Tax Insights

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Tax Insights

17 February 2023

Supreme Court holds that mere availability of an alternative remedy cannot render a writ petition as ‘not maintainable’; directs adherence to judicial discipline by

Revisional Authority

In brief

By a recent order¹, the Supreme Court held that the High Court should not have dismissed a writ petition merely on the grounds of availability of an alternative remedy without examining whether an exceptional case has been made out for such entertainment.

The Supreme Court has also laid emphasis on adherence to judicial discipline to avoid chaos in the administration of tax laws and undue harassment of the taxpayer.

In detail

Facts

• The taxpayer is engaged in the business of manufacturing mosquito repellents which it offered to tax at 4%.

• The Assessing Authority issued a notice seeking to impose tax on the product at 10% instead of 4%, stating that the product was incorrectly classified. Subsequently, the taxpayer’s contention was accepted, and the Assessing Authority passed an order taxing the product at the lower rate of tax of 4%. While doing so, the Assessing Authority had relied on the order of the Haryana bench of the VAT Tax Tribunal in a review petition filed by the Revenue authorities, which had distinguished the decision of the Supreme Court in the case of M/s Sonic Electrochem and another² on facts and cited the absence of a corresponding entry in the Haryana General Sales Tax Act, 1973.

• Subsequently, the Revisional Authority, while relying on the Supreme Court’s decision in the case of M/s Sonic Electrochem and another² and exercising powers under section 34 of the Haryana Value Added Tax Act, 2003 (Haryana VAT Act), sought to revise the assessment orders by reclassifying the mosquito repellents liable to tax at 10% instead of 4%.

• The appellant filed a writ petition before the High Court assailing the jurisdiction of the Revisionary Authority

1 2023-VIL-10-SC

2 M/s. Sonic Electrochem and another v. STO and other (1998) 12-PHT-215 (SC)

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to exercise suo motu the revisionary power to reopen the assessment proceeding.

• The High Court dismissed the writ petition on the ground of availability of alternative remedy under the Haryana VAT Act. The High Court observed that there could be no presumption that the Appellate Authority would not be able to grant the relief sought in the writ petition.

Supreme Court’s key observations

• The ‘entertainability’ and ‘maintainability’ of a writ petition are distinct concepts. The objection to

‘maintainability’ goes to the root of the matter, and if such objection were found to be of substance, the courts would be rendered incapable of even receiving the lis for adjudication. On the other hand, the question of ‘entertainability’ is entirely within the realm of discretion of the high courts, writ remedy being discretionary.

• The High Court could entertain a writ petition at its discretion even though the alternative remedy was not availed of; unless exercise of discretion is shown to be unreasonable or perverse, this court would not interf ere.

• The competence of the Revisional Authority to exercise suo motu power is a jurisdictional issue and is a pure question of law. Accordingly, the writ petition by the taxpayer deserved a consideration on merits.

• Since the issue had attained finality before the Haryana bench of the VAT Tax Tribunal, the Revisionary Authority does not possess jurisdiction to exercise suo motu revisionary power in terms of section 34 of the Haryana VAT Act.

• It was also observed that there was no other decision on a similar issue by any other competent Tribunal or high court, taking a different view than that of the Haryana bench of the VAT Tax Tribunal. Thus, the ruling of the Haryana bench of the VAT Tax Tribunal binds the state, a f ortiori, the Revisional Authority.

Supreme Court’s decision

The Supreme Court allowed the appeal filed by the appellant and held as follows:

• The very jurisdiction of the Revisional Authority having been questioned in the writ petition, and the

impugned order of the High Court dismissing the writ petition without examining the merits of the challenge cannot be sustained.

• The Supreme Court, while passing this order, referred to its earlier decision³ which set out exceptions where a high court would be justified in entertaining a writ petition even where the taxpayer had not availed the alternate remedy provided by the statute, before approaching the court, which were as follows:

- Where the writ petition seeks enforcement of any of the fundamental rights;

- Where there is violation of principles of natural justice;

- Where the order or the proceedings are wholly without jurisdiction; or - Where the vires of an Act is challenged.

The takeaways

This Supreme Court decision clarifies that jurisdictional issue is a question of law and may b e entertained by a high court in exceptional cases despite the availability of an alternate remedy under the statute. This decision carries relevance for future litigation under the GST landscape, which provides powers to revisional authorities under section 108 of the Central Goods and Services Tax Act, 2017.

An emphasis on adherence to judicial discipline by the Revenue authorities is laid by this decision.

3 Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Others (1998) 8 SCC 1

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pwc.in

In this document, “PwC” refers to PricewaterhouseCoopers Private Limited (a limited liability company in India having Corporate Identity Number or CIN : U74140WB1983PTC036093), which is a member firm of PricewaterhouseCoopers International Limited (PwCIL), each member firm of which is a separate legal entity.

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