1960 (11) TMI 106 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the suit is barred by Section 18-A of the Madras General Sales Tax Act, 1939.
2. Whether the trial court's judgment on the merits of the case is sustainable.

Issue-wise Detailed Analysis:

1. Bar under Section 18-A of the Madras General Sales Tax Act, 1939:

The main contention in this appeal is whether the suit is barred by Section 18-A of the Madras General Sales Tax Act, 1939. The provision states, "No suit or other proceeding shall, except as expressly provided in this Act, be instituted in any Court to set aside or modify any assessment made under this Act." The court examined the scope and ambit of Section 18-A, concluding that the language of the section clearly indicates that no challenge to an assessment could be entertained in any suit or proceeding except as provided in the Act. The Act provides remedies through appeals to the Commercial Tax Officer, Deputy Commissioner of Commercial Taxes, Sales Tax Appellate Tribunal, and revisions to the High Court. The court emphasized that the legislative intent was to oust the jurisdiction of civil courts to set aside or modify an assessment, as the Act sets up a comprehensive machinery for the levy and collection of tax and for dealing with grievances of assessees.

The court further deliberated whether a suit for refund of sales tax alleged to have been illegally collected falls outside the purview of Section 18-A. It concluded that Section 18-A applies to such suits as well, as they inherently involve questioning the validity of the assessment. The court reasoned that if the assessment stands, the tax collected cannot be deemed illegal, and hence, the refund cannot be claimed. The court also highlighted the potential for anomalous situations if civil courts were allowed to entertain such suits, as it would permit lower courts to contradict decisions made by higher tribunals and the Supreme Court.

The court referred to previous decisions, including the Privy Council's ruling in Secretary of State v. Mask & Co. and Raleigh Investment Co. v. Governor-General in Council, which supported the view that when a statute provides a specific remedy, the party must adopt that remedy and cannot resort to an alternative jurisdiction. The court also noted that the Madras General Sales Tax Act contains provisions similar to those in the Indian Income-tax Act, enabling assessees to raise objections through a hierarchy of tribunals.

The court dismissed the argument that Section 18-A would only apply if the assessment could be justified with reference to the provisions of the Act. It clarified that the expression "made under this Act" relates to the existence of the assessment, not its accuracy in law. The court concluded that even if the tax was levied wrongly, it would still fall within the scope of Section 18-A, as the alleged illegality does not affect the jurisdiction of the tribunals established under the Act.

2. Merits of the Trial Court's Judgment:

The trial court had ruled in favor of the plaintiff, stating that the Sales Tax Authorities must be deemed to have collected the tax on the sales of groundnut illegally. However, the appellate court found this judgment unsubstantial. It noted that the plaintiff had included the transactions in question in the returns submitted and had paid the taxes voluntarily without availing any of the remedies provided under the Sales Tax Act. The court observed that the plaint did not allege any mistake responsible for making the payments and instead claimed that the transactions were not on the plaintiff's behalf but as a commission agent for their principals.

The court examined the evidence and concluded that the plaintiff acted as a commission agent, and the transactions were purchases of groundnut, which are subject to tax. It referred to the definition of "dealer" in Section 2(b) of the Madras General Sales Tax Act, which includes commission agents, and noted that the plaintiff had not obtained a license under Section 8 of the Act, which could have exempted them from tax. The court emphasized that without such a license, the plaintiff's turnover was liable to be taxed.

The court criticized the trial judge's reasoning, pointing out that the judge had overlooked the fact that the plaintiff had voluntarily included the disputed turnover in the returns and paid the taxes. The appellate court found the trial court's judgment unsatisfactory and strained in favor of the plaintiff. Consequently, the appellate court reversed the trial court's judgment, allowed the appeal with costs, and dismissed the suit with costs.

Conclusion:

The appellate court held that the suit was barred by Section 18-A of the Madras General Sales Tax Act, 1939, and that the trial court's judgment on the merits was unsubstantial. The appeal was allowed, and the suit was dismissed with costs.