judgement:
l Appeals Nos. 1682 to 1691 of 1967.
Appeals by special leave from the judgment and order dated November 30, 1962 of the Allahabad High Court in Misc.
Sales Tax Reference Nos. 144, 134, 143, 148, 124, 104, 105, 112 and 113 of 1958 respectively.
M.C. Chagla and section section Shukla, for the appellants (in all the appeals).
C. B. Agarwala and 0.
P. Rana, for the respondents (in all appeals) The Judgment of the Court was delivered by Ramaswami, J.
These appeals are brought, by special leave from the judgment of the Allahabad High Court dated November 30, 1962 in Miscellaneous Sales Tax Reference No. 144 of 1958 and other connected references.
The appellants are manufacturers and dealers of oil in the Province of Uttar Pradesh and they have their own depots outside the Province.
For the financial year 1948 49 and the subsequent period from April 1, 1949 to January 25, 1950 the appellants had sent their goods to their depots outside the Province of Uttar Pradesh, for example, to Calcutta in the State of West Bengal before any contract of sale in respect of the goods was made.
514 After the goods had reached the depots outside the Province of Uttar Pradesh, they were sold to various parties.
The Sales Tax Officers of Uttar Pradesh assessed the outside sales of all the appellants to sales tax under the Uttar Pradesh Sales Tax Act 15 of 1948, hereinafter called the Act.
It appears that this category of sales roughly amounted to more than one crore of rupees in the case of the appellants and the sales tax was levied at the rate of 3 pies per rupee subject to a rebate under section 5 of the Act and certain other adjustments.
Aggrieved by the assessments, the appellants took the matter in appeal under section 9 of the Act.
The appeals were heard by various Appellate Officers called Judge, Appeals.
Some of the Appellate Officers held that the assessment was properly made, while some others took the view that the assessments made for outside sales were improper and the assessment order should be quashed.
The parties aggrieved by the appellate orders filed revisions before the revising authority called Judge, Revisions under section 10 of the Act.
By his judgment dated July 10, 1957 the Judge, Revisions held that the out of State sales would be taxable (1) if the goods were in existence in the Province of Uttar Pradesh at the time when the contracts for sale were made, and (2) if the goods were manufacturer after the contracts for sale were made in respect of them and were subsequently appropriated towards those contracts.
He further held that sales of goods which were not only manufactured but also exported before any contracts for sale were made would not be taxable.
Under section II of the Act, the Commissioner of Sales Tax applied to the Revising Authority for making a reference of the case to the High Court, By its order dated January 23, 1958 the Revising Authority drew up a statement of the case and referred to the Allahabad High Court the following two questions of law for determination : "(1) Whether clause (ii) of the Explanation 11 to Section 2 (h) U.P. Sales Tax Act provides for taxing sales in which goods were manufactured or produced in U.P. but for which the contract for sale was made after the goods had left the State ? (2) If the reply to the above is in affirmative, whether this provision is ultra vires ?" By its judgment dated November 30, 1962, the High Court ans wered the first question in the affirmative and the second question in the negative.
It is necessary at this stage to refer to the relevant statutory provisions which were in force during the material period.
Section 99 of the Government of India Act, 1935 authorised a Provincial Legislature, subject to the provisions of that Act, to make laws for the Province or for any part thereof.
Section 515 100(3) of that Act provided that, subject to the two preceding sub sections, the Provincial Legislature had, and the Federal Legislature had not, power to make laws for any Province or any part thereof with respect to any of the matters enumerated in List 11 of the Seventh Schedule to that Act.
The matter enumerated in Entry 48 in List 11 was "Taxes on the sale of goods and on advertisements.
" It was in exercise of this legislative power that the Uttar Pradesh State Legislature enacted Act 15 of 1948 which came into force on April 1, 1948.
Section 3 of the Act Provides as follows "3.
Liability to tax under the Act Subject to the provisions of this Act, every dealer shall pay on turnover in each assessment year a tax at the rate of 3 pies a rupee : Provided that (i) the Provincial Government may, by notification in the official Gazette, reduce the rate of tax on the turnover of any dealer or class of dealers or on the turnover in respect of any goods or class of goods; (ii) a dealer whose turnover in the previous year is less than Rs. 12,000/ or such larger amount as may be prescribed shall not be liable to pay the tax under this Act for the assessment year; Section 2(c) defines a "dealer" to mean "any person or association of persons carrying on the business of buying or selling and supplying goods in the United Provinces, whether for commission, remuneration or otherwise and includes any firm or Hindu joint family and any society, club or association which sells or supplies Goods to its members but does not include any department of the Provincial Government or of the Indian Union (hereinafter called the 'Dominion Government ')".
Section 2(h) is to the following effect " 'sale ' means, with its grammatical variations and cognate expressions, any transfer of property in goods for cash or deferred payment or other valuable conside ration and includes forward contracts but does not include a mortgage, hypothecation, charge or pledge Explanation II Notwithstanding anything.
in the Indian , or any other law for the time being in force, the sale of any goods 516 (i)which are actually in the United Provinces at the time when in respect thereof, the contract of sale as defined in section 4 of that Act is made, (ii)or which are produced or manufactured in the United Provinces by the producer or manufacturer thereof, shall, wherever the delivery or contract of sale is made, be deemed for the purposes of this Act to have taken place in the United Provinces.
Section 10 states "Power of revision (1)The Provincial Govern ment shall appoint as Revising Authority a person qualified under subsection (3) of section 220 of the Government of India Act, 1935, for appointment as Judge of a High Court.
(2) The appellate authority appointed under section 9 shall be under the superintendence and control of the Revising Authority.
(3) The Revising Authority may in its discretion at any time suo motu or on being moved by the Commissioner of Sales Tax or on the application of any person aggrieved, call for and examine the record of any order made or proceedings recorded by any appellate or assessing authority under this Act for the purpose of satisfying itself as to the legality or propriety of such order or as to the regularity of such proceedings and may pass such order as he thinks fit.
(4) The Revising Authority shall not pass any order under sub section (3) adversely affecting any person unless an opportunity has been given to such person to be heard.
(5) If the amount of assessment is reduced by the Revising Authority under sub section (3) it shall order the excess amount of tax if already realized to be refunded.
" Section 11 is to the following effect "Statement of case to High Court (I) Within sixty days from the passing by the Revising Authority of any order under sub section (3) of section 9 or subsection (1) of section 10 affecting any liability of any dealer to pay tax under this Act, such dealer may, by application in writing accompanied by a fee of one hundred rupees, require the Revising Authority 517 to refer to the High Court any question of law arising out of such order.
(2) If, for reasons to be recorded in writing, the Revising Authority refuses to make such reference, the applicant may, within thirty days of such refusal, either (a) withdraw his application (and if he does so, the fee shall be refunded, or (b) apply to the High Court against such refusal.
(3) If upon the receipt of an application under clause (b) of sub section (2),the High Court is not satisfied that such refusal was Justified, it may require the Revising Authority to state a case and refer it to the High Court and on receipt of such requisition the Revising Authority shall state and refer the case accordingly.
(4)If the High Court is not satisfied that 'the statement in a case referred under this section is sufficient to enable it to determine ' the question raised thereby, it may refer the case back to the Revising Authority to make such additions thereto or alterations therein as the High Court may direct in that behalf.
By the Amending Act of 1954 (U.P. Act VIII of 1954) which came into force on April 1, 1954 the following provisions were substituted in place of sub sections (1), (3) and (4): "(1) Within one hundred and twenty days from the date of service of the order under sub section (3) of section 10, the person aggrieved, may, by application in writing require the Revising Authority to refer to the High Court any question of law arising out of such order (3) The provisions of subsection (1) shall also be applicable to the Commissioner of Sales Tax with the modification that it shall not be necessary for him to deposit any fee.
(4) If on any application, being made under subsection (1) or (3) the Revising Authority refuses to state the case the person aggrieved or the Commissioner of Sales Tax as the case may be, may . . apply to the High Court . . " It was argued by Mr. Chagla in the first place that cl.
(ii) of Explanation II to section 2(h) of the Act means that the goods should have been manufactured and produced in Uttar Pradesh for sale 518 to the person who had contracted to buy them.
In other words, there must be a contract for the sale before manufacture or produce.
It was pointed out that in the present case the contract was entered into after the goods were manufactured and exported out of Uttar Pradesh.
It was contended that as a matter of construction Explanation II does not cover these sales and the deeming provision will not make the appellants liable to pay sales tax in regard to such sales.
We are unable to accept this argument as correct.
There is nothing in the language or context of Explanation II to suggest that the goods should be produced or manufactured in Uttar Pradesh after the contracts for sale had been entered into.
There is hence no warrant for the argument that for attracting the tax liability the goods must have been manufactured or produced after and not before the agreement for sale.
In other words, it is only necessary for the application of Explanation 11 that the goods must have been sold by the person who produced or manufactured them but there is no requirement that he must have manufactured or produced them after the agreement for sale.
It is the admitted position in these appeals that the goods were manufactured or produced in Uttar Pradesh by the appellants carrying on business in Uttar Pradesh in those goods and therefore the appellants are liable to pay the tax on their sales irrespective of where and when the contracts for sale were entered into and also irrespective of the fact that the contracts were entered into after the goods had been exported out of Uttar Pradesh.
We accordingly hold that the first question was rightly answered by the High Court.
We proceed to consider the next, and more important, ques tion arising in these appeals, namely, whether the deeming provision contained in section 2(h) Explanation II(ii) of the Act was ultra vires the Government of India Act, 1935.
It was argued by Mr. Chagla that the doctrine of nexus was not applicable to sales tax legislation, because such legislation was concerned with the tax on the transaction of sale, that is to say, a completed sale and to break up a sale into its component parts and to take one or more such parts and to apply the theory to it would mean that the State would be entitled to impose tax on one or more of the ingredients or constituent elements of the transaction of sale which by itself will not amount to a sale.
An identical question has been the subject matter of consideration by this Court in The Tata Iron & Steel Co., Ltd. vs The State of Bihar( ').
It was held in that case that the provisions of section 4(1) read with section 2(g) second pro viso, of the Bihar Sales Tax Act, 1947 as amended by the Bihar Sales Tax Amendment Act, 1949 were within the legislative competency of the Provincial Legislature of Bihar.
The second proviso added by the amending Act did not extend the meaning (1) ; 519 of the expression "sale" so as to include a contract of sale : what it actually did was to lay down certain circumstances in which a sale, although completed elsewhere, was to be deemed to have taken place in Bihar.
The circumstances mentioned in the proviso to section 2(g) of the Bihar Sales Tax Act, namely, the presence of the goods in Bihar at the date of the agreement of sale or their production or manufacture there must be held to constitute a sufficient nexus between the taxing Province and the sale wherever that might take place.
It is manifest that a transaction of sale is a composite transaction and consists of legal ingredients like agreement of sale, passing of title and delivery of goods but it is not necessary for the purpose of legislative jurisdiction that all legal ingredients of sale or even the transfer of title should have taken place inside the Province.
It is sufficient if there is a proper territorial nexus or connection between the taxing authority and the transaction sought to be, taxed.
The fact that the goods are manufactured in the Province constitutes a real and pertinent nexus or connection which confers jurisdiction upon the Provincial Legislature to impose the tax.
In dealing with the question whether the production or manufacture of goods constituted a sufficient nexus to the subject matter of taxation, section R. Das, C.J., observed as follows : "For the purpose of the present case it is sufficient to state that in a sale of goods the goods must of necessity play an important part, for it is the goods in which, as a result of the sale, the property will pass.
In our view the presence of the goods at the date of the agreement for sale in the taxing State or the production or manufacture in that State of goods the property wherein eventually passed as a result of the sale wherever that might have taken place, constituted a sufficient nexus between the taxing State and the sale.
In the first case the goods are actually within the State at the date of the agreement for sale and the property in those goods will generally pass within the State when they ' are ascertained by appropriation by the seller with the assent of the purchaser and delivered to the purchaser or his agent.
Even if the property in those goods passes outside the State the ultimate sale relates to those very goods.
In the second case the goods, wherein the title passes eventually outside the State, are produced or manufactured in Bihar and the sale wherever that takes place is by the same person who produced or manufactured the same in Bihar.
The producer or manufacturer gets his sale price in respect of goods which were in Bihar at the date when the important event of agreement for sale was made or which were produced or manufactured in Bihar.
These are relevant facts on which the State could well fasten its tax.
" 520 The principle of this decision was reiterated by this Court in a subsequent case Bharat Sugar Mills Ltd. vs The State of Bihar( ').
In The Tata Iron & Steel Co. Ltd. vs The State of Bihar( '), the course of dealing between the manufacturers and the purchasers was described as follows : "The intending purchaser has to apply for a permit to the Iron and Steel Controller I at Calcutta, who forwards the requisition to the Chief Sales Officer of the assessee working in Calcutta.
The Chief Sales Officer thereafter makes a 'works order ' and forwards it to Jamshedpur.
The 'works order 'mentions the complete specification of the goods required.
After the receipt of the 'works order ' the Jamshedpur factory initiates a 'rolling ' or 'manufacturing ' programme.
After the goods are manufactured, the Jamshedpur factory sends, the invoice to the Controller of Accounts who prepares the forwarding notes, and on the basis of these forwarding notes, railway receipts are prepared.
The goods are loaded in the wagons at Jamshedpur and despatched to various stations, but the consignee in the railway receipt is the assessee itself and the freight also is paid by the assessee.
The railway receipts are sent either to the branch offices of the assessee or to its bankers, and after the purchaser pays the amount of consideration, the railway receipt is delivered to him.
These facts are admitted and the correctness of these facts are not disputed by the State of Bihar.
" In our opinion, the ratio of this decision applies to the present case and it must be accordingly held that Explanation II to section 2(h) of the Act is not ultra vires as being outside the legislative competence of the State of Uttar Pradesh.
Reference was made in he course of argument to the recent decision of this Court in K. section Venkataraman & Co. vs State of Madras(3) in which it was held by the majority judgment that an authority created by a statute cannot question the vires of the statute or any of the provisions thereof under which it functions.
The authority must act under the Act and not outside it and if it acts on the basis of a provision of that statute which is ultra vires, to that extent it would be acting outside the Act.
In that event, a suit to question the validity of such an order made outside the Act would lie in a civil court.
In this context it was pointed out by the majority judgment that the reasoning of the Judicial Committee in Raleigh Investment Co ' (4) case was based upon the as sumption that the question of ultra vires can be canvassed and finally decided through the machinery provided under the Income (1) 11 S.T.C. 793.
(3) ; (2) ; (4) 74 I. A. 50.
521 tax Act.
The Judicial Committee held that section 67 of the Income tax Act, 1922 was a bar to the maintainability of the suit.
The argument on behalf of the assessee in that case was that an assessment was not an assessment "made under the Act" if the assessment gave effect to a provision which was ultra vires the Indian Legislature; that in law such a provision, being a nullity, was nonexistent; and 'that an assessment justifiable in whole or in part by reference to, or by such a provision was more aptly described as an assessment not made under the Act than as an assessment made under the Act.
The argument was negatived by the Judicial Committee for the reason that the circumstance that the assessing officer had taken into account an ultra vires provision of the Act was immaterial in determining whether the assessment was "made under the Act".
The main reason that persuaded the Judicial Committee to accept the construction they placed on section 67 of the Income tax Act may be stated in their own words as follows: "The absence of such machinery would greatly assist the appellant on the question of construction and, indeed, it may be added that, if there were no such machinery and if the section a effected to preclude the High Court in its ordinary civil jurisdiction from considering a point of ultra vires, there would be a serious question whether the opening part of the section, so far as it de barred the question of ultra vires being debated fell within the competence of the legislature.
" It was held by this Court in K. section Venkataraman & Co. vs State of Madras( ') that the assumption underlying the reasoning of the Judicial Committee was not correct and it was not open to the Income tax Officer the Appellate Assistant Commissioner and the Appellate Tribunal to decide any question as to the ultra wires character of any provision of the Income tax Act.
In other words, the question of ultra vires could not be deemed to arise out of the Tribunal 's order and if an assessee raises such a question, the Tribunal can only reject it on the ground that it has no jurisdiction to entertain the objection or to decide upon it.
The High Court also cannot possibly give any decision on the question of ultra vires, because its jurisdiction under section 66 is a special advisory jurisdiction and its scope is strictly limited.
On behalf of the appellants it was suggested that in the present.
case the Revising Authority, under the Act cannot, on a similar line of reasoning, refer to the High Court any question regarding the constitutional validity of Explanation 11 of section 2(h) of the Act.
It was, however, pointed out on behalf of the respondents that in a number of cases in which proceedings relating to taxation have reached the High Courts by way of a reference, appeal or revision, the question of constitu (1) [1966] 2 S.C.R.229.
522 tional validity of the statute under which the authority functioned was raised, entertained and decided.
For instance, in Tata Iron & Steel Co. Ltd. vs State of Bihar(1) a reference was made by the Board of Revenue raising questions as to the validity of certain provisions of the Bihar Sales tax Act and decided by the High Court, and ultimately by this Court.
Similarly, in Sardar Baldev, Singh vs C.I.T., Delhi '& Ajmer(2) in an appeal from the order of the Income tax Appellate Tribunal with special leave, the constitutional validity of section 23A of the Indian Income tax Act, 1922 was permitted to be challenged.
Again, in Navinchandra Mafatlal vs The C.I.T., Bombay City(3) in a refrence under section 66(1) of the Indian Income tax Act, 1922 a question as to the vires of section 12 B of the Indian Income tax Act was raised before the Income tax Appellate Tribunal and was referred to the Bombay High Court.
This Court in appeal from the opinion expressed by the High Court on on the reference also considered that question.
Also, in Gannon Dunkerley & Co. vs State of Madras(4), the proceeding reached the High Court of Madras in a revision petition under section 12 B of the Madras General Sales Tax Act, 1939 and the High Court entertained the plea of ultra vires and decided it in favour of the tax payer.
It is, however, not necessary in the present case for us to decide the question as to whether the principle laid down in K. section Venkataraman 's case(5) is applicable.
The reason is that the apellants did not challenge the jurisdiction of the High Court to examine the question of law regarding the constitutional validity of Explanation 11 to section 2 (h) of the Act.
Nor was any such challenge made in the Special Leave Petition to this Court or in the statement of the case.
On the contrary, the appellant has itself applied to the Judge, Revisions under section 10 of the Act contending the Explanation II to section 2(h) was ultra vires.
It is not therefore open to the appellants to deny the jurisdiction of the Revisional Authority to decide the question or to challenge the jurisdiction of the High Court to examine the question of law referred to it under section I 1 of the Act and to pronounce upon the constitutional validity of the impugned section.
In other words, it must be taken that the appellants had voluntarily submitted to the jurisdiction of the Revisional Authority and of the High Court on the matter in issue and having submitted to the jurisdiction and having taken the chance of judgment in its favour, it is not right that the Appellants should take exception to the jurisdiction of the High Court when the judgment has gone against it.
We cannot therefore permit the appellants to canvass in this Court for the first time the question whether it was competent for the (1) ; (2) ; (3) [1955] 1 S.C.R. 829.
(4) I.L.R. (5) [1966] 2 S.C.R.229.
523 High Court to decide the question of law referred to it under section 11 of the Act.
We accordingly reject the, argument of the appellants on this aspect of the case.
It was lastly submitted by Mr. Chagla that a reference to the High Court under section II of the Act at the instance of the Commissioner of Sales tax was incompetent as the Commissioner was neither a dealee nor 'a person aggrieved within the meaning of the section as it originally stood and the amendment effected in sub section
(3) of section I 1 by U.P. Sales tax Act 8 of 1954 which came into force on April 1, 1954 was not retrospective in character and could not apply to proceedings which had been initiated earlier before Sales tax authorities as well as before the Revising Authority.
It was pointed out that the appellate order was made on January 4, 1952 and the revision application was filed before the amending Act of 1954 came into force.
It further appears that the revision application was disposed of on July 8, 1957 by the Revising Authority.
The contention put forward on behalf of the appellants was that the Commissioner had no power to apply for a reference at the time the appellants had made the application for revision.
It was conceded by Mr. Chagla that at the time the Commissioner applied for a reference under section 11 of the Act the amending Act 1954 had already come into force and under the amended section the Commissioner was empowered to ask for a reference.
The point taken was that the material date was the date on which the appellants made the application for revision and not the date on which the application was actually decided by the Revising Authority.
We are unable to accept this argument as correct.
The right to apply for a reference is conferred upon a person aggrieved by an order passed under section 10 and this right exists regardless of when the application for revision was made.
Only the existence of an order under section 10 is required for the accrual of the right to make an application for a reference.
It was suggested by Mr. Chagla that the Commissioner did not have the right to apply for a reference because the right did not exist when the appellants had made the application for revision.
But the right did exist on the date on which the Commissioner applied for a reference and there is nothing in the language or context of section II to suggest that the Commissioner could exercise the right only if it existed on the date on which the application for revision had been made.
On behalf of the appellants Mr. Chagla referred to the well recognised rule that a statute should be interpreted, as far as possible, so as to respect vested rights.
But this rule has no application to the present case for we do not think that amendment of section 1 1 of the Act by enabling the Commissioner also to ask for a reference of a question to the High Court alters any vested or substan tive right of the assessee.
On the contrary, we consider that the L7Sup.
C.1168 9 524 amendment is merely a procedural matter and the present case falls within the general principle that the presumption against a retrospective construction has no application to enactments which affect only the procedure and practice of courts.
For "it is perfectly settled that if the legislature forms a new procedure, that, instead of proceeding in this form or that, you should proceed in another and a different way, clearly there bygone transactions are to be sued for and enforced according to the new form of procedure.
Alterations in the form of procedure are always retrospective, unless there is some good reason or other why they should not be." (Gardner.
vs Lucas) (1).
We, are accordingly of the opinion that Mr.Chagla is Unable to make good his argument on this aspect of the case. ' For 'these reasons we hold that there is no merit in these appeals which are accordingly dismissed with costs there will be one hearing fee.
V.P.S Appeals dismissed.
(1) ,603.

summary:
For the period 1st April 1948 to 25th January 1950, goods (oil) were manufactured produced in the State of Uttar Pradesh by the appellants who were carrying on business in the State in those goods.
Part of the goods were sent to their depots outside the State before any contract of sale in respect of them was made, and thereafter, sold to various parties.
those outside sales were also assessed to sales tax under the U.P. sales Tax Act, 1948.
The matter was taken to the Appellate Authority and thereafter to the Revising Authority constituted under the Act.
Though the revision was filed before last April 1954 when the Amending Act of 1954 came into force, it was disposed of in 1957, in favour of the appellants.
On the application of the commissioner of Sales Tax two questions of law were referred to the High Court one of which related to the constitutional validity of Explanation II (ii) to section 2(h) of the Act, according to which, the sale of any goods 'which are produced or manufactured in U.P. by the producer or manufacture thereof, shall, wherever the delivery 'or contract of We is made, be deemed for the purposes of this Act to ,have taken place in U.P ' The High Court decided both questions in favour of the Commissioner.
In appeal to this Court it was contended that : (1) For attracting tax liability the Explanation requires that the goods should have been manufactured or produced in U.P. after the contract of sale was entered into , (2) the Explanation was ultra vires as being outside legislative competence, because, Wes tax legislation was concerned with tax on the transaction of a completed sale, and a State could not impose sales tax on the basis that one of the component parts of sale constitutes sufficient nexus between the taxing state and the sale; (3) the Revising Authority could not refer to the High Court and the High Court could not decided on such reference, any question regarding the constitutional validity the Explanation; and (4) the Revising Authority could not make a reference to the High Court under section 11, at the instance of the Commissioner, as the Commissioner had no power to apply when the revision was filed before the Authority but was empowered to do so only by the amending Act of 1954 which had no retrospective operation.
HELD : (I) For the application of the Explanation and attracting tax liability, it is only necessary that the goods must have been sold by the person who produced or manufactured them, but there is no requirement that he must have manufactured or produced them after the contract of sale and not before.
(518 C] (2)To confer jurisdiction upon the 'State Legislature to impose sales tax, 'it is sufficient if there is a proper territorial nexus or connection 512 513 between the taxing authority and the transaction sought to be taxed.
and, the fact that goods were manufactured in the State constitutes a real and pertinent nexus.
[519 C] The Tata Iron and Steel Co. Ltd. vs State of Bihar, ; and Bharat Siigar Mills vs The State of Bihar, 11 S.T.C. 793, followed (3) The appellants did not challenge the jurisdiction of the High Court to examine the constitutional validity of the Explanation; nor was any such challenge made in the special leave petition to this Court or in the statement of case.
On the contrary, the appellants contended in the revision before the Revising Authority that the Explanation was ultra vires.
Therefore, having voluntarily submitted to the jurisdiction of the Revising Authority it is not open to the appellants to challenge the.
jurisdiction Of the Revising Authority to refer the question of the constitutional validity of the Explanation to the High Court, or of the High Court to decide it.
[522 E G] (4) The Commissioner had the power to apply for a reference on the date he applied for a reference, as the amending Act had by then come into force.
There is nothing in the language or in the context of section 1 1 to suggest that he could exercise the right only if it existed on the date on which the revision was filed before the Revising Authority.
The rule that a statute should be interpreted, as far as possible, so as to respect vested rights has no application because,, the amendment does not affect any vested right of the appellants, but only deals with a procedural matter.
[523 E H] Gardner vs Lucas, , 603, applied.


judgement:
Appeals Nos.
260 to 263 of 1967.
Appeals from the judgment and decree dated January 5, 1965 of the Madhya Pradesh High Court, Indore Bench in First Ap peals Nos. 68, 69, 71 and 70 of 1961 respectively.
C. Setalvad, Rameshwar Nath and Mahinder Narain, for the appellants (in all the appeals).
B. Sen and I. N. Shroff, for the respondents (in all the appeals).
The Judgment of the Court was delivered by Hidayatullah, C.J.
These are four appeals by certificate against the common judgment of the High Court of Madhya Pradesh (Indore Bench), 16 December, 1964/5 January, 1965 dismissing four suits filed by the appellants to recover sales tax alleged to be realized illegally from them by the State of Madhya, Pradesh, the respondent in these appeals.
The suits were earlier decreed by the District Judge, Ujjain.
The facts in the suits are common and were as follows: The appellants are dealers in tobacco and have their places of business at Ujjain.
They purchase and sell tobacco used for eating, smoking and for preparing bidis.
They get their tobacco locally or import it from extra state places.
The former Madhya Bharat State enacted in 1950 the Madhya Bharat Sales Tax Act (Act 30 of 1950) which came into force on May 1, 1950.
Under 665 section 3 of the Act every dealer whose business in the previous year in respect of sales or supplies of goods exceeded in the case of an, importer and manufacturer Rs. 5,000 and in other cases Rs. 12,000 had to pay tax in respect of sales or supplies of goods effected in Madhya Bharat from 1st May 1950.
Under section 5, the: tax was a single point tax and it was provided that the Government might by a notification specify the point of the sales at which the tax was payable.
The section also fixed the minimum and maximum rates of tax leaving it to Government to notify the actual rate.
Government, in pursuance of this power, issued a number,.
of notifications on April 30, 1950, May 22, 1950, October 24, 1953 and January 21, 1954.
All these notifications imposed tax at different rates on tobacco above described on the importer, that is to say at the point of import.
The tax was not levied on sale or purchase of tobacco of similar kind in Madhya Bharat.
The tax was collected by the authorities in varying amounts from the appellants for different quarters.
We are not concerned with the, amounts.
The appellants served notices under section 80 of the Code of Civil Procedure and filed the present suits for refund of the tax on the ground that it was illegally collected from them being against the constitutional prohibition in article 301 and not saved under article 304(a) of the Constitution.
The State of Madhya Pradesh was formed on November, 1, 1955.
In Bhailal vs M.P.(1) the High Court of Madhya Pradesh declared the notifications to be offensive to article 301 of the Constitution on the ground that it was illegal to levy a tax on the importer when an equal tax was not levied on similar goods produced in the State.
The decision was later confirmed on this point in State of M.P. vs Bhailal Bhai(2).
The appellants did not take, recourse to the provisions of article 226 of the Constitution but filed their suits on December 21, 1957.
The suits were opposed by the State on the main ground that such a suit was barred by the provisions of section 17 of the Act which provides : "17.
Bar to certain proceedings.
Save as is provided in section 13, no assessment made and no order passed under this Act or the rules made thereunder by the assessing authority, appellate authority or the Commissioner shall be called in question in any Court, and save as is provided in sections 11 and 12 no appeal or application for revision shall lie against any such assessment or order.
" The State also pleaded that as appeals against the assessment were pending before the Sales Tax Appeal Judge the plaintiffs were (1) (2) ; 666 not entitled to file the suits.
The District Judge, following State of Tripura vs The Province of East Bengal(1) and Bhailal Bhai Gokal Bhai vs State of M.P.(2), held that such a suit lay when a declaration was sought that the provisions of law relating to an assessment were ultra vires, and demand was made for refund of amounts illegally collected under it.
On the second point the District Judge held that section 21 of the Act which allows the Commissioner or the appellate authority to order refund of tax wrongly paid did not apply since no such appeal was proved to have been filed and the tax was not wrongfully paid but wrongfully realised.
On appeal by the State the High Court reversed the decision.
Before the High Court it was conceded (as it is conceded even now) that the tax could not be imposed in view of the bar of article 301.
The short question thus was whether the suit was barred expressly by section 17 of the Act or any implication arising from the Act.
The contention on behalf of the appellants was that if it was a question of the correctness of the imposition within the valid framework of the statute, rules or notifications section 17 might have operated but not when the imposition was under a void law.
In the latter event the assessee was free to challenge the validity of the law in a civil suit and also to claim a refund.
The High Court considered the matter in the light of the decisions of the Judicial Committee in Raleigh Investment Co. vs Governor General in Council(3), Secretary of State vs Mask(4),Firm I. section Chetty & Sons vs State of Andhra Pradesh(5), State of Andhra Pradesh vs Firm Subbayya & Sons(6), and others, and came to the conclusion that the suit was incompetent.
The High Court conceded that both aspects of the case were well supported by, authority.
It is not necessary to enter into the reasons which weighed with the High Court because our discussion of the autho rities in this judgment will clearly expose the rival views and the one preferred in the High Court.
The question that arises in these appeals has been before this Court in relation to other statutes and has been answered in different ways.
These appeals went before a Divisional Bench of this Court but in view of the difficulty presented by the earlier rulings of this Court, they were referred to the Constitution Bench and that is how they are before us.
At the very start we may observe that the jurisdiction of the Civil Courts is all embracing except to the extent it is excluded by an express.
provision of law or by clear intendment arising from such law.
This is the purport of (1) A. 1.
R. (3) [1947] L. R. 74 1, A. 50; A. 1.
R. (4) [1940] L. R. 67 1.
A. 222; A. 1.
R. (5) ; ; A. 1.
R. (6) A. 1.
R. B.).
(2) 667 section 9 of the Code of Civil Procedure.
How section 9 operates is perhaps best illustrated by referring to the categories of cases, mentioned by Willes, J. in Wolverhampton New Waterworks co. vs Hawkesford(1) They are : "One is where there was a liability existing at common law, and that liability is affirmed by a statute which gives a special and peculiar form of remedy different from the remedy which existed at common law: there, unless the statute contains words which expressly or by necessary implication exclude the common law remedy the party suing has his election to pursue either that or the statutory remedy.
The second class of cases is, where the statute gives the right to sue merely, but provides, no particular form of remedy : there, the party can only proceed by action at common law.
But there is a third class, viz., where a liability not existing at common law is created by a statute which at the same time gives a special and particular remedy for enforcing it. .
The remedy provided by the statute must be followed and it is not competent to the party to pursue the course applicable to cases of the second class.
" This view of Willes, J. was accepted by the House of Lords Neville vs London 'Express ' Newspaper, Ltd.(2).
To which category do such cases belong in India ? The con troversy in India has revolved round the principles accepted in Secretary of State vs Mask (3 ) and in Raleigh Investment Co. vs Governor General in Council(4).
In the first case it was laid down by the Judicial Committee that the ouster of the jurisdiction of a Civil Court is not to be lightly inferred and can only be established if there is an express provision of law or is clearly implied.
In the second case it was held that where a liability to tax is created by statute which gives special and particular remedies against illegal exactions the remedy contemplated by the statute must be followed and it is not open to the assessee to pursue the ordinary process of Civil Courts.
To the latter case we shall refer in some detail presently.
Opinion in this Court has, however, wavered as to how far to go with the dicta of the Privy Council in the two cases.
Before, however, we go into the question we may refer to State of M.P. vs Bhailal(5).
In that case the notifications were declared ultra vires Article 301 of the Constitution and not saved by article 304(a).
It was therefore held that the portion of the tax already paid must be refunded by Government.
The question then posed was: (1) ; (2) (2) [1940] 67 I. A. 222.
(4) [1947] 74 I. A. 50.
(5) ; 668 "The question is whether the relief of repayment has to be sought by the 'tax payer by an action in a civil court or whether such an order can be made by the High Court in the exercise of its jurisdiction conferred by article 226 of the Constitution 2" This Court after examining the jurisdiction under article 226 concluded that the High Court had the power to order refund in proceedings for a writ since complete relief could not be said to be given if only a declaration were given.
The Court, however,observed : "At the same time we cannot lose sight of the fact that the special remedy provided in Article 226 is not intended to supersede completely the modes of obtaining relief by an action in a civil court or to deny defences legitimately open in such actions." Pointing out that where a defence of limitation could be raised or other issues of fact had to be tried, it was held that the Court should leave the party aggrieved to seek his remedy by the ordinary mode of a civil suit.
Therefore in those cases (there were 31 appeals before this Court) where the writ was asked for within three years, this Court upheld the order of refund by the High Court in its writ jurisdiction, but in those cases in which the parties had gone to the High Court after a lapse of 3 years, the order of refund was questioned and not approved observing that the petitioners would be at liberty to seek such relief as they might be entitled to in a Civil Court if it was not barred by limitation.
It will appear from this analysis of the case that this Court :accepted the proposition that a suit lay.
This it did without adverting to the provisions of the Act there considered to see whether the jurisdiction of the Civil Courts was barred or not, either expressly or by necessary implication.
This Court was, of course, "not invited to express its opinion on the matter but only on whether the High Court in its extraordinary jurisdiction could order refund of tax paid under a mistake.
Having held that in some cases the High Court should not order refund, this Court merely pointed out that the civil suit would be the only other remedy open to the party.
The case cannot, therefore, be treated as an authority to hold that the Civil Courts had jurisdiction to entertain such suits.
We may now proceed to consider first the two cases of the Judicial Committee before examining the position under the rulings of this Court.
In Secretary of State vs Mask(1) the sole question was the jurisdiction of the civil court to entertain a suit to (1) [1940] L. R. 67 1.
A. 222.
669 recover an excess amount of customs duty collected from Mask and Co. The suit was filed after an appeal to the Collector of Customs and a revision taken to the Government of India under the was dismissed.
The suit was dis missed by the trial Judge on the preliminary ground that the Civil Court had no jurisdiction.
An appeal by Mask and Co. to the High Court succeeded and there was a remit.
The appeal to the Judicial Committee followed.
Section 1.88 of the provided inter alia "Every order passed in appeal under this section shall, subject to the power of revision conferred by section 191, be final." The Judicial Committee first made a general observation "It is settled law that the exclusion of the jurisdiction of the Civil Courts is not to be readily inferred, but that such exclusion must either be explicitly expressed or clearly implied.
It is also well settled 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.
" Then it proceeded to quote section 188 (as above) and observed "By Ss. 188 and 191 a precise and self contained code of appeal is provided in 'regard to obligation which are created by the statute itself, and it enables the appeal to be carried to the supreme head of the executive Government.
It is difficult to conceive what further challenge of the order was intended to be excluded other than a challenge in the Civil Courts. . " and came to the conclusion that the jurisdiction of the Civil Courts was excluded.
The decision of the High Court was reversed and that of the trial Judge restored.
The next case is the Raleigh Investment Co. Ltd. vs Governor General in Council(1).
This was an appeal to the Privy Council from a judgment of the Federal Court of India in civil appellate jurisdiction reversing a decree passed by a Special Bench of the Calcutta High Court in its original civil jurisdiction.
It arose from a suit filed for recovery of a sum paid under protest pursuant to an assessment to income tax of the Investment Company on the ground that the computation was under a provision of the Income Tax Act which was ultra vires the Indian Legislature.
One of the defences in the suit was that whether the said provision (1) [1947] L. R. 74 I.A. 50. 670 was ultra vires or not, the Civil Courts were excluded from exercising their jurisdiction by section 226 of the Government of India Act, 1935 and section 67 of the Indian Income Tax Act.
The provision in question was held ultra vires by the High Court and it further held that neither of the two provisions was a bar to the civil courts ' jurisdiction.
The Federal Court in disagreement held that section 226 of the Government of India Act, 1935 barred the jurisdiction and that the provision impugned was not ultra vires.
The bar of section 67 of the Income Tax Act was not pressed before the Federal Court.
When the case reached the Judicial Committee, the case was considered under section 67 but not under section 226.
The Judicial Committee was of the opinion that section 67 barred the jurisdiction.
The Investment Company had raised the question before the Incometax authorities that Explanation 3 to para 4(1) of the Income tax Act 1922 was ultra vires.
This was not accepted and the assessment was made.
The Investment Company filed an appeal but did not proceed with it and the assessment was confirmed.
The appellate authority also said in its order that the constitutional question could not be raised before it.
The suit was then instituted.
Section 67 of the Indian Income tax Act in specific terms stated "No suit shall be brought in any civil court to set aside or modify any assessment made under the Act.
" The result of the suit has already been stated. 'The Judicial Committee considered this section and observed that the suit in form did not profess to modify the assessment but in substance it did so.
The declaration that a certain provision was ultra vires was but a step.
According to the Judicial Committee the assessment made under an ultra vires statute was not a nullity and the assessment ought to be taken to proceed on a mistake of law in the course of assessment.
Therefore, without going into the question whether the provision impugned was ultra vires or not the Judicial Committee considered the matter.
The argument was that the assessment was not one 'under the Act ', if effect was given to an ultra vires provision since the provision would be a nullity and non existent.
To discover the force of the prohibition in section 67 the following tests were applied (a) Does the Act contain machinery by which the assessee can raise the question of the vires of the provision before the special authorities ? (b) This test was not conclusive but one to be considered.
671 (c) If there was no such machinery and yet the civil courts were barred the vires of section 67 itself might come in for consideration.
The Judicial Committee, however, came to the conclusion that the Income tax Act gave the assessee an opportunity to raise the question under the Income tax Act.
The provision for a case stated for the advisory opinion of the High Court was available and even if the authorities refused to state a case, the High Court could be directly approached.
The decision of the High Court was also subject to further appeal.
Thus there was adequate machinery in the Income tax Act.
The words of section 67 'under the Act ' were construed as the activity of an assessing officer acting as such.
That this activity took into consideration an ultra vires provision did not take the matter out of these words.
That phrase meant the provenance of the assessment, and not the accuracy or correctness of the assessment or the machinery of the Income tax Act or the result of; the activity.
There was no difference between an incorrect apprehension of the provisions of the Income tax Act and the invalidity of a provision.
The Judicial Committee explained that if this were not so all questions of the correctness of the assessment under the,; Income tax Act could be brought before the Court and I the section rendered otiose.
The section made no distinction between tin inquiry into the merits of the assessment and jurisdiction to embark on an enquiry at all.
The Civil Courts ' jurisdiction in either case was invoked as to the correctness of the assessment and the language of the section precluded consideration of jurisdiction in such circumstances.
The Income tax Act having a suitable and adequate machinery, jurisdiction to question the assessment otherwise than by that machinery was, therefore, held barred.
The Judicial Committee even doubted whether a provision such as section 67 was at all necessary in the circumstances.
Both these cases thus appear to be decided on the basis of provisions in the relevant Acts for the correction, modification and setting aside of assessments and the express bar of the jurisdiction of the Civil Courts.
The presence of a section barring the jurisdiction was the main reason and the existence of an adequate machinery for the same relief was the supplementary reason.
The provision for a reference of a question to the High Court was considered adequate to raise the issue of the validity of any provision of law under which the taxing authorities acted.
This follows from the Raleigh Investment Co. 's case(1).
Mask & Co. 's case (2) was more concerned with the finality to the orders given by the .
Even so in the Mask & Co. 's case(2) room was left for interference by the Civil Courts by observing that (1) [1947] L. R. 74 1.
A. 50.
(2) [1940] L. R. 67 I. A. 222.
672 the Civil Courts had jurisdiction to examine into cases where the provisions of the Act had not been complied with, or the statutory tribunal had not acted in conformity with the fundamental principles of judicial procedures.
These observations were accepted by this Court in Firm of Illuri Subbayya Chetty Sow vs The State of Andhra Pradesh(1) and in Kerala vs Ramaswami Iyer and Sons(2).
A passage from the latter case might be,quoted here "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 these cases.
" The observations of the Judicial Committee were thus completely accepted.
We may now examine how the matter was further viewed in this Court.
In two other cases this Court laid down that the validity of the provisions under which the authorities act is not a matter for those authorities to decide.
In Circo 's Coffee Co. vs State of Mysore(3) it was contended that section 40(2) of the Mysore Sales Tax Act 1957 was ultra vires and beyond the competence of the State Legislature.
This Court observed : "It is true that a question as to the vires of section 40(2) of the Sales Tax Act was raised, but it is now settled by decisions of this Court that the question as to the vires of a statute which a taxing officer has to ad minister cannot be raised before him." The same was again reiterated in C. T. Santhul Inathan Chettiar vs Madras(4) in the following words : ". this Court has held, in Venkataraman and Co. vs State of Madras that the authorities under a taxing statute are not concerned with the validity of the taxing provisions and the questions of ultra vires is foreign to the scope of their jurisdiction.
As no such point could be raised before the Income tax authorities, neither the High Court nor the Supreme Court can go into these questions in a revision or reference from the decision of those authorities.
This case was followed in Commissioner of Income tax vs Straw Products ; (emphasis supplied) (1) ; (2) ; (3) 19 section T. C. 66.
(4) C. A. 1045 of 1966 decided on 20th July, 1967.
67 3 The party was left to 'appropriate proceedings ' without specifying what they would be.
Perhaps a suit was meant.
It follows that the question of validity of the taxing laws is always open to the Civil Courts for it cannot be the implication of any provision to make such a decision final or that even void or invalid laws must be enforced without any remedy.
Therefore, in Pabbojan Tea Co. Ltd. vs Dy.
Commissioner, Lakhimpur(1), after, quoting the observations of Viscount Simonds (Pyx Granite Co. Ltd. vs Ministry of Housing and Local Govt.
(1960 A.C. 260 at p. 286): "It is a principle not by any means to be whittled down that the subject 's recourse 'to Her Majesty 's Courts for determination of his rights is not to be excluded except by clear words."; our brother Mitter added that the extreme proposition in Raleigh Investment Co. 's case (2 ) had not found favour with this Court.
Our learned brother observed : "This Court was not prepared to accept the dictum in the judgment (Raleigh Investment Co.) to the effect that even the constitutional validity of the taxing provi sions would have to be challenged by adopting the procedure prescribed by the Income tax Act See Firm of Illuri Subbayya Chetty and Sons vs State of Andhra Pradesh ; at 760.
" The position was rather strengthened in K. section Venkataraman & Co. vs State of Madras(3).
The question then was whether a suit was not maintainable under section 18 A of the Madras General Sales Tax Act 1939 (corresponding to section 67 of the Indian Income tax Act (1922).
The suit followed the decision of this Court in Gannon Dunkerley and Co. vs State of Madras (4) in which 'works contracts ' of an indivisible nature were held not to fall within the taxing provisions of the Madras General Sales Tax Act, 1939.
Section 18 A was pleaded as a bar.
It was held that since the provisions of the Madras General Sales Tax Act, 1939 were declared ultra vires in their application to 'indivisible works contracts ' the action of the authorities was outside the said Act and not under the Act for the purposes of section 18 A.
The suit was held not barred.
Subarao, J. (as he then was) speaking for the majority distinguished both the Raleigh Investment Co. 's case(5) and the Commissioner of I. T. Punjab, North West Frontier & Delhi Provinces, Lahore vs Tribune Trust, Lahore(") on the ground that no question of the (1) A. I. R. (3) ; (5) [1947] L. R. 74 1.
A. 50.
(2) [1947] L. R.74 T. A. 50.
(4) [1059] section C. R. 379.
(6) [1947] L. R. 74 1.
A. 306.
674 vires of the law was raised in them.
Referring to Raja Bahadur Kamakshya Narain Singh of Ramgarh vs C.I.T. (1) and State of Tripura vs The Province of East Bengal(3), Subbarao J. pointed out that the suit was held maintainable in the latter and there was nothing in the former to support the contention that the question of ultra vires of a statutory provision could be canvassed only through the machinery provided under the statute.
Referring next to the case of Firm of Illuri Subbayya Chetty and Sons ' case(3).
the learned Judge said that the question whether section 18 A of the Madras General Sales Tax Act, 1939 could apply where, a particular provision of the Sales Tax Act was ultra vires was left open (see, p. 243).
The learned Judge next quoted the opinion of the majority in Bharat Kala Bhandar Ltd. vs M. C. Dhamangaon(4) to the following effect : "But, with respect, we find it difficult to appreciate how taking into account an ultra vires provision which in law must be regarded as not being a part of the Act at all, will make the assessment as one 'under the Act '.
No doubt the power to make an assessment was conferred by the Act and, therefore, making an assessment would be, within the jurisdiction of the assessing authoririty.
But the jurisdiction can be exercised only according, as well as with reference, to the valid provisions of the Act.
When, however, the authority travels beyond the valid provisions it must be regarded as acting in excess of its jurisdiction.
To give too wide a construction to the expression 'under the Act ' may lead to the serious consequence of attributing to tile legislature which owes its existence itself to the Constitution, the intention of affording, protection to unconstitutional activities by limiting challenge to them only by resort to the special machinery provided by it in place of the normal remedies available under the Code of Civil Procedure, that is, to a machinery which cannot be as efficacious as the one provided by the general law.
Such a construction might necessitate the consideration of the very constitutionality of the provision which contains this expression.
This aspect of the matter does not appear to have been considered in Raleigh Investment Co. 's case.
" The learned Judge next considered whether these observations, although obiter, were departed from in M/s. Kamla Mills Ltd. vs The State of Bombay(5) and came to the conclusion that that decision did not touch upon the question whether a suit would lie in (1)[1947] F. C. R. 130.
(2) ; (3) ; (4) ; (5) ; 675 a, case where the assessment was made on the basis of a provision which was ultra vires the Constitution (see p. 246).
Having considered these rulings the learned Judge examined the remedies provided by the Indian Income tax Act and found that all authorities were creatures of the statute and functioned under it and could not ignore its provisions since the said Act conferred no such 'right ' on them.
Whether the provisions were good or bad was not their concern.
Pointing out that the reference to the High Court under the Indian Income tax Act was confined to questions arising from the order of the Appellate Tribunal, the learned Judge observed that 'the question of ultra vires is foreign to the scope of the Tribunals ' jurisdiction ' and that if such a question were raised the Tribunal could only reject it on the ground that it had no jurisdiction to decide it, and the High Court and the Supreme Court would be equally incompetent on appeal to go into the question.
The learned Judge next considered the decisions of the High Courts into which it is not necessary to go here and on the strength of some observations which supported his view, stated his view in the following words "The legal position that emerges from the discussion may be summarized thus : 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 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.
But an authority created by a statute cannot question the vires of that statute or any of the provisions thereof where , under it functions.
It must act under the Act and not outside it.
If it acts on the basis of a provision of the statute, which is ultra vires, to that extent it would be acting outside the Act.
In that event, a suit to question the validity of such an order made outside the Act would certainly lie in a civil court.
" As the head note correctly states the effect of the decision was that the foundation laid by the Judicial Committee in Raleigh Investment Co. 's case(1) for construing the expression 'under the Act ' had no legal basis.
It may be mentioned that in Bharat Kala Bhandar (2) case also it was held that there was no machinery provided in the Central Provinces and Berar Municipal Act for refund of tax assessed (1) (1947) L.R.741.A.50.
(2) [1965] 3S.C.R.499. 676 and recovered in excess of constitutional limits and that the remedy: furnished by that Act was inadequate for enabling the assessee to challenge effectively the constitutionality or legality of assessment or levy of tax by a municipality or to recover from it what was realised under an invalid law.
(see the judgment of Mitter, J. also in Pabbojan case(1) at page 276).
In Bharat Kala Bhan case (2) it was pointed out that : ". . one of the corollaries flowing from the principle that the Constitution is the fundamental law of the land is that the normal remedy of a suit will be available for obtaining redress against the violation of a constitutional provision.
The Court must, therefore, lean in favour of construing a law in such a way as not to take away this right and render illusory the protection afforded by the Constitution.
" Again in Deputy Commercial Tax Officer, Madras vs Raya laseema Constructions(") the problem was the same as was dealt with in Venkataraman 's Co. Ltd. case (4) .
The earlier case was followed and it was held that the sales tax authorities having given effect to an ultra vires provision section 18 A of the Madras General Sales Tax Act, 1939 was no bar to the maintainability of the suit to recover tax paid under such an assessment since the authorities must be taken to have acted outside and not under the Madras General Sales Tax Act.
This brings us to the case of Provincial Government vs J. section Basappa(5).
There too three suits were filed alleging that the goods had passed to extra state points while they were still in the possession and ownership of the seller.
Since the property in the goods remained in the seller till the goods had entered into other provinces, the sales could not be subjected to a tax in Madras Presidency.
Section 11 (4) of the Madras General Sales Tax Act, 1939 made orders of the taxing authorities final but the Act applied only to sales within the Presidency of Madras and not outside it.
There was at that time no provision to oust the jurisdiction of the civil courts.
Section 18 A of which we have spoken earlier and on which most of the cases turned, was added much later.
Many of the remedies such as were considered in Raleigh Investment Co. 's case(6) and Venkataraman 's case (4) were also added at the same time as section 18 A.
The question thus had to be decided without an express provision ousting the jurisdiction of the Civil Courts and (1) A. 1.
R. (3) 17 section T. C. 505.
(5) 1 7.
(2) ; (4) ; (6) [1947] L. R. 74 I. A. 50.
677 without the existence of ail adequate machinery for raising such an issue before the authorities.
The only provision which had to be considered was section 11(4) which provided 'every order passed in appeal under this section, shall,, subject to the powers of revision conferred by section 12, be final. ' The fundamental provisions of the Madras General Sales Tax Act, 1939 (as it then stood) were that the sales must be within the Presidency of Madras.
The authorities ignoring these provisions held that 'outside sales ' were taxable.
Relying upon the dictum of the Judicial Committee in Mask & Co. 's case(1), as applied in Firm of Illuri Subbayya Chetty 's case(2), this Court held that the suits were competent.
In the case of this Court last cited the following observation was made: "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 provi sions 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 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.
" The Divisional Bench relying upon this observation pointed out "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 pro visions 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 section 18A in the Act, the jurisdiction of the civil court would not be taken away at least where the action (1) (1940) L. R. 67 1.
A. 222.
(2) [1964] 1 S.C. R. 752.
678 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 section 18A was implicit in it and that section 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." This case was, therefore, stronger than any so far noticed because of the absence of section 18 A and the elaborate machinery for adequate remedy was introduced later and the tax was illegal1y collected ignoring the fundamental provisions of the Madras General Sales Tax Act, 1939.
However, in Kerala vs Ramaswami Iyer and Sons(1) (although it was not pointed out what express provision or clear intendment in the Madras General Sales Tax Act, 1939 as it then stood, barred a civil suit) Basappa 's(2) case was declared to be wrongly decided.
In that very case the learned Judges considered a. rule which gave exemption but held that it did not give protection because it was enacted after the account period.
What if it had been enacted before ? The observations in Basappa 's case(1) that if a commodity was not taxable at all or was exempt the civil Court would have jurisdiction were, however, not accepted.
It was sufficient to have said in Ramaswami Iyer 's case(2) that exemption or no exemption that was for the authorities to decide and not a matter for the Civil Courts.
The argument of exemption was rejected by observing : "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 salestax collected by the dealers." (emphasis supplied) This reasoning shows that if it had been, the suit might have been held competent.
It is not necessary for us to pursue this matter further than to say that the observation that Basappa 's case was wrongly decided is open to serious doubt.
(1) ; (2) ; , 679 This leaves for consideration only the cases Firm of Illuri Subbayya Chetty and Sons vs State of Andhra Pradesh(1) and Kamla Mills Ltd. vs State of Bombay(2).
The case of Firm of Illuri Subayya Chetty(1) arose under the Madras General Sales Tax Act, 1939, and section 18 A was pleaded to make the suit incompetent.
The transactions in respect of which tax was recovered were said to be of sales and not purchases and the latter only were to, be taxed.
It was held that section 18 A barred the suit because the attempt was to set aside or modify an assessment made under the said Act.
It was pointed out that any challenge to the correctness of the assessment must be made before the appellate or revisional forums under the same Act since the character of the transaction was a matter into which the appellate and revisional authorities could go.
A litigant who accepted the assessment when he could call it in question by other proceedings under the same Act could not begin a suit.
The expression 'under the Act ' was sufficient to cover even an incorrect assessment.
The assessee firm succeeded in the suit but the High Court held it barred under section 18 A and also held against the assessee firm on the nature of the transaction.
This Court first held that there was no provision in the said Act for bringing a civil suit to question the assessment.
Therefore the matter must fall in section 18 A.
This Court analysed the provisions of the said Act which provided by section 12 A, 12 B, 12 C and 12 D for special appeals, including an appeal to the High Court, the highest Civil Court in the State, laying down further that the appeal should be heard by a Division Bench.
In the light of this elaborate machinery the question, of alternative remedy was approached.
It was also pointed out that the assessee firm had itself included these transactions in its returns.
Having conceded that the tax was payable and not having raised the issue before the appellate authorities constituted under the said Act, it was held that the firm could not be allowed to raise the issue in a suit.
This was enough to dispose of the appeal to this Court.
The Constitution Bench, however, went on to examine the rulings of the Judicial Committee in Mask & Co. 's(3) and Raleigh Investment Co. 's(4) cases.
Dealing with the former case, this Court pointed out that non compliance with the provisions of the statute meant non compliance with such fundamental provisions of the statute as would make the entire proceedings before the appropriate authority illegal and without jurisdiction.
I The defect of procedure must also be fundamental.
In either case the defect must make the order invalid in law and void.
The Court went on to observe : (1) ; (3) (1940) L. R. 67 I. A. 222.
(2) ; (4) (1947) L. R. 74 I. A. 50.
680 .lm15 ".
In what cases such a plea would succeed it is unnecessary for us to decide in the present appeal because we have no doubt that the contention of the appellant that on the merits, the decision of the assessing authority was wrong, cannot be the subject matter of a suit because section 18 A clearly bars such a claim in the civil courts.
" Referring next to the Raleigh Investment Co. 's case(1) this Court pointed out that under the scheme of the Income tax Act, the Judicial Committee thought that a question of vires of the provisions could also be considered, but this Court did not think it necessary to pronounce any opinion whether this assumption was well founded or not.
This point was later considered in Venkataraman 's case(2) by Subbarao, J. (as he then was) and we have sufficiently analysed the views of this Court.
The case of Firm of Illuri Subbayya (3 ) may be said to be decided on special facts with additional reference to the addition of section 18 A excluding the jurisdiction of civil court and the special remedies provi ded in sections 12 A to 12 D by which the matter could be taken to the highest civil court in the State.
This brings us to the last case on the subject.
That is the Kamla Mills case(4).
That case was heard by a special Bench of 7 Judges and is of more binding value than the others.
Kamla Mills Ltd. was assessed to certain sales effected between 26 January 1950 and 31 March 1951 which the taxing authorities treated as 'inside sales ' and the Company claimed to be 'outside sales ' as determined under the Bengal Immunity Co. Ltd. vs State of Bihar and others(5).
The judgment in the last cited case was delivered on September 6, 1955.
The period for invoking remedies under the Bombay Sales Tax Act, 1946 under which the assessment was made had expired.
A suit was, therefore, filed to claim refund.
The Bombay Act contained section 20 which read "20.
Save as is provided in section 23, no assessment made and no order passed under this Act or the rules made thereunder by the Commissioner or any person appointed under section 3 to assist him shall be called into question in any Civil Court, and save as it provided in sections 21 and 22, no appeal or application for revision shall lie against any such assessment or order.
" The suit was dismissed on the preliminary point arising from this bar.
A Letter Patent appeal in the High Court of Bombay also (1) 1.
A. 50.
(3) ; (2) ; (4) ; (5) 681 failed.
The case came before this Court on a certificate.
It was referred to a Special Bench because section 20 was challenged as unconstitutional because it barred a suit even where the assessment was unconstitutional.
This Court held that as there was adequate remedy to raise the question before the authorities by asking for rectification of the assessment, the section could not be said to deprive him of remedy in such a way as to render the section itself unconstitutional as was hinted in Raleigh Investment Co. 's case(1) about section 67 of the Indian Income tax Act.
We are not concerned with that question.
The next question which was considered was whether the jurisdiction conferred on the taxing authorities included the jurisdiction to determine the nature of the transaction or was the decision about the character of the transaction, a decision on a collateral fact ? This Court held that it was the former and not the latter.
Therefore the decision was held to be merely an error in assessment which was capable of correction by the usual procedure of appeals etc.
The bar of section 20 was, therefore, held to apply.
During the course of the arguments the Special Bench considered Basappa 's case (2 ) and distinguished it from the Firm of Illuri Subayya Chetty 's case(3) on the ground that the former was not barred by section 18 A as it did not exist.
The, Special Bench, however, made an observation to the following effect : "In cases where the exclusion of the civil courts ' jurisdiction is expressly provided for, the, consideration as to the scheme of the statute in question and the adequacy or the sufficiency of the remedies provided for by it may be relevant but cannot be decisive.
But where exclusion is pleaded as a matter of necessary implication, such consideration would be very important, and in conceivable circumstances, 1 night even become decisive.
If it appears that a statute creates a special right or a liability and provides for the determination of the right and liability to be dealt with by tribunals specially constituted in that behalf, and it further lays down that all questions about the said right and liability shall be determined by the tribunals so constituted, it becomes pertinent to enquire whether remedies normally associated with actions in civil courts are prescribed by the said statute or not." The Special Bench refrained from either accepting the dictum of Mask & Co. 's case(4) or rejecting it, to the effect that even if jurisdiction is excluded by a provision making the decision of the authorities final, the Civil Courts have jurisdiction to examine into (1) [1947] L.R. 741. A.50.
(3) 72.
(2) ; (4) [1940] L. R. 67 1.
A. 222.
682 cases where the provisions of the particular Act are not complied with.
Neither of the two cases of Firm of Illuri Subayya(1) or Kamla Mills(2) can be said to run counter to the series of cases earlier noticed.
The result of this inquiry into the diverse views expressed in this Court may be stated as follows : (1) Where the statute gives a finality to the orders of the special tribunals the Civil Courts ' jurisdiction must be held to be excluded if there is adequate remedy to do what the Civil Courts would normally do in a suit.
Such provision, however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure.
(2) Where there is an express bar of the jurisdiction of the court, an examination of the scheme of the particular Act to find the adequacy or the sufficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the civil court.
Where there is no express exclusion the examination of the remedies and the scheme of the particular Act to find out the intendment becomes necessary and the result of the inquiry may be decisive.
In the latter case it is necessary to see if the statute creates a special right or a liability and provides for the determination of the right or liability and further lays down that all ques tions about the said right and liability shall be determined by the tribunals so constituted, and whether remedies normally associated with actions in Civil Courts are prescribed by the said statute or not.
(3) Challenge to the provisions of the particular Act as ultra vires cannot be brought before Tribunals constituted under that Act.
Even the High Court cannot go into that question on a revision or reference from the decision of the Tribunals.
(4) When a provision is already declared unconstitutional.
or the constitutionality of any provision is to be challenged, a suit is open.
A writ of certiorari may include a direction for refund if the claim is clearly within the time prescribed by the Limitation Act but it is not a compulsory remedy to replace a suit.
(1) ; (2) ; 683 (5) Where the particular Act contains no machinery for refund ' of tax collected in excess of constitutional limits or illegally collected a suit lies.
(6) Questions of the correctness of the assessment apart from its constitutionality are for.
the decision of the authorities and a civil suit does not lie if the orders of the authorities are declared 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 it is a relevant enquiry.
(7) An exclusion of the jurisdiction of the Civil Court is not readily to be inferred unless the conditions above set down apply.
In the light of these conclusions we have to see how the present case stands.
Section 3 was the charging section.
It spoke of the incidence of the tax.
In consisted of several sub sections.
These sub sections laid the tax on dealers according to their tax able turnover and in the case of a dealer who imported goods into Madhya Bharat the taxable turnover was Rs. 5000/ .
Section 4 made certain exclusions and exemptions, and section 5 prescribed the rate of tax.
That section read "5(1) The tax payable by a dealer under this Act shall be at a single point and shall not be less than Rs. 1 9 0 per cent.
or more than 6 1/4 per cent of the tax able turnover, as notified from time to time by the Government by publication in the official gazette.
Provided that Government may in respect of special class of goods charge tax up to 12 1/2per cent.
on the tax able turnover.
(2) The Government while notifying the tax payable by a dealer may also notify the goods and the point of their sale at which the tax is payable." In notifying the rate provision was made for rates in respect of importers, the point of time being the import.
As the import itself postulated movement of goods, the matter fell within Article 301 and as trade and commerce is declared to be free throughout the territory of India, it became unfree by reason of the tax.
The tax would therefore have ex facie offended Article 301.
This could however be avoided if the tax was saved by Article 304(a).That required that similar goods manufactured or produced in Madhya Bharat had to bear an equal tax.
Such equal tax was not imposed hence the notifications were struck down as making 684 discrimination and rendering trade and commerce unfree.
This was the effect of Bhailal 's case(1).
No doubt the Madhya Bharat Sales tax Act contained provi sions for appeal, revision, rectification and reference to the High Court, the notifications being declared void the party could take advantage of the fact that tax was levied without a complete charging section.
This affected the jurisdiction of the tax authorities because they could not even proceed to assess the party.
The question was one falling in category Nos. 3 and 4 rather than in category No. 2 above.
It was directly covered by the decision of this Court in Venkataraman 's case ( 2 ) read with Circo 's Coffee Co.(2) and Senthulnathan Chettiar 's case(2) already referred to We would have considered this matter again if Venkataraman 's case (2 ) had been doubted before but it seems to have been followed in the last mentioned case and Pabbojan Tea Company 's case(5).
If Kamla Mills Ltd. case(6) had not expressly left the question open we would have applied the earlier case of the Special Bench but as it is we are bound not by the Special Bench decision but by Venkataraman 's case(2).
We must therefore allow these appeals with costs.
The judgment of the High Court is set aside and suits are decreed.
The order for costs shall be as in the suit.
The costs in the High Court shall be borne as incurred.
V.P.S. Appeal allowed.
, (1) ; (2) ; (3) 19 section T. C. 66 (section C.).
(4) C. A. 1045 of 1966, dated 20 7 1967.
(5) A. 1.

dataset_name: IN-Abs

summary:
By Notifications issued by the State Government under section 5 of the Madhya Bharat Sales Tax Act 1950 sales tax was imposed and collected from the appellants.
They filed suits, for refund of the tax on the ground that it was illegally collected from them being against the constitutional prohibition in article 301 and not saved under article 304(a).
In Bhailal vs State of M.P. (1960) M.P.L.J. 6011, the petitioner therein challenged in a writ petition, the levy of sales tax on the same grounds and the High Court declared the notifications to be offensive to article 301 and held that ,the imposition of tax was illegal.
Following that decision, the trial court decreed the suits filed by the appellants.
In appeal before the High Court it was conceded by the State that the tax could not be imposed in view of article 301, but it was contended that the suits were not maintainable in view of section 17 of the Act which provides that no assessment made under the Act shall be called in question in any court.
The High Court held that the suits were incompetent.
In appeal to this Court, HELD: The suits were maintainable.
[684 D] An enquiry into the diverse views expressed in the decisions of this Court shows that an exclusion of the jurisdiction of civil court is not readily to be inferred unless the following conditions apply : (1) Where the statute gives a finality to the orders of the special tribunals the civil court 's jurisdiction must be held to be excluded if there is adequate remedy to do what the civil courts would normally do in a suit.
Such provision, however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure.
[682 A C; 683 C] Secretary of State vs Mask [1940] L.R. 67 I.A. 222; Firm Illuri Subbayya Chetty & Sons vs State of Andhra Pradesh, ; and Kerala vs Ramaswami Iyer and Sons, ; In Firm Illuri Subbayya Chetty & Sons ' case the assessee conceded that the tax was payable and did not raise the issue before the appellate authorities under the Act.
The suit for refund of tax was held not maintainable on those special facts, with reference to the addition of section 18A excluding the jurisdiction of civil court and the special remedies provided in sections 12A to 12D in the Madras General Sales Tax Act, 1939.
This Court, however, did not think it necessary to pronounce any opinion on the Judicial Committee 's view in the Raleigh Investment Co. case [1947] L.R. 74 I.A. 50) that even the vires of the provisions could be considered by the Tribunals constituted under the Act.
Dealing with Mask & Co. 's case, it was pointed out that non compliance with the provisions of the statute meant non compliance with such fundamental 663 provisions of the statute as would make the entire proceedings before the appropriate authority illegal and without jurisdiction.
[679 G H; 680 B D] (2) Where there is an express bar of the jurisdiction of the an examination of the scheme of the particular Act to find the adequacy or the sufficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the civil court.
[682 D] Where there is no express exclusion the examination of the remedies and the scheme of the particular Act to find out the intendment becomes necessary and the result of the inquiry may be decisive.
In the latter case, it is necessary to see if the statute creates a special right or a liability and provides for the determination of the right or liability and further lays down that all questions about the said right and liability shall be determined by the tribunals so constituted, and whether remedies normally associated with actions in civil courts are prescribed by the said statute or not.
[682 D F] In Provincial Government vs J. section Basappa, [1964] 5 S.C.R. 517 it was held that the civil court had jurisdiction because, at the relevant time, (a) the Madras General Sales Tax Act, 1939, did not have section 18A (which was introduced later barring the jurisdiction of civil court) (b).
the Act did not have the elaborate machinery for adequate remedy which was also introduced later, and (c) the tax was illegally collected ignoring the fundamental provisions of the Act.
Therefore, the observation in Kerala vs Ramaswami Iyer & Sons that Basappa 's case was wrongly decided is open to doubt.
[678 D, H] M/s. Kamala Mills Ltd. vs State of Bombay, [1966] 1 S.C.R. 64 was a decision of a Special Bench holding that section 20 of the Bombay Sales Tax Act 1946 excluded the jurisdiction of the civil court in suits for refund of tax, in cases, where the decision of the authorities under the Act was merely an error in assessment capable of correction by the usual pro cedure of appeals etc.
But the Bench observed, that in such cases, where the jurisdiction of the civil court is barred by providing an adequate machinery in the Act, it becomes 'pertinent to enquire whether remedies normally associated with actions in civil court are prescribed by the statute or not ', and thus expressly left open the question as to how far the bar would operate in cases where the charging provision is ultra vires.
[681 A B, G . 684 C D] (3) Challenge to the provisions of the particular Act as ultra vires cannot be brought before Tribunals constituted under that Act.
Eve,, the High Court cannot go into that question on a revision or reference from the decision of the Tribunals.
[682 F G] K. section Venkataraman vs State of Madras, [1966] 2 S.C.R. 229; Deputy Commercial Tax Officer, Madras vs
Rayalaseema Constructions, 17 S.T.C. 505; Circo 's Coffee Co. vs State of Mysore, 19 S.T.C. 66 (S.C.); C. T. Senthulnathan Chettiar vs Madras, (C.A. 1045 of 1966.
dated 20th July, 1967) and Pabojan Tea Co. Ltd. vs Dy.
Commissioner, Lakhimpur, ; ; (4) When a provision is already declared unconstitutional or the constitutionality of any provision is to be challenged, a suit is open.
A writ of certiorari may include a direction for refund if the claim is clearly within the time prescribed by the Limitation Act but it is not a compulsory remedy to replace a suit.
[682 G H] In State of M.P. vs Bhailal, ; which confirmed the decision in this Court upheld the order of refund by the High Court in its writ jurisdiction held that in cases where a defence of limitation was open or other facts had to be decided, the order of 664 refund was not proper, and accepted the proposition that a suit lay in ' such cases without adverting to, the provisions of the Act to see whether the jurisdiction of civil court was barred either expressly or by necessary implication.
Therefore, this case cannot be an authority for holding that the civil court has jurisdiction to entertain such suits.
[668] (5) Where the particular Act contains no machinery for refund of,, tax collected in excess of constitutional limits or illegally collected a suit lies.
[683 A] Bharat Kala Bhandar Ltd. vs Municipal Council, Dhamangaon, ; (6) Questions of the correctness of the assessment apart from its constitutionality are for the decision of the authorities and a civil suit,does not lie if the orders of the authorities are declared 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 it is a relevant enquiry.
[6 83 B] In the present case, though the Madhya Bharat Sales Tax Act contains ,Provisions for appeal, revision, rectification and reference to the High ,Court, the notifications having been rightly declared void in the earlier decision of the High Court, the appellants could take advantage of the fact that tax was levied without a complete charging section.
Since the tax authorities could not even proceed to assess the party their jurisdiction was affected and the case fell within categories (3) and (4) above, ,and not in category (2).
[684 A C]