1966 (2) TMI 21 - SC - VAT and Sales Tax

Whether the jurisdiction of the civil court to try the suit is excluded? Held that - In the absence of express exclusion of the jurisdiction of the civil court the action for refund of tax was maintainable. There was in the Travancore-Cochin General Sales Tax Act at the material time no express provision which obliged the taxing authority to exclude from the computation of taxable turnover the amount of sales tax collected by the dealer. The argument of counsel for the respondents that the taxing authority has infringed a prohibition imposed upon him has therefore no substance. Appeal allowed

Summary

Issues Involved:

1. Jurisdiction of the civil court to try the suit.
2. Interpretation of "turnover" under the Travancore-Cochin General Sales Tax Act.
3. Exclusion of sales tax collected by the dealer from the computation of taxable turnover.

Detailed Analysis:

1. Jurisdiction of the Civil Court to Try the Suit:

The primary issue in this appeal was whether the jurisdiction of the civil court to try the suit was excluded by the Travancore-Cochin General Sales Tax Act. The respondents were assessed to sales tax for the period August 16, 1950, to March 31, 1951, and sought a decree for an excess amount paid. The court of first instance decreed the claim, and the High Court of Kerala confirmed the decree.

The State of Kerala contended that Section 23A of the Travancore-Cochin General Sales Tax Act barred the jurisdiction of the civil court. However, this section was incorporated into the Act by Act 18 of 1955, after the suit was instituted, and did not oust the jurisdiction of the civil court for suits properly instituted before its enactment.

The respondents argued that in the absence of an express provision excluding the jurisdiction of the civil court, the suit was maintainable, relying on the decision in Provincial Government of Madras (now Andhra Pradesh) v. J. S. Basappa. In Basappa's case, it was held that without a provision like Section 18A of the Madras General Sales Tax Act, 1939, the jurisdiction to entertain the suit was not taken away, especially where the action of the authorities was "wholly outside the law."

The judgment emphasized that the jurisdiction of the civil court could be excluded expressly or by clear implication arising from the scheme of the Act. Where the legislature sets up a special tribunal to determine questions relating to statutory rights or liabilities, the jurisdiction of the civil court would be deemed excluded by implication. The court referred to Raleigh Investment Co. Ltd. v. Governor-General-in-Council, where the Judicial Committee observed that the scheme of the Income-tax Act set up a particular machinery for assessing total income, and jurisdiction to question the assessment outside this machinery was inconsistent with the statutory obligation to pay.

In K. S. Venkataraman & Co. (P.) Ltd. v. State of Madras, it was observed that if a statute imposes a liability and creates an effective machinery for deciding questions of law or fact arising in regard to that liability, it may bar the maintainability of a civil suit by necessary implication.

In Kamala Mills Ltd. v. State of Bombay, the court held that the jurisdiction of the civil court to entertain suits for refund of tax paid was excluded by the scheme of the Bombay Sales Tax Act, 1946, which set up a complete machinery for levy, assessment, and collection of tax.

The Travancore-Cochin General Sales Tax Act set up machinery for levy, assessment, and collection of tax, with a hierarchy of authorities to administer the Act. The Act was a complete code dealing with the levy, assessment, collection, and refund of tax, and the jurisdiction of the civil court to entertain the suit was excluded by implication.

2. Interpretation of "Turnover" Under the Travancore-Cochin General Sales Tax Act:

The respondents contended that the Sales Tax Officer acted in defiance of the mandatory provisions of the Act by including the sales tax collected by the dealer in the computation of taxable turnover. They relied on rule 7 of the Rules framed under the Act and the definition of "turnover" under the Act.

The court noted that "turnover" was defined as the aggregate amount for which goods are bought or sold by a dealer. The expression "aggregate amount for which goods are sold" would include the amount of sales tax received by the dealer. There was no provision in the Act suggesting that sales tax collected was to be excluded from the connotation of "turnover" for the assessment year ending March 31, 1951.

The amendment to rule 7(1), which excluded sales tax collected by the dealer from the computation of taxable turnover, was effective from April 1, 1951, and was not applicable to the assessment period in question. The exclusion prescribed by the amendment was not clarificatory but an additional head in the computation of net turnover.

3. Exclusion of Sales Tax Collected by the Dealer from the Computation of Taxable Turnover:

The respondents argued that the amendment to rule 7(1) merely clarified what was implicit in the definition of "turnover." However, the court held that "turnover" included the aggregate amount for which goods were sold, including sales tax collected by the dealer.

In George Oakes (Private) Ltd. v. State of Madras, the court observed that the aggregate amount for which goods are bought or sold includes the tax as part of the price paid by the buyer. The amount goes into the common till of the dealer until it is paid to the government. This conception of turnover was not new and was found in England and America.

The court concluded that there was no express provision in the Travancore-Cochin General Sales Tax Act obliging the taxing authority to exclude sales tax collected by the dealer from the computation of taxable turnover for the assessment year ending March 31, 1951. The argument that the taxing authority infringed a prohibition imposed upon him had no substance.

Conclusion:

The appeal was allowed, and the suit was dismissed. There was no order as to costs throughout. The judgment clarified that the jurisdiction of the civil court to entertain the suit was excluded by the scheme of the Travancore-Cochin General Sales Tax Act, and the sales tax collected by the dealer was rightly included in the computation of taxable turnover.