9911796707
TMI Blog1968 (4) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the suits are common and were as follows: The appellants are dealers in tobacco and have their places of business at Ujjain. They purchase and sell tobacco used for eating, smoking and for preparing bidis. They get their tobacco locally or import it from extra- State places. The former Madhya Bharat State enacted in 1950 the Madhya Bharat Sales Tax Act (Act 30 of 1950), which came into force on May 1, 1950. Under section 3 of the Act every dealer whose business in the previous year in respect of sales or supplies of goods exceeded in the case of an importer and manufacturer Rs. 5,000 and in other cases Rs. 12,000, had to pay tax in respect of sales or supplies of goods effected in Madhya Bharat from 1st May, 1950. Under section 5, the tax was a single point tax and it was provided that the Government might by a notification specify the point of the sale at which the tax was payable. The section also fixed the minimum and maximum rates of tax leaving it to Government to notify the actual rate. Government in pursuance of this power issued a number of notifications on April 30, 1950, May 22, 1950, October 24, 1953, and January 21, 1954. All these notifications imposed tax at di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner or the appellate authority to order refund of tax wrongly paid did not apply since no such appeal was proved to have been filed and the tax was not wrongfully paid but wrongfully realised. On appeal by the State the High Court reversed the decision. Before the High Court it was conceded (as it is conceded even now) that the tax could not be imposed in view of the bar of Article 301. The short question thus was whether the suit was barred expressly by section 17 of the Act or any implication arising from the Act. The contention on behalf of the appellants was that, if it was a question of the correctness of the imposition within the valid framework of the statute, rules or notifications, section 17 might have operated but not when the imposition was under a void law. In the latter event the assessee was free to challenge the validity of the law in a civil suit and also to claim a refund. The High Court considered the matter in the light of the decisions of the Judicial Committee in Raleigh Investment Co. v. Governor-General in Council', Secretary of State v. Mask A.I.R. 1940 P.C. 105; 67 I.A. 222. , Firm of Illuri Subbayya Chetty and Sons v. State of Andhra Pradesh [1963] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry do such cases belong in India. The controversy in India has revolved round the principles accepted in Secretary of State v. Mask(2) and in Raleigh Investment Co. v. Governor-General in Council [1947] 15 I.T.R. 332; A.I.R. 1947 P.C. 78.. In the first case it was laid down by the Judicial Committee that the ouster of the jurisdiction of a civil court is not to be lightly inferred and can only be established if there is an express provision of law or is clearly implied. In the second case it was held that where a liability to tax is created by statute which gives special and particular remedies against illegal exactions the remedy contemplated by the statute must be followed and it is not open to the assessee to pursue the ordinary civil process of courts. To the latter case we shall refer in some detail presently. Opinion in this Court has, however, wavered as to how far to go with the dicta of the Privy Council in the two cases. Before, however, we go into the question we may refer to State of M. P. v. Bhailal Bhai [1964] 15 S.T.C. 450; [1964] 6 S.C.R. 261. Under that case the notifications were declared to be ultra vires Article 301 of the Constitution and not saved by Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to entertain such suits. We may now proceed to consider first the two cases of the Judicial Committee before examining the position under the rulings of this Court. In Secretary of State v. Mask [1940] 67 I.A. 222., the sole question was the jurisdiction of the civil court to entertain a suit to recover an excess amount of customs duty Collected from Mask and Co. The suit was filed after an appeal to the Collector of Customs and a revision taken to the Government of India under the Land Customs Act, 1924, was dismissed. The suit was dismissed by the trial Judge on the preliminary ground that the civil court had no jurisdiction. An appeal by Mask and Co. to the High Court succeeded and there was a remit. The appeal to the Judicial Committee followed. Section 188 of the Land Customs Act, 1924. provided inter alia: "Every order passed in appeal under this section shall, subject to the power of revision conferred by section 191, be final." The Judicial Committee first made a general observation: "It is settled law that the exclusion of the jurisdiction of the civil courts is not to be readily inferred, but that such exclusion must either be explicitly expressed or clearly impl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Investment Company had raised the question before the Income-tax Authorities that Explanation 3 to para. 4(1) of the Income-tax Act, 1922, was ultra vires. This was not accepted and the assessment was made. The Investment Company filed an appeal but did not proceed with it and the assessment was confirmed. The appellate authority also said in its order that the constitutional question could not be raised before it. The suit was then instituted. Section 67 of the Indian Income-tax Act in specific terms stated: "No suit shall be brought in any civil court to set aside or modify any assessment made under the Act.......... The result of the suit has already been stated. The Judicial Committee considered this section and observed that the suit in form did not profess to modify the assessment but in substance it did so. The declaration that a certain provision was ultra vires was but a step. According to the Judicial Committee the assessment made under an ultra vires statute was not a nullity and the assessment ought to be taken to proceed on a mistake of law in the course of assessment. Therefore, without going into the question whether the provision impugned was ultra vires or not t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such as section 67 was at all necessary in the circumstances. Both these cases thus appear to be decided on the basis of provisions in the relevant Acts for the correction, modification and setting aside of assessments and the express bar of the jurisdiction of the civil courts. The presence of a section barring the jurisdiction was the main reason and the existence of an adequate machinery for the same relief was the supplementary reason. The provision for a reference of a question to the High Court was considered adequate to raise the issue of the validity of any provision of law under which the taxing authorities acted. This follows from Raleigh Investment Co.'s case [1947] 15 I.T.R. 332; 74 I.A. 50. Mask & Co.'s case [1940] 67 I.A. 222., was more concerned with the finality to the orders given by the Land Customs Act. Even so in the Mask & Co.'s case [1940] 67 I.A. 222., room was left for interference by the civil court by observing that the civil courts have jurisdiction to examine into cases where the provisions of the Act "have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure". These ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Tea Co. Ltd. v. Deputy Commissioner, Lakhimpur(5), after quoting the observations of Viscount Simonds (Pyx Granite Co. Ltd. v. Ministry of Housing and Local Govt.): "It is a principle not by any means to be whittled down that the subject's recourse to Her Majesty's Courts for determination of his rights is not to be excluded except by clear words," our brother Mitter, J., added that the extreme proposition in Raleigh Investment Co.'s case' has not found favour with this Court. Our learned brother observed: "This Court was not prepared to accept the dictum in the judgment (Raleigh Investment Co.) to the effect that even the constitutional validity of the taxing provisions would have to be challenged by adopting the procedure prescribed by the Income-tax Act-see Firm of Illuri Subbayya Chetty and Sons v. State of Andhra Pradesh(3)." The position was rather strengthened in K. S. Venkataraman and Co. v. State of Madras [1966] 2 S.C.R. 229; 17 S.T.C. 418. The question there was whether a suit was not (1) [1967] 19 S.T.C. 66. (2) C. A. No. 1045 of 1966 decided on 20th July, 1967; [1968] 67 I.T.R. 102 (S.C.). (3) [1966] 17 S.T.C. 418; 60 I.T.R. 112. (4) [1966] 60 I.T.R. 156. (7) [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t all, will make the assessment as one 'under the Act'. No doubt the power to make an assessment is conferred by the Act and, therefore, making an assessment would be within the jurisdiction of the assessing authority. But the jurisdiction can be exercised only according, as well as with reference, to the valid provisions of the Act. When, however, the authority travels beyond the valid provisions it must be regarded as acting in excess of its jurisdiction. To give too wide a construction to the expression 'under the Act' may lead to the serious consequence of attributing to the Legislature which owes its existence itself to the Constitution, the intention of affording protection to unconstitutional activities by limiting challenge to them only by resort to the special machinery provided by it in place of the normal remedies available under the Code of Civil Procedure, that is, to a machinery which cannot be as efficacious as the one provided by the general law. Such a construction might necessitate the consideration of the very constitutionality of the provision which contains the expression. This aspect of the matter does not appear to have been considered in Raleigh Investment C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that event, a suit to question the validity of such an order made outside the Act would certainly lie in a civil court." As the head-note correctly states the effect of the decision was that the foundation laid by the Judicial Committee in Raleigh Investment Co.'s case [1947] 15 I.T.R. 332; 74 I.A. 50., for construing the expression "under the Act" had no legal basis. It may be mentioned that in Bharat Kala Bhandar case[1965] 3 S.C.R. 499; 59 I.T.R. 73. also it was held that there was no machinery provided in the Central Provinces and Berar Municipal Act for refund of tax assessed and recovered in excess of constitutional limits and that the remedy furnished by that Act was inadequate for enabling the assessee to challenge effectively the constitutionality or legality of assessment or levy of tax by a municipality or to recover from it what was realised under an invalid law (see the judgment of Mitter, J., also in Pabbojan case A.I.R. 1968 S.C. 271 at p. 276.). In Bharat Kala Bhandar case [1965] 3 S.C.R. 499; 59 I.T.R. 73., it was pointed out that: " ..... one of the corollaries flowing from the principle that the Constitution is the fundamental law of the land is that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities ignoring these provisions held that the outside sales were taxable. Relying upon the dictum of the Judicial Committee in Mask and Co.'s case, as applied in Firm of Illuri Subbayya Chetty's case, this Court held that the suits were competent. In the case of this Court last cited the following observation was made: "It is necessary to add that these observations, though made in somewhat wide terms, do not justify the assumption that if a decision has been made by a taxing authority' under the provisions of the relevant taxing statute, its validity can be challenged by a suit on the ground that it is incorrect on the merits and, as such, it can be claimed that the provisions of the said statute have not been complied with. Non-compliance with the provisions of the statute to which reference is made by the Privy Council must, we think be non-compliance with such fundamental provisions of the statute a, would make the entire proceedings before the appropriate authority illegal and without jurisdiction. Similarly, if an appropriate authority has acted in violation of the fundamental principles of judicial procedure, that may also tend to make the proceedings illegal and void an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enacted after the account period. What if it had been enacted before? The observations in Basappa's case that if a commodity was not taxable at all or was exempt the civil court would have jurisdiction were, however, not accepted. It was sufficient to have said in Ramaswami Iyer's case [1966] 3 S.C.R. 582; 18 S.T.C. 1., that exemption or no exemption that was for the authorities to decide and not a matter for the civil court. The argument of exemption was rejected by observing: "There was in the Travancore-Cochin General Sales Tax Act at the material time no express provision which obliged the taxing authority to exclude from the computation of taxable turnover the amount of sales tax collected by the dealer." (emphasis supplied) The reasoning shows that if it had been, the suit might have been held competent. It is not necessary for us to pursue this matter further than to say that the observation that Basappa's case [1964] 5 S.C.R. 517; 15 S.T.C. 144., was wrongly decided is open to serious question. This leaves for consideration only the case of Firm of Illuri Subbayya Chetty and Sons v. State of Andhra Pradesh [1964] 1 S.C.R. 752; 14 S.T.C. 680 and Kamala Mills Ltd. v. State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he statute as would make the entire proceedings before the appropriate authority illegal and without jurisdiction. The defect of procedure must also be fundamental. In either case, the defect must make the order invalid in law and void. The Court went on to observe: ".....In what cases such a plea would succeed it is unnecessary for us to decide in the present appeal because we have no doubt that the contention of the appellant that on the merits, the decision of the assessing authority was wrong, cannot be the subject-matter of a suit because section 18-A clearly bars such a claim in the civil courts." Referring next to Raleigh Investment Co.'s case [1947] 74 I.A. 50; 15 I.T.R. 332. , this Court pointed out that under the scheme of the Income-tax Act, the Judicial Committee thought that a question of vires of the provisions could also be considered, but this Court did not think it necessary to pronounce any opinion whether this assumption was well-founded or not. This point was later considered in Venkataraman's case [1966] 2 S.C.R. 229; 17 S.T.C. 418., by Subba Rao, J. (as he then was), and we have sufficiently analysed the views of this Court. The case of Firm of Illuri Subbay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he taxing authorities included the jurisdiction to determine the nature of the transaction, or was the decision about the character of the transaction, a decision on a collateral fact. This Court held that it was the former and not the latter. Therefore the decision was held to be merely an error in assessment which was capable of correction by the usual procedure of appeals, etc. The bar of section 20 was, therefore, held to apply. During the course of the arguments the Special Bench considered Basappa's case [1964] 5 S.C.R. 517; 15 S.T.C. 144., and distinguished it from the Firm of Illuri Subbayya Chetty's case [1964] 1 S.C.R. 752; 14 S.T.C. 680., on the ground that the former was not barred by section 18-A as it did not exist. The Special Bench, however, made an observation to the following effect: "In cases where the exclusion of the civil courts' jurisdiction is, expressly provided for, the consideration as to the scheme of the statute in question and the adequacy or the sufficiency of the remedies provided for by it may be relevant but cannot be decisive. But where exclusion is pleaded as a matter of necessary implication, such considerations would be very important, and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nals so constituted, and whether remedies normally associated with actions in civil courts are prescribed by the said statute or not. (3) Challenge to the provisions of the particular Act as ultra vires cannot be brought before tribunals constituted under that Act. Even the High Court cannot go into that question on a revision or reference from the decision of the tribunals. (4) When a provision is already declared unconstitutional or the constitutionality of any provision is to be challenged, a suit is open. A writ of certiorari may include a direction for refund if the claim is clearly within the time prescribed by the Limitation Act but it is not a compulsory remedy to replace a suit. (5) Where the particular Act contains no machinery for refund of tax collected in excess of constitutional limits or illegally collected a suit lies. (6) Questions of the correctness of the assessment apart from its constitutionality are for the decision of the authorities and a civil suit does not lie if the orders of the authorities are declared to be final or there is an express prohibition in the particular Act. In either case the scheme of the particular Act must be examined because it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
