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TMI Blog1965 (4) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... ti, for P.K. Bose, with him), for intervener No. 9. N. Krishnaswamy Reddy, Advocate-General for the State of Madras (V. Ramaswami, Additional Government Pleader, and A.V. Rangam with him), for intervener No. 5. C.B. Agarwala, Senior Advocate (O.P. Rana with him), for intervener No. 8. Naunit Lal, for intervener No. 2. JUDGMENT The judgment of the court was delivered by GAJENDRAGADKAR C.J.---The principal point of law which arises in this appeal is whether the Bombay High Court was right in holding that the suit filed by the appellant, Kamala Mills Ltd., against the respondent, the State of Bombay, was incompetent. The appellant is a limited company and owns a textile mill at Bombay. It carries on the business of manufacture and sale of textile cloth. During the period 26th January, 1950, to 31st March, 1951, the appellant was registered as a "dealer" under the provisions of the Bombay Sales Tax Act, 1946 (V of 1946) (hereinafter called "the Act"). The appellant's case is that during the said period, it sold goods inside and outside the then State of Bombay. The total value of goods sold by the appellant outside the State of Bombay was Rs. 40,20,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the view taken by the learned trial judge and dismissed the appeal preferred by the appellant. The appellant then applied for and obtained a certificate from the said High Court and it is with the said certificate that it has come to this court in appeal. When this appeal was argued before a Division Bench of this court on March 23, 1964, Mr. Purshottam for the appellant contended that in addition to the point which had been decided by the High Court, he wanted to urge that section 20 of the Act was invalid. The case which was thus presented by Mr. Purshottam was that on a fair and reasonable construction, it should be held that section 20 does not create a bar against the institution of the present suit. If, however, it was construed to create a bar, it was constitutionally invalid. It appears that though this alternative plea had been taken by the appellant in its plaint, no issue was framed in respect of it and naturally, the point has not been considered either by the learned trial judge or by the Division Bench which heard the Letters Patent Appeal. Even so, the Division Bench of this court which heard the appeal, allowed Mr. Purshottam to raise his alternative contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... introducing section 30 in the Act shall be made and shall always be deemed to have been made in the said Act as so continued in force, with effect from the 26th January, 1950. It is well-known that the controversy in regard to the interpretation of article 286 began with the decision of this court in State of Bombay v. United Motor, and ended with the subsequent decision of this court in the case of Bengal Immunity Co. In order to alleviate the economic crisis which was likely to result in view of the subsequent decision of this court, the President promulgated the Sales Tax Validation Ordinance, 1956, on January 30, 1956, the provisions of which were later incorporated in the Sales Tax Validation Act, 1956. This Act validated sales tax collected by different States from April 1, 1951, to September 6, 1955, in accordance with the principles laid down by this court in United Motors' case. The sales tax similarly collected between January 26, 1950, to March 31, 1951, was also sought to be validated by the Sales Tax Continuance Order, 1950. If we had reached the stage of considering the merits about the validity of the recovery of tax in the present case, it would have become necess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be equally applicable to cases of assessment made erroneously in respect of transactions which are otherwise statutorily exempted from the operation of the Act. If a sales tax statute exempts certain transactions from the purview of its charging section, and the appropriate authority makes an order of assessment in respect of such an exempted transaction, the assessment would be beyond its jurisdiction and can be impeached by a suit ; section 20 will not protect such an assessment. No doubt, Mr. Sastri emphasised the fact that the constitutional prohibition against an assessment in respect of outside sales stood on a much higher pedestal than the prohibition by a statutory provision in a Sales Tax Act. The first prohibition is a constitutional prohibition and its breach would entitle a citizen to claim the protection of article 265 and article 31(1) ; but, on principle, according to Mr. Sastri, a transaction which is exempted from assessment either by virtue of article 286 or by virtue of any specific statutory provision, cannot be validly assessed, and an assessment made in respect of it cannot claim the status of an assessment made under the Act within the meaning of section 20. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are correct or not. It is the activity of the assessing officer acting as such officer which is intended to be protected and as soon as it is shown that exercising his jurisdiction and authority under this Act, an assessing officer has made an order of assessment, that clearly falls within the scope of section 18A. It was also observed that whether or not an assessment has been made under this Act, will not depend on the correctness or accuracy of the order passed by the assessing authority. This position is not seriously disputed by Mr. Sastri before us. He, however, contends that if the impugned order has been passed without jurisdiction, it cannot fall within the purview of section 20 of the Act. In other words, the contention is that when the appropriate authority purported to levy the tax on the appellant in respect of the transactions in question, it was attempting to assess outside sales; and since the said assessment contravened article 286, it was invalid and the order was without jurisdiction and as such a nullity. How can an order passed by the appropriate authority without jurisdiction claim the protection of section 20, asks Mr. Sastri. In deciding the validity of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry. The inferior tribunal must itself decide as to the collateral fact : when, at the inception of an inquiry by a tribunal of limited jurisdiction, a challenge is made to its jurisdiction, the tribunal has to make up its mind whether it will act or not, and for that purpose to arrive at some decision on whether it has jurisdiction or not. There may be tribunals which, by virtue of legislation constituting them, have the power to determine finally the preliminary facts on which the further exercise of their jurisdiction depends; but, subject to that, an inferior tribunal cannot, by a wrong decision with regard to a collateral fact, give itself a jurisdiction which it would not otherwise possess. " It would be noticed that Mr. Sastri's argument that the impugned order of assessment is without jurisdiction and as such does not fall within section 20, proceeds on the assumption that the finding of the appropriate authority that the transactions in question were taxable under the relevant provisions of the Act, is a finding on a fact which is collateral. The question is : is this assumption well-founded ? In our opinion, the answer to this question must be in the negative. In this co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealers and to deal with the questions as to whether the transactions entered into by the dealers are liable to be assessed under the relevant provisions of the Act or not. In our opinion, it is plain that the very object of constituting appropriate authorities under the Act is to create a hierarchy of special tribunals to deal with the problem of levying assessment of sales tax as contemplated by the Act. If we examine the relevant provisions which confer jurisdiction on the appropriate authorities to levy assessment on the dealers in respect of transactions to which the charging section applies, it is impossible to escape the conclusion that all questions pertaining to the liability of the dealers to pay assessment in respect of their transactions are expressly left to be decided by the appropriate authorities under the Act as matters falling within their jurisdiction. Whether or not a return is correct; whether or not transactions which are not mentioned in the return, but about which the appropriate authority has knowledge, fall within the mischief of the charging section; what is the true and real extent of the transactions which are assessable; all these and other allied ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner under article 32 on the sole ground that the impugned order of assessment was based on a misconstruction of the notification in question. The Act under which the notification was issued was valid; the validity of the notification itself was not impeached; and so, the narrow ground which the court had to consider was if the appropriate authority misconstrued the notification and imposed a tax on a commodity which in fact fell within its protection, could the validity of such an order be impeached under article 32 Of the Constitution on the ground that it contravened the fundamental right of the petitioner under article 19(1)(g)? The two answers given in accordance with the majority opinion were against the petitioner; and so, the majority decision can be said to have rejected the petitioner's argument that a question of jurisdiction was involved in the misconstruction of the notification in question. It would thus appear that, according to the majority view, the question about the taxability of a particular transaction falls within the jurisdiction of the appropriate authorities exercising their powers under the taxing Act, and their decision in respect of it cannot be trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we are not called upon to consider the extent of our jurisdiction under article 32, when such questions are brought before us by citizens for relief on the ground that their fundamental rights have been contravened by assessment orders. At this stage, we are only dealing with the question as to whether Mr. Sastri is right in contending that an erroneous conclusion of the appropriate authority on the question about the character of the sale transactions on which the appellant has been taxed, can be said to be without jurisdiction. In other words, if the appropriate authority, while exercising its jurisdiction and powers under the relevant provisions of the Act, holds erroneously that a transaction, which is an outside sale, is not an outside sale and proceeds to levy sales tax on it, can it be said that the decision of the appropriate authority is without jurisdiction ? In our opinion, this question cannot be answered in favour of Mr. Sastri's contention. Whether or not such a conclusion can be challenged under article 226 or under article 32 of the Constitution, and if yes, under what circumstances, are matters with which we are not concerned in the present proceedings. For the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent case, we are not called upon to consider the merits of these observations or their scope and effect. In Raleigh Investment Company Ltd. v. Governor-General in Council, section 67 of the Indian Income-tax Act, 1922 (XI of 1922), which barred a suit, fell to be considered. The Privy Council held that the said provision barred a suit where the plaintiff sought to challenge an assessment order made by the appropriate tax authorities under the provisions of the said Act. In construing the effect of the words "no suit shall be brought in any civil court to set aside or modify any assessment made under this Act ", the Privy Council thought it necessary to enquire whether the Act contained machinery which enabled an assessee effectively to raise in the courts the question whether a particular provision of the Income-tax Act bearing on the assessment made is or is not ultra vires. " The presence of such machinery ", observed the Privy Council, " though by no means conclusive, marches with a construction of the section which denies an alternative jurisdiction to enquire into the same subject-matter. The absence of such machinery would greatly assist the appellant on the question of con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bjection shall be taken to any valuation, assessment, levy, nor shall the liability of any person to be assessed or taxed be questioned, in any other manner or by any other authority than is provided in this Act." According to the majority view, the bar created by this provision did not amount to the exclusion of the jurisdiction of the civil court to entertain a claim for refund of the tax alleged to be illegally recovered, because there were no words in the said provision which could be construed as excluding the civil court's jurisdiction either expressly or impliedly. The minority view, however, held that a suit for refund was barred. We do not think Mr. Sastri can successfully advance his case before us by relying on these two decisions. After all, as the Privy Council observed in the case of Mask & Co., the determination of the question as to whether section 20 bars the present suit, must rest on the terms of section 20 themselves, because that is the provision under consideration " and decisions on other statutory provisions are not of material assistance, except in so far as general principles of construction are laid down ". Besides, in regard to these two decisions, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is not to be excluded except by clear words. That is, as McNair J. called it in Francis v. Yiewsley and West Drayton Urban District Council, a 'fundamental rule' from which I would not for my part sanction any departure ". Approaching the task of construing section 17 from this point of view, his Lordship came to the conclusion that there was nothing in section 17 which excluded the jurisdiction of the civil court to entertain the claim in question. We do not see how this decision can afford any assistance to the appellant. There is one more aspect of the matter which must be considered before we finally determine the question as to whether section 20 excludes the jurisdiction of the civil court in entertaining the present suit. Whenever it is urged before a civil court that its jurisdiction is excluded either expressly or by necessary implication to entertain claims of a civil nature, the court naturally feels inclined to consider whether the remedy afforded by an alternative provision prescribed by a special statute is sufficient or adequate. In cases where the exclusion of the civil court's jurisdiction is expressly provided for, the consideration as to the scheme of the stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hesitate to construe section 20 as creating an absolute bar, or if such a construction is not reasonably possible, the court may seriously examine the question about the constitutionality of such express exclusion of the civil court's jurisdiction having regard to the provisions of articles 19 and 31 of the Constitution. It is with this two-fold object that this aspect of the matter must now be examined. Before proceeding to examine this matter, we ought to refer to the decision of this court in Sales Tax Officer, Banaras v. Kanhaiya Lal Mukund Lal Saraf. In that case, this court has held that the term " mistake " in section 72 of the Indian Contract Act comprises within its scope a mistake of law as well as a mistake of fact and that, under that section, a party is entitled to recover money paid by mistake or under coercion, and if it is established that the payment, even though it be of a tax, has been made by the party labouring under a mistake of law, the party receiving the money is bound to repay or return it though it might have been paid voluntarily, subject, however, to questions of estoppel, waiver, limitation or the like. Basing himself on this decision, Mr. Sastri cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner, refund to a registered dealer applying in this behalf any amount of tax paid by such dealer in excess of the amount due from him under this Act. The proviso to this section prescribes a period of limitation of twenty-four months from the date on which the order of assessment was passed or within twelve months of the final order passed on appeal, revision or reference in respect of the order of assessment, whichever period is later. Then, we have section 21 which provides for the remedy of an appeal; and section 22 which provides for a revisional remedy. It is significant that though section 21(1) prescribes a period of sixty days for appeal and section 22 prescribes a period of four months for revision, under section 22B the prescribed authority is given power to extend the period of limitation if it is satisfied that the party applying for such extension had sufficient cause for not preferring the appeal or making the application within such period. Section 23A provides for rectification of mistake. It is thus clear that the appellant could have either appealed or applied for revision and prayed for condonation of delay on the ground that the mistake which was responsible for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tent in so far as it seeks to challenge the validity of section 20. This finding, however, is of no material assistance to the appellant, because even after it succeeds on this point, it has still to face the plea of the respondent that, on the merits, the suit is barred ; and on that plea, the appellant must fail, because section 20 is a bar to the appellant's claim that the amount in question which is alleged to have been illegally recovered from it should be refunded to it. That is a matter which falls directly within the mischief of section 20. What then is the ultimate position in this case? The Act under which tax was recovered from the appellant is valid and so is the charging section valid; the appropriate authorities dealt with the matter in regard to the taxability of the impugned transactions in accordance with the provisions of the Act and in consequence, tax in question was recovered on the basis that the said transactions were taxable under the Act. The appellant contends that the transactions were outside sales and they did not and could not fall under the charging section because of article 286, and it argues that the tax was levied because both the appellant and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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