High Court can't entertain writ petition against tax assessment order when statutory appeal remedy exists.

Case Name:

The State Of Madhya Pradesh And Another Vs. M/s Commercial Engineers And Body Building Company Limited-(GST SC Cases)

Key Takeaways:

- High Courts should not entertain writ petitions under Article 226 against tax assessment orders if a statutory appeal mechanism is available to the petitioner.

- The availability of an alternative statutory remedy is a ground to dismiss the writ petition at the outset.

- The court reiterated the settled legal principle that writ jurisdiction should not circumvent statutory appeal procedures, especially in fiscal matters.

Issue:

Whether the High Court was correct in entertaining a writ petition under Article 226 of the Constitution challenging a tax assessment order, despite the availability of a statutory appeal remedy to the petitioner.

Facts:

The respondent (assessee) was denied input tax rebate under the Madhya Pradesh Value Added Tax Act, 2002 through an assessment order dated 28.02.2015. Instead of availing the statutory appeal remedy under Section 46(1) of the Act, the respondent filed a writ petition before the High Court. Despite objections raised by the State, the High Court entertained the writ petition and allowed the rebate claim by setting aside the assessment order. The State of Madhya Pradesh appealed this order in the Supreme Court.

Arguments:

State's Arguments:

- No statutory duty to entertain writ petitions against tax assessment orders when appeal remedies exist.

- The tender terms made it clear that the tax liability rests with the supplier/assessee.

- Seeking clarification from tax authorities through a writ is a long-drawn process not envisaged under the tax laws.

Respondent's Arguments:

- The writ raised a pure question of law on admitted facts, not requiring any factual inquiry.

- Hence, the High Court rightly entertained the writ petition under Article 226.

Key Legal Precedents:

- United Bank of India v. Satyawati Tondon:

When a statutory appeal remedy is available, High Courts should not entertain writ petitions against assessment orders by bypassing the appeal route.

- CCE v. Dunlop India Ltd:

Article 226 is not meant to short-circuit statutory procedures. Writs lie only in extraordinary situations where statutory remedies are ill-suited.

- Punjab National Bank v. O.C. Krishnan:

Courts should refrain from exercising writ jurisdiction when alternative statutory remedies are available.

Judgement:

The Supreme Court allowed the State's appeal and set aside the High Court's order. It held that the High Court ought not to have entertained the writ petition when a statutory appeal remedy under Section 46(1) of the MP VAT Act was available against the assessment order denying input tax rebate. The court quashed the High Court judgment and dismissed the writ petition, directing the respondent to pursue the statutory appeal route within four weeks.

FAQs:

Q1: Does this judgment preclude writ petitions in all tax matters?

A1: No, the judgment does not create a blanket ban on writ petitions in tax matters. Writs can still be entertained in extraordinary situations where statutory remedies are ill-suited or when issues of jurisdictional error or vires of the statute are involved.

Q2: What is the rationale behind preferring statutory appeals over writs?

A2: Statutory appeal mechanisms provide a comprehensive framework for adjudicating disputes, including appreciating evidence and examining factual aspects. Writs are extraordinary remedies and should not ordinarily circumvent statutory procedures, especially in fiscal matters.

Q3: Can the respondent challenge this judgment?

A3: Yes, the respondent can file a review petition before the Supreme Court seeking reconsideration of this judgment, or a curative petition on limited grounds. However, as per the court's directions, the respondent must first exhaust the statutory appeal remedy.

Q4: How does this judgment impact other tax laws?

A4: The legal principles reiterated in this judgment, such as the primacy of statutory remedies and the limited scope of writ jurisdiction in tax matters, are likely to apply across various tax laws and assessment procedures, unless specific statutes provide otherwise.

1. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 05.08.2015 passed by the High Court of Madhya Pradesh, Principal Seat at Jabalpur in Writ Petition No. 7628/2015, by which the Division Bench of the High Court has entertained the writ petition under Article 226 of the Constitution of India and has quashed and set aside the Assessment Order passed by the Divisional Deputy Commissioner, Commercial Tax, Jabalpur, the State of Madhya Pradesh has preferred the present appeal.

2. By an Assessment Order dated 28.02.2015, the Assessing Officer

denied the Input rebate under Section 14 of the Madhya Pradesh Value

Added Tax Act, 2002 (hereinafter referred to as the ‘MP VAT Act, 2002’)

to the respondent. Without preferring an appeal against the Assessment

Order denying the Input rebate under Section 46(1) of the MP VAT Act,

2002, the respondent preferred the writ petition before the High Court.

Despite the specific objection raised on behalf of the State not to

entertain the writ petition against the Assessment Order denying the

Input rebate in view of the availability of the statutory remedy of appeal

under Section 46(1) of the MP VAT Act, 2002, the High Court entertained

the writ petition by observing that there are no disputed questions of

facts involved in the matter and it is a question to be decided on

admitted facts for which no dispute or enquiry into factual aspects of the

matter is called for. That thereafter by the impugned judgment and

order, the High Court has set aside the Assessment Order denying the

Input rebate and consequently has allowed the Input rebate in favour of

the respondent – assessee – original writ petitioner. The impugned

judgment and order passed by the High Court is the subject matter of

present appeal.

3. Number of submissions have been made by the learned counsel

appearing on behalf of the respective parties on merits including the

entertainability of the writ petition by the High Court under Article 226 of

the Constitution of India challenging the Assessment Order denying the

Input rebate. However, for the reasons stated hereinbelow, we propose

to dismiss the writ petition preferred before the High Court and relegate

the respondent – assessee – original writ petition to prefer a statutory

appeal against the Assessment Order, we are not considering any other

submission on merits on whether the High Court is justified in allowing

the Input rebate or not.

4. Having heard learned counsel for the respective parties at length

on the entertainability of the writ petition under Article 226 of the

Constitution of India by the High Court against the Assessment Order

and the reasoning given by the High Court while entertaining the writ

petition against the Assessment Order despite the statutory remedy by

way of an appeal available, we are of the opinion that the High Court

ought not to have entertained the writ petition under Article 226 of the

Constitution of India challenging the Assessment Order denying the

Input rebate against which a statutory appeal would be available under

Section 46(1) of the MP VAT Act, 2002.

5. While entertaining the writ petition under Article 226 of the

Constitution of India challenging the Assessment Order denying the

Input rebate, the High Court has observed that there are no disputed

question of facts arise and it is a question to be decided on admitted

facts for which no dispute or enquiry into factual aspects of the matter is

called for. The aforesaid can hardly be a good/valid ground to entertain

the writ petition under Article 226 of the Constitution of India challenging

the Assessment Order denying the Input rebate against which a statutory

remedy of appeal was available.

6. At this stage, a recent decision of this Court in the case of The

State of Maharashtra and Others v. Greatship (India) Limited (Civil

Appeal No. 4956 of 2022, decided on 20.09.2022) is required to be

referred to. After taking into consideration the earlier decision of this

Court in the case of United Bank of India v. Satyawati Tondon and

others, reported in (2010) 8 SCC 110, it is observed and held that in a

tax matter when a statutory remedy of appeal is available, the High

Court ought not to have entertained the writ petition under Article 226 of

the Constitution of India against the Assessment Order by-passing the

statutory remedy of appeal. While holding so, this Court considered the

observations made by this Court in paragraphs 49 to 53 in Satyawati

Tondon (supra), which read as under:

“49. The views expressed in Titaghur Paper Mills Co. Ltd. vs. State of Orissa (1983) 2 SCC 433 were echoed in CCE v. Dunlop India Ltd. (1985) 1 SCC

260 in the following words: (SCC p. 264, para 3)

“3. ... Article 226 is not meant to short-circuit or circumvent statutory

procedures. It is only where statutory remedies are entirely ill-suited to

meet the demands of extraordinary situations, as for instance where the

very vires of the statute is in question or where private or public wrongs

are so inextricably mixed up and the prevention of public injury and the

vindication of public justice require it that recourse may be had to Article

226 of the Constitution. But then the Court must have good and

sufficient reason to bypass the alternative remedy provided by statute.

Surely matters involving the revenue where statutory remedies are

available are not such matters. We can also take judicial notice of the

fact that the vast majority of the petitions under Article 226 of the

Constitution are filed solely for the purpose of obtaining interim orders

and thereafter prolong the proceedings by one device or the other. The

practice certainly needs to be strongly discouraged.”

50. In Punjab National Bank v. O.C. Krishnan (2001) 6 SCC 569 this Court

considered the question whether a petition under Article 227 of the

Constitution was maintainable against an order passed by the Tribunal

under Section 19 of the DRT Act and observed: (SCC p. 570, paras 5-6)

“5. In our opinion, the order which was passed by the Tribunal directing

sale of mortgaged property was appealable under Section 20 of the

Recovery of Debts Due to Banks and Financial Institutions Act, 1993

(for short ‘the Act’). The High Court ought not to have exercised its

jurisdiction under Article 227 in view of the provision for alternative

remedy contained in the Act. We do not propose to go into the

correctness of the decision of the High Court and whether the order

passed by the Tribunal was correct or not has to be decided before an

appropriate forum.

6. The Act has been enacted with a view to provide a special procedure

for recovery of debts due to the banks and the financial institutions.

There is a hierarchy of appeal provided in the Act, namely, filing of an

appeal under Section 20 and this fast-track procedure cannot be

allowed to be derailed either by taking recourse to proceedings under

Articles 226 and 227 of the Constitution or by filing a civil suit, which is

expressly barred. Even though a provision under an Act cannot

expressly oust the jurisdiction of the Court under Articles 226 and 227 of

the Constitution, nevertheless, when there is an alternative remedy

available, judicial prudence demands that the Court refrains from

exercising its jurisdiction under the said constitutional provisions. This

was a case where the High Court should not have entertained the

petition under Article 227 of the Constitution and should have directed

the respondent to take recourse to the appeal mechanism provided by

the Act.”

51. In CCT v. Indian Explosives Ltd. [(2008) 3 SCC 688] the Court

reversed an order passed by the Division Bench of the Orissa High Court

quashing the show-cause notice issued to the respondent under the

Orissa Sales Tax Act by observing that the High Court had completely

ignored the parameters laid down by this Court in a large number of cases

relating to exhaustion of alternative remedy.

52. In City and Industrial Development Corpn. v. Dosu Aardeshir

Bhiwandiwala [(2009) 1 SCC 168] the Court highlighted the parameters

which are required to be kept in view by the High Court while exercising

jurisdiction under Article 226 of the Constitution. Paras 29 and 30 of that

judgment which contain the views of this Court read as under: (SCC pp.

175-76)

“29. In our opinion, the High Court while exercising its extraordinary

jurisdiction under Article 226 of the Constitution is duty-bound to take all

the relevant facts and circumstances into consideration and decide for

itself even in the absence of proper affidavits from the State and its

instrumentalities as to whether any case at all is made out requiring its

interference on the basis of the material made available on record.

There is nothing like issuing an ex parte writ of mandamus, order or

direction in a public law remedy. Further, while considering the validity

of impugned action or inaction the Court will not consider itself restricted

to the pleadings of the State but would be free to satisfy itself whether

any case as such is made out by a person invoking its extraordinary

jurisdiction under Article 226 of the Constitution.

30. The Court while exercising its jurisdiction under Article 226 is duty-

bound to consider whether:

(a) adjudication of writ petition involves any complex and disputed

questions of facts and whether they can be satisfactorily resolved;

(b) the petition reveals all material facts;

(c) the petitioner has any alternative or effective remedy for the

resolution of the dispute;

(d) person invoking the jurisdiction is guilty of unexplained delay and

laches;

(e) ex facie barred by any laws of limitation;

(f) grant of relief is against public policy or barred by any valid law; and

host of other factors.

The Court in appropriate cases in its discretion may direct the State or its

instrumentalities as the case may be to file proper affidavits placing all the relevant facts truly and accurately for the consideration of the Court and particularly in cases where public revenue and public interest are involved.

Such directions are always required to be complied with by the State. No

relief could be granted in a public law remedy as a matter of course only

on the ground that the State did not file its counter-affidavit opposing the

writ petition. Further, empty and self-defeating affidavits or statements of

Government spokesmen by themselves do not form basis to grant any

relief to a person in a public law remedy to which he is not otherwise

entitled to in law.”

53. In Raj Kumar Shivhare v. Directorate of Enforcement [(2010) 4 SCC

772] the Court was dealing with the issue whether the alternative statutory

remedy available under the Foreign Exchange Management Act, 1999 can

be bypassed and jurisdiction under Article 226 of the Constitution could be

invoked. After examining the scheme of the Act, the Court observed: (SCC

p. 781, paras 31-32)

“31. When a statutory forum is created by law for redressal of grievance

and that too in a fiscal statute, a writ petition should not be entertained

ignoring the statutory dispensation. In this case the High Court is a

statutory forum of appeal on a question of law. That should not be

abdicated and given a go-by by a litigant for invoking the forum of

judicial review of the High Court under writ jurisdiction. The High Court,

with great respect, fell into a manifest error by not appreciating this

aspect of the matter. It has however dismissed the writ petition on the

ground of lack of territorial jurisdiction.

32. No reason could be assigned by the appellant's counsel to

demonstrate why the appellate jurisdiction of the High Court under

Section 35 of FEMA does not provide an efficacious remedy. In fact

there could hardly be any reason since the High Court itself is the

appellate forum.”

7. In view of the above, the impugned judgment and order passed by

the High Court entertaining the writ petition under Article 226 of the

Constitution of India against the Assessment Order denying the benefit

of Input rebate is unsustainable and the same deserves to be quashed

and set aside and the original writ petitioner is to be relegated to prefer

an appeal against the Assessment Order dated 28.02.2015 passed by

the Divisional Deputy Commissioner, Commercial Tax, Jabalpur, which

may be available under Section 46(1) of the MP VAT Act, 2002.

8. In view of the above and for the reasons stated above and without

expressing anything on merits in favour of either of the parties on the

Input rebate claimed by the respondent – original writ petitioner, the

impugned judgment and order passed by the High Court is hereby

quashed and set aside. The writ petition preferred by the respondent

herein – original writ petitioner – assessee is hereby dismissed on the

ground of alternative efficacious statutory remedy of appeal available to

the respondent. The respondent is relegated to prefer an appeal before

the appellate authority under Section 46(1) of the MP VAT Act, 2002. If

such an appeal is preferred within a period of four weeks from today, the

same be entertained and decided and disposed of on merits without

raising an issue with respect to limitation, however, subject to

compliance of the statutory requirements, if any, for preferring an appeal

under Section 46(1) of the MP VAT Act, 2002. The appellate authority to

decide and dispose of the appeal and the issue without in any way being

influenced by any of the observations made by the High Court which as

such is hereby quashed and set aside by the present judgment and

order.

9. The present appeal is allowed to the aforesaid extent. However,

there shall be no order as to costs.

[M.R. SHAH]

NEW DELHI; .

OCTOBER 14, 2022. [KRISHNA MURARI]