1965 (3) TMI 18 - SC - Income Tax

Whether the appellant s suit is maintainable? Held that - Where the question merely is, whether the assessment had been made according to law, the assessing officer of the municipality having jurisdiction on the subject-matter and over the assessee the provisions of section 84(3) may be a bar to a suit. Where, however, the question raised is as to the jurisdiction of the assessing officer to proceed against the assessee and levy on or collect from him an amount in excess of that permitted by the Constitution, the matter would be entirely out of the bar of that provision. Here since the assessing officer had no authority to levy a tax beyond what section 142A of the Government of India Act, 1935, permitted or what article 276 permits his proceedings are void in so far as they purport to levy a tax in excess of the permissible amount and authorise its collection and the assessment order is no answer to the suit for the recovery of the excess amount. To this extent, even the order of assessment cannot obtain the protection of section 84(3) of the Act and, therefore, the appellant s suit is maintainable. For all these reasons we hold that the High Court was in error in dismissing the appellant s suit. We hold the same in the connected appeal and accordingly allow both the appeals with

Issues Involved:
1. Legality of Tax Imposition and Enhancement
2. Compliance with Section 48 of the Central Provinces Municipalities Act, 1922
3. Applicability of Section 84(3) of the Central Provinces Municipalities Act, 1922
4. Jurisdiction of Civil Courts

Issue-Wise Detailed Analysis:

1. Legality of Tax Imposition and Enhancement:
The appellant, a private limited company, challenged the legality of a tax imposed by the Notified Area Committee of Dhamangaon under Section 66(1)(b) of the Central Provinces Municipalities Act, 1922. The tax was initially set at one anna per bojha of ginned cotton and one anna per bale of pressed cotton. This rate was later increased to four annas per bojha and four annas per bale by a notification dated April 10, 1941. The appellant contended that this enhancement violated Section 142A of the Government of India Act, 1935, and Article 276 of the Constitution, which set upper limits for such taxes. The Supreme Court held that the enhancement was ultra vires and illegal, as it exceeded the constitutional limits.

2. Compliance with Section 48 of the Central Provinces Municipalities Act, 1922:
Section 48 of the Act stipulates that no suit shall be instituted against any Committee for anything done or purported to be done under the Act until the expiration of two months after notice in writing has been delivered. The appellant argued that the recovery of the excess tax was illegal and did not fall under the purview of Section 48. The Supreme Court, however, found that the assessment and collection of the tax, even if in excess, were acts done under the Act. Therefore, the suit was subject to the conditions laid down in Section 48, including the requirement for notice and the six-month limitation period.

3. Applicability of Section 84(3) of the Central Provinces Municipalities Act, 1922:
Section 84(3) bars any objection to valuation, assessment, or levy of tax except as provided in the Act. The appellant contended that this provision did not apply to their case, as the tax was collected in violation of constitutional limits. The Supreme Court held that Section 84(3) did not bar the jurisdiction of civil courts in cases where the tax was collected in violation of constitutional provisions. The Court emphasized that the Constitution is the paramount law, and any action violating its provisions is beyond the jurisdiction of the assessing authority.

4. Jurisdiction of Civil Courts:
The respondent argued that the suit was barred by the exclusive machinery provided under the Act for challenging tax assessments, citing Section 83 and Section 85(2). The Supreme Court, however, held that the Act did not provide an adequate or effective remedy for challenging the constitutionality of the tax assessment. The Court distinguished between cases where the assessment was merely incorrect and those where it was unconstitutional. It concluded that civil courts have jurisdiction to entertain suits for the recovery of taxes collected in violation of constitutional limits.

Separate Judgments:
- Mudholkar J. (Majority Judgment): Held that the civil court has jurisdiction and the appellant's suit is maintainable. The appeal was allowed with costs throughout.
- Raghubar Dayal J. (Dissenting Judgment): Held that the suit was barred by Section 48 and Section 84(3) of the Act. The appeal was dismissed with costs.

Conclusion:
The Supreme Court allowed the appeal, holding that the appellant's suit for the recovery of excess tax was maintainable and not barred by the provisions of the Central Provinces Municipalities Act, 1922. The decision emphasized the paramountcy of the Constitution and the jurisdiction of civil courts in cases of constitutional violations.

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