TMI Blog1959 (2) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... a sum of Rs. 1,725-6-9 remains due in respect of this assessment. The Department demanded payment of these sums amounting to Rs. 2,501-6-4. By that time this Court had held in Gannon Dunkerley Co. (Madras) Ltd. v. State of Madras[1954] 5 S.T.C. 216; (1955) 1 M.L.J. 87. that "works contracts" did not involve any element of sale of materials and that therefore the levy of sales tax in respect of those materials was unlawful. The petitioner pointed this out to the Commercial Tax Officer on 3rd August, 1954. Nothing happened for a long time. But, on 26th November, 1956, the Deputy Commercial Tax Officer wrote to the petitioner that he had been directed to take steps to collect this arrear under the Revenue Recovery Act, and, in view of that, he called upon the petitioner to pay up this amount. The subsequent representations which the petitioner made to the appropriate authorities proved of no avail. The petitioner has therefore come to this Court for the issue of a writ of mandamus or other suitable direction, to the Deputy Commercial Tax Officer, Mannady Division, Madras 1, requiring him to forbear from collecting these amounts. The petitioner in W.P. No. 270 of 1957 is a firm of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uent decisions that the relevant provisions of the Act and the Rules did not authorise the imposition of the tax amounts now in question the assessments are not nullities and that they have become final. Once an assessment has become final the amount charged thereunder remains payable and the State is entitled to collect it. The arguments in the case, perhaps inevitably, spread over a wide area and involved the investigation of certain subsidiary questions as to how far the decisions given by the Privy Council prior to the India Independence Act are binding on the High Courts, and, to what extent the existence of an alternative remedy should influence this Court in exercising its writ jurisdiction in a matter of this kind. But, we consider it unnecessary to traverse all that ground over again, and shall confine ourselves to the decision of the main questions before us. The situation is this: The Commercial Tax Officers who made the assessments in these cases had jurisdiction in respect of the subjectmatter. They had also jurisdiction in respect of the persons concerned. At the time they made the assessments they bona fide believed that the assessment was in accordance with the law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of such contracts it was assessed to sales tax in the years 1948-49, 1949-50 and 1950-51, and the amounts were paid. In 1952, the Allahabad High Court held that the provisions of the U. P. Sales Tax Act purporting to impose sales tax on forward contracts were ultra vires. Thereupon the firm applied to the Commissioner of Sales Tax for a refund of the sums which had been collected from it. The refund was refused. The firm thereupon filed a petition for the issue of a writ of mandamus requiring the Sales Tax Officer and the Government to refund the amount. The petition was allowed by Chaturvedi, J. The State of Uttar Pradesh appealed. The Advocate-General for the State argued that the amount in dispute was paid by the respondent firm under a mistake of law and was therefore irrecoverable. This contention was negatived and the appeal dismissed. It will be noticed that in this case-as in the cases before us-the assessment had become final under the U.P. Sales Tax Act. None the less the court directed refund of the tax which had been collected on the basis of an ultra vires provision contained in the local Sales Tax Act. It must, however, be mentioned that the points taken before us, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Indian Legislature, and it filed a suit to recover the amount which it had paid in pursuance of the assessment. The High Court of Calcutta held that the provision was ultra vires and that its jurisdiction to entertain this suit was not barred by section 67 of the Income-tax Act. On appeal the Federal Court reversed the decision of the High Court. The company then appealed to the Privy Council, which observed, "An assessment made under the machinery provided by the Act, if based on a provision subsequently held to be ultra vires is not a nullity like an order of a court lacking jurisdiction. Reliance on such a provision is not an excess of jurisdiction but a mistake of law made in the course of its exercise. Their Lordships therefore regard the suit as in truth directed exclusively to a modification of the assessment.The argument for the appellant was that an assessment was not an assessment 'made under the Act' if the assessment gave effect to a provision which was ultra vires the Indian Legislature. In law such a provision, being a nullity, was non-existent.The obvious meaning, and in their Lordships' opinion the correct meaning of the phrase 'assessment made under the Act' is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e levied or collected except by authority of law" and this makes a vital difference. We have an express prohibition against the levy or collection of tax save under the authority of law and the Constitution also provides remedies for enforcing that prohibition. The Government of India Act, 1935, contained no such provisions. The facts in Commissioner of Income-tax, West Punjab v. Tribune Trust, Lahore[1958] 16 I.T.R. 214; (1948) 2 M.L.J. 14., were as follows: In respect of the assessment for the year 1932-33 the Tribune Trust, Lahore, claimed exemption under section 4(3) (i) of the Income-tax Act. The matter was finally decided by the Privy Council in favour of the assessee. Meanwhile, during the pendency of the appeal before the Privy Council assessments continued to be made in respect of the same property disallowing the claim for exemption which the assessee had preferred. The assessee did not appeal against the orders disallowing its claim. After the assessee succeeded before the Privy Council in respect of the year 1932-33 the assessee applied to the Commissioner to reopen the assessments for the years subsequent to 1932-33 and quash the assessments as they had become a nullit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment of India Acts and explained in detail the difference between the levy of a tax, the assessment of a tax and the collection of a tax. Lord Dunedin in Whitney v. Commissioners of Inland Revenue[1926] A.C. 37. stated as follows: "Now, there are three stages in the imposition of a tax: there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment. That, ex-hypothesi, has already been fixed. But assessment particularises the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay." The learned Advocate-General pointed out that each of these three stages is separate and complete and contended that a person who objects to the amount of the tax imposed on him ought to avail himself of the remedies provided by the taxing statute, and, if the assessment has become final either by reason of the fact that the assessee failed to avail himself of the remedies provided by the Act or because those remedies became unavailing, he cannot thereafter complain. Once the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come final. Now, to say that an assessment has become final is not equivalent to saying that the assessment is lawful-as has been demonstrated in the present case. When we say that an assessment has become final all that we ordinarily mean is that the assessee may no longer challenge it in the manner provided by the appropriate statute, that is to say, by resorting to the remedy of appeal, revision or reference, as the case may be. It may be that these remedies have been tried unsuccessfully or it may be that the time within which these remedies should have been sought has expired. But it does not follow that the assessment is lawful. Suppose, for example, a citizen is engaged in buying or selling not merely rice and wheat but also lands and houses. Suppose also the Sales Tax Officer includes in the turnover of his business not merely the value of the rice and wheat but also the value of the lands and houses he has dealt with in the year and charges sales tax on the whole. There can be no doubt whatever that the levy of sales tax so far as it relates to immovable property would be illegal. The Sales Tax Officer would have no jurisdiction whatever to do that. None the less, if owing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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