Jaga Button Industries Ltd. vs The State of Madras

Ramaswami, J.—This is a second appeal preferred against the decree and judgment of the learned District Judge of Coimbatore in A. S.

No. 313 of 1954, reversing the decree and judgment of the learned Subordinate Judge of Coimbatore in O.S. No. 185 of 1953.

In regard to an assessment under the Madras General Sales Tax Act, the appellant has been challenging the levy of the same on the ground that

it was taxation of sales outside the State of Madras, and offending against Article 286 of the Constitution and Section 22 of the General Sales Tax

Act which incorporates Article 286(2) of the Constitution and was illegal. This contention was upheld by the trial Court and on the ground that the

assessment was bad on the foot just now mentioned and the suit of the plaintiff was decreed. On appeal the learned District Judge held that the

assessment could be supported on the ground that there was no evidence in the case to show that the purchasers of the goods now in question did

not purchase them for export outside the State, and he left open the other question whether the suit is or is not maintainable by reason of Section

18-A of the General Sales Tax Act. That section provides that no suit or other proceedings shall except as expressly provided under this Act be

instituted in any Court to set aside or modify any assessment under this Act. Therefore he allowed the appeal by the State. The defeated assessee

has preferred this second appeal.

u/s 9 of the Civil Procedure Code, Civil Courts have jurisdiction to try all suits of a civil nature excepting suits of which their cognizance is either

expressly or impliedly barred: Suraj Narain v. Jami AIR 1946 Pat. 335, Jagannatha v. Kutumbarayadu (1916) 39 Mad. 21, State of Bombay v.

Adamjee [1951] A.C. 147 and Valli v. Corporation of Madras (1915) 38 Mad. 41. Section 18-A of the Madras General Sales Tax Act

withdraws from the purview of the Civil Courts suits for setting aside or modifying assessment made under the said Act.

The plaint states that the order passed by the Deputy Commissioner is illegal and ultra vires and not sustainable on the merits of the case, as also

the orders of the Sales Tax Officers. This cannot be agitated in a Civil Court and the decision of the Privy Council in Raleigh Investment Co. Ltd.

v. Governor-General in Council [1947] 15 ITR 332; 60 L.W. 390, furnishes the answer. The Judicial Committee held that an assessment made

under the machinery provided by the Act is not a nullity, like an order of Court lacking jurisdiction. Reliance of such a provision is not an excess of

jurisdiction but a mistake of law made in the course of its exercise, and the suit is in truth directed exclusively to set aside or modify "" an assessment

made under the Act"" and hence it is not maintainable. Their Lordships further pointed out that the circumstance that the assessing officer had taken

into account an ultra vires provision of the Act is, in this view, immaterial in determining whether the assessment is made under the Act. The phrase

describes the provenance of the assessment and does not relate to its accuracy in point of law. The use of the machinery provided by the Act, not

the result of that use, is the test. It is apparent that where the form of prayer did not use the very words but the substance is clear that a

modification or setting aside the assessment is sought for, the plaintiff assessee has to seek the remedy provided under Sections 11 and 12 to 12-D

of the Act, which is a self-contained Act and prescribes a special machinery for the redress of the grievance. Therefore, the declaration sought for

in this case cannot be regarded as having any relevancy except as leading up to the claim for repayment. Therefore, the learned advocate for the

appellant has not succeeded in taking this case out of the purview of the hierarchy of tribunals constituted for this purpose under the Madras

General Sales Tax Act which is a self-contained and comprehensive legislation which enables an assessee to question the assessment imposed on

him. Hence a person who is dissatisfied with the assessment and seeks to set it aside or modify cannot do so before the Civil Court; but it will be

open to him to raise before the Civil Court only those pleas which these authorities under the Act are precluded from entertaining: Public

Prosecutor v. Ramalingam Pillai (1958) 2 M.L.J. 243.

There is no doubt that in this case the assessment was perfectly valid before the coming into existence of the Constitution. It is equally clear that

after the coming into existence of the Constitution this levy of assessment on sales outside the State would be certainly illegal. But the transactions

in this case relate to 1950-51. In this connection the learned advocate for the Government points out that by reason of the Sales Tax Continuance

Order, 1950, published in the Gazette of India, Extraordinary, dated the 26th January, 1950, any tax on the sale or purchase of goods which was

being lawfully levied by the Government of any State immediately before the commencement of the Constitution of India shall continue to be levied,

notwithstanding that the imposition of such tax is contrary to the provision contained in Clause (2) of Article 286 of the Constitution.

That these sales are saved from illegality by reason of the Sales Tax Continuance Order, 1950, has been upheld in two reported cases, namely,

the East India Match Factory v. State of Madras [1954] 5 S.T.C. 269, where it is pointed out that if Article 286(2) applied the President''s order

issued thereunder justified the levy of the tax by the State of Madras up to 31st March, 1951. In Vedullapalli Satyanarayana Murthy v. State of

Madras [1955] 6 S.T.C. 405, it was held that if the sales fell within Article 286(2) they would be liable to tax under the Sales Tax Continuance

Order, 1950, of the President made thereunder.

I have dealt with these two points in two recent decisions (S. A. No. 1186 of 1955 - Palaniswami Nadar v. State of Madras [1959] 10 S.T.C.

207, and S.A. No. 818 of 1956 - Indian Drugs Co., Tuticorin v. State of Madras [1959] 10 S.T.C. 322.

This second appeal fails and is dismissed but in the circumstances without costs.