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State of Madras and anr. Vs. Efficient Publicities Private Ltd. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberAppeal No. 457 of 1974.
Judge
Reported in[1979]44STC427(Mad)
AppellantState of Madras and anr.
RespondentEfficient Publicities Private Ltd.
Appellant AdvocateK. Venkataswami, Additional Government Pleader
Respondent AdvocateV. Ratnam, Adv.
DispositionAppeal allowed
Cases ReferredRaja JagadambikaPratap Narain Singh v. Central Board of Direct Taxes
Excerpt:
- - section 38 provides for a revision to the high court within ninetydays from the date on which a copy of the order under section 36(3) or section36(6) of the act is served in the manner prescribed by any person who objectsto such order, or the deputy commissioner on the ground that the appellatetribunal has either decided erroneously or failed to decide any question oflaw. it is the activity of the assessing officeracting as such officer which is intended to be protected and as soon as it isshown that exercising his jurisdiction and authority under this act, anassessing officer has made an order of assessment, that clearly falls withinthe scope of section 18-a. is thisassumption well-founded ? in our opinion, the answer to this question must bein the negative. we are, therefore,.....varadarajan, j. 1. the defendants in o.s. no. 6676 of1968 on the file of the first assistant judge, city civil court, madras, arethe appellants. the respondent was carrying on business in advertisement andpublicity in tamil nadu. according to the plaint, in the course of suchbusiness, the respondent was getting blocks, slides, etc., made for itscustomers and passing them on to its customers. the commercial tax authoritieswere making demands for tax on the cost involved in the preparation of blocks,etc. the respondent had been resisting these demands on the ground that nosale was involved in the transactions and had taken up the matter on appealbefore the appellate assistant commissioner for commercial taxes but withoutavail. the appellants had compulsorily levied sales tax aggregating to.....
Judgment:

Varadarajan, J.

1. The defendants in O.S. No. 6676 of1968 on the file of the First Assistant Judge, City Civil Court, Madras, arethe appellants. The respondent was carrying on business in advertisement andpublicity in Tamil Nadu. According to the plaint, in the course of suchbusiness, the respondent was getting blocks, slides, etc., made for itscustomers and passing them on to its customers. The commercial tax authoritieswere making demands for tax on the cost involved in the preparation of blocks,etc. The respondent had been resisting these demands on the ground that nosale was involved in the transactions and had taken up the matter on appealbefore the Appellate Assistant Commissioner for Commercial Taxes but withoutavail. The appellants had compulsorily levied sales tax aggregating to Rs.22,218 for the years from 1961-62 to 1965-66. But a Bench of this Court hasheld on 8th March, 1967, in W.P. Nos. 2465 to 2468, 2702 to 2708 and 2767 to2770 of 1966 that the line of activities carried on by the respondent cannotbe deemed to be sales. The respondent thereafter requested the DeputyCommercial Tax Officer, II Division, Mount Road, Madras-2, for refund of theaforesaid sum of Rs. 22,218 by its letter dated 10th November, 1967. Thedemand has not been complied with. The action of the appellants in levying thesaid tax has been declared to be illegal and void. The appellants are,therefore, bound to refund the amount to the respondent. The respondent filedthe suit in these circumstances for the recovery of the said amount togetherwith interest from the date of the suit.

2. The second appellantadopted the written statement of the first appellant. The first appellantcontended that the allegation that the respondent has been resisting thedemands for sales tax on its transactions for the years 1961-62 to 1965-66 onthe ground that no sales were involved in the transactions and that theauthorities had not accepted the position is not correct. The respondent didnot put forth any case for the assessment year 1961-62. But for the year1962-63 the respondent disputed only the tax of Rs. 371.30, which was leviedon pre-sale expenses and the appeal was allowed by the Appellate AssistantCommissioner and effect was given to his order. Similarly, for the year1963-64, the disputed turnover to the extent of Rs. 5,064.00 and Rs. 71,320.00on the sale of slides and blocks supplied by the respondent was rejected bythe Appellate Assistant Commissioner and the respondent did not take thematter further in appeal before the Appellate Tribunal or the High Court. Forthe years 1964-65 and 1965-66, the assessments were made on the book turnoverof the respondent, who has not questioned the assessment before either theappellate authorities or the revisional authorities. Therefore, it is whollyincorrect to allege that the respondent has been resisting the demands allthese years.

3. The first appellant further contended that the civilcourt has no jurisdiction to entertain a suit as regards the correctness ofthe assessment in view of Section 51 of the Tamil Nadu General Sales Tax Act,1959, as the respondent has not availed of the adequate remedy available underthe provisions of that Act by preferring appeals or revisions and the civilcourt cannot go into the question of refund of sales tax by reopening theassessments, which have become final. The first appellant raised the questionof limitation, contending that the respondent has abandoned its case, that theclaim is hopelessly barred by limitation and that the respondent is notentitled to claim the benefits of the Limitation Act as if the cause of actionarose on 8th March, 1967, when the High Court pronounced t`e judgment in theaforesaid writ petitions.

4. On the above pleadings, six issues wereframed by the trial court. On issue No. 1 relating to the respondent's rightto recover the suit amount, the learned First Assistant Judge held that therespondent is entitled to recover the amount. On issue No. 2 relating tojurisdiction of the civil court to entertain the suit, the learned FirstAssistant Judge held that the respondent is not seeking to set aside or modifythe assessment orders of the commercial tax authorities, but simply wants arefund of the monies that had been collected illegally and the civil courthas, therefore, jurisdiction to entertain the suit. On issue No. 3 relating tothe question, whether the levy of sales tax for the years 1961-62 to 1965-66is in order, he held that the transaction of the respondent is of anadvertising agency and will not be liable to sales tax and that the levy isnot in order. On issue No. 4 relating to the question, whether the respondentis estopped from putting forward the claim, the learned First Assistant Judgeheld that there is no estoppel against law. On issue No. 5 relating to the barof limitation, the learned First Assistant Judge held that since the decisionof the High Court in the said writ petitions was rendered in March, 1967, andthe suit has been filed in November, 1968, it is not barred by limitation. Onthese findings, the learned First Assistant Judge decreed the suit as prayedfor with costs.

5. The respondent filed a return for each of the years1961-62 to 1965-66. For the year 1961-62, the Joint Commercial Tax Officeraccepted the return and assessed the respondent to tax and there was no appealagainst this order. For the year 1962-63, the Joint Commercial Tax Officeradded some additional turnover, rejecting the claim of the respondent forexemption, and passed an assessment order. There was an appeal by therespondent to the Appellate Assistant Commissioner of Commercial Taxesagainst the addition of the turnover and rejection of the respondent'sclaim for exemption, and it was allowed in favour of the respondent. For theyear 1963-64, the Joint Commercial Tax Officer added some additional turnoverrejecting a portion of the exemption claimed by the respondent. There wasan appeal by the respondent to the Appellate Assistant Commissioner ofCommercial Taxes and it was dismissed and no appeal was taken by therespondent to the Appellate Tribunal. The order of the Appellate AssistantCommissioner became final. For the years 1964-65 and 1965-66, the JointCommercial Tax Officer accepted the returns of the respondent and passed theassessment orders. The respondent did not take the matter in any appeal.These facts are not in dispute before us. Subsequent to the assessment ofthe respondent for the years 1964-65 and 1965-66, traders doing similarbusiness of advertisement and block-making filed W.P. Nos. 2465 to 2468, 2702to 2708 and 2767 to 2770 of 1966, challenging the levy of sales tax on thetransactions on the ground that no sale was involved and that it was only aservice contract business and the commercial tax authorities had no authorityto levy sales tax on the same. These writ petitions were allowed on 8thMarch, 1967, by a Bench of this Court and that judgment has become final.The respondent, who did not file any writ petition against the levy of salestax on it, however, sent a notice calling upon the appellants to refund thesuit amount and filed the present suit, after the claim had been disputed bythe appellants. However, the appellants have accepted the position even withreference to the respondent in regard to the years subsequent to 1964-65 and1965-66 and have admitted that the nature of business carried on by therespondent will not attract sales tax. In exhibit B-6, it was stated that theHigh Court has held in W.P. Nos. 2465 to 2468 of 1966 and others that thetransactions of advertisement agencies are not in any sense sales liable totax under the Tamil Nadu General Sales Tax Act, 1959, and, therefore, thetotal and taxable turnover for the year 1966-67 is determined at 'nil'rupees.

6. Though the judgment of this Court in W.P. Nos. 2465 to 2468,2702 to 2708 and 2767 to 2770 of 1966 is not inter-parties or a judgment inrent and, therefore, not binding on the appellants, it is a piece of evidenceto show that the transactions similar to those carried on by the respondent donot involve any element of sale and are not liable to sales tax under theTamil Nadu General Sales Tax Act, 1959. There is also exhibit B-6, whereby ithas been held by the commercial tax authorities that the business of therespondent was of advertisement agencies and that it is not in any senseliable to tax under the Act. The learned First Assistant Judge also held thatthe business of the respondent was of advertising agencies and is not liablefor assessment to tax under the Tamil Nadu General Sales Tax Act, 1959. Inthese circumstances, the question that the respondent was not liable to tax onthe transactions for the years 1961-62 to 1965-66 was not disputed before usby the Learned Counsel for the appellants. No ground has been taken in thememorandum of grounds of appeal against the decision of the learned FirstAssistant Judge that there is no bar of limitation. The only contention urgedbefore us is that the civil court has no jurisdiction to entertain the suit inview of Section 51 of the Tamil Nadu General Sales Tax Act and we are calledupon to decide only that question.

7. Section 3 of the Tamil NaduGeneral Sales Tax Act, 1959, hereinafter referred to as the Act, is thecharging section. Section 12 of the Act lays down the procedure to be followedby the assessing authority. Clause (1) of that section lays down that:

The assessment of a dealer shall be on the basis of theprescribed return relating to his turnover submitted in the prescribed mannerwithin the pre-scribed period.

8. There is no dispute thatthe assessments of the respondent for all the years in question, namely,1961-62 to 1965-66, were on the basis of the returns submitted by therespondent as required under Section 12(1) of the Act. Section 31(1) of theAct provides for an appeal to the Appellate Assistant Commissioner against theorder passed under Section 12 of the Act by the appropriate authority withinthirty days from the date on which that order was served on the assessee inthe manner prescribed. Section 32 of the Act provides for suo motu revision ofany order passed or proceeding recorded by the appropriate authority underSection 12 and certain other sections of the Act. Section 34 provides for suomotu revision by the Board of Revenue of any order or proceeding recorded bythe appropriate authority under Section 12 and some other sections of the Actor an order passed by the Appellate Assistant Commissioner under Section 31(3)of the Act, or any order passed by the Deputy Commissioner under Section 32(1)of the Act. Section 35 provides for revision to the Board of Revenue by anyperson aggrieved by any order passed by the Deputy Commissioner under Section 33(3) within a period of thirty days from the date on which a copy of theorder was served on him in the manner prescribed. Section 36 provides for anyperson objecting to an order passed by the Appellate Assistant Commissionerunder Section 31(3) of the Act or an order passed by the Deputy Commissionerunder Section 32(1) filing an appeal against an order to the AppellateTribunal within a period of sixty days from the date on which the order wasserved on him in the manner prescribed. Section 37 provides for an appeal tothe High Court against the order of the Board of Revenue under Section 34within sixty days from the date on which the order was served in the mannerprescribed. Section 38 provides for a revision to the High Court within ninetydays from the date on which a copy of the order under Section 36(3) or Section36(6) of the Act is served in the manner prescribed by any person who objectsto such order, or the Deputy Commissioner on the ground that the AppellateTribunal has either decided erroneously or failed to decide any question oflaw. Section 51, providing for bar of suits and proceedings to set aside ormodify assessments except as provided in the Act, reads:

(a) No suit or other proceedings shall, except as expressly provided underthis Act be instituted in any court to set aside or modify any assessment madeunder this Act.

(b) No injunction shall be granted by any court inrespect of any assessment made, or to be made, or in respect of any actiontaken, or to be taken, in pursuance of any of the provisions of this Act.

9. At the relevant time Rule 16 of the Tamil Nadu GeneralSales Tax Rules, 1959, provided for refund and stated inter alia that 'ifthere are no arrears of tax due under the Act from the dealer, or if aftersuch adjustment there is still an excess, the officer shall serve upon thedealer a notice in form C for refunding the amount of the excess tax, andalong with such notice, he shall also send to the dealer a voucher forclaiming refund of that amount from the treasury'. Now, that rule has beenreplaced by Section 39-A of the Act, which has been inserted by Act 31 of1972, with effect from 1st December, 1972. Section 39-A reads thus:

Amendment of order of assessment, etc.--(1) Where as a resultof any order passed in appeal or revision or review under this Act, any changebecomes necessary, in the order of assessment, the appropriate appellateauthority, or revising or reviewing authority may authorise the assessingauthority to amend the order of assessment accordingly and on such amendmentbeing made, any amount overpaid by the assessee shall be refunded to himwithout interest, or the further amount of tax, if any, due from him shall becollected in accordance with the provisions of this Act, as the case maybe.

(2) Pending the exercise of the powers of appeal, revision orreview, the appropriate appellate authority, or revising or reviewingauthority may, on application made by the assessing authority or the assessee,stay the refund to the assessee of any amount overpaid, or the collection offurther amount of tax due from the assessee, in pursuance of the order whichis the subject-matter of appeal, revision or review.

10.The Learned Counsel for the appellants invited our attention to threedecisions in support of his contention that the civil court has nojurisdiction to entertain the suit, in view of the bar in Section 51 of theAct and the various provisions referred to above, made in the Act itself forrectifying the errors, if any, committed by the appropriate authority in thematter of assessment. The first of those decisions is of the Supreme Court inKamala Mills Ltd. v. State of Bombay : [1965]57ITR643(SC) . Theappellant in that case was a limited company, a textile mill in Bombay,carrying on business in the manufacture and sale of textiles. During theperiod 26th January, 1950, to 31st March, 1951, it was registered as a'dealer' under the Bombay Sales Tax Act, 1946. In that period, the appellantsold goods out-side the State of Bombay for Rs. 40,20,623-12-0 and Rs.1,08,946-14-0. On these amounts general sales tax of Rs. 61,885-12-0 andspecial sales tax of Rs. 3,301-8-0 respectively were levied. The appellantfiled a suit on the original side of the Bombay High Court on 20th December,1956, claiming the said amounts aggregating to Rs. 65,187-4-0, on the groundthat it had been levied illegally and that the illegality was discovered soonafter the Supreme Court delivered judgment in Bengal Immunity Company Limitedv. State of Bihar : [1955]2SCR603 and Section 20 of the Bombay Sales Tax Actdid not bar the institution of the suit. Section 20 of that Act reads:

Save as is provided in Section 23, no assessment made and noorder passed under this Act or the Rules made thereunder by the Commissioneror any person appointed under Section 3 to assist him shall be called intoquestion in any civil court, and save as is provided in Sections 21 and 22, noappeal or application for revision shall lie against any such assessment ororder.

11. The claim made by the appellant in that case wasresisted by the respondent, the State of Bombay, on several grounds, one ofthem being that the civil court had no jurisdiction to entertain the suit inview of the bar under Section 20 of the Act. The other ground was that theappellant's contention that Section 20 was ultra vires of the Constitution waswithout any substance. The suit was dismissed, upholding the plea that thecivil court had no jurisdiction in view of Section 20. The Division Bench ofthe Bombay High Court agreed with the view of the learned trial Judge anddismissed the appeal. Further appeal was taken to the Supreme Court afterobtaining a certificate from the High Court. The Supreme Court has observedin its decision:

There is no doubt that a claim for therefund of sales tax alleged to have been paid by the appellants throughmistake is a claim of a civil nature and normally it should be triable by theordinary courts of competent jurisdiction as provided by Section 9 of theCode; but this section itself lays down that the jurisdiction of the civilcourts to try suits of a civil nature can be excluded either expressly orimpliedly; and so, the point raised for our decision in the present appeal iswhether on a fair and reasonable construction of Section 20, it can be saidthat the jurisdiction of the civil court is barred either expressly orimpliedly....

This question has been recently considered by thisCourt in Firm of Illuri Subbayya Chetty & Sons v. State of Andhra Pradesh : [1963]50ITR93(SC) . Dealing with Section 18-A of the Madras General Sales Tax Act (Act 9 of 1939), which corresponds to Section 20 with which weare concerned in the present appeal, this Court observed that the expression'any assessment made under this Act' is wide enough to cover all assessmentsmade by the appropriate authorities under this Act whether the saidassessments are correct or not. It is the activity of the assessing officeracting as such officer which is intended to be protected and as soon as it isshown that exercising his jurisdiction and authority under this Act, anassessing officer has made an order of assessment, that clearly falls withinthe scope of Section 18-A. It was also observed that whether or not anassessment has been made under this Act, will not depend on the correctness oraccuracy of the order passed by the assessing authority....

It wouldbe noticed that Mr. Sastri's argument that the impugned order of assessment iswithout jurisdiction and, as such, does not fall within Section 20, proceedson the assumption that the finding of the appropriate authority that thetransactions in question were taxable under the relevant provisions of theAct, is a finding on a fact which is collateral. The question is: is thisassumption well-founded In our opinion, the answer to this question must bein the negative....

It would thus be seen that the appropriateauthorities have been given power in express terms to examine the returnssubmitted by the dealers and to deal with the question as to whether thetransactions entered into by the dealers are liable to be assessed under therelevant provisions of the Act or not. In our opinion, it is plain that thevery object of constituting appropriate authorities under the Act is to createa hierarchy of special tribunals to deal with the problem of levyingassessment of sales tax as contemplated by the Act.... The whole activityof assessment beginning with the filing of the return and ending with an orderof assessment, falls within the jurisdiction of the appropriate authority andno part of it can be said to constitute a collateral activity not specificallyand expressly included in the jurisdiction of the appropriate authority assuch. We are, therefore, satisfied that Mr. Sastri is not right when hecontends that the finding of the appropriate authority that a particulartransaction is taxable under the charging section of the Act, is a finding ona collateral fact and it is only if the said finding is correct that theappropriate authority can validly exercise its jurisdiction to levy sales taxin respect of the transactions in question. In fact, what we have said aboutthe jurisdiction of the appropriate authorities exercising their powers underthe Act, would be equally true about the appropriate authorities functioningeither under similar Sales Tax Acts or under the Income-tax Act....

For the purpose of construing Section 20, we are not prepared to hold thatan assessment based on an erroneous finding about the character of thetransaction, is an assessment made without jurisdiction and, as such, isoutside the purview of Section 20 of the Act....

Reverting then toSection 20, it seems to us plain that the words used in this section are sowide that even erroneous orders of assessment made would be entitled to claimits protection against the institution of a civil suit....Our conclusion,therefore, is that Section 20 should be construed in the same manner in whichSection 18-A of the Madras General Sales Tax Act was construed by this Courtin Firm of Illuri Subbayya Chetty & Sons : [1963]50ITR93(SC) and thateven on this wide construction, the said section is constitutionallyvalid.

12. In State of Madras v. Sri Ramakrishna Mills(Coimbatore) Limited [1969] 24 S.T.C. 274 which came up before a Bench of thisCourt, the suit had been filed to recover a sum of Rs. 11,170.00 alleged tohave been paid by the plaintiff under a mistake of fact and law as sales tax.During the assessment year 1955-56, after 6th September, 1955, inter-Statepurchases or sales were not taxable by reason of the bar under Article 286(2)of the Constitution. In that period, the plaintiff had purchased goods worthRs. 22 lakhs odd outside Madras State. The sales tax on those purchases cameto Rs. 11,170. By a mistake of fact and law, the plaintiff had included thosetransactions in its return for assessment of sales tax and did not claimexemption. The Deputy Commercial Tax Officer accepted the plaintiff's returnand assessed it by an order dated 30th September, 1956, and served it on himon 24th November, 1956. The plaintiff filed an appeal after a lapse of sixmonths and not within the stipulated time of thirty days, raising the questionof exemption. The Commercial Tax Officer dismissed the appeal on thepreliminary ground that it is barred by limitation. The plaintiff wasunsuccessful in the further appeal to the Sales Tax Appellate Tribunal.Without filing any revision to the High Court within sixty days, the plaintifffiled a suit in the civil court for recovering the amount after issuing astatutory notice under Section 80 of the Code of Civil Procedure. The defencewas that the suit was barred under Section 18-A of the Madras General SalesTax Act, 1939. The learned Judges were concerned with the plea of legal bar tothe maintainability of the suit. The contention urged before them was that thesales tax authority had failed to comply with Article 286(2) of theConstitution and that this must be considered as non-compliance with afundamental provision of the statute as would make the entire proceedingsbefore the appropriate authorities illegal and without jurisdiction.Disagreeing with that contention, the learned Judges observed:

Before the sales tax authority could come to a conclusionthat the transaction is hit by Article 286 of the Constitution there isnecessarily an anterior stage in the proceedings involving an examination ofthe details of the transaction, and it is only after it has decided on suchexamination that the sale is out-side the State, can it decide that thetransaction should not be taxed. But, if, in the course of the same enquiry,it comes to the conclusion that the evidence shows that it is a sale insidethe State, it has jurisdiction to assess it. It is not, therefore, a casewhere the 'entire proceedings' before the authority are illegal and withoutjurisdiction.

On the other hand, the relevant principle to apply, forthe purpose of juris-diction in such a case, is the one which the SupremeCourt laid down in Kamala Mills Limited v. State of Bombay [1965] 16 S.T.C.613 (S.C.) where the facts are analogous to those in the presentcase....They, therefore, held that even if a mistake was committed by theassessing authority in assessing the transaction, which would be hit byArticle 286 of the Constitution, the decision was within the jurisdiction andthe assessment could claim the protection of Section 20 of the Bombay SalesTax Act.

13. The learned Judges upheld the plea that thesuit was barred by Section 18-A of the Madras General Sales Tax Act, 1939.

14. In Bata Shoe Co. Ltd. v. Jabalpur Corporation : [1977]3SCR182 theplaintiff-company paid a sum of Rs. 16,528 odd as octroi duty to the thenJabalpur Municipal Committee in respect of the articles imported by theplaintiffs' retail shops at Jabalpur within the limits of the MunicipalCommittee between 1st April, 1943, and 31st March, 1946. This duty wasassessed by the Municipal Committee on an amount which was 40 per cent lessthan the retail price of the goods brought within the municipal limits. TheMunicipal Committee decided in 1946-47 to reopen and revise the assessment bycharging octroi duty at only 6 per cent less than the retail price of thegoods and also to levy double the duty as penalty on the ground that theplaintiffs had intentionally evaded payment of the duty payable on the goods.On appeal, the Sub-Divisional Officer, Jabalpur, reduced the duty by modifyingit as 12 per cent less than the retail price and upholding the rate ofpenalty, namely, double the duty. The Board of Revenue rejected the revisionapplication of the plaintiffs who thereafter paid the amount under protestwith a further amount that was also demanded. Subsequently, the plaintiffsfiled the suit for recovery of the two sums aggregating to Rs. 31,677 odd. TheMunicipal Committee, which was succeeded by the Jabalpur City Corporation,raised contentions as regards jurisdiction of the civil court to entertain thesuit as well as limitation. The trial court rejected both the contentions anddecreed the suit. The High Court held on appeal that there was no bar oflimitation and that the reassessment of octroi duty ultimately fixed in theappeal by the Sub-Divisional Officer could not be questioned in the civilcourt. The Supreme Court dismissed the appeal filed by the plaintiffsobserving that the error could be corrected only in the manner provided in theAct and by the authority prescribed thereunder and that the remedy by way of asuit is barred. The learned Judges have observed:

In KamalaMills' case, : [1965]57ITR643(SC) it was observed that if a statute creates aspecial right or liability, provides for the determination of that right orliability by tribunals specially constituted in that behalf and lays down thatall questions in regard to that right or liability shall be exclusivelydetermined by the tribunals so constituted, it becomes pertinent to enquirewhether remedies normally associated with actions in a civil court areprescribed by the said statute or not. If the court is satisfied that the Actprovides no remedy for making a claim for the recovery of an illegallycollected tax, the court might hesitate to construe a provision givingfinality to the orders passed by the tribunals specially created by the Act ascreating an absolute bar to the suits and if such a construction was notreasonably possible, the court would be called upon to examine theconstitutionality of the provision excluding the civil court's jurisdiction inthe light of Articles 19 and 31 of the Constitution. According to the 1stproposition in Dhulabhai's case, : [1968]3SCR662 . if the statute givesfinality to the orders passed by the special tribunals created by it, thecivil court's jurisdiction would be excluded if the statute provides adequateremedies to do what the civil courts are normally empowered to do in a suit.

15. The learned Judges have repelled the contention that theAct protects correct assessments only and that every incorrect or wrong orderof assessment can be challenged by a suit though the statute gives it finalityand provides full and effective remedies to challenge it and they have addedthat such a contention is contrary to the decision in the Kamala Mills' case, : [1965]57ITR643(SC) that if the appropriate authority while exercising itsjurisdiction and powers under the relevant provisions of the Act comes to anerroneous conclusion, it cannot be said that the decision is withoutjurisdiction. They have added that the plaintiffs' reliance on the firstproposition in the Dhulabhai's case, : [1968]3SCR662 is equallymisconceived and that the case falls under one or the other of the twoparagraphs in the second proposition laid down in that case.

16. On theother hand, Mr. V. Ratnam, appearing for the respondent, invited our attentionto several decisions and strenuously contended that the appropriateauthorities had no jurisdiction to levy assessment on the transactions whichdo not involve any element of sale, as has been held by this Court in theaforesaid writ petitions which had been filed by some third parties carryingon business similar in nature to the business carried on by the respondent,and contended that the orders are therefore illegal and the civil court hasjurisdiction to entertain the suit filed for the recovery of the amountillegally collected from the respondent.

17. In Union of India v.Sarojini Rajah : [1974]97ITR37(Mad) the plaintiff filed asuit for the recovery of Rs. 15,370.00 odd with interest. Her case was thatimmediately after her husband's death on 30th November, 1959, she received anumber of notices from the income-tax department in respect of the arrears ofincome-tax stated to be due by her husband, including copies of notices issuedto certain banks attaching monies belonging to her husband, that, on receiptof those notices, she intimated the Income-tax Officer that she had no moniesor assets of her husband, that a notice dated 10th December, 1959, also hadbeen issued to her calling upon her to pay a sum of Rs. 15,370 odd stated tobe due as tax on the provisional assessment under Section 23B of the Income-tax Act, that she understood that the notice to be one relating to theprovisional assessment of her income and in that mistake she paid the amountand that she realised when a few days later she received another noticedemanding payment of a sum of Rs. 10,487 odd in pursuance of a provisionalassessment of her own income that the earlier demand related to theprovisional assessment on the return submitted by her husband. She requestedadjustment of the amount paid by her against the sum of Rs. 10,487 odddemanded from her, saying that the sum of Rs. 15,370 odd had been paid bymistake. She paid the sum of Rs. 10,487 odd to avoid penal assessment andapplied for refund of the sum of Rs. 15,370 odd, and after it was refused, shefiled the suit for recovery of the amount with interest. One of the objectionsraised was that the suit in substance was to set aside a provisionalassessment made under Section 23B of the Income-tax Act and it is barred underSection 67 of that Act and that the only remedy open to the plaintiff is toresort to the remedies provided under the Act. The learned Judges repelled thecontention regarding the non-maintainability of the suit and observed:

We are not able to see how this suit is one to set aside ormodify any assessment made under the Income-tax Act. This is a simple suit forrecovery of money said to have been paid under a mistake or under coercion.The plaintiff does not seek to set aside or modify any assessment made underthe Act against her husband. What she states is that she is not liable tosatisfy the demand under exhibit A-1 for payment of tax due by her husbandfrom out of her personal funds and, therefore, the collection made from hershould be refunded.

18. We respectfully agree with thelearned Judges, but this decision does not apply to the facts of the presentcase and cannot help the respondent. The plaintiff in that case did notdispute the correctness of the provisional assessment made under Section 23Bof the Income-tax Act on the return submitted by her husband. She onlycontended that she was not in possession of any monies or assets of herhusband and that she had paid the sum of Rs. 15,370 odd under the mistakenbelief that it was in relation to the provisional assessment of her own incomeand that she realised the mistake when she received a few days later anothernotice demanding payment of Rs. 10,487 odd in pursuance of a provisionalassessment of her own income. Without questioning the correctness of theprovisional assessment made on the return submitted by her husband, shesought to recover the amount on the ground that it had been paid by her undera pure mistake of fact. But, in the present case, as stated earlier, theassessments had been made on the basis of the returns submitted by therespondent itself, as required by Section 12(1) of the Act, and the amountcould not be refunded to the respondent without a finding that the assessmentitself was wrong on the ground that the transactions carried on by therespondent are works contracts and did not involve any element of sale. Thoughthe respondent has not prayed for a declaration that the assessment orders arenot valid, there is, in effect, a prayer for the court to hold so when therespondent seeks to recover the amount on the ground that there was notransaction of sale and that the amount has been collected illegally. Inthese circumstances, we do not agree with the learned First Assistant Judgethat the respondent does not seek to set aside or modify the assessment ordersmade by the commercial tax authorities but simply wants a refund of the moneythat has been collected from it illegally. It is not possible to order anyrefund of the money except on the basis that the assessment orders are wrongon the ground that the transactions carried on by the respondent are not salesliable to be assessed under the provisions of the Act. We also do not agreewith the observation of the learned First Assistant Judge that it is not thegrievance of the respondent that the assessment order, when it was made,suffered any mistake and that the respondent has not come to the court for anyrelief to rectify the order of assessment. We do not also agree with thelearned First Assistant Judge that the decision dated 14thApril, 1969, in Eastern Equipment & Sales Ltd. v. Sales Tax AppellateTribunal1 does not help the appellants. In these writ petitions it has beenheld that if a litigant wants to take advantage of a subsequent decision of asuperior court, it is his duty to keep the matter alive and not allow it tobecome final and then come by way of a rectification as if the order, when itwas made, (1) W.P. Nos. 1080 to 1083 of 1969. suffered from a mistake. Therespondent in the present case had not kept the matter alive when he filed thesuit but had allowed the orders of the appropriate authority, namely, theJoint Commercial Tax Officer and the Appellate Assist-ant Commissioner,referred to above, to become final.

19. In State of Madras v. SriRamakrishna Mills (Coimbatore) Limited [1969] 24 S.T.C. 274 referred to above,it has been observed that the effect of Section 18-A of the Madras GeneralSales Tax Act, 1939, is that the aggrieved party cannot by-pass theseprovisions and seek remedy by way of suit under the common law, and urge thatwhat has been paid by him is one paid under a mistake of fact and law andtherefore refundable under the general principle stated in Section 72 of theIndian Contract Act. The learned First Assistant Judge has proceeded on thebasis that that observation will not apply to the facts of the present caseand he has observed that the respondents in that case had 'gone to the civilcourt under some other context, namely, to question the assessment made by thetax authorities even before going to the High Court to get a decision whetherthe tax assessed was proper or legal. On the other hand, so far as the factsof the present case are concerned, there has been a categorical decision bythe High Court that the transactions of the advertising agencies are not salesand they could not be assessed for sales tax payment. Inasmuch as it has beenheld that the taxes of the kind levied on the plaintiff are illegal, it isopen to the plaintiff to have come to the civil court to get a refund of thesame. The plaintiff does not seek the setting aside or modification of theassessment orders made by the commercial tax authorities, but simply wants arefund of the money that has been collected from it illegally'. We are of theopinion that this view of the learned First Assistant Judge is whollyincorrect, for, the respondent cannot recover the money except on the basisthat the orders of the appropriate authorities assessing the respondent tosales tax are illegal and cannot be allowed to stand. There can be no orderfor refund of the amount except on an implied finding that the said orders areillegal and unsustainable.

20. Mr. V. Ratnam very strongly relied uponthe decision of the Supreme Court in Dhulabhai v. State of Madhya Pradesh, : [1968]3SCR662 . The contention of the plaintiffs in the suits filed forthe refund of tax collected under Section 5 of the Madhya Bharat Sales TaxAct, 1950, in those cases was that the amount was illegally collected againsta constitutional prohibition under Article 301 and the levy was not savedunder Article 304(a). The notifications issued by the Government imposing taxon tobacco imported at different rates was declared void in the Bhailal Bhai'scase : [1964]6SCR261 . The main defence was that the Madhya BharatAct contains provisions of appeal, revision, rectification and reference andthat the suits were barred by the provisions of Section 17 of that Act whichprovided:

Save as is provided in Section 13, no assessmentmade and no order passed under this Act or the Rules made thereunder by theassessing authority, appellate authority or the Commissioner shall be calledinto question in any court, and save as is provided in Sections 11 and 12 noappeal or application for revision shall lie against any such assessment ororder.

21. The District Judge found that the suits weremaintainable. But, on appeal by the State of Madhya Pradesh, the High Courtreversed the decision of the District Judge, though it had been conceded thatthe tax could not be imposed in view of the bar of Article 301. The SupremeCourt allowed the appeal preferred against the decision of the High Court.Reference has been made in the decision of the Supreme Court to the decisionin the Kamala Mills' case, : [1965]57ITR643(SC) without any disapproval. TheSupreme Court has laid down seven propositions on an analysis of the variousdecisions. They are:

(1) Where the statute gives afinality to the orders of the special tribunals the civil courts' jurisdictionmust be held to be excluded if there is adequate remedy to do what the civilcourts would normally do in a suit. Such a provision, however, does notexclude those cases where the provisions of the particular Act have notbeen complied with or the statutory tribunal has not acted in conformitywith the fundamental principles of judicial procedure.

(2) Wherethere is an express bar of the jurisdiction of the court, an examinationof the scheme of the particular Act to find the adequacy or the sufficiency ofthe remedies provided may be relevant but is not decisive to sustain thejurisdiction of the civil court.

Where there is no express exclusion,the examination of the remedies and the scheme of the particular Act to findout the intendment becomes necessary and the result of the inquiry may bedecisive. In the latter case, it is necessary to see if the statute creates aspecial right or a liability and provides for the determination of the rightor liability and further lays down that all questions about the said right andliability shall be determined by the tribunals so constituted, and whetherremedies normally associated with actions in civil courts are prescribed bythe said statute or not.

(3) Challenge to the provisions of theparticular Act as ultra vires cannot be brought before tribunals constitutedunder that Act. Even the High Court cannot go into that question on arevision or reference from the decision of the tribunals.

(4) When aprovision is already declared unconstitutional or the constitutionality of anyprovision is to be challenged, a suit is open. A writ of certiorari mayinclude a direction for refund if the claim is clearly within the timeprescribed by the Limitation Act but it is not a compulsory remedy to replacea suit.

(5) Where the particular Act contains no machinery forrefund of tax collected in excess of constitutional limits or illegallycollected, a suit lies.

(6) Questions of the correctness of theassessment apart from its constitutionality are for the decision of theauthorities and a civil suit does not lie if the orders of the authorities aredeclared 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 itis a relevant enquiry.

(7) An exclusion of the jurisdiction of thecivil court is not readily to be inferred unless the conditions above set downapply.

22. Mr. Ratnam relied on proposition No. (5) andsubmitted that the collection of the sales tax in this case was illegal on theground that no sale was involved in the transactions carried on by therespondent and, therefore, the civil court has jurisdiction to entertain thesuit. It must be noted that it has not been contended that there was anythingunconstitutional in the case or that the refund of the amount is claimed onthe ground that any provision of the Act, under which the amount was purportedto have been collected by the appropriate authorities, had been declared ultravires for the relevant period. The decision of this Court in the aforesaidW.P. Nos. 2465 to 2468, 2702 to 2708 and 2767 to 2770 of 1966 was notinterparties and the judgment rendered therein is not a judgment in rent, ashas been mentioned earlier. The decision in those writ petitions can be takenonly as a piece of evidence or circumstance. The respondent has to prove thatno sale was involved in the business carried on by it and, therefore, no salestax was leviable under the Act. The enquiry as to whether no sale was involvedin the business carried on by the respondent could be made only by thetribunals constituted under the Act, as mentioned above, in the variousprovisions, namely, Sections 31(1), 36 and 38, and also in Sections 32, 34, 35 and 37 of the Act. As said earlier, the amount could not be refunded except onthe footing that no assessment could have been made on the business carried onby the respondent. Section 51 of the Act clearly lays down that no suit orother proceedings shall, except as expressly provided under the Act, beinstituted in any court to set aside or modify any assessment made under theAct. No doubt, the respondent has not specifically prayed for setting aside ormodifying the assessment orders made for the years 1961-62 to 1965-66, but, aswe stated earlier, the amount collected as sales tax under the provisions ofthe Act could not be refunded except on the footing that the assessment ordersare invalid. Therefore, Section 51 of the Act would clearly bar the suit. Wedo not think that, by laying down the fifth proposition in the Dhulabhai'scase, A.LR. 1969 S.C. 78 the Supreme Court has held broadly that every orderof assessment, which is not in accordance with law, is such as could bechallenged by instituting a suit in a civil court without having recourse tothe provisions specifically made available in the Act for questioning thecorrectness of the same. We say this, having regard to the fact that, in thatcase, the Supreme Court has not differed from its earlier decision in theKamala Mills' case, : [1965]57ITR643(SC) which has been referred to in thedecision without any disapproval, and the Supreme Court had held in the KamalaMills' case3 that for the purpose of Section 20 of the Bombay Sales Tax Act,which corresponds to Section 18-A of the Madras General Sales Tax Act of 1939and Section 51 of the present Act, they were not prepared to hold that anassessment based on an erroneous finding about the character of thetransaction is an assessment made without jurisdiction and is, as such,outside the purview of Section 20 of the Bombay Sales Tax Act, that Section 20of the Act is wide enough to cover all assessments made by the appropriateauthorities under the Act, whether the said assessments are correct or not,that it is the activity of the assessing officer acting as such officer whichis intended to be protected, and as soon as it is shown that exercisinghis jurisdiction and authority under the Act an assessing officer has made anorder of assessment, that clearly falls within the scope of Section 18-A andthat whether or not an assessment has been made under the Act will not dependon the correctness or accuracy of the order passed by the assessing authority,and Section 20 of the Bombay Sales Tax Act should be construed in the samemanner in which Section 18-A of the Madras Act of 1939 was construed by theSupreme Court in the Firm of Illuri Subbayya Chetty and Sons' case [1963] 14S.T.C. 680 (S.C.). These observations made by the Supreme Court in the KamalaMills' case, : [1965]57ITR643(SC) are a complete answer to the submission ofMr. Ratnam that because the tax had been levied on transactions similar tothose held in the aforesaid W.P. Nos. 2465 to 2468, 2702 to 2708 and 2767 to2770 of 1966 to be not taxable as admitted for the future years by theappropriate authorities themselves in exhibit B-6, it must be held that theassessments are illegal in the sense that they could be questioned by filing aregular suit in the civil court without having recourse to the provisionscontained in the Act itself for correcting such errors. Therefore, we are ofthe opinion that the decision of the Supreme Court in the Dhulabhai's case, : [1968]3SCR662 does not help the respondent.

23. Mr. V. Ratnamnext relied upon a decision of a Bench of the Andhra Pradesh High Court inState of Andhra Pradesh v. Appanna Satyanarayana Murthi and Raja Rao & Co.[1970] 26 S.T.C. 190 In that case, the plaintiffs were dealers registeredunder the Andhra Pradesh General Sales Tax Act and carrying on business incopra. They were assessed on their turnover in copra for the year 1957-58 andthe subsequent years. Under the Act separate sales tax could be levied oncoconuts and copra as two separate commodities at the time of the assessmentin that case. But by Act No. 26 of 1961 there was an amendment deleting coprafrom the commodities assessable to sales tax and an explanation brought in bythe amendment provided for inclusion of copra in the definition of 'coconut'and the amendment was retrospective from 15th June, 1957. The allegation inthe plaint in that case was that as a result of the amendment the levy ofsales tax and its collection had become illegal and that the plaintiffs wereentitled to refund of the tax paid by them under coercion. The claim wasresisted on several grounds, including the ground of non-maintainability ofthe suit in the civil court. The trial Judge held that the claim did notpertain to the merits or propriety of the assessment and that the jurisdictionof the civil court to entertain the suit was not barred. Even in the appeal itwas contended that the civil court had no jurisdiction to entertain the suitand also the claim for refund is unsustainable, because the assessment itselfhad not been set aside or modified. The contention regarding thenon-maintainability of the suit was repelled by the learned Judges and theyhave observed:

It is necessary to take notice of an aspectpeculiar to these cases. The claim for restitution arises by reason of asupervening event. Where the claim for restitution arises because of suchevent and the retention of the tax previously collected is challenged as an'illegal act', the cause of action rests on facts or actions of authoritiesthat are impugned, which are de hors the statute under which the levy andcollection had been made. It appears to us that in the circumstances like thepresent, the test whether the statute bars the action in a civil court isobviously inappropriate. The remedy that is sought in civil courts is for theredress of a wrong done not under a colour of taxing statute but because ofsomething extraneous to it. The action is in essence in respect of somethingdone or omitted to be done, not under the said enactment but outside thepurview of the jurisdiction or power conferred by the said enactment.Therefore, the question as to whether the remedy by a resort to civil court isbarred in these cases on hand by reason of the preclusive provisions of thespecial law, does not arise at all. The act complained of is an illegalretention of the amount and the illegal retention of the amount is an act notdirectly attributable to any power conferred by the special enactment. Nordoes the special enactment provide any machinery for challenging the illegalretention of the tax that was collected.

23. In the earlierpart of the judgment, the learned Judges have observed:

Thelearned Government Pleader sought to impress on us that these cases on handare governed by the ruling in the Kamala Mills' case, : [1965]57ITR643(SC) .We cannot agree with his contention. That decision turned on the principlethat an authority vested with jurisdiction and powers under the relevant Acthas the competence to determine whether a particular transaction was anoutside sale and even if the authority commits an error, it is nevertheless anerror within its jurisdiction and is capable of being corrected by theappellate forum. The error is one within jurisdiction and no fundamentaldeparture from the statutory provisions is made so as to permit a review by acivil court. We think that there is no warrant for the application of thatrule in the cases on hand.

24. We do not see how thisdecision would apply to the facts of the present case where the refund of theamount is sought not on the basis of anything which is extraneous to theprovisions of the Act under which the amount purports to have been collectedas tax but only by contending that the business carried on by the respondentdid not involve any element of sale and could not, therefore, be taxed underthe provisions of the Act, which recourse, in view of Section 51 of the Act,could be had only before the hierarchy of tribunals constituted under theprovisions of the Act itself.

25. Mr. V. Ratnam finally relied upon thedecisions of the House of Lords in Anisminic Ltd. v. Foreign CompensationCommission [1969] 1 All E.R. 208. and of the Supreme Court in Raja JagadambikaPratap Narain Singh v. Central Board of Direct Taxes : [1975]100ITR698(SC) (S.C.) and submitted that the orders of assessment of the respondent for theyears 1961-62 to 1965-66 are nullities and they could be questioned in a civilcourt. In the English case, the appellants before the House of Lords submitteda claim for the first respondent, the Foreign Compensation Commission, whosedetermination thereof could not be questioned in any court of law by virtue ofSection 4(4) of the Foreign Compensation Act, 1950. In May, 1963, theCommission provisionally determined that the appellants before the House ofLords had failed to establish their claim on the ground that the T.E.D.O.,which had become the successor-in-title to the appellants, was not at any timea British national. The appeal before the House of Lords was from an orderof the Court of Appeal allowing the appeal of the Commission filed against theorder of Browne, J., declaring that the provisional determination by theCommission was made with-out or in excess of the jurisdiction and was anullity. Section 4(4) of the Foreign Compensation Act, 1950, provided that thedetermination by the Commission of any application made to them under that Actshall not be called in question in any court of law. The Commission contendedin that case that there was a provisional determination of the claim by it andit was apparently valid as there was nothing on the face of the document tocast any doubt on its validity, and if it was a nullity it could beestablished only by raising some kind of proceedings in court, and that isexpressly prohibited by Section 4(4) of the Act. But the appellants before theHouse of Lords contended that that is not the meaning of the words of theprovision and that 'determination' means a real determination and does notinclude an apparent or purported determination which, in the eye of the law,has no existence because it is a nullity. Lord Reid has observed in hisjudgment:

It is a well-established principle that aprovision ousting the ordinary jurisdiction of the court must be construedstrictly--meaning, I think, that, if such a provision is reasonably capable ofhaving two meanings, that meaning shall be taken which preserves the ordinaryjurisdiction of the court.

Statutory provisions which seek to limit theordinary jurisdiction of the court have a long history. No case has been citedin which any other form of words limiting the jurisdiction of the courts hasbeen held to protect a nullity....

It has sometimes been said that itis only where a tribunal acts without jurisdiction that its decision is anullity. But in such cases the word 'jurisdiction' has been used in a verywide sense, and I have come to the conclusion that it is better not to use theterm except in the narrow and original sense of the tribunal, being entitledto enter on the enquiry in question. But there are many cases where, althoughthe tribunal had jurisdiction to enter on the enquiry, it has done or failedto do something in the course of the enquiry which is of such a nature thatits decision is a nullity. It may have given its decision in bad faith. It mayhave made a decision which it had no power to make. It may have failed in thecourse of the enquiry to comply with the requirements of natural justice. Itmay in perfect good faith have misconstrued the provisions giving it power toact so that it failed to deal with the question remitted to it and decidedsome question which was not remitted to it. It may have refused to take intoaccount something which it was required to take into account. Or it may havebased its decision on some matter which, under the provisions setting it up,it had no right to take into account. I do not intend this list to beexhaustive. But if it decides a question remitted to it for decision withoutcommitting any of these errors, it is as much entitled to decide that questionwrongly as it is to decide it rightly....If it is entitled to enter on theenquiry and does not do any of those things which I have mentioned in thecourse of the proceedings, then its decision is equally valid whether it isright or wrong subject only to the power of the court in certain circumstancesto correct an error of law.

26. The appeal was allowedby the majority of the three Law Lords, Lord Morris of Borth-y-Gest and LordPearson dissenting, and two of the majority of the Law Lords holding that theprovisional determination by the Commission was a nullity.

27. Theassessment orders in the present case had been passed on the returns submittedby the respondent itself admitting that the transactions were liable to betaxed under the provisions of the Act. Therefore, it could not be stated thatthe assessment orders, in pursuance of which the amount had been paid by therespondent, were a nullity.

28. In Raja Jagadambika Pratap Narain Singhv. Central Board of Direct Taxes : [1975]100ITR698(SC) it has beenobserved:

Mere exemptions from taxation of income otherwisecompetently taxable fell wholly within the jurisdiction of the officer fordetermination. There is a fundamental difference where the claim is thatagricultural income is beyond the legislative competence of Parliament toenact and altogether outside the jurisdiction of the Income-tax Officer. Itmay well be contended that the impost is ultra vires his powers and,therefore, a nullity. Merely because an order has been passed by the officerand has not been appealed against, it does not become legal and final ifotherwise it is void: for instance, if there is a flagrant violation ofnatural justice, the order by a Tribunal may be a nullity.

29. As stated earlier, the assessment orders have been made by theappropriate authority on the admission made by the respondent in the returnssubmitted for the relevant years admitting that the transactions were liableto be taxed under the provisions of the Act and there is no question of anylegislative incompetence in the present case. Even if the appropriateauthorities had committed any error in exercising the jurisdiction conferredupon them by the provisions of the Act, it could not be stated that they hadno jurisdiction and, therefore, their orders are nullities, for, it has beenobserved in the Kamala Mills' case, : [1965]57ITR643(SC) as stated earlier,that whether or not an assessment has been made under the Act will not dependon the correctness or accuracy of the order passed by the assessing officerand that it is the activity of the assessing officer acting as such officerwhich is intended to be protected and as soon as it is shown that exercisinghis jurisdiction and authority under the Act an assessing officer has made anorder of assessment, that clearly falls within the scope of Section 51 of theAct corresponding to Section 18-A of the Act of 1939. We are, therefore, ofthe opinion that these last two decisions relied upon by Mr. Ratnam do nothelp the respondent.

30. Thus, on a consideration of the variousdecisions to which our attention had been drawn and the materials on records,we hold that the assessment orders in this case had been passed on the basisof the admission made by the respondent in the returns submitted by therespondent for the relevant years, that the appropriate authorities hadjurisdiction to pass the orders of assessment, that the amounts could not beordered to be refunded to the respondent except on the fooling that theassessment orders are erroneous, that the finding that the assessment ordersare erroneous which alone would lead to an order for refund of the amountcollected in pursuance thereof could be given only by the Tribunalsconstituted in accordance with the provisions of the very Act, that there wasa provision for refund of the amount wrongly collected in Rule 16, which hasnow been replaced by Section 39-A of the Act, and that the civil court has nojurisdiction to entertain the suit by virtue of Section 51 of the Act.

31. We accordingly allow the appeal with costs throughout and set aside thejudgment and decree of the learned First Assistant Judge and dismiss thesuit.


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