MAY 15, 2020

By Shailesh Sheth, Advocate & Founder M/s. SPS Legal

ON May 6, 2020, the Supreme Court delivered a significant ruling in the case of  Assistant Commissioner (CT), LTU, Kakinada vs. M/s. Glaxo Smith Kline Consumer Health Care Ltd.  - 2020-TIOL-93-SC-VAT dealing with the   issue of the invocation of the jurisdiction of the High Court under Article 226 of the Constitution of India for the redressal of a grievance involving an assessment which could have been challenged by way of an appeal but which was not so challenged.

Before we advert to certain significant observations made by the Court, let us have a look at the facts of the case.

Facts in brief:

The Respondent, a registered dealer under the AP VAT Act, 2005 and CST Act, 1956, is engaged in the manufacture and sale of Horlicks, Boost, Ayurvedic Medicines, etc.  Pursuant to the finalization of assessment for A. Y. 2013-14 under CST Act, 1956 and based on the information and documents submitted by the Respondent, the Assistant Commissioner, by his Assessment Order dated 21.06.2017, raised a demand of Rs.76,73,197/- on the finding that the Respondent had failed to submit 'F' Forms to the extent of turnover reported in the CST Returns. The Respondent did not challenge the Assessment Order served upon it on 22.06.2017 but deposited an amount equivalent to 12.5% of the demand on 12.09.2017. The Respondent then filed an application under Rule 60 of the AP VAT Rules, 2005 for the correction of error, highlighting the error in raising the demand based on the incorrect turnover reported by them. The application filed on 08.05.2018 was rejected by the Assistant Commissioner by Order dated 11.05.2018 and the appeal filed on 28.05.2018 there against was rejected by the Appellant i.e. Deputy Commissioner by Order dated 17.08.2018. It was only thereafter that the Respondent filed,  as advised, an Appeal on 24.09.2018 against the Assessment Order dated 21.06.2017.  The appeal was dismissed being barred by limitation on 25.10.2018 and also because no sufficient cause was made out. The Respondent then,  as advised, filed a Writ Petition against the Assessment Order dated 21.06.2017, though, for reasons best known to themselves, they did not challenge the Order passed by the Appellate Deputy Commissioner rejecting the statutory appeal preferred by them against the Assessment Order dated 21.06.2017.   The Division Bench of the High Court took note of the submission of the Respondent that an employee in charge of the tax matters defaulted, and later was suspended in contemplation of disciplinary proceedings, as a result of which the statutory appeal could not be filed within the prescribed time. The High Court, on 08.11.2018, directed the deposit of an additional amount equivalent to 12.5% and posted the matter on 19.11.2018.  This was an ex-parte Order.  The High Court then heard the matter on 19.11.2018 and finally allowed the Writ Petition and quashed the Assessment Order dated 21.06.2017 of the Assistant Commissioner and relegated the matter back to the Assistant Commissioner for reconsideration of the matter afresh after following the principles of natural justice.

Aggrieved, the Revenue filed an appeal before the Supreme Court.

Judgement:

+ While recognizing the powers of the High Court 'to entertain a Writ Petition against any order or direction passed/action taken by the State under Article 226 of the Constitution', the Apex Court cautioned that 'it (High Court) ought not to do so as a matter of course when the aggrieved person could have availed of an effective alternative remedy in the manner prescribed by law'. [Para 11]

+ Putting the above explicitly, the Court said that the wide jurisdiction under Article 226 of the Constitution of India 'does not mean that it can disregard the substantive provisions of a statute and pass orders which can be settled only through a mechanism prescribed by the statute.' [Para 11]

+ The Apex Court quoted with approval the judgement of the Constitution Bench in  Thansingh Nathmal & Ors. Vs. Supdt. of Taxes, Dhubri & Ors. AIR 1964 SC 1419,  wherein it was held that although the power of the High Court under Article 226 of the Constitution is very wide, the Court must exercise self imposed restraint and not entertain the writ petition, if an alternative effective remedy is available to the aggrieved person. [Para 11]

+ Making an interesting observation about the powers vested in it under Article 142 of the Constitution of India, the Apex Court remarked that 'even while exercising that power, this Court is required to bear in mind the legislative intent and not to render the statutory provision otiose.' [Para 12]

+ The Bench also referred to the recent decision of a 3-Judge Bench of the Court in the case of  ONGC Ltd. vs. Gujarat Energy Transmission Corporation Ltd. & Ors. (2017) 5 SCC 42,  wherein it was held that Section 5 of the Limitation Act, 1963 could not be invoked by the Court for maintaining an appeal beyond the maximum prescribed period in Section 125 of the Electricity Act. The submission made to the Supreme Court for the exercise of its jurisdiction under Article 142 of the Constitution, so as to render complete justice was also rejected by the Court referring to its various decisions and the dictum laid down therein.

+ Significantly, the Supreme Court found the premise on which the full Bench decision of the Andhra Pradesh High Court in Electronics Corporation of India Limited vs. Union of India & Ors.-   2018-TIOL-484-HC-AP-CX-LB   which   had adopted the view taken by the Full Bench of the Gujarat High Court in  Panoli Intermediate (India) Pvt. Ltd. vs. Union of India & Ors. 2015-TIOL-2448-HC-AHM-CX and also of the Karnataka High Court in Phoenix Plasts Company vs. Commissioner of Central Excise (Appeal-I), Bangalore -   2013-TIOL-654-HC-KAR-CX   fallacious. The Apex Court went on to explain that a provision in a statute prescribing the limitation period is not a matter of taking away the jurisdiction of the High Court. [Para 15]

+ At the same time, recognizing the powers of the High Court under Article 226 of the Constitution, the Supreme Court observed that the assessee may approach the High Court before the statutory period of appeal expires to  challenge the assessment order by way of writ petition on the ground that:

- the same is without jurisdiction; or

- is passed in excess of jurisdiction by overstepping; or crossing the limits of jurisdiction including in flagrant disregard of law and rules of procedure; or

- is in violation of principles of natural justice, where no procedure is specified.

+ The High Court may, the Supreme Court observed, accede to such a challenge and can also non-suit the petitioner on the ground that alternative efficacious remedy is available and that be invoked by the writ petitioner.

+ The Supreme Court, after elaborating as above, made the following cautionary observations:

"However, if the writ petitioner chooses to approach the High Court after expiry of the maximum limitation period of 60 days prescribed under Section 31 of the 2005 Act, the High Court cannot disregard the statutory period for redressal of the grievance and entertain the writ petition of such a party as a matter of course. Doing so would be in the teeth of the principle underlying the dictum of a three-Judge Bench of this Court in Oil and Natural Gas Corporation Limited (supra). In other words, the fact that the High Court has wide powers, does not mean that it would issue a writ which may be inconsistent with the legislative intent regarding the dispensation explicitly prescribed under Section 31 of the 2005 Act. That would render the legislative scheme and intention behind the stated provision otiose." [ Para 15]

+ With the above and other observations and findings, the Supreme Court allowed the appeal of the Revenue and set aside the impugned judgement of the High Court.

Lessons from the Judgement…

++ A salutary principle that can be derived from this judgement is that mere non-existence of an efficacious alternative remedy due to efflux of time in filing an appeal will not constitute 'sufficient ground' for the invocation of the High Court's jurisdiction under Article 226 of the Constitution of India. Therefore, the taxpayer would have to be extremely alert and pursue the statutory remedy of appeal as provided in law. Any delay in filing the appeal would prove fatal to his challenge or claim, howsoever justified and valid it may be on merits. The only ray of hope, in such circumstances, may lie in the Petitioner establishing 'sufficient cause' for delay in filing the appeal within the statutorily prescribed period of limitation and even here, he may find himself 'skating on thin ice'! Even in the situations as enumerated in para 15 of the judgement where a party may be tempted to approach the High Court directly without availing the statutory remedy of appeal, it is advisable that the same is  done before expiry of the limitation period prescribed under the statute for filing an appeal and not leisurely and at his will!

++ The facts in the Glaxo's case (supra) though peculiar, are also quite disturbing as when weighed in the context of the observations of the Apex Court, an impression is gathered that the Respondent-Company was not alert, if not negligent, in pursuing the statutory remedy, whether due to the employee's negligence as the Company strenuously argued before the Court or lack of proper advice or for any other reason and ultimately found itself on the back foot on all counts before the Apex Court! 

++ To sum up, it is trite law that when there is an infringement of a constitutional right in any manner, the exercise of the extra-ordinary jurisdiction vested in the High Court under Article 226 of the Constitution is not barred and the delay in or non-filing of appeal against an Order passed by the statutory authority shall not pose any hurdle. However, it is equally trite law that if a person has not acted with the reasonable diligence and care as would be expected of him and has 'slept over' a matter, then the High Court may loath to intervene only on the ground of absence of an efficacious, alternative remedy due to efflux of the statutory period of limitation prescribed for filing the appeal.

++ Thus, even while the  ratio decidendi  of the judgement may be considered as  in personam  and not  in rem, it reinforces the principle embodied in the Latin maxim "Vigilantibus Et Non Dormientibus Jura Subveniunt'  that is, "The Law assists those that are vigilant with their rights, and not those that sleep thereupon." 

[The views expressed are strictly personal.]