Revisions) on the point which normally is binding upon the Sales Tax Officer.
6. Now, it is well settled that jurisdiction under Article 226 of the Constitution is normally not exercised where an adequate alternative remedy exists unless there are some special circumstances which would warrant the departure from that normal rule. We are satisfied that the present one is a fit case in which this court should entertain the petition and decide the question involved under Article 226 of the Constitution. The remedy by way of appeal, in the circumstances set out by the petitioner, is obviously not efficacious.
7. Before considering the contention on the merits, we would like to point out that although each assessment year is a separate unit of assessment and the findings in one assessment year are not binding in respect of other assessment years yet when a question like the one involved in the present case is answered in a particular manner by the revising authority which is the highest Tribunal in the hierarchy of officers of the sales tax department, the Sales Tax Officer is ordinarily bound to follow the decision of the Judge (Revisions) while deciding a similar question in the subsequent assessments unless some fresh material comes before him which justifies his taking a contrary view.
8. The Bombay High Court in H. A. Shah & Co. v. Commissioner of Income-tax [1956] 30 I.T.R. 618 held :
As a general rule the principle of res judicata is not applicable to decisions of income-tax authorities. An assessment for a particular year is final and conclusive between the parties only in relation to the assessment for that year and the decisions given in an assessment for an earlier year are not binding either on the assessee or the department in a subsequent year. But this rule is subject to limitations, for there should be finality and certainty in all litigations including litigation arising out of the Income-tax Act and an earlier decision on the same question cannot be reopened if that decision is not arbitrary or perverse, if it had been arrived at after due inquiry, if no fresh facts are placed before the Tribunal giving the later decision, and if the Tribunal giving the earlier decision has taken into consideration all material evidence....
9. The Bombay High Court has affirmed its earlier view in Burmah Shell Refineries Ltd. v. G. B, Chand, Income-tax Officer [1966] 61 I.T.R. 493 at p. 506 where it has been observed :
The view of this court thus had been that though the Income-tax Officer is not bound by the rule of res judicata or estoppel on record, he can reopen a question previously decided only if fresh facts come to light which on investigation would entitle the officer to come to a conclusion different from the conclusion previously reached or if the earlier decision had been rendered without taking into consideration material evidence.
10. It is abundantly clear that in the instant case the Sales Tax Officer had not placed on record any fresh material which could justify his sticking to his original view which had been reversed by the revising authority. In fact no attempt has been made in the counter-affidavit filed on behalf of the department to show that the Sales Tax Officer was justified in ignoring the decision of the revising authority in respect of the assessment year 1961-62. In our opinion the course adopted by the Sales Tax Officer is highly improper, if not illegal. As has been pointed out by the Supreme Court in Bhopal Sugar Industries Ltd. v. Income-tax Officer, Bhopal [1960] 40 I.T.R. 618 (S.C.) if the inferior officers in the hierarchy of Tribunals were permitted to ignore the directions and decisions of a superior officer, it would strike at the very root of the administration of justice and would produce chaos. Such conduct on the part of inferior officers would contribute towards arbitrariness and perversity in assessment orders.
11. Then, we find that the Sales Tax Officef-rtias passed the impugned assessment orders totally disregarding the material placed by the petitioner in support of its contention. The assessment proceedings are quasi-judicial in nature and it is well settled that a quasi-judicial order must be passed after taking into consideration all the materials placed on the record. If that is not done, the order can be termed as arbitrary and perverse and it is settled law that such an order can be struck down by the High Court in the exercise of its jurisdiction under Article 226 of the Constitution. We have perused the material which was placed before the Sales Tax Officer. It only points to one conclusion, namely, that the entry relating to sanitary fittings in the notification under Section 3-A has no application whatsoever to the pipes, the turnover whereof is in dispute. As such the Sales Tax Officer was not right in law in applying the rate mentioned in the notification under Section 3-A of the U.P. Sales Tax Act.
12. We could have disposed of this petition on the grounds already mentioned above, but since the question involved is of a recurring nature and relates to the interpretation of a notification, we have thought it fit to indicate our view on the merits also, so that the controversy raging between the petitioner and the sales tax department is set at rest.
13. The notification with which we are concerned is Notification No. ST-1363/X-1045 (1960) dated 5th April, 1961, issued under Section 3-A of the Act. Item No. 18 of that notification is "sanitary fittings" the turnover whereof is taxable at the rate of 7 per cent, at the point of sale by the importer or manufacturer. Admittedly, the petitioner is a manufacturer of hume pipes. The question is whether hume pipes fall within the category of sanitary fittings.
14. The term "sanitary fittings" has not been defined anywhere in the Act or in the Rules. This term, therefore, has to be interpreted in a popular and commercial sense. In Commissioner of Sales Tax, Madhya Pradesh, Indore v. Jaswant Singh Charan Singh A.I.R. 1967 S.C. 1454 the Supreme Court observed:
But it is now well-settled that while interpreting items in statutes like the Sales Tax Acts, resort should be had not to the scientific or the technical meaning of such terms but to their popular meaning or the meaning attached to them by those dealing in them, that is to say, to their commercial sense.
15. Reference in that case was made by the Supreme Court to the case of Ramavatar Budhaiprasad v. Assistant Sales Tax Officer, Akola A.I.R. 1961 S.C. 1325 where betelleaves were held not to fall within the category of vegetables which term, according to their Lordships' opinion, must be interpreted not in a technical sense but in its popular sense as understood in common language, i.e., denoting a class of vegetables which are grown in a kitchen garden or on a farm and are used for the table. Reference was also made to His Majesty the King v. Planters Nut and Chocolate Co. Ltd. (1951) C.L.R. (Ex.) 122 where it was held that "if a statute uses the ordinary words in every day. use, such words should be construed according to their popular sense". The same principle has been reiterated by a Full Bench (sic) of this court in Avadh Sugar Mills v. Sales Tax Officer [1968] 21 S.T.C. 295.
16. The term "sanitary fittings" is a term of every day use. In common parlance the term "sanitary fittings" is used in respect of items like a washbasin, commodes, cistern tank, urinals and other articles which are commonly used in bath-rooms and lavatories. It is true that concrete pipes of certain specification are used for drainage and sewage disposals. They are laid underground. But anything connected with sanitation cannot be brought within the term "sanitary fittings". Sanitary fittings must be restricted to articles which are fitted in private or public bath-rooms or lavatories. Moreover, even the concrete pipes which are used for drainage and sewage disposals are put to a variety of other uses. We are therefore of opinion that only such articles can be classed as sanitary fittings for purposes of notification under Section 3-A as are ordinarily used as sanitary fittings. All articles connected with sanitation are not necessarily sanitary fittings. This is clear from a subsequent Notification No. ST-3119/X-1012(4)-65 dated 1st September, 1966, where the entry reads "sanitary goods and fittings".
17. The petitioner has brought ample evidence on the record to show that the pipes manufactured and supplied by it were neither purchased nor used as sanitary fittings. In commercial world also there is a separate section of trade which deals in items of sanitary fittings. Hume pipes do not come in that section of the trade. The petitioner has filed the opinion of various sections of trade according to which hume pipes are not regarded as items of sanitary fittings. This allegation of the petitioner has not been controverted. All that the Sales Tax Officer has said in the assessment orders as also in the counter-affidavit is that hume pipes can also be used as sanitary fittings. That, in our opinion, is not the criterion for interpreting the term "sanitary fittings" as it occurs in the notification referred to above. The expression "sanitary fittings" must be confined, in our opinion, to such articles as are commonly understood as belonging to that category in common parlance and in the commercial sense.
18. We are, therefore, clearly of the opinion that the pipes of the type, which the petitioner manufactures and supplies, are not covered by the entry relating to sanitary fittings in the notification in question and are not liable to tax at the rate of 7 per cent. The pipes are unclassified goods and are taxable at the general rate specified under Section 3.
19. We accordingly allow this petition and quash the impugned assessment orders relating to the assessment years 1962-63 and 1965-66, both dated 22nd January, 1970, so far as they seek to levy tax on the turnover of pipes at the rate of 7 per cent. The petitioner is entitled to its costs.
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Indian Hume Pipe Company Ltd. vs The State Of Uttar Pradesh And Ors.


High Court Of Judicature at Allahabad

29 September, 1970
  • R Pathak
  • R Gulati