1957 (3) TMI 80 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of Civil Courts
2. Limitation
3. Compliance with Section 80 C.P.C.
4. Situs of Sale and Transfer of Property
5. Validity of Composite Assessment

Detailed Analysis:

1. Jurisdiction of Civil Courts:
The trial court negated the plea that civil courts have no jurisdiction to entertain the suits, and this issue was not in controversy in the appeals.

2. Limitation:
The trial court held that the suits were barred by limitation either under Section 18 of the Madras General Sales Tax Act or Article 16 of the Limitation Act. However, the High Court found this view erroneous. Section 18 applies only to suits for damages and compensation, not for the refund of taxes. Article 16 requires three conditions: payment must be made in protest, in satisfaction of a claim by Revenue Authorities, and relate to arrears of revenue or demands recoverable as such arrears. The payments in these cases were advance payments under Rule 13 of the Turnover and Assessment Rules, not made under protest or in satisfaction of a claim. Therefore, Article 62, which prescribes a three-year limitation period, was applicable, and the suits were within time.

3. Compliance with Section 80 C.P.C.:
The trial court found non-compliance with Section 80 C.P.C. in O.S. 14 of 1950, but the High Court disagreed. The difference in statements between the suit notice and the plaint (mistake vs. coercion) was deemed immaterial. The object of Section 80 is to inform the Government of the nature of the action, and this was fulfilled. The Government Pleader did not support the trial court's judgment on this point.

4. Situs of Sale and Transfer of Property:
The trial court grouped the sales into four categories based on railway receipts and invoices. It found that in categories 1 and 4, the seller remained the owner until payment, and the sales occurred outside the province. This was not contested by the defendant. For categories 2 and 3, the High Court examined the definition of sale under Section 2(h) of the Madras General Sales Tax Act and the principles under Sections 19 to 25 of the Indian Sale of Goods Act. The court found that the property in the goods passed to the buyer when the goods were delivered to the railway for transmission, provided the seller did not reserve the right of disposal. The evidence did not support the seller's retention of ownership until payment, and the sales in categories 2 and 3 occurred within the province of Madras, making them assessable.

5. Validity of Composite Assessment:
The High Court considered the validity of the entire assessment, which included both taxable and non-taxable transactions. Citing the Supreme Court judgment in Ram Narain Sons Ltd. v. Assistant Sales Tax Commissioner, the court held that a composite assessment blending legal and illegal levies is invalid in toto. This applied even to O.S. 23 of 1949, where only a small part of the tax was illegal. The assessment could not be saved on the principle of de minimus non curat lex, as established by the Privy Council and approved by the Supreme Court. The High Court declared all the assessments invalid but allowed the taxing authorities to reassess if permissible by law.

Cross-Objections:
The cross-objections in A.S. 566 of 1951 argued that the notice under Section 80 C.P.C. was issued before the cause of action arose, as an appeal was pending. The High Court rejected this, citing the Privy Council's view that an appeal does not suspend the original decree. The original assessment order provided a cause of action for the notice. The court also dismissed the argument that the notice was conditional, stating that such conditions do not affect the validity of the notice.

Order:
The High Court dismissed the memorandum of cross-objections and upheld its decision to disallow costs to the plaintiff, as the point on which he succeeded was raised for the first time during the appeals. The judgment could not be reviewed without an application under Order 47, Rule 1, C.P.C.