State of Kerala Vs. Ramaswami Iyer
& Sons  INSC 45 (11 February 1966)
11/02/1966 SHAH, J.C.
GAJENDRAGADKAR, P.B. (CJ) WANCHOO, K.N.
CITATION: 1966 AIR 1738 1966 SCR (3) 582
RF 1969 SC 78 (17,25) D 1975 SC1801 (2) RF
1975 SC2238 (22) R 1991 SC 435 (19)
Travancore-Cochin, General Sales Tax Act (11
of 1125 M.E.)Suit to recover excess tax paid-Jurisdiction of civil court if
Part of Sales-tax paid by the respondent was assessed
upon the amount which it collected from its customers as salestax and which was
included in its net turnover. A suit by the respondent for refund of that part
of the sales-tax which was charged on the sales-tax collected by the respondent
on the basis that it was not lawfully due under the Travancore-Cochin General
Sales Tax Act, 1950, was decreed by the trial court and the decree was
confirmed by the High Court.
In appeal to this Court, it was contended
that the civil court had no jurisdiction to try the suit.
HELD : By constituting appropriate
authorities under the Act and ,creating a hierarchy of authorities to deal with
the problem of levying tax as contemplated by the Act, the jurisdiction of the
civil court to entertain the suit was excluded by necessary implication. [586
G] Jurisdiction of the civil court to try the suit was not barred by s. 23A
ousting the jurisdiction of the civil court, because that section which was not
retrospective in operation was incorporated into the Act after the suit was
filed. But the jurisdiction of the civil court may be excluded by express
enactment or by necessary intendment arising from the scheme of the Act. The
Travancore-Cochin Sales Tax Act is a complete code dealing with the levy,
assessment, collection and refund of tax. It authorises investment of power in
a hierarchy of authorities to administer the Act. For the purpose of making
assessment of tax, the authorities have power to decide all questions arising
before them, and the orders of the appellate authorities, subject to the
exercise of revisional jurisdiction by the Board of Revenue, were declared
The liability to pay tax arose under and by
virtue of the provisions of the Act and the quantum of liability was determined
under the Act alone. Further, at the material time, there was no express
provision in he Act, which obliged the taxing authority to exclude from the
computation of the taxable turnover the amount of sales-tax collected by the
dealer. Hence, it could not be said that by assessing sales-tax on such amount,
the taxing authority had infringed a prohibition imposed by the statute upon
him. Therefore the principle in Secretary of State for India v. Mask and Co.
L.R. 67 I.A. 222, that civil courts have jurisdiction to examine a case where
the provision-, of the statute have been infringed did not apply in the instant
case. [583 F;
584 C; 585 H-586 B; 589 B] Provincial
Government of Madras v. J. S. Basappa,  5 S.C.R. 517; 15 S.T.C. 144
Kamala Mills v. State of Bombay,  1
S.C.R. 64, followed.
George Oaks v. State of Madras,  2
S.C.R. 570; A.I.R.
1962 S.C. 1037 and K. S Venkataraman v. State
of Madras,  2 S.C.R. 229 referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 1104 of 1964.
Appeal by special leave from the judgment and
decree dated the October 7, 1963 of the Kerala High Court in A.S. No. 190 of
C. K. Daphtary, Attorney-General and A. G.
Pudissery, for the appellant.
T. N. Subbramania Iyer and M. R. K. Pillai,
for the respondent.
The Judgment of the Court was delivered by
Shah, J. For the period August 16, 1950 to March 31, 1951 the respondents were
assessed to sales-tax under the Travancore Cochin General Sales-tax Act, 1950,
by the assessing authority, Moovattupuzha, on a turnover of Rs.
14,04,732/716 which included Rs. 49,318/7/4
collected by the respondents from their constituents as tax on their sale
transactions. The respondents paid the tax assessed and commenced an action in
the Court of the District Judge, Parur, for a decree for Rs. 7,577/9/1 claiming
that the amount was in excess of tax lawfully due from them under the Act. The
Court of First Instance decreed the claim for Rs. 7,477/9/1 with interest and
proportionate costs, and the High Court of Kerala confirmed that decree.
In this appeal with special leave, on behalf
of the State of Kerala the principal ground which falls to be determined is
whether the jurisdiction of the Civil Court to try the suit is excluded.
Section 23-A of the Travancore-Cochin General Sales-tax Act 11 of 1125 M. E.
provides that :
".No suit or other civil proceeding
shall, except as expressly provided in this Act, be instituted in any court to
set aside or modify any assessment made under this Act." But this express
bar on which counsel for the State relied did not exclude the jurisdiction of
the civil court, for s.
23-A was incorporated in the
Travancore-Cochin General Sales-tax Act by Act 18 of 1955 after the suit was
instituted by the respondents, and by s. 23-A as incorporated the jurisdiction
of the civil court to try a suit properly instituted before it was enacted is
Counsel for the respondents submitted that in
the absence of an express provision in the Act excluding the jurisdiction of
the civil court, the courts below were right in holding that the suit was
maintainable, and in support of that contention, he relied upon the decision of
this Court in The Provincial Government of Madras (Now Andhra Pradesh) v. J.S. Basappa
(1). In Basappa's case the (1)  S.C.R. 517:15 S.T.C. 144.
584 assesee who was taxed in respect of
certain sales which took place outside the taxing State, sued the State for a
decree for refund of the amounts paid by him on the plea that the transactions
in respect of which the tax was levied were not taxable under the law. This
Court held that without a provision like S. 18-A of the Madras General
Sales-tax Act, 1939, the jurisdiction to entertain the suit was not taken away,
specially where the action of the authorities was "wholly outside the
law". It was observed in that case that finality attached to orders passed
in 1 appeal by the Act was a finality for the purposes of the Act and I 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." But
the jurisdiction of the civil court may be excluded expressly or by clear
implication arising from the scheme of the Act. Where the Legislature sets up a
special tribunal to determine 'questions relating to rights or liabilities
which are the creation of a statute, the jurisdiction of the civil court would
be deemed excluded by implication. In Raleigh Investment Company Ltd. v.
Governor General in Council(1) the Judicial Committee in dealing with the
question whether the jurisdiction of the civil court to entertain a suit for
refund of income-tax may be deemed to be excluded, apart from the express
exclusion prescribed by s. 67 of the Income-tax Act, by the scheme of the
Income-tax Act, observed ".............. the scheme of the Act (the Income
tax Act) is to set up a particular machinery by the use of which alone total
income assessable for income-tax is to be ascertained. The income-tax exigible
is determined by reference to the total income so ascertained, and Only by
reference to such total income. Under the Act (S.45) there arises a duty to pay
the amount of tax demanded on the basis of that assessment of total income.
Jurisdiction to question the assessment otherwise than by use of the machinery
expressly provided by the Act would appear to be inconsistent with the
statutory obligation to pay arising by virtue of the assessment. The only
doubt, indeed, in their Lordships' mind, is whether an express provision was
necessary in order to exclude jurisdiction in a civil court to set aside or
modify an assessment." In delivering the judgment of the majority in K.S. Venkatarmnan
& Co. (P) Ltd v. State of Madras(2), Sobba Rao, 1., observed :
"If a statute imposes a liability and
creates an effective machinery for deciding questions of law or fact arising in
regard to that liability, it may, by necessary implication, bar the
maintainability of a civil suit in respect of the said liability. A statute may
also, confer exclusive jurisdiction (1) L.R. 74 I.A. 50.
(2)  1 S.C.R, 229.
585 on the authorities constituting the said
machinery to decide finally a jurisdictional fact thereby excluding by
necessary implication the jurisdiction of a civil court in that regard."
in a case recently decided by this Court Kamala Mills Ltd.
v. State of Bombay (1) exclusion of the
jurisdiction of the civil court to entertain and decide suits for refund of tax
paid fell to be determined. In that case a dealer was assessed to tax under the
Bombay Sales-tax Act 5 of 1946 in respect of "outside $ales" which by
virtue of the ban imposed by Art. 286 of the Constitution were not taxable.
The dealer sued to recover the tax paid by
him. This Court held that where the Sales-tax Officer by misconceiving the
nature of the transactions brings to tax transactions in respect of which the
State has no authority to legislate for levying tax because of the ban imposed
by Art. 286 of the Constitution, the validity of the order of assessment of tax
cannot be reopened in a suit for refund of tax paid.
The Bombay Sales-tax Act 5 of 1946, it is
true, contained s. .20 which in terms enacted that an assessment shall not be
called in' question in any civil court, but the court in Kamala, Mills case(1)
held that the jurisdiction of the civil court to entertain a suit for tax
assessed under the Act was excluded expressly, and by the clear implication of
the Act as well.
The assessing authority invested with' power
under the Travancore-Cochin General Sales-tax Act is constituted by the Act a
tribunal, which within the limits of its authority is competent to decide all
questions of fact and law Arising before him in the course of proceedings for
assessment and of his own jurisdiction as well. The Act sets up machine for
levy,assessment, and collection of tax. By s. 3 of the Act charge is imposed,
subject to exemptions prescribed by ss. 4, 5 and 6 upon every dealer to pay tax
on his total turnover of each year. Duty to pay the tax is imposed by s.
11(2) of the Act. Section, 12 sets up the
procedure of the assessing authority in making assessments and s. 13 deals with
recovery of tax. A taxpayer aggrieved by an order of assessment may appeal
under s. 14 against the order of assessment, and the decision of the appellate
authority is by cl. (4) subject to the power of revision conferred by s. 1
expressly declared final. Section 15 as it stood at the relevant time provided
for the exercise of revisional jurisdiction by the Board of Revenue against the
order of the taxing authorities-original as well as appellate. By s. 24 power
is conferred upon the State Government to frame rules' setting up machinery for
determination of the not chargeable turn over, for refund of tax collected in
excess of true liability and for other incidental matters. The Act is therefore
a complete code dealing with the levy, assessment and collection and refund of
(1)  1 S.C.R. 64: A.I.R. 1965 S.C.
586 it authorises investment of power in a
hierarchy of authorities to administer the Act. For the purpose of making
assessment of tax, the authorities have power to decide all questions arising
before them, and the orders of the appellate authorities subject to the
exercise of revisional jurisdiction under S. 15 are declared final.
Liability to pay tax arises under and by
virtue of the provisions of the Act, and, the quantum of liability may be
determined under the Act alone.
It is true that in Kamala Mills' case(1)
reliance was placed on behalf of the claimant upon Basappa's case(2), and the
following observations were made by the Court :
"In Provincial Government of Madras (Now
Andhra Pradesh) v. J. S. Basappa it was held by this Court that the finality
attached to orders passed in appeal by section 11(4) of the Madras General
Sales-Tax Act (IX of 1939) was a finality for the purposes of the said Act and
did not make valid an action which was not warranted by the Act, as for
"ample, the levy of tax on a commodity which was not taxable at all or was
exempt. We ought to add that this decision was based on the fact that the said
Act at the relevant time did not contain section 18A which came into force on
May 15, 1951; and it was section 18A which was construed by this Court in Firm
of Illuri Subbayya Chetty & Sons [(1964) 1 SCR 752]." In Basappa's
case(2) the taxpayer sought in an action for refund of tax paid, a decree on
the plea that, the transactions in respect of which tax was levied were
"outside sales", and it was held that in the absence of express
exclusion of the jurisdiction of the civil court, the action for refund of tax
was maintainable. But the nature of the transactions taxed in the Kamala Mills'
case(1) was not different. In the judgment in Kamala Mills' case(1) it was
pointed out that the jurisdiction of the civil court to entertain a suit for
refund of tax paid in compliance with an order of assessment may be excluded
either expressly or necessary implication, and as the scheme of the Bombay
Sales Tax Act, 146, indicated that a complete machinery was set up by
constituting appropriate authorities under the Act, and creating a hierarchy of
authorities to deal with the problem of levying tax as contemplated by the Act,
jurisdiction of the civil court to entertain the suit was excluded by
implication as well as by express enactment.
That is clear from the following observations
in the Kamala Mills' case(1):
"Whether or not a return is correct;
whether or. not transactions which are not mentioned in the return, but about
which the appropriate authority has knowledge, fall (1)  1 S.C.R. 64.
(2)  5 S.C.R. 517.
587 within the mischief of the charging
what is the true and real extent of the
transactions which are assessable; all these and other allied questions have to
be determined by the appropriate authorities themselves; and so, we find it
impossible to accept Mr. Sastri's argument that the finding of the appropriate
authority that a particular transaction is taxable under the provisions of the
Act, is a finding on a collateral fact which gives the appropriate authority jurisdiction
to take a further step and make the actual order of assessment." The
action of the taxing authority in Basappa's case(1) in taxing transactions
which he erroneously held were taxable was no. more outside the Act, than the
action of the taxing authority in Kamala Mills' case(2). If it be granted that
the jurisdiction of the civil court may be excluded by express enactment or by
necessary intendment arising from the scheme of the Act, Basappa's case(1) must
be regarded as wrongly decided.
It is true that even if the jurisdiction of
the civil court is excluded, where the provisions of the statute have not been
complied with or the statutory tribunal has not acted in conformity with the
fundamental principles of judicial procedure, the civil courts have
jurisdiction to examine those cases : Secretary of State for India v. Mask
& Company(2). Counsel for the respondents urged that the case of the
respondents fall within that exception, since the Sales-tax Officer in imposing
tax-liability acted in defiance of the mandatory provisions of the Act and in
support of the argument he placed reliance upon r. 7 of the Rules framed under
the Act and the definition of "turnover" under the Act. Under the Act
sales-tax is charged for the year at the prescribed rates on the total turnover
of the dealer. The Government of Travancore-Cochin promulgated rules in
exercise of powers under s. 24 of the Travancore Cochin General Sales Tax Act,
and r. 7 dealt with computation of "net turnover". In r. 7(1) by cls.
(a) to (k) certain exemptions admissible in the computation of the net turnover
were set out. By notification No. SRI-1643-51RD dated March 31, 1951 it was
directed that with effect from April 1, 1951, the following clause shall be
"(1) all amounts of sales-tax collected
by the dealer." By this amendment in the computation of the taxable
turnover, the amounts of sales tax collected by the dealer were not to be
included. But this amendment was to have effect only from April 1, 1951, and in
the proceeding in this appeal tax-liability for the assessment period ending
March 31, 1951 fell to be determined.
(1)  5 S. C. R. 517.
(2)  1 S. C. R. 64.
(3) L. R. 67 1. A. 222.
588 The exemption was therefore inoperative
in the computation of taxable turnover for the assessment year in question.
Counsel for the. respondents however
contended that the effect of the amendment w s merely to clarify what was
implicit in the content of the expression "turnover". By s. 2(k)
"turnover" means-insofar as the definition is relevant "the
aggregate amount for which goods are either bought by or sold by a dealer,
whether for cash or for deferred payment or other valuable consideration
"Turnover" being the aggregate amount for which goods are bought or sold,
and normally the aggregate amount would include such amount as the purchaser
pays to the dealer for the goods, the expression "aggregate amount for
which goods are . . . sold" within the meaning of "turnover" in
s. 2(k) would include the amount of sales-tax received by the dealer. There is
no provision in the Act which may' by implication suggest that from the
connotation of the expression 'turnover' the sales tax collected in the year of
assessment ending March 31, 1951 was to be excluded. Exclusion prescribed by cl.
(1) of r. 7(1) enacted with effect from April 1, 1951 is not clarificatory, but
prescribes an additional head in the computation of net turnover.
This Court in George Oaks (Private) Ltd. v.
State of Madras(1) in dealing with the question whether sales tax charged by
the dealer may be excluded within the meaning of the expression
"turnover" as used in the Madras General Sales-Tax Act, 1939,
"Under the definition of turnover the
aggregate amount for which goods are' bought or sold is taxable. This aggregate
amount "includes the tax as part of the price paid by the buyer. 'the
amount goes into the common till of the dealer till he pays the tax. It is
money which he keeps using for his business till he pays it over to Government.
Indeed, he may, turn it over again and again till he finally hands it to
Government. There is thus nothing anamolous in the law treating it as part of
the amount on which tax must be paid by him. This conception of a turnover is
not new. It is found in England and America and there is no reason to think
that when the legislatures in India defined turnover' to include tax also, they
were striking out into something quite unknown and unheard of before."
Counsel for the respondents contended that these observations made in interpreting
the terms of the Madras General Sales tax (Definition of Turnover and
Validation of Assessments) Act, 1954, have no bearing on the interpretation of
the expression "turnover"' as in the Travancore-Cochin General Sales
tax Act. But the (1)  2 S.C.R. 570 : A.I.R. 1962 S. C. 1037.
589 observations made by the Court were not
made in the context of any special statute.
There was in the Travancore-Cochin General
Sales-tax Act at the material time no express provision which obliged the
taxing authority to exclude from the computation of taxable turnover the amount
of sales-tax collected by the dealer.
The argument of counsel for the respondents
that the taxing authority has infringed a prohibition imposed upon him has
therefore no substance.
The appeal is therefore allowed and the suit
There will be no order as to costs