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Firm and Illuri Subbayya Chetty and Sons Vs. the State of Andhra Pradesh - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtSupreme Court of India
Decided On
Reported inAIR1964SC322; [1963]50ITR93(SC); [1964]1SCR752; [1963]14STC680(SC)
ActsMadras General Sales Tax Act, 1939 - Sections 18-A
AppellantFirm and Illuri Subbayya Chetty and Sons
RespondentThe State of Andhra Pradesh
Cases ReferredRaleigh Investment Coy. Ltd. v. Governor
.....order on the merits, is a relevantconsideration and that consideration is satisfied by the act with which we areconcerned in the present appeal. 18-a must be deemed to exclude the jurisdiction of civilcourts to entertain claims like the present......has misjudged the effect of theprovisions of s. 18-a. in dealing with the question whether the civil courts'jurisdiction to entertain a suit is barred or not, it is necessary to bear inmind the fact that there is a general presumption that there must be a remedyin the ordinary civil courts to a citizen claiming that an amount has beenrecovered from him illegally and that such a remedy can be held to be barredonly on very clear and unmistakable indications to the contrary. the exclusionof the jurisdiction of civil courts to entertain civil causes will not beassumed unless the relevant statute contains an express provision to thateffect, or leads to a necessary and inevitable implication of that nature. themere fact that a special statute provides for certain remedies may not byitself.....

Gajendragadkar, J.

1. The short question which arises in this appeal is whether the suitinstituted by the appellant, Firm of Illury Subbayya Chetty & Sons, in thecourt of the Subordinates Judge at Kurnool, seeking to recover Rs. 8,349/- fromthe respondent, the State of Andhra Pradesh, on the ground that the said amounthad been illegally recovered from it under the Madras General Sales Tax Act,1939 (Mad. IX of 1939) (hereinafter called the Act) for the years 1952-54 iscompetent or not; and this question has to be determined in the light of thescope and effect of section 18-A of the Act.

2. The appellant is a firm of merchants carrying on commission agency andother business at Kurnool and as such, it purchases and sells ground-nuts andother goods on behalf of principles for commission. For the year 1952-53, theSales-tax authorities included in the appellant's taxable turnover an amount ofRs. 3,45,488/12/10 representing groundnut sales and collected the tax on thetotal turnover from it in September, 1953 when the amount of the said tax wasdetermined and duly adjusted. The said turnover of Rs. 3,45,488/12/10 in factrepresented sales of groundnuts and not purchases and tax was recovered fromthe appellant on the said amount illegally, inasmuch as it is only on purchaseof groundnuts that the tax is leviable. As a result of this illegal levy, theappellant had to pay Rs. 5,398/4/3 for the said year. Similarly, for thesubsequent year 1953-1954 the appellant had to pay an illegal tax of Rs.1,159/11/9. In its plaint, the appellant claimed to recover this amounttogether with interest @ 12% per annum and that is how the claim was valued atRs. 8,349/-.

3. This claim was resisted by the respondent on two grounds. It was urgedthat the suit was incompetent having regard to the provisions of s. 18-A of theAct; and on the merits it was alleged that the transactions in regard togroundnuts on which sales tax was levied and recovered from the appellant weretransactions of purchase and not of sale. In this connection, the respondentreferred to the fact that the appellant itself had included the transaction inquestion in the return submitted by it in form A and that it was makingpayments tentatively every month to be adjusted after the final assessment wasmade at the end of the year. Accordingly, the final adjustment was made inSeptember and the total amount due from the appellant duly recovered. Thus, theappellant having voluntarily made the return and paid the taxes, it was notopen to him to contend that the transactions in regard to groundnuts were nottaxable under the Act. Besides, the appellant had not preferred an appealeither to the Deputy Commissioner of Commercial Taxes or to the Sales TaxAppellate Tribunal; and so, it had not availed itself of the remedies providedby the Act.

4. On these pleadings, the trial Court framed three principal issues. Thefirst issue was whether the suit was barred by s. 18-A of the Act; the secondwas whether there had been excess collection of sales tax for the two years inquestion and if so, how much And the third issue was whether the appellantwas estopped from questioning the validity of the assessment According to thetrial court, the respondent had failed to prove its pleas against theappellant's claim and so, it recorded findings in favour of the appellant inall the three issues. In the result, a decree followed in favour of theappellant for the recovery of Rs. 6,558/- with interest @ 6% per annum fromNovember 12, 1955 till the date of payment.

5. This decree was challenged by the respondent by preferring an appealbefore the High Court of Andhra Pradesh. It appeared that the decision of thesaid High Court in the case of State of Andhra Pradesh v. Shri Krishna CoconutCo. (1960) 1 An W.R. 279, was in favour of the view taken by the trialCourt; but the respondent urged before the High Court that the said decisionwas erroneous in law and required reconsideration. That is why the respondent'sappeal was placed before a Full Bench of the High Court. The Full Bench hasupheld the contentions raised by the respondent. It has held that in view ofthe provisions of s. 18-A of the Act, the suit is incompetent. Alternatively,it has found that on the merits, the claim made by the appellant was notjustified. The result of these findings was that the respondent's appeal wasallowed and the appellant's suit was dismissed with costs. The appellant hadfiled cross-objections claiming additional interest on the decretal amount, butsince its suit was held to be incompetent by the High Court, itscross-objections failed and were dismissed with costs. It is against thisdecree that the appellant has come to this Court by special leave.

6. Mr. Ranganathan Chetty for the appellant contends that the High Court wasin error in coming to the conclusion that the appellant's suit was incompetentbecause he argues that the High Court has misjudged the effect of theprovisions of s. 18-A. In dealing with the question whether the Civil Courts'jurisdiction to entertain a suit is barred or not, it is necessary to bear inmind the fact that there is a general presumption that there must be a remedyin the ordinary civil courts to a citizen claiming that an amount has beenrecovered from him illegally and that such a remedy can be held to be barredonly on very clear and unmistakable indications to the contrary. The exclusionof the jurisdiction of Civil Courts to entertain civil causes will not beassumed unless the relevant statute contains an express provision to thateffect, or leads to a necessary and inevitable implication of that nature. Themere fact that a special statute provides for certain remedies may not byitself necessarily exclude the jurisdiction of the civil courts to deal with acase brought before it in respect of some of the matters covered by the saidstatute.

7. It is, therefore, necessary to enquire whether s. 18-A expressly or bynecessary implication excludes the jurisdiction of the civil court to entertaina suit like the present. Section 18-A provides that no suit or other proceedingshall, except as expressly provided in this Act, be instituted in any Court toset aside or modify any assessment made under this Act. It is common groundthat there is no express provision made in the Act under which the present suitcan be said to have been filed, and so, it falls under the prohibitioncontained in this section. The prohibition is express and unambiguous and therecan be no doubt on a fair construction of the section that a suit cannot beentertained by a civil court if, by instituting the suit, the plaintiff wantsto set a side or modify any assessment made under this Act. There is therefore,no difficulty in holding that this section excludes the jurisdiction of thecivil courts in respect of the suits covered by it.

8. It is, however, urged by Mr. Chetty that if an order of assessment hasbeen made illegally by the appropriate authority purporting to exercise itspowers under the Act, such an assessment cannot be said to be an assessmentmade under this Act. He contends that the words used are 'any assessmentmade under this Act' and the section does not cover cases of assessmentwhich are purported to have been made under this Act. In support of thisargument he has referred us to the provisions of s. 17(1) and s. 18 where anyact done or purporting to be done under this Act is referred to. It would,however, be noticed that having regard to the subject-matter of the provisionscontained in Sections 17(1) and 18 it was obviously necessary to refer not only toacts done, but also to acts purporting to be done under this Act. Section 17(1)is intended to bar certain proceedings and s. 18 is intended to afford anindemnity and that is the reason why the legislature had to adopt the usualformula by referring to acts done or purporting to be done. It was whollyunnecessary to refer to cases of assessment purporting to have been made underthis Act while enacting s. 18-A, because all assessments made under this Actwould attract the provisions of s. 18-A and that is all that the legislatureintends s. 18-A to cover.

9. The expression 'any assessment made under this Act' is, in ouropinion, wide enough to cover all assessments made by the appropriateauthorities under this Act whether the said assessments are correct or not. Itis the activity of the assessing officer acting as such officer which isintended to be protected and as soon as it is shown that exercising hisjurisdiction and authority under this Act, an assessing officer has made anorder of assessment that clearly falls within the scope of s. 18-A. The factthat the order passed by the assessing authority may in fact be incorrect orwrong does not affect the position that in law, the said order has been passedby an appropriate authority and the assessment made by it must be treated asmade under this Act. Whether or not an assessment has been made under this Actwill not depend on the correctness or the accuracy of the order passed by theassessing authority. In determining the applicability of s. 18-A, the onlyquestion to consider is : 'Is the assessment sought to be set aside or modifiedby the suit instituted an assessment made under this Act or not ?' Itwould be extremely anomalous to hold that it is only an accurate and correctorder of assessment which falls under s. 18-A. Therefore, it seems to us thatthe orders of assessment challenged by the appellant in its suit fall under s.18-A.

10. In this connection, it is necessary to emphasise that while providingfor a bar to suits in ordinary civil courts in respect of matters covered by s.18-A, the legislature has taken the precaution of safeguarding the citizens'right by providing for adequate alternative remedies. Section 11 of the Actprovides for appeals to such authority as may be prescribed; s. 12 confersrevisional jurisdiction on the authorities specified by it; s. 12-A allows anappeal to the appellate Tribunal; s. 12-B provides for a revision by the HighCourt under the cases specified in it; s. 12-C provides for an appeal to theHigh Court; and s. 12-D lays down that petitions, applications and appeals toHigh Court should be heard by a Bench of not less than two Judges. The mattercan even be brought to this Court by way of a petition under Art. 136 of theConstitution. It would thus be seen that any dealer who is aggrieved by anorder of assessment passed in respect of his transactions, can avail himself ofthe remedies provided in that behalf by these sections of the Act. It is in thelight of these elaborate alternative remedies provided by the Act that thescope and effect of s. 18-A must be judged. Thus considered, there can be nodoubt that where an order of assessment has been made by an appropriateauthority the provisions of this Act, any challenge to its correctness and anyattempt either to have it set aside or modified must be made before theappellate or the revisional forum prescribed by the relevant provisions of theAct. A suit instituted for that purpose would be barred under s. 18-A.

11. The facts alleged by the appellant in this case are somewhat unusual.The appellant itself made voluntary returns under the relevant provisions ofthe Act and included the groundnut transactions as taxable transactions. It wasnever alleged by the appellant that the said transactions were transactions ofsale and as such, not liable to be taxed under the Act. It is true that unders. 5A(2) groundnut is made liable to tax under s. 3(1) only at the point of thefirst purchase effected in the State by a dealer who is not exempt fromtaxation under s. 3(3), but at the rate of 2% on his turnover. When theappellant made its voluntary returns and paid the tax in advance to be adjustedat the end of the year from time to time, it treated the groundnut transactionsas taxable under s. 5A(2). In other words, the appellant itself having concededthe taxable character of the transactions in question, no occasion arose forthe taxing authority to consider whether the said transactions could be taxedor not; and ever after the impugned orders of assessment were made, theappellant did not choose to file an appeal and urge before the appellateauthority that the transactions were sale transactions and as such, wereoutside the purview of s. 5A(2). If the appellant had urged that the saidtransactions were outside the purview of the Act and the taxing authority inthe first instance had rejected that contention, there would be no doubt thatthe decision of the taxing authority would be final, subject, of course, to theappeals and revisions provided for by the Act. The position of the appellantcannot be any better because it did not raise any such contention in theassessment proceedings under the Act. If the order made by the taxing authorityunder the relevant provisions of the Act in a case where the taxable characterof the transaction is disputed is final and cannot be challenged in a civilcourt by a separate suit, the position would be just the same where the taxablecharacter of the transaction is not even disputed by the dealer who accepts theorder for the purpose of the Act and then institutes a suit to set it aside orto modify it.

12. The question about the exclusion of the jurisdiction of the civil courtsto entertain civil actions by virtue of specific provisions contained inspecial statutes has been judicially considered on several occasions. We may inthis connection refer to two decisions of the Privy Council. In Secretary ofState v. Mask. & Coy. (1940) 67 I.A. 222 the Privy Council wasdealing with the effect of the provisions contained in s. 188 of the SeaCustoms Act (VIII of 1878). The relevant portion of the said section providesthat every order passed in appeal under this section shall, subject to thepower of revision conferred by s. 191, be final. Dealing with the questionabout the effect of this provision, the Privy Council observed that it issettled law that the exclusion of the jurisdiction of the civil courts is notto be readily inferred, but that such exclusion must either be explicitlyexpressed or clearly implied. Lord Thankerton who delivered the opinion of theBoard, however, proceeded to add that 'it is also well-settled that thateven if jurisdiction is so excluded, the civil courts have jurisdiction toexamine into cases where the provisions of the Act have not been complied with,or the statutory tribunal has not acted in conformity with the fundamentalprinciples of judicial procedure.' It is necessary to add that theseobservations, though made in somewhat wide terms, do not justify the assumptionthat if a decision has been made by a taxing authority under the provisions ofthe relevant taxing statute, its validity can be challenged by a suit on theground that it is incorrect on the merits and as such, it can be claimed thatthe provisions of the said statute have not been complied with. Non-compliancewith the provisions of the statute to which reference is made by the PrivyCouncil must, we think, be non-compliance with such fundamental provisions ofthe statute as would make the entire proceedings before the appropriateauthority illegal and without jurisdiction. Similarly, if an appropriateauthority has acted in violation of the fundamental principles of judicialprocedure, that may also tend to make the proceedings illegal and void and thisinfirmity may affect the validity of the order passed by the authority inquestion. It is cases of this character where the defect or the infirmity inthe order goes to the root of the order and makes it in law invalid and voidthat these observations may perhaps be invoked in support of the plea that thecivil court can exercise its jurisdiction notwithstanding a provision to thecontrary contained in the relevant statute. In what cases such a plea wouldsucceed it is unnecessary for us to decide in the present appeal because wehave no doubt that the contention of the appellant that on the merits, the decisionof the assessing authority was wrong, cannot be the subject-matter of a suitbecause s. 18-A clearly bars such a claim in the civil courts.

13. The next decision to which reference may be made was pronounced by thePrivy Council in the case of Raleigh Investment Coy. Ltd. v. Governor-Generalin Council (1947) 74 I.A. 50. In that case the effect of s. 67 of theIndian Income-tax Act fell to be considered. The said section, inter alia,provides that no suit shall be brought in any civil court to set aside ormodify any assessment made under this Act. It would be noticed that the wordsused in this section are exactly similar to the words used in s. 18-A withwhich we are concerned. In determining the effect of s. 67, the Privy Councilconsidered the scheme of the Act by particular reference to the machineryprovided by the Act which enables an assessee effectively to raise in courtsthe question whether a particular provision of the Income-tax Act bearing onthe assessment made is or is not ultra-vires. The presence of such machineryobserved the judgment, though by no means conclusive, marches with aconstruction of the section which denies an alternative jurisdiction to enquireinto the same subject-matter. It is true that the judgment shows that the PrivyCouncil took the view that even the constitutional validity of the taxingprovision can be challenged by adopting the procedure prescribed by theIncome-tax Act; and this assumption presumably proceeded on the basis that ifan assessee wants to challenge the vires of the taxing provision on which anassessment is purported to be made against him, it would be open to him toraise that point before the taxing authority and take it for a decision beforethe High Court under s. 66(1) of the Act. It is not necessary for us toconsider whether this assumption is well founded or not. But the presence ofthe alternative machinery by way of appeals which a particular statute providesto a party aggrieved by the assessment order on the merits, is a relevantconsideration and that consideration is satisfied by the Act with which we areconcerned in the present appeal.

14. The clause 'assessment made under this Act' which occurs in s.18-A also occurs in s. 67 with which the Privy Council was concerned, and inconstruing the said clause, the Privy Council observed that 'the phrase'made under this Act' describes the provenance of the assessment : itdoes not relate to its accuracy in point of law. The use of the machineryprovided by the Act, not the result of that use, it the test.' These twoPrivy Council's decisions support the conclusion that having regard to thescheme of the Act, s. 18-A must be deemed to exclude the jurisdiction of civilcourts to entertain claims like the present.

15. In the result, we must hold that the view taken by the High Court isright and so, the appeal fails and is dismissed. There would be no order as tocosts.

16. Appeal dismissed.

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