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Smt Ujjam Bai vs. State Of U.P (1961)

June 25, 2024

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This article is written by Advocate Devshree Dangi. It is an analysis of a petition filed before the Supreme Court for the enforcement of fundamental rights under Article 32 of the Constitution. It discusses the legal complexities in the case before the Supreme Court of India seeking the quashing of an assessment order of the Sales Tax Officer under the UP Sales Tax Act, 1948. Also, certain notifications issued by the UP Government regarding the exemption of certain goods from sales tax. It also discusses various legal provisions of the UP Sales Tax Act, 1948 and the Constitution of India. This article examines certain questions based on the provisions enumerated under the Constitution and their relation with the scope of judicial review of tax assessment orders.

Table of Contents

Introduction

The present case is a petition before the Supreme Court for quashing the assessment order of sales tax under the U. P. Sales Tax Act, 1948, especially in relation to certain notifications regarding the exemption of certain goods from sales tax. The petitioner, who operated a business of manufacturing and selling handmade bidis, was issued with a tax assessment order in respect of the period from 1st April 1958 to 30th June 1958, despite there being notifications that such manufactured goods were exempted from being charged with sales tax. The core issues of the controversy were whether the legal exemptions provided by the State Government of Uttar Pradesh for various specified activities and goods had been rightly interpreted and applied by the Sales Tax Officer and whether the petitioner suffered a violation of fundamental rights guaranteed under Articles 19(1)(g) and 32 of the Constitution of India through the tax assessment. This case also raises questions as to the interpretation of the Constitution on Article 12 and also with the provision of Article 32 with the whole aspect of the judicial review of the tax assessment orders and definition of the “State”.

Details of the case

Name of the case: Smt Ujjam Bai vs State Of U.P (1961)
Type of case: 1962 AIR SC 1621, 1963 SCR (1) 778
Name of the Court: Supreme Court
Bench: S.K. Das, J.L. Kapur, A.K. Sarkar, M. Hidayatullah, N. Rajagopala Ayyangar, J.R. Mudholkar, J. Subba Rao
Name of the parties: Ujjam Bai (petitioner), State of UP (Respondent).
Important statutes: U. P. Sales Tax Act, 1948, The Constitution of India
Date of the judgement: 28th April 1961

Facts of the case

In this case, the petitioner was a partner in the manufacturing and selling of handmade bidis. The State Government of UP vide notification dated 14th December 1957 exempted the sale of “Cigars, cigarettes, bidis, and tobacco” from sales tax liability under the U.P. Sales Tax Act, 1948. However, this exemption was subject to the condition that the dealers must pay the additional Central Excise Duty levied on such goods as of 13th December 1957. Later, the State Government of UP vide notification on 25th November 1958 exempted these goods from the sale tax without any condition from 1st July 1958.
The present matter occurred when the Sales Tax Officer issued a notice for assessment of tax liabilities to the petitioner during the assessment period starting from 1st April 1958 to 30th June 1958. The petitioner disagreed with the tax assessment liability, which the Sales Tax officer imposed on him, and claimed exemption from sales tax under the aforementioned notifications.
The Sales Tax officer did not entertain the arguments raised by the petitioner on the notification and urged that the notification would apply to all the dealers and not just those who had paid the additional Central Excise duties at the time that business closed on 13th December 1957. Hence, the petitioner is liable to pay the sales tax as they didn’t pay such excise duties.
The petitioner then appealed against the Sales Tax Officer’s decision before the appellate authority (judge) under Section 9 (appeal) of the U.P. Sales Tax Act, 1948. But the same was dismissed on 1st May 1959.
After this, the petitioner’s firm moved to the High Court under Article 226 of the Constitution, challenging the order of the Sales Tax Officer.
The High Court determined that there was no apparent error in the interpretation by the Sales Tax officer regarding the notification. Afterwards, the petitioner’s firm appealed before the Supreme Court under Article 133(1)(a). Initially, the appeal was dismissed due to non-prosecution, but later, the petitioner’s firm applied for restoration of appeal and condonation of delay.
While the appeal was under consideration by the SC, the petitioner’s firm filed a new petition under Article 32 of the Constitution, petitioning for the enforcement of fundamental rights outlined under Articles 19(1)(g) and 31.
This petition was challenged whether this legal action could be brought directly to the Supreme Court under Article 32 of the Indian Constitution. The respondents also challenged the applicability of the earlier decision of the Supreme Court in Kailash Nath vs. State of U.P. (1957) that the petitioner had relied on in this case.
In response to this, the Constitution bench referred certain questions for the final decision by a larger bench. It also included the question of whether an assessment order under tax legislation, which is valid, can be challenged under Article 19(1)(g) solely on the grounds of misinterpretation. Also, whether the validity of such an order can be questioned under Article 32 of the Constitution.

Issues raised

Whether the order of assessment, which is made under a taxing statute and made intra vires, may be set aside as being violative of Article 19(1)(g) of the Constitution because it was based on a misconstruction of a provision of the Act or a notification made under it?
Whether the correctness of such an assessment order can be challenged with recourse to Article 32 of the Constitution?
Whether the remedies involved in the U. P. Sales Tax Act, like appeal or revision or any other remedy, are sufficient to redress the grievances against the said assessment order or otherwise the remedies involved are ineffectual or insufficient if the Act in question is alleged to be ultra vires [violation of law]?
Whether Article 265 of the Constitution, which provides that no tax shall be levied or collected save in accordance with the provisions of the law, have any bearing on the assessment orders and their compliance with the provision of the fundamental rights?
To what extent do the earlier case laws, which deal with the interaction of taxation laws and fundamental rights, have a bearing on the conditions under which a writ of certiorari or prohibition can be invoked in case of an assessment order?

Arguments of the parties

Petitioners

The petitioner argued that the imposition and levy of the tax was a breach of the rights contained under Article 19(1)(g) of the Constitution on the exercise of the petitioner’s trade and business. They believed that the imposition of this tax inhibited their operations and hindered the organisation from operating effectively and efficiently as most of its functions were being regulated which they deemed a violation of their rights as enshrined in the constitution.
The petitioner proceeded to argue that the effect of the tax is as an unconstitutional removal of property without compensation, contrary to Article 31 of the Constitution. People who pay the tax argued that the tax came as a means of relieving the government of some of its responsibilities to the citizens; this they pointed out as unconstitutional since the government was in a way taking or confiscating a portion of the people’s income or property without repayment.
The petitioner however claimed that he had been unjustifiably treated by the Sales Tax Officer who had misconceived a notification dated December 14, 1957. But as mentioned by the petitioner while issuing the notification, it should not be confined to the products on which additional excise duty had been paid. They argued that due to this, there was a wrong interpretation that was made, which resulted in the levy being applied to their products.
As such, the petitioner asserted that due to this misconstruction, the tax that is being imposed is actually unlawful. They contended that due to the effect of the misinterpretation of the notification by the Sales Tax Officer, which led to the imposition of tax which was not legally legal under the law, it amounted to violating their constitutional right of undertaking business herein without undue and unauthorised interferences.
The petitioner argued that the assessment order is unconstitutional as it contravenes Article 19(1)(g). They claimed that this has been a violation of their fundamental right that the Court’s jurisdiction under Article 32 is invoked to address the improper assessment thereby negating their freedom to business lawfully.
petitioner submitted that while tax laws are outside Part III of the Constitution and therefore protected by Article 265, an order made under the relevant statute by a quasi-judicial tribunal like the Sales Tax Officer may be violative of Article 19(1)(g) even if the statute is intra vires. They argued that infringement of fundamental rights based on quasi-judicial operations violates the constitution even where there is a misapplication of the law.
In favour of the petitioner by Mr. Palkhivala, a construction of a taxing statute in a manner that is unconstitutional would infringe on Article 19(1)(g). There was a constitutional point made that the distinction between jurisdictional and non-jurisdictional errors is unimportant in this context. It is possible to violate the constitutional right to trade and conduct business when any authority misconstrues a statute or any quasi-judicial tribunal misconstrues a statute or a particular provision of the statute that affects the constitutional rights of the applicant.
The petitioner relied on the case Kailash Nath & Anr vs State Of U.P. & Ors (1957) and argued that an erroneous order of assessment actually involves misconstruction of a notification that is under a statute by a quasi-judicial authority and even if the statute is intra vires then he has a violation of the fundamental right under Article 19(1)(g) to trade.

Respondent

It was submitted on behalf of the respondents that the petition was not maintainable in as much as it was based on facts that do not give rise to any question of enforcement of any fundamental right. The Act is valid, and all of its parts are good in law.

The respondents submitted that the provision in the Act empowering the Sales Tax Officer to make an assessment of the tax is proper. Any such decision rendered by a quasi-judicial tribunal exercising its jurisdiction is complete, valid and legal.

They opined that the error, if any, is within the jurisdiction of the assessing authority to commit, and a decision that has been given by it is legally sound, no matter how wrong it may be.

The respondents further argued that no legally valid Act can trespass on any constitutional right. The correct course of action in rectifying an error of the type that is alleged in this case is by an appeal or, in cases where the mistake can be seen on the record, by filing a writ petition under Article 226 of the Constitution. If these remedies are not pursued, then even if the decision was wrong, there is no reason for it to be reversed.

According to them, there can be no misconstruction that results in a violation of constitutional provisions or any kind of mistake. The error complained about the concept of determination within the assessing authority, and decision-making in such a matter does not interpose the right to freedom to carry on business under Article 19(1)(g) of the Constitution.

The respondents pointed out that the term “State” used in Article 12 does not mean judicial authorities. Thus, there is no violation of the fundamental rights for reference to an order made by the assessment authority.

The respondents denied the argument that the quasi-judicial tribunals are outside the scope of Article 12 authorities, referred to as ‘other authorities’. They have reasoned this on the ground that while performing its executive functions, the sales tax authorities are in no legal way affiliated with the judiciary.

The respondents have dismissed the petitioner’s argument that the misconstruction of a taxing statute could constitute a violation of one’s fundamental rights under Article 19(1)(g). They argued that such an argument fails to consider the differences between jurisdictional and non-jurisdictional errors.

When asked to express their opinions about this area of the Act, the respondents also claim that appeal or revision offers enough remedies to correct an error to their satisfaction. They further submit that these remedies are adequate and that the petition under Article 32 of the Constitution is not the proper mode to challenge the threshold the Sales Tax Officer determines.

Law discussed in Smt Ujjam Bai vs. State Of U.P (1961)

Provisions of U. P. Sales Tax Act, 1948

Section 9 of the U. P. Sales Tax Act, 1948: Assessment procedures and dealer obligations

Section 9 describes the procedure for assessing taxes by sales or purchases. In case a dealer or another person disagrees with the decision made by the assessing authority, he has a right to appeal within thirty days starting from the day of receiving the decision. The appellant has a right to request a fast consideration of the appeal if the subject of dispute with reference to the amount of tax, fee, or penalty does not exceed one thousand rupees. The appeal is written in the appropriate form, and the appellant must then verify the appeal in the appropriate way. The appellate authority may either confirm the order made, modify it or even revoke the order or remand the matter back to the assessing authority for passing a fresh order. The appellate authority can also order that tax, fee, or penalty, when ordered, should not be paid until the appeal has been determined. This decision made by the appellate authority is final, and no appeal against this decision or revision is allowed. It also needs to state that if the amount of the tax, fee or penalty has been paid in full, the excess should be refunded if the initial amount has been reduced. The appellate authority stands subordinate to the Commissioner in the same way as the line department but, at the same time, cannot infringe on the discretion of the appellate authority as it is exercised for performing its functions.

Section 3 of the U. P. Sales Tax Act, 1948: Aspect of liability and tax rates

Under the U. P. Sales Tax Act, 1948, the provision of tax liability has been prescribed under Section 3. According to this Section, the business entities are subjected to tax based on their turnover relating to sales or purchases. Any taxes arising anywhere are payable at the rates as stated in the Act, subject to the provisions that there are certain instances when they are not payable by dealers. This condition, of course, does not limit the right of the State Government to adjust the specified amount insofar as tax liability is concerned. Also, it deals with the provisions related to tax liability for commission agents and approvals given by the State Government in certain circumstances, for instance, for industrial units in power projects.

Section 4 of U. P. Sales Tax Act, 1948: Tax exemption on specific goods and sales

Section 4 of the provision, known as “Exemption from tax”, describes on what conditions no tax is payable pursuant to the Act. Nevertheless, it specifies provisions for absolute exemption on tax on the sale or purchase of water, milk, salt (other than processed or branded salt), newspapers and other goods so exempted by the State Government by notification. Further, it also states that it shall not apply to the sale or purchase of products by certain persons, for instance, All India Spinners Association, Gandhi Ashram, Meerut, or their branches. The provision also empowers the State Government to extend the relief to the sale or purchase by other persons or classes of persons, using notification in the Gazette. Nevertheless, the conditions and fees, not exceeding eight thousand rupees in a given financial year, can be placed and charged by the state government while exempting any fee. The explanation within the provision mentions that the above-exempted products are not exempt to the extent that they fall within the exclusions for mineral water, aerated water, condensed milk or baby milk.

Provisions of the Indian Constitution

Article 12: Definition of ‘State’

From a legal standpoint, a state can be defined simply as a component part of a nation which has dominion over a definite territory and has all the attributes required to work as an individual entity in a state-nation. Article 12 explains who belongs to the category of ‘State’ within the meaning of Part III of the Constitution, which concerns fundamental rights. They are the Central Government and Parliament of India, the State Government and the State Legislature of each of the States, and every other authority within the territory of India or within the sphere of the authority of the Government of India.

Article 13: Fundamental rights violation: Laws Inconsistent with or in Derogation of Fundamental Rights

Article 13(1) states that any existing law in force at the time of commencement of the Constitution in so far as it is against the provisions of part III of the Constitution shall be null and void. Article 13(2) states that the State is precluded from enacting any new legislation that extinguishes or abrogates these rights; any legislation that does so will be of no effect to the extent of the inconsistency. The meaning of the term ‘law’, as provided under Article 13(3)(a), is extremely wide, and it covers any regulation made in the form of an Ordinance, order, bye-law, rule, regulation, notice, custom or usage of a body of persons legally capable of making legal enactment within the territory of India. A law in force, as per article 13(3)(b), includes a law which may have been enacted by the legislative or any other competent authority in India prior to the commencement of this Constitution, even though no authority was in existence for enforcing such law and the same may not be in force at the commencement of this Constitution. In this article, the provisions do not relate to any amendment of the Constitution pursuant to Article 368, as is provided by Article 13(4).

Article 19(1)(g): Provisions of certain rights concerning the freedom of trade

Article 19(1)(g) provides every citizen the right to practise any profession or engage in any occupation, trade, or business. This right is nevertheless subject to restrictions that are both reasonable and necessary in the public interest, as well as other grounds as provided in Article 19(6). Article 19(6) allows the government to impose reasonable restrictions on the rights provided under 19(1)(g). It includes setting qualifications for professionals and enables state-run enterprises to operate, even if it means excluding citizens.

Article 32: Constitutional right guaranteed to every citizen to seek remedy in the Supreme Court

Article 32 gives this right to approach the Supreme Court for the enforcement of the fundamental rights provided under Part III of the Constitution. The Supreme Court has the power to give directions, orders or writs referential to the above rights of the subjects or may issue writs in the nature of Habeas corpus, mandamus, prohibition, quo warranto and certiorari. Article 32 of the Constitution of the Constitution of India is a vast provision in that it covers all the Fundamental Rights. It also allows for judicial review, thus allowing the Supreme Court to review laws and actions by the government to protect these rights. Thus, Article 32 also remains a right in itself to claim justice and protection of rights along with the prevention of violation of the democratic rights of citizens in the country by administrative authoritarianism. However, a mere mistake of law committed by a quasi-judicial entity cannot be rectified under Article 32.

Article 133(a): Appellate jurisdiction in appeals from high courts in certain cases as presented in Article 132 of the Constitution

Article 133(a) provides for the circumstances and conditions under which an appeal can be filed to the Supreme Court against any judgement, decree, or final order of a High Court in any civil case. There lies an appeal to the Supreme Court from any judgement, decree, or final order in a civil proceeding of a High Court in India if the High Court certifies under the provision of Article 134-A that the case involves a substantial question of law of general importance and that in the opinion of a High Court such question ought to be referred to the Supreme Court.

Article 226: Power of High Courts to issue certain writs

Article 226 of the Indian Constitution enables the High Court to pass such directions or orders or writs, including the writs backed like habeas corpus, mandamus, prohibition, quo warranto and certiorari for the purpose of protecting or enforcing any of the rights contained in Part III and for any other matter.

Article 265: No taxes shall be imposed without the authority of law.

This Article provides that it is unlawful for government authorities to levy taxes without sanction and proper legal authorisation, that is when there is no legal basis for their impositions. It makes it mandatory that any sort of imposition of tax has to be completely under the law, be it a direct tax like the income tax or an indirect tax like the goods and services tax (GST).

Notification dated December 14, 1957

This notification was issued under Section 4 of the U. P. Sales Tax Act, 1948. It granted an exemption in sales tax on certain classes of goods in the state, which included bidis and many other conditional exemptions. Here’s a detailed breakdown:

Scope of Exemption: The notification specifically permitted the goods “Cigars, cigarettes, bidis, and tobacco” to be free from liability to pay sales tax under the U. P. Sales Tax Act, 1948.

Condition for Exemption: This condition was as follows: The dealers had to have cleared the additional Central Excise Duties, which were becoming payable on these goods as per the provisions of the taxation laws enacted prior to December 13, 1957.

Effective Date: This exclusion stood from December 14, 1957, or from the date the agreement needing the drug or inoculation was signed after December 14, 1957.

Nature of Goods Covered: bidis that are hand-made cigarettes, too, were made part of the items that are exempted from being taxed under the sales tax under this notification.

The notification, therefore, framed a perceptual immunity for the identified products, including bidis, from the levies of sales tax on the condition that evidence of the payment of the relevant excise duties had been provided to the assessing authority.

Subsequent Notification dated November 25, 1958:

In the following notification, the exemption from sales tax for bidis was further explained and spread from one category to another. Here are the detailed aspects:

Unconditional Exemption: The notification suspended the provisions of the sales tax law relating to the unconditional payment of sales tax for the hand-made and machine-made bids from July 1, 1958.

Extension of Exemption: Thus, by way of this notification, the earlier condition (on this point, where the purchase was subject to proof of having paid excise duty) was eroded, and all sorts of bidis sales were exempted.

Thus, with the existence of the subsequent notification, only the bidis were completely relieved from the sales tax from July 1, 1958, in the excise duties already paid or unpaid.

Judgement in Smt Ujjam Bai vs. State Of U.P (1961)

Scope of judicial review of quasi judicial orders

After analysing the facts and contentions by both parties, the Supreme Court held that it is competent to set aside an order of a quasi-judicial body if its order violated the fundamental rights of a citizen. This is also where the power of the court to review the act of a quasi-judicial body acting ultra vires or lacking jurisdiction to do so corresponds to the power conferred on the court in those cases. Furthermore, the court had specifically underlined that non-compliance with the principles of natural justice and non-observance of the mandatory procedural provisions laid down in the relevant statute could warrant intervention by the court.

Relevance of remedies available under Article 32 in case of error committed by a quasi-judicial authorities

The Apex Court also emphasised that an inadvertent error committed by a quasi-judicial forum on the point of law cannot be addressed by availing the remedy under Article 32 of the Constitution. The Court held that an order of assessment made by an authority under a ‘Taxing Statute’, which is intra vires, cannot be said to be ‘repugnant’ to Article 19 (1) (g) of the Constitution only because it is based on a misinterpretation of a provision of title Act or of a notification issued by the body. The Court held that so long as the decision of the Tribunal was within the jurisdiction and such order was not against the provision of law, the order passed by it was not liable to quash. Thus, the Court held that the petition under Article 32 deserves to fail.

Refining the ruling set in Kailash Nath vs. State of U. P. (1957)

The Supreme Court revisited the ruling in Kailash Nath vs. State of U. P. (1957) According to the ruling, the error made while exercising a power covered under an intra vires statute does not abridge the fundamental rights of an individual and, therefore, cannot be challenged in the Supreme Court through Article 32. It also helped in bringing down the litmus test of judicial review in relation to taxation and administrative discretion. The Court considered issues of differentiation to be made between orders made in intra-vires statutes where such orders fall under valid authority and, on the other hand, orders made in ultra-vires statutes that had no legal force and could be challenged under Article 32. It made references to several cases to underscore that an erroneous decision as a quasi-judicial authority in as much as it operates under a legal statute does not infringe on any fundamental right. Finally, the Court dismissed the petitioner’s argument and agreed with the Respondent, thus reiterating that an order made under a non-ultra vires statute, even if contentious, does not infringe the constitutional provisions and can be challenged under Article 32. This decision changed the law after Kailash Nath’s case and gave a new definition of the scope of the Judicial Review in the taxation and Administrative decisions.

Rationale behind this judgement

The rationale for the judgement lies in the extensive analysis of the legal position as regards the routes available for the taxpayers for aggrieving against the tax demands of the taxing authorities and their bearing on fundamental rights. The decision reaffirms the longstanding proposition that the propriety of tax assessments turns on the taxing entity’s observance of jurisdictional limits and the statutory formalities associated with the tax process rather than the mere existence of errors in the assessment process. It is this that underlies the statement that, regardless of any errors, the acts of assessment remain operative within the jurisdiction of the authority, the area of its power concerning law or procedure.

In addition, the judgement aims to differentiate and stress the contrast between measures performed by the state as administrative workflows and decisions made in quasi-judicial forums. It goes a long way in establishing the proposition that even if legal determinations made through the instrumentality of quasi-judicial tribunals are possibly incorrect, these determinations carry the imprimatur of the existing legal order and are, therefore, beyond the purview of challenge under Article 32 of the Constitution. It helps emphasise that, contrary to the business-extension interpretation, apart from its jurisdictional powers, the role of the quasi-judicial tribunal requires the Courts to protect it against certain constitutional challenges in its decision-making capacity if it makes mistakes.

Furthermore, it outlines that there are further legal remedies open for a disappointed taxpayer, including the possibility of an appeal to a higher court as a legal and proper means of contesting a juridical decision to assess taxes. Consequently, through highlighting the availability of the superior recourse, the judgement aims to stress the importance of observing proper legal processes in cases to do with tax assessment and the need to follow a set procedural framework in the event of any perceived injustices arising out of such tax assessments. It seeks to maintain the legibility of the legal rules governing tax assessments without undermining the availability of strong legal recourse in the event of disputes and cases.

Indeed, the reasoning provided in the judgement is thorough and exhaustive with one and only one goal: to maintain the relation between the executive power and the judicial authority while aiming at protecting individual freedoms without affecting the legal framework applicable in relation to the assessment and the appeal of taxes.

Views and opinions of judges

The judgement of the Supreme Court makes it clear and reiterates that although Article 32 gives relaxed jurisdictions for the enforcement of fundamental rights, the jurisdiction for practically challenging tax assessments based upon legal or interpretational errors should ideally be sought through legal remedies such as an appeal or by filing an application under Article 226 of the constitution rather than directly under Article 32. The Court was very careful to distinguish between mistakes and errors that fall within the jurisdiction of the tax authorities and violations of articles and fundamental freedoms. The Court argued it was very important to appreciate that such matters should not be looked at in a binary manner.

Justice S.K. Das

Justice S.K. Das emphasised the importance of Article 32 of the Constitution as a fundamental right of the citizens of India to directly approach the Supreme Court for the enforcement of their fundamental Rights. He pointed out that this right is not subjected to any technicalities of procedure, and it has to be upheld without any obstacles. He addressed the issue of tax assessment by an authority under a legal taxing statute within its jurisdiction. He stated that it cannot be questioned on the basis that there has been a misinterpretation of any law. Such errors should not be directly brought before the Court for judicial review but rather ought to be taken through statutory appeals or the appeal under Article 226, where the error is self-evident from the record.

Justice Kapur

The generally accepted Principle of construction chosen by Justice Kapur is that the statute is constitutional and valid in its entirety and not unconstitutional or invalid in part. He emphasised the constitutional dimension of statutes and the consequences which assessments made under such consequent statutes hold. He said that if any of it becomes unconstitutional, then all evaluations under this statute are equally unconstitutional.

Justice Subba Rao

Justice Subba Rao also highlighted the preliminary significance of the Constitution, saying that it is a framework of the nation and that the court has a mission to safeguard fundamental rights and freedoms as stated in the Constitution. He also focused on the broad jurisdiction enshrined in Article 32 that gives the Supreme Court the power to protect fundamental rights without being bound by procedural formalities.

Justice Hidayatullah

Justice Hidayatullah then explained the scope of Article 32 and how it applies to cases that are associated with the violation of fundamental rights. He pointed out that while Article 32 confers upon citizens the right to come directly to the Supreme Court for redress, any relief under this provision can only be claimed on the grounds of a gross violation of the guarantee of fundamental rights – one is not entitled to seek reliefs under this Article on the basis of errors of law or fact within the jurisdiction of the authority even if the error is a manifest one.

Justice Ayyangar

Justice Ayyangar brought out the difference between legislative competence and quasi-judicial action. He laid down that quasi-judicial actions can transgress fundamental rights if there is a manifest misinterpretation of the law so as to bring about such actions.

Justice Mudholkar

Justice Mudholkar elucidated the legal implications of tax assessments made under valid laws and proper procedures. It was highlighted that errors of law or interpretation alone do not amount to a violation of fundamental rights unless they go beyond legislative competence or contravene constitutional provisions.

Important cases cited in Ujjam Bai vs. State of UP (1961)

Ramjilal vs. Income-tax Officer, Mohindergarh (1951)

This case involved the two provisions of the Constitution namely Article 31 and 265. The Honourable Supreme Court admitted that since Article 265 of the Constitution has been categorical with the proposition that no tax can be levied or collected unless it is authorised by law, it can be said with certainty that provisions of clause (1) of Article 31 pertain to taking away of property in circumstances other those involving levying or collecting a tax. Besides, as the right deriving from the Article 265 does not belong to the rights stated in the Part III of the Constitution, it could not be claimed under the Article 32.

Himmatlal Harilal Metha vs. The State of Madhya Pradesh (1954)

This case arose out concerning a dispute involving sales tax under the Central Provisions and Berar Sales Tax Act. The Supreme Court reaffirmed that where legal provision under a taxing statute is ultra vires and is therefore void, anyone who takes an action thereunder is acting without the authority of law as computed under Article 265. Otherwise, Article 19(1)(g) comes into play, and the threat to collect tax by use of the force of an impugned Act is an adequate violation of fundamental rights under Article 19(1)(g).

The Bengal Immunity Company Limited vs. The State of Bihar (1955)

This was a case dealing with the validity of sales tax on inter-state commerce. The Supreme Court pointed out that no tax can be levied or collected without being the authority of law, and such words ‘authority of law’ can only mean authority of a good and valid law. Where there is substance in the argument that an Act permitting the assessment, levying, and collection of tax violates Article 286 the remedy in the form of a writ must be optimised by the party affected. It also acknowledged that the remedy under the Act cannot be adequate if the Act itself is ultra vires and void.

Tata Iron and Steel Co. , Ltd. vs. S. R. Sarkar (1960)

This case involved the issue of double taxation under the provisions of the central sales tax act. The Supreme Court underlined it that an attempt to collect tax under a statute which was ultra vires violated the rights guaranteed under the Constitution and submission of cause of action to the High Court for protection of fundamental rights was not barred under Article 265. Nevertheless, the Court did not rule it one way or the other to implicate the decision given in the case of Kailash Nath against the case of Ramjilal.

The Parbhani Transport Co-operative Society Ltd. vs. Regional Transport Authority, Aurangabad (1960)

This case was based on an allegation that the Transport Authority’s decision was prejudicial to Article 14. The Parbhani Transport Co-operative Society Ltd. aggrieved by the decision of the Transport Authority in the matter of grant of motor carriage permit has sought the intervention of this Hon’ble Court challenging the decision as violation of Article 14 of the Constitution of India. According to the Supreme Court there could not be a violation of article 14 even if the decision of the quasi-judicial body was wrong in the fact situation akin to the Transport Authority.

Administrative actus refer to actions taken by an authority while the quasi-judicial decisions refer to actions taken by an authority that have some features of both a judicial and an administrative function. It was cognisant of the reality that when conceptual laws are used to address fact situations, quasi-judicial bodies can get it wrong. However, such errors do not mean a violation of Article 14 and the right to equality. Unlike the Article 14 right, for a violation in the infringement of Article 14 of the Act, there must prove that it was done arbitrarily, was a result of malice or that it was against natural justice. This stance maintains the quasi-judicial processes allowing for no constitutional challenge arising each time a decision is perceived to have disobeyed the equality principles while at the same time protects against inequality violation.

Gulabdas vs. Assistant Collector of Customs (1957)

The Supreme Court clarified the provision of Article 32 that in case if an erroneous order is passed under various provisions of a statute which are valid jurisdictionally, then even if the order is wrong there is no violation of any fundamental rights hence, it is to be challenged in accordance with Statute and not under Article 32.

Mohd. Yasin vs. Town Area Committee (1952)

This case was relied on in order to reinforce the proposition that for a law to be valid not only does a legislative enactment have to have legislative competence but it has to comply with the provisions of the Constitution particularly those that relate to bill of rights.

Kavalappara Kottarathil Kochunni Moopil Nayar vs. The State of Madras (1960)

This case also explained the extent of the power inherent in the Article 32 of the Constitution of India with regards to the Supreme Court. It reiterated that no plea could be made to the effect that there are other remedies available as the right to approach the Supreme Court under Article 32 is itself an enforceable right. The Court also found it unnecessary to make a specific ruling whether the Court could refuse to entertain a petition under Article 32 if the issues include determination of matters of fact, which the parties have disputed.

Daryao vs. State of U. P. (1960)

This case involved dealing with whether the petition which falls under article 32 can attract the doctrine of res judicata. According to the Supreme Court, if a dispute is made on merits and the petition under Article 226 is rejected and it is not appealed against then the subsequent petition under Article 32 is barred. However, the Court was very particular in listing the circumstances pertaining to this rule, for instance where the petition under Article 226 is dismissed on the grounds of acquiescence, on the premise of availability of other legal redress withinOnta or without a reasoned order.

Analysis of the case

The facts and issues involved in the present case are crucial in pointing towards cooperation between tax assessment mechanisms and constitutionally protected rights in India. The petitioner firm, invoking state notifications as its grounds of appeal, defended its manufacture and sale of handmade bidis against the assessment by the Sales Tax Officer. The crux of the matter was whether an assessment under a voidable taxing statute could be questioned under Article 19(1)(g), the invocation of which has been based upon fault management of the provisions of the law and whether such a challenge may be initiated under Article 32.

It raises questions as to where tax authorities’ jurisdictions began/ended in the context of intra-group transactions and what interpretative latitude was open to be afforded to tax statutes. As mentioned earlier, the decision of the Sales Tax Officer to deny tax exemption for the additional Central Excise Duty included in the price after the December 1957 notification was challenged by the petitioner. The later notification in November 1958 did away with this condition, leading to the question of retrospective effect and the statutory meaning of these conditions.

One of the significant areas of this case is drawn from looking at how tax assessments impugned fundamental rights, which include the right under Article 19(1)(g) of every person to engage in any profession, occupation, trade, or business of his choice. Such interpretation of the petitioner’s argument that misinterpretation of tax notifications violated this right lets us pay more attention to the debates concerning the extent of the state action and economic liberties.

Number of cases followed the principles laid down in the present case. The case of Kamlapati Trivedi vs State Of West Bengal (1978) was based on the taxation power and fundamental rights scale set in the present case. This particular case was also a classical conflict, power of the government to impose taxes against the right of a citizen to pursue his business. In this matter the present case played a very important role as a precedent. The court referred to it in order to highlight how the previous courts have considered the balance between the rights in Article 19(1)(g) and the state’s right of taxation.

In the case of Mehta Construction Company vs State Of Maharashtra And Another (1981) it drew a distinction between errors in tax assessments that is an issue in the present case. This case was focused on opposing a particular government tax assessment. The present case was mentioned in order to make the distinction between legal mistakes committed by the government in the assessment stage (which neither does nor necessitate an appeal) and mistakes that go beyond the jurisdiction of the government in the implementation of taxes (which can be appealed).

Applying legal reasoning, the judgement referenced the case of Kailash Nath vs. State of U.P. as an illustration of some of the aspects of tax assessments and the restrictions on fundamental rights. From this point, the situation is more favourable because the Supreme Court is working to develop new directions in jurisprudence and maintain the continuity of legal norms. The decision also clarifies the rights of the taxpayers to safeguard themselves against wrongful assessment of taxes and also provides the right steps to pursue in the case of wrongful assessment.

Conclusion

The present petition under Article 32 of the Constitution for setting aside the tax assessment simply on the grounds of misinterpretation of the notification is held as not maintainable by the Supreme Court. The Court continued holding that the appropriate recourse for such complaints was in the statutory appeals and applications under Article 226 of the Indian Constitution. The decision effectively elucidates the doctrine applicable to quasi-judicial tribunals vis-à-vis errors of law on the one hand and jurisdictional simpliciter on the other. Thus, it is important to carefully follow the legal process in situations that occur due to the results of the tax assessment. It is noteworthy that the judgement left unanswered several questions related to Article 12, notably with the definition of the term “State” and its implications in terms of legal and judicious approaches.

Frequently Asked Questions (FAQs)

In what way does Article 32 of the Indian Constitution contribute towards the protection of fundamental rights?

According to the Indian Constitution, under Article 32 of the constitution, there are preferred methodologies for preserving and protecting Fundamental Rights. The Constitution gives every citizen the freedom to petition the Supreme Court for violation of Fundamental Rights. This right is not enclosed by any trivialities of procedure and should be implemented unrestricted. Article 32 states that the citizens of India have the right to approach the Supreme Court for the enforcement of Fundamental Rights. It allows the Supreme Court to effectively issue the common and important legal writs of habeas corpus, mandamus, prohibition, quo warranto, and certiorari to safeguard these rights. This article makes it possible for individuals to have direct legal recourse where their Fundamental Rights have been infringed. It ensures that such rights are well entrenched in the constitution and are not just mere provisions on paper but are protected and enforceable.

In what manner does Article 12 of the Indian Constitution, explaining the concept of ‘State’, influence the prospects of the fundamental rights of the citizens?

The concept of ‘State’, as defined in Article 12, is a very important factor in relation to the fundamental rights provided in the constitution of India. According to Article 12, the term “State” is very vast, and it enumerates the Central Government, State Government, and any other authority within the territory of India or within the State under the administration of the Government of India. This concept goes further in expanding the other fundamental rights to cover any of the actions of the three arms of the government, which include the quasi judicial bodies. This is so because the protection of fundamental rights is not limited to the action of the central and the state governments but also to the action of all other authorities coming within the definition of ‘State’ as provided in Article 12. Local and other authorities, the same as most such entities, are also under certain legal requirements to observe and respect fundamental rights. Therefore, the extensive meaning of Article 12 expands the protection of fundamental rights, not only by extending the subjects of acts but also by recognising actions of individuals and legal entities different from the state. It also ensures that every person can enforce his constitutional rights against different entities, which will increase the possibility of protecting fundamental rights for citizens of India.

What is the legal process that taxpayers in India can use to appeal their tax assessments, and what is this process?

The Income-tax assessees within the Indian taxation laws possess legal rights and remedies, which are legal formalities to challenge the assessments made by the concerned assessing officer for claims of excess or wrong taxation. The methods of assessing the tax and duties of the dealer are provided in section 9 of the U. P. Sales Tax Act, 1948. According to section 12 of this Act, the dealers are required to submit their return within one month from the date of the filing. If the dealer fails to submit a return or submits a wrong return, then the revenue authorities governed under this Act have the power to do the best judgement assessment. Besides the above for forming a challenge, taxpayers have the right to statutory appeals and applications to the state under Article 226 of the constitution of India. Article 226 empowers the High Court to issue writs either to enforce them for the protection of fundamental rights or in their defence. This simply means that taxpayers can pursue their rights, which allows them to change the assessments they find inequal or incorrect.

In what manner does the decision made in the present case help demarcate between mistakes that come under the purview of tax authorities and infringement of fundamental rights?

The analysis of the above judgement established the guidelines to differentiate between cases of violating the fundamental right as against the cases that fall within the domain of the tax authority or Income Tax Act, 1961 by deciding, among others, where the tax authority is wrong on the point of law or in its interpretation of law then it could be said that such a thing is done in violation of the fundamental right; their jurisdiction is confined to the statutory remedy.

But if the tax were assessed in conformation with the provisions of Article 14 of the Constitution relating to the citizen’s fundamental rights, then this matter would, without doubt, have to be disposed of under Article 32 of the Constitution as this right has been violated. In the process of the present judgement, the High Court has also left no doubt that there is a clear distinction between legal wrongs and denial of constitutional rights in continuation with tax assessments.

How does Article 265 of the Indian Constitution control the powers to impose taxes and compel obedience to the provisions of the law?

Article 265 of the Indian Constitution is of paramount importance to prevent the centre and the states from encroaching upon the power to raise revenues and assume powers by levying taxes. Constitutional provision forbidding the levying of any sort of tax without the authority of the law is found in Article 265 of our constitution. The objective of this provision is to ban any form of taxes unless by provision of law; this reiterates the importance of legal basis or following legislative requirements in the assessment and collection of taxes. Through this limitation, Article 265 charts the legal way through which taxes can be enforced and collected so as to afford an opportunity to the afflicted persons to protect their rights and interests against the oppressive exercise of this power by the government.

What is the role of Article 13 of the Constitution of India in preventing existing laws from violating the rights conferred upon the citizens under the Constitution?

Article 13 of the Constitution of India has the crucial job of checking that no law becomes operative in India that would go against the fundamental rights enshrined in the Indian Constitution. Article 13 propounds that by virtue of which any law which is in force at the time of commencement of the Constitution and is repugnant to provisions of Part III of the Constitution is declared to be void. This provision makes certain that legislation does not infringe upon the rights enshrined in what we have in the Constitution under Part III, thus protecting the rights and freedoms of the people. Article 13 also protects the Constitution’s supremacy, for the laws inconsistent with the provisions available in the Constitution have been declared null and void, thereby making the provisions of the Constitution inviolate from any encroachment by existing laws through the enforcement of the rights contained in the Constitution.

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