The Supreme Court of India in their Lordships’ Judgment dated September 3, 2021 in the case of The Assistant Commissioner of State Tax and Others v. M/s Commercial Steel Limited, Civil Appeal No 5121 of 2021 has reversed the judgment of the Telengana High Court granting relief in Writ Petition filed in the Court though alternate remedy was available. The High Court in the exercise of its writ jurisdiction under Article 226 of the Constitution set aside the action of the Revenue in collecting an amount from the Petitioner towards tax and penalty under the Central Goods and Services Tax Act 2017 (CGST) and State Goods and Services Tax Act (SGST) and directed a refund together with interest at the rate of 6% per annum from 13 December 2019. A further direction had been issued to the State of Telangana to consider initiating disciplinary proceedings against the Assistant Commissioner. Costs of ₹ 25,000 had been imposed on the Asstt. Commissioner, who was the first respondent before the High Court.
The respondent before the Supreme Court was a proprietary concern engaged in the business of iron and steel and was registered under the Central Goods and Services Tax Act 2017 and had been allotted a GST code. The respondent purchased certain goods from a dealer, JSW Steel Limited, Vidyanagar, Karnataka, under a tax invoice dated 11 December 2019. The consignment of goods was being carried in a truck bearing registration No KA 35 C 0141. While it was proceeding from the State of Karnataka, it was intercepted on 12 December 2019 at 5.30 pm at Jeedimetala. The tax invoice indicated that the goods were earmarked for delivery at Balanagar, Telangana. The case of the appellants was that Balanagar is situated between the State of Karnataka and Jeedimetala and that no reasonable person would cross Balanagar and then turn around to go back to the place of destination.
The High Court entertained the writ petition and ordered the refund of the amount collected towards tax and penalty together with interest. The High Court had observed that a mere possibility of a local sale would not clothe the officials to take such an action and there was no material to indicate that an attempt was made by the respondent to deliver the goods at a different place and to sell them in the local market evading CGST and SGST. The High Court had also come to the conclusion that since the vehicle was being driven from Karnataka by the local driver from that State, “it is perfectly possible for the driver to lose his way on account of being unfamiliar with the roads” in Hyderabad and bypass Balanagar to proceed to Jeedimetala.
The Supreme Court held that the respondent had a statutory remedy under section 107. Instead of availing of the remedy, the respondent instituted a petition under Article 226. The existence of an alternate remedy is not an absolute bar to the maintainability of a writ petition under Article 226 of the Constitution. But a writ petition can be entertained in exceptional circumstances where there is:
a breach of fundamental rights;
a violation of the principles of natural justice;
an excess of jurisdiction; or
a challenge to the vires of the statute or delegated legislation.
The Court said in the present case, none of the above exceptions was established. There was, in fact, no violation of the principles of natural justice since a notice was served on the person in charge of the conveyance. In this backdrop, it was not appropriate for the High Court to entertain a writ petition. The assessment of facts would have to be carried out by the appellate authority. The Court further said that as a matter of fact, the High Court had while doing this exercise proceeded on the basis of surmises. Thus, the Supreme Court reversed the decision of the High Court and relegated the case to the alternate remedy.
After the publication of this judgment, there is an uproar all over India. The tax payers have apprehension that the bureaucracy will take disadvantage of this judgment of Hon’ble Supreme Court. The author wishes to inform them, that this judgment is more on facts. Court is not saying that an alternate remedy is the only remedy, but the Court is saying that on the facts of impugned case it is not falling in the parameters enumerated in the judgment. It is quite possible that the Court has noticed some facts (not recorded in the judgment) which compelled them to relegate the case to alternate remedy. In several cases the Court has upheld the judgments entertaining Writ Petitions. Kindly see the observations of the Constitution Benches of the Supreme Court recorded in the judgment of that Court in the case of Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Others (1998) 8 Supreme Court Cases 1.
“14. The power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provision of the Constitution. This power can be exercised by the High Court not only for issuing writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari for the enforcement of any of the Fundamental Rights contained in Part III of the Constitution but also for “any other purpose”.
Under Article 226 of the Constitution, the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this Court not to operate as a bar in at least three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. There is a plethora of case-law on this point but to cut down this circle of forensic whirlpool, we would rely on some old decisions of the evolutionary era of the constitutional law as they still hold the field.
Rashid Ahmed v. Municipal Board, Kairana [AIR 1950 SC 163 : 1950 SCR 566] laid down that existence of an adequate legal remedy was a factor to be taken into consideration in the matter of granting writs. This was followed by another Rashid case, namely, K.S. Rashid & Son v. Income Tax Investigation Commission [AIR 1954 SC 207 : (1954) 25 ITR 167] which reiterated the above proposition and held that where alternative remedy existed, it would be a sound exercise of discretion to refuse to interfere in a petition under Article 226. This proposition was, however, qualified by the significant words, “unless there are good grounds therefor”, which indicated that alternative remedy would not operate as an absolute bar and that writ petition under Article 226 could still be entertained in exceptional circumstances.
A specific and clear rule was laid down in State of U.P. v. Mohd. Nooh [AIR 1958 SC 86 : 1958 SCR 595] as under:
“But this rule requiring the exhaustion of statutory remedies before the writ will be granted is a rule of policy, convenience and discretion rather than a rule of law and instances are numerous where a writ of certiorari has been issued in spite of the fact that the aggrieved party had other adequate legal remedies.”
This proposition was considered by a Constitution Bench of this Court in A.V. Venkateswaran, Collector of Customs v. Ramchand Sobhraj Wadhwani [AIR 1961 SC 1506 : (1962) 1 SCR 753] and was affirmed and followed in the following words:
“The passages in the judgments of this Court we have extracted would indicate (1) that the two exceptions which the learned Solicitor General formulated to the normal rule as to the effect of the existence of an adequate alternative remedy were by no means exhaustive, and (2) that even beyond them a discretion vested in the High Court to have entertained the petition and granted the petitioner relief notwithstanding the existence of an alternative remedy. We need only add that the broad lines of the general principles on which the Court should act having been clearly laid down, their application to the facts of each particular case must necessarily be dependent on a variety of individual facts which must govern the proper exercise of the discretion of the Court, and that in a matter which is thus pre-eminently one of discretion, it is not possible or even if it were, it would not be desirable to lay down inflexible rules which should be applied with rigidity in every case which comes up before the Court.”
Another Constitution Bench decision in Calcutta Discount Co. Ltd. v. ITO, Companies Distt. I [AIR 1961 SC 372 : (1961) 41 ITR 191] laid down:
“Though the writ of prohibition or certiorari will not issue against an executive authority, the High Courts have power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Courts will issue appropriate orders or directions to prevent such consequences. Writ of certiorari and prohibition can issue against the Income Tax Officer acting without jurisdiction under Section 34, Income Tax Act.”
Much water has since flown under the bridge, but there has been no corrosive effect on these decisions which, though old, continue to hold the field with the result that law as to the jurisdiction of the High Court in entertaining a writ petition under Article 226 of the Constitution, in spite of the alternative statutory remedies, is not affected, specially in a case where the authority against whom the writ is filed is shown to have had no jurisdiction or had purported to usurp jurisdiction without any legal foundation.”
Thus, where an action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings or unnecessary harassment, the High Courts can issue appropriate orders or directions to prevent such consequences.