1968 (4) TMI 64 - SC - VAT and Sales Tax

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 discrimination and rendering trade and commerce unfree. No doubt the Madhya Bharat Sales Tax Act contained provisions 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 - Appeal allowed.

Issues Involved:
1. Jurisdiction of Civil Courts
2. Validity of Tax Notifications
3. Constitutional Provisions (Article 301 and Article 304(a))
4. Bar to Civil Suits under Section 17 of the Madhya Bharat Sales Tax Act
5. Adequacy of Statutory Remedies

Issue-wise Detailed Analysis:

1. Jurisdiction of Civil Courts:
The Supreme Court emphasized that the jurisdiction of civil courts is comprehensive and can only be excluded by an express provision of law or by clear implication arising from such law. This principle is rooted in Section 9 of the Code of Civil Procedure. The Court cited the categories of cases where civil court jurisdiction might be excluded, as illustrated by Willies, J., in Wolverhampton New Waterworks Co. v. Hawkesford.

2. Validity of Tax Notifications:
The appellants challenged the tax notifications issued under the Madhya Bharat Sales Tax Act, arguing that the tax was illegally collected and violated Article 301 of the Constitution. The notifications imposed tax on imported tobacco but not on similar goods produced within the state, leading to discrimination. The High Court had earlier declared these notifications offensive to Article 301, and this was confirmed by the Supreme Court in Bhailal Bhai v. State of M.P.

3. Constitutional Provisions (Article 301 and Article 304(a)):
Article 301 guarantees freedom of trade and commerce throughout India, while Article 304(a) allows states to impose reasonable restrictions on this freedom, provided there is no discrimination between goods imported from other states and those produced locally. The Supreme Court held that the tax notifications violated Article 301 and were not saved by Article 304(a) because an equal tax was not levied on similar goods produced within the state.

4. Bar to Civil Suits under Section 17 of the Madhya Bharat Sales Tax Act:
The State argued that the suits were barred by Section 17 of the Act, which prohibits questioning any assessment or order made under the Act in any court. The Supreme Court examined whether the imposition of tax under a void law could be challenged in a civil suit. It was held that the jurisdiction of civil courts is not excluded when the imposition is under a void law, as the authorities would be acting outside the law.

5. Adequacy of Statutory Remedies:
The Court analyzed the adequacy of statutory remedies provided under the Madhya Bharat Sales Tax Act, such as appeals, revisions, and references to the High Court. It was concluded that these remedies were inadequate to address the issue of the validity of the tax notifications. The Court reiterated that challenges to the constitutionality of a provision cannot be brought before tribunals constituted under that Act, and a civil suit is the appropriate remedy.

Conclusion:
The Supreme Court allowed the appeals, setting aside the judgment of the High Court and decreeing the suits. The Court held that the civil courts have jurisdiction to entertain suits challenging the validity of tax imposed under a void law, and the statutory remedies provided under the Madhya Bharat Sales Tax Act were inadequate to address the constitutional issues raised by the appellants. The Court also emphasized that the imposition of tax under the challenged notifications violated Article 301 and was not saved by Article 304(a) of the Constitution.

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