1965 (11) TMI 124 - SC - VAT and Sales Tax

It is no doubt true that when there is an alternative remedy, the High Court will not normally entertain an application under Article 226, but where, as in the instant case, the High Court has chosen to exercise its jurisdiction to grant relief to the respondent, this Court will not interfere with the jurisdiction exercised by the High Court - Appeal dismissed.

Summary

Issues:
1. Assessment of sales tax on works contracts under the Madras General Sales Tax Act, 1939.
2. Legality of demand for payment of assessed amounts.
3. Jurisdiction of assessing officer and validity of assessments.
4. Applicability of Article 265 of the Constitution.
5. Ultra vires nature of provisions of the Madras General Sales Tax Act on indivisible building contracts.
6. Proper remedy for challenging assessments - writ of mandamus vs. filing a suit.

The Supreme Court judgment dealt with appeals arising from a Division Bench of the Madras High Court regarding the assessment of sales tax on works contracts under the Madras General Sales Tax Act, 1939. The firm in question was assessed for two consecutive years, and demands were made for the outstanding amounts. However, the legality of the assessments came into question following a High Court ruling that works contracts did not involve the sale of materials, rendering the levy of sales tax unlawful. The respondent contended that the State had no authority to demand payment due to the illegal assessment. The High Court held that acts of an assessing officer beyond jurisdiction would be null and void, and issued a writ of mandamus directing the appellant to refrain from collecting the amounts.

The Supreme Court analyzed the nature of the transactions and found that there was no dispute that they were works contracts, as assumed in the High Court judgment. The Court also referred to Article 265 of the Constitution, highlighting a previous ruling that certain provisions of the Madras General Sales Tax Act were ultra vires the State Legislature, making the assessments void. It was established that the Sales Tax Authorities had acted outside the Act by making assessments based on provisions declared ultra vires. The Court further cited a case where it was held that a suit for refund of illegally collected tax was maintainable due to the invalidity of the charging section.

Regarding the proper remedy, the appellant argued that a writ of mandamus was not appropriate, and the respondent should have filed a suit instead. However, the Court noted that when the High Court chooses to exercise jurisdiction to grant relief, interference by the Supreme Court is unwarranted. Ultimately, the appeals were dismissed, affirming the High Court's decision to issue a writ of mandamus and emphasizing the ultra vires nature of the relevant provisions of the Madras General Sales Tax Act.