The Provincial Government of Madras Vs.
J. S. Basappa [1963] INSC 225 (20 November 1963)
20/11/1963 HIDAYATULLAH, M.
HIDAYATULLAH, M.
SARKAR, A.K.
SHAH, J.C.
CITATION: 1964 AIR 1873 1964 SCR (5) 517
CITATOR INFO :
D 1965 SC1942 (28) O 1967 SC1738 (3,6,7) RF
1969 SC 78 (23,25,31) E 1969 SC 343 (11)
ACT:
Jurisdiction of Civil Courts-Statute
conferring finality of orders of assessment-levy of tax without jurisdiction-If
Civil Courts' jurisdiction excluded-Compost turnover- Transactions Validly
taxed and those not, severability of- Madras General Sales Tax Act, 1908 (IX of
1908), ss. 11, 12.
HEADNOTE:
The respondent, a groundnut-oil merchant
filed three suits alleging that the property in some goods remained with him
till the except of the-goods to an extra-provincial point and till the payment
of price after export, and sales tax was not demandable on these sales under
the Madras General Sales Tax Act, 1933. The appellant contended that the sales
were not inter-provincial sales, the suits were not maintainable in a civil
court, the respondent had not exhausted his' alternative remedies and the suits
were barred by limitation under s. 18 of the Act.
Before the High Court an additional ground
based upon the decision in M/s. Ram Narain Sons Ltd. v. Assistant Commissioner
of Sales Tax, [1955] 2 S.C.R. 483 was raised that the whole assessment was
invalid because it included an illegal levy which, was not severable from the
legal demand., Held: (i) Section 18 of the Sales Tax Act applies to suits for
damages and compensation in respect of acts done under the Act. 'Me period of
limitation prescribed in that section does not apply to the kind of suits which
were filed by the respondent.
(ii) The jurisdiction of civil courts is not
necessarily taken away when the decision of a tribunal is made, final, because
the civil court's jurisdiction to examine the order with reference to
fundamental provisions of the statute, non-compliance with which would make the
proceedings illegal and without jurisdiction, still remains unless the statute
goes further and states either expressly or by necessary implications that the
civil court's jurisdiction is completely taken away.
(iii) Applying the above principle the
jurisdiction of the civil court was not taken away as the taxing of 'outside'
sales was a matter wholly outside the jurisdiction of the taxing authorities.
Firm of Illuri Subhayya Chetty & Sons v.
State of Andhra Pradesh, [1964] 1 S.C.R 752 and Secretary of State represented
by the Collector of South Arcot v. Mask & Co. 67 I.A. 222.
518 (iv) The entire assessment was void
because it was not possible in the present case to separate from the composite
turnover transaction which were validly taxed from those which were not, in as
much as this pertains to the domain of tax officers and the courts have no
powers within that domain.
M/s. Ram Narain Sons Ltd. v. Assistant
Commissioner of Sales Tax, [1955] 2 S.C.R. 483 and Bennett & White,
(Calgary) Ltd. v. Municipal District of Sugar City, [1951] A.C. 786.
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 494-496 of 1962.
Appeal from the judgment and decrees dated
March 12, 1957, of the Andhra Pradesh High Court in A.S. Nos. 566 to 568 of
1961.
A.V. Viswanatha Sastri, T.V.R. Tatachari and
B.R.G.K. Achar, for the appellants.
Bhimsankaram, Chander Kohli and E.
Udayaratnam, for respondents.
November 20, 1963. The Judgment of the Court
was delivered by HIDAYATULLAH, J.-This judgment will dispose of Civil Appeals
Nos. 494 to 496 of 1962. The State of Andhra Pradesh which now stands
substituted for the Provincial Government of Madras is the appellant. The
respondent is one J.S.
Basappa, a groundnut-oil merchant of Kurnool
who was selling oil within the Province and also exported it to extra-
Provincial points. These three appeals concern salestax for the years 1944-45,
1945-46 and 1946-47. They arise out of three suits filed by Basappa against the
Provincial Government of Madras now represented by the Government of Andhra
Pradesh, the details of which are given below.
For the year 1944-45, Basappa was assessed to
sales-tax amounting to Rs. 12,983-2-2 of which, according to him, a sum of Rs.
1,594-1-5 only represented sales within the Province. He claimed that the
remaining sales took place outside the Province of Madras. He submitted that
property in the goods remained with him till the export of the goods to an
extraProvincial point and till payment of price after export. He claimed that
these sales could not be included in 519 his 'turnover under the Madras General
Sales-tax Act, 1939 (Act No. IX of 1939) and sales-tax was wrongly demanded
from him. In respect of this assessment, he filed O.S. No. 14 of 1950 (original
No. 0. S. 40 of 1949) in the Court of the Subordinate Judge, Kurnool for refund
of Rs. 11,389-0-9 ps.
The Madras State Government in a written
statement traversed 'all the allegations and stated that delivery of the goods
was made in Kurnool when the goods were booked and further that the goods were dispatched
at buyer's risk and remained at buyer's risk throughout, it also contended that
the notice under s. 80 was not proper and the suit was not in accordance with
that notice and was not maintainable because the orders under the Sales-tax Act
were made final by s. 11(4) of the Sales-tax Act and because Basappa had not
exhausted his other remedies under the Salestax Act.
Lastly, it contended that the suit was barred
by time not having been filed within six months from 'the date of the act
complained of as required by s. 18 of the Sales-tax Act or within one year as
required by Art. 16 of the Indian Limitation Act.
In respect of the year 1945-46, Basappa filed
O.S. No. 44 of 1949 claiming a refund of Rs. 8,356/on similar grounds, and in
respect of the year 1946-47 he filed O.S. No. 23 of 1949 for a declaration that
the levy of Rs. 9,23 3-6-7 was illegal and without jurisdiction and for a
permanent injunction to restrain the taking authority from collecting the tax.
In this suit, in addition to the'defences also taken in the other suits it was
contended that, the suit was incompetent as a revision application was pending
with the Board of Revenue.
These suits were disposed of by the
Subordinate Judge,, Kurnool by a common judgment dated February 22, 1951. -The
main points which were decided were:- (1) whether the suits were not
maintainable as (a) the civil court had no jurisdiction and (b) the assessee
had not exhausted his other remedies, (2) whether the suits were barred by
time, and ( 3) whether the sales took place outside -the Province of Madras and
the 520 levy of the tax in respect of some- of the transactions was illegal.
The Subordinate Judge held that. there was nothing in the Sales-tax Act to
exclude the jurisdiction of, the civil court and that the finality spoken of by
s' 11 ,of the Sales-tax Act- was, a finality arising under the Sales-tax Act
and had, no reference to-, the jurisdiction of the civil court. He -also held
that Basappa was not required to exhaust his other remedies before moving the
civil court by suit. On, the second point, the Subordinate Judge: held that
O.S. No.. 14 of 1950 and 44 of 1949 were barred by time under s. 18 of the
Sales-tax Act or Art. 16 of the Limitation Act whichever might be applied. The
learned Subordinate Judge held that Art. 62 of the Limitation Act was not
'applicable because Basappa had not pleaded in these two-.suits that payment of
the, tax was made under a mistake. The Subordinate Judge,, however, held that
O.S.
No. 23 of 1949 was in time. In O.S. No. 14 of
1-950 and 44 of 1949, he recorded findings that tax amounting to Rs. 7,203-12-9-in
respect of O.S. 14 of 1950 and Rs. 5,370-7-0 in respect of O.S. No. 44 of 1949
were wrongly levied,, because those amounts concerned sales which took place
outside the Province of Madras. In O.S. 23 of 1949 he held that sales of the
value of Rs. 79,465/- took Place outside the Province and tax in respect of
them at 1 % (which was the uniform rate applicable to all the three years) was
not demandable.' A -declaration to this 'effect' was granted and an injunction
was issued restraining the State Government' from recovering Rs. 793-10-6 from
Basappa. In the result.
O.S. No.14 f 1950 and 44 of 1949 were
dismissed' 'with costs and O. S. No. 23 'of 1949 was 'partially decreed with
proportionate costs.
Basappa appealed in: all the three suits
against the decision, of the Subordinate; Judge, Kurnool. The Government of
Madras objected-in-the appeal of Basappa from% the. decision in 0.S. No. 23 of
1949 in respect: of the decree for Rs. 793-10-6. In the High Court,'
applications were made in, the appeals for urging an: -additional ground that
the whole assess- 521 ment, was invalid because it included an illegal levy
which was not severable from the legal demand. This ground 'was based upon the
decision of this Court in M/s. Ram. Narain Sons Ltd. v. Assistant Commissioner
of Sales Tax and others (1) This request was not opposed and permission was
granted to Basappa. . The High Court differed from the Subordinate Judge on the
question of limitation and held that neither s. 18 of the Sales-tax Act nor
Art. 16 of the Limitation Act was applicable to., the suits, which were
governed by Art.
62 'of the Limitation Act. The High Court
accordingly held that O.S. 14 of 1950 and O.S. 44 of 1949 which were dismissed
as barred by time were not barred. On the' main question, the High Court
classified all the sales into four categories which were:
1. Where the plaintiff himself was the
consignor as well as the consignee,
2. Where the plaintiff himself was the
consignor and the 'buyer the consignee,
3. Where the buyer was the consignor as well
as the consignee, and
4. Where a third party was shown as the
consignor, the consignee being the plaintiff.
The Subordinate Judge had held that sales-tax
was properly demandable in respect of categories 2 and 3 but not in respect of
categories 1 and 4. The second part of the decision was not assailed before the
High Court. The High Court again considered categories 2 and 3 and held that
sales coming under those categories were properly assessable to sales-tax as the
sales took place within the Province of Madras. The High Court, however,,
acting upon the decision of this court in Ram Narain's case(1) held that the
legal and the illegal levies were so mixed up that the entire demand for tax
was rendered illegal and void. In the result, the appeals filed by Basappa were
allowed and the cross-objection filed by the Provincial Government of Madras
was dismissed. The High Court certified these cases and the present appeals
have been filed.
(1) [1955] 2 S.C.R. 483.
522 Three questions are raised by Mr. A.V.
Viswanatha Sastri.
They are, (1) that the civil court had no
Jurisdiction to try these suits, (2) that the suits O.S. 14 of 1950 and 44 of
1949 were barred by time under s. 18 of the Sales-tax Act and (3) that the High
Court was wrong in holding that the assessments were not capable of being split
up and in declaring the total assessments to be void.
The first two points give no trouble at all.
Section 18 of the Act reads:
"No suit shall be instituted against
the, Government and no suit, prosecution or other proceeding shall be
instituted against any Officer or servant of the State Government in respect of
any act done or purporting to be done under this Act, unless the suit,
prosecution or other proceeding is instituted within six months from the date
of the act complained of." This section applies to suits for damages and
compensation in respect of acts under the Act. It is worded in familiar
language by which 'authorities, including Government, are protected and
indemnified in respect of bona fide acts done or purporting to be done under
powers conferred by the statute. The period of limitation prescribed in the
section does not apply to the kind of suits which were filed by Basappa. This
Point has no substance and was not even pressed in the High Court.
Similarly, the first point must also be
decided against the State of Andhra Pradesh, because of a recent, decision of
this court in Firm of tlluri Subhayya Chetty Sow v. The State of Andhra
Pradesh(1) That case was decided under s.
18A of the Madras General Sales-tax Act which
was inserted by s. 10 of the Madras General 'Sales-tax Amendment Act, 1951
which came into force on May 15, 1951. That section reads "No suit or
other proceeding shall, except as expressly 'provided in this Act, be
instituted (1) [1964] 1 S.C.R. 752.
523 in any Court to set aside or modify: any
assessment made under this Act." The present appeals have to be decided
without the assistance of s. 18A, because the suits were filed in the Court of
Subordinate Judge, Kurnool and were decided by him before the amendment came
into force . Prior to the insertion of s. 18A there was no: specific provision
taking away the jurisdiction of the civil court except s. 11(4) by which a
finality attached to orders passed in appeal. Under that section, appeals were
provided in respect of orders of assessment and there was also a provision for
revision in s. 12. It was provided by sub-s. (4) of s. II that "every
order passed in appeal under this section, shall, subject to the powers of
revision conferred by s. 12, be final.'.' While enacting s. 18A the Legislature
added an elaborate machinery which did not exist earlier for correcting
assessments.
Mr. Sastri contends that in deciding whether
the civil court's jurisdiction is barred we must take into account the
provisions of s. 11 and s. 12, because these provisions which provide adequate
remedies " march with the construction" of s. 11(4). He submits that
the finality which was conferred on the appellate order subject to a revision
must necessarily be a finality against determination of the same question by
the civil court. It is pointed out by-,this court in Chetty's case(1) that the
exclusion of the jurisdiction of the civil court is not to be readily inferred and
that even -if a provision giving the orders a finality was enacted, civil
courts-still have jurisdiction to interfere where fundamental, provisions of
the Act are not complied with, or where the statutory Tribunals do not act in
conformity with the fundamental principles of judicial procedure.
Gajendragadkar, J. speaking for the court on that occasion summed up the law as
follows:
"In dealing with the question whether
Civil Courts' jurisdiction to entertain a suit is barred or not,' it is
necessary to bear in mind the fact that there. is a general presumption that
there (1) [1964] 1 S.C.R. 752.
524 must be a. remedy in the. ordinary civil
courts to a citizen claiming that an amount- has been recovered from him
illegally and that such a remedy can be held to be barred only on very clear
and unmistakable indications to the contrary. The exclusion of the jurisdiction
of Civil Courts to entertain civil. causes will not be assumed unless the
relevant statute contains an express provision to that, effect, or leads to a
necessary and inevitable implication of that nature. The mere fact that a
special statute, provides for certain remedies may not by itself necessarily
exclude the jurisdicti on of the civil courts to deal with a case brought
before it in respect of some of the matters covered by the said statute.,"
Referring to the remarks of Lord Thankerton in Secretary of State represented
by the Collector of South Arcot v. Mask & Co.(1)-"it is also
well-settled that that even if jurisdiction is so excluded, the civil courts
have jurisdiction to examine into cases where the, provisions of the Act have
not been complied with, or the statutory tribunal has not acted in conformity
with the fundamental principles of judicial Procedure"-it was observed:
"It is necessary to add that these
observations, though made in somewhat wide terms, do not justify the assumption
that if a decision has been made by a taxing authority under the, provisions of
the relevant taxing statute, its validity can be challenged by a suit on the
ground that it..is incorrect on the merits and as- such, it can be claimed that
the provisions of the said statute have not been complied with. Non-compliance
with the provisions of the statute to which reference is made by the Privy
Council must, we think, be non-compliance with such fundamental provisions of
the statute. as would make the entire proceedings before the appropriate
authority illegal and without jurisdiction. Similarly, if an appropriate
authority has acted in violation (1) 67 I.A. 222 at 236.
525 of the fundamental principles of judicial
procedure, that may also tend to make the proceedings illegal and void and this
infirmity may affect the validity of the order passed by -the authority in
question." It was thus held that the civil court's jurisdiction may not be
taken away by making the decision of a tribunal final, because' the civil
court's jurisdiction to examine the order, with reference to fundamental
provisions of the statute non-compliance with which would make the proceedings illegal
and without jurisdiction, still remains, unless the statute goes further and
states either expressly or by necessary implication that the civil court's
jurisdiction is completely taken away,.
Applying these. tests, it is clear that
without a provision like s. 18A in the Act, the jurisdiction of the civil court
would not be 'taken and at least where the action of the authorities is wholly
outside the law and is not a mere error in the exercise of jurisdiction. Mr.
Sastri says that we must interpret the Act in, the same way as if s. 18A was
implicit in it and that s. 18A was added to make explicit what was already
implied. We cannot agree. The finality that statute conferred upon orders of
'assessment, ;.Subject, however, to appeal and revision, was a finality for the
purposes of 'the Act. It did not make valid an action which was not warranted
by the Act, as for example, the levy , of tax on a commodity ;which was not
taxed at all or was exempt. In. the. present case, the taxing of sales which
did not take place within the State was a matter wholly. outside the
jurisdiction of the taxing authorities and in respect of such illegal action.
the jurisdiction of the civil, court continued to subsist. In our judgment the-
suits were competent.
The last question is whether the assessment
as a whole must fail or only in respect of the part which was outside the'
jurisdiction of the sales tax authorities We have already reproduced the four
categories into 'Which all the transactions of sale 'were classified. The High
Court and the Court below. found that 526 categories 1 and 4 represented
transactions of sale which could not be taxed at all by the authorities as
those transactions took place outside the State. It may be mentioned that the
Sales-tax Act did not then contain any provision which established a nexus
between the sales and the Province. That provision came later. The High Court
relying upon Ram Narain's case(" held that the assessments as a whole must
fail. In Ram Narain's case a portion of the assessment was invalid under Art.
286 of the Constitution and the question was whether the total assessment must
fail.
This Court observed:
"The necessity for doing so is, however
obviated by reason of the fact that the assessment is one composite whole
relating to the pre-Constitution as well as the post- Constitution periods and
is invalid in to There is authority for the proposition that when an assessment
consists of a single undivided sum in respect of the totality of the property
treated as assessable, the wrongful inclusion in it of certain items of
property which by virtue of a provision of law were expressly exempted from
taxation renders the assessment invalid in toto." This Court cited with
approval a passage from Bennett & White (Calgary) Ltd. and Municipal
District of Sugar City No. 5(2) where the Judicial Committee observed :
"When an assessment is not for an entire
sum, but for separate sums, dissected and earmarked each of them to a separate
assessable item, a -court can sever the items and cut out one or more along
with the sum attributed to it, while affirming the' residue. But where the
assessment consists of a single undivided sum in respect of the totality of
property treated assessable and when one component (not dismissible as 'de minimize)
is on any view not assessable and wrongly included, it would seem clear that
such .a procedure is barred and the assessment is (1) [1955] 2 S.C.R. 483.
(2) [1951] A.C, 786 at 816.
527 bad wholly. That matter is covered by
authority. In Montreal Light Heat & Power Consolidated v. City of Westmount
(1926) S.C.R. (Can.) 515 the court (see especially per Anglin C.J.) in these
conditions held that an assessment Which was bad in part was infected
throughout and treated it as 'invalid. . Here their Lordships are of opinion,
by parity. of reasoning,; that the assessment was invalid in to." It is
urged by Mr. Sastri that the tax here is at the uniform rate of 1 % and as all
the returns and documents necessary to separate the bad part from the good are
available, there is no need to cansel the whole assessment.
He contends that these cases are rather
governed by the other rule that where the assessment is for separate sums, only
that portion need be declared illegal which is void.
It is necessary to explain the distinction
between the two classes of cases and how they are to be distinguished. A
difference in approach arises only in those cases where the assessment of many
matters results in amounts of tax which though parts of the whole assessment,
stand completely separate. There the court can declare the "separate
dissected and earmarked', items illegal and excise them from the levy. In doing
so, the court does not arrogate to itself the functions of the taxing
authorities; but where the tax is a composite one and to separate the good part
from the bad, proceedings in the nature of assessment have to be undertaken,
the civil court lacks the jurisdiction.
Here, the amount of tax is a percentage of
the turnover and the turnover is a mixed one and it is thus not merely a
question of cutting off some items which are separate but of entering upon the
function of assessment which only the authorities under the. Sales-tax Act can
undertake. Cases of assessment based upon gross valuation such as the case from
Canada referred to by the Judicial' Committee afford a, parallel to a case of
assessment of a composite turnover such as we have here. Just as in the
Canadian case it was not possible to separate the valuation of movable
properties from 528 that of immovable properties, embraced in a gross valuation
roll, so also here, it is not possible to separate from' the composite
'turnover transactions which are .validly taxed, from those which are not, for
that must pertain to the domain of tax officers and the courts have no powers
within that domain. In our opinion, the High Court was right in declaring the
total assessment: to be affected by -the portion which was illegal and void.
In the result, these appeals fail and are
dismissed with costs, one set only.
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