1969 (3) TMI 76 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the suit claim is barred under section 18-A of the Madras General Sales Tax Act, 1939.
2. Jurisdiction of the sales tax authority to assess inter-State transactions.
3. Applicability of Article 286(2) of the Constitution to the transactions in question.
4. Maintainability of a civil suit for recovery of tax paid under a mistake of fact and law.

Detailed Analysis:

1. Bar under Section 18-A of the Madras General Sales Tax Act, 1939:
The primary issue was whether the suit filed by the plaintiff to recover the sum paid as sales tax was barred under section 18-A of the Madras General Sales Tax Act, 1939. Section 18-A 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 various precedents, including the Supreme Court's decision in Dhulabhai v. State of Madhya Pradesh, which summarized the principles governing the jurisdiction of civil courts in matters of tax assessment. The court concluded that the sales tax authority has exclusive jurisdiction to decide whether a transaction falls within the State's jurisdiction for tax purposes, and any erroneous decision on this point must be challenged through the remedies provided in the Sales Tax Act, not through a civil suit.

2. Jurisdiction of the Sales Tax Authority:
The court reaffirmed that the sales tax authority has the jurisdiction to decide whether a sale or purchase takes place within the State or in the course of inter-State trade, invoking Article 286 of the Constitution. The court emphasized that even if the sales tax authority makes an erroneous decision, the remedy lies within the framework of the Sales Tax Act, through appeals and revisions, and not through a civil suit. The court referenced the Supreme Court's decision in Kamala Mills Limited v. State of Bombay, which held that the sales tax authority's decision on the nature of transactions is within its jurisdiction, and any error does not render the assessment without jurisdiction.

3. Applicability of Article 286(2) of the Constitution:
The plaintiff argued that the transactions in question were inter-State purchases and thus exempt from sales tax under Article 286(2) of the Constitution. The court noted that the sales tax authority must first examine the details of the transactions to determine their nature. If the authority erroneously concludes that the transactions are taxable, the assessment is still within its jurisdiction. The court rejected the plaintiff's argument that non-compliance with Article 286(2) constitutes non-compliance with a fundamental provision that would render the entire proceedings illegal and without jurisdiction.

4. Maintainability of a Civil Suit:
The court examined whether a civil suit is maintainable for recovering tax paid under a mistake of fact and law. The court referenced the Supreme Court's decision in Venkataraman and Co. (P.) Ltd. v. State of Madras, which held that a tribunal created by statute cannot question the vires of that statute. The court distinguished between cases where the charging provision itself is ultra vires and cases where the assessment is illegal due to the nature of the transactions. The court concluded that the present case falls within the latter category, where the assessment's legality is a matter for the sales tax authority to decide, and thus, a civil suit is not maintainable.

Conclusion:
The court allowed the appeal, holding that the suit is barred under section 18-A of the Madras General Sales Tax Act, 1939. The court emphasized that the remedy for any erroneous assessment lies within the statutory framework of the Sales Tax Act, through appeals and revisions, and not through a civil suit. The decision reaffirmed the exclusive jurisdiction of the sales tax authority to assess the nature of transactions and the applicability of Article 286(2) of the Constitution. The appeal was allowed with costs.

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