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TMI Blog1960 (11) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... total taxable turnover of the amount of tax payable by the firm. Finally, the balance of tax was paid for the two accounting years in September, 1953, and June, 1954, respectively. The return submitted by the firm for 1952-53 included an amount of Rs. 3,45,488-12-10 representing the purchase of groundnuts. More than a year after the last payment, the firm laid an action (O.S. No. 10 of 1956) for refund of Rs. 8,349 made up of Rs. 6,558 the amount paid by way of tax and Rs. 1,791 being the interest accrued thereon at twelve per cent per annum, the basis of the suit being that the department included in the plaintiff's turnover sales of groundnuts which were exempted and collected taxes thereon unauthorisedly. The answer of the defendant was that the suit was incompetent, having regard to the provisions of section 18-A of the Act and that, in any event, the turnover in question represented the purchases of groundnuts made by the plaintiff, that the assessment was made on the basis of the returns submitted in Form 'A' and that consequently it was not open to the plaintiff to plead that he had furnished the department with sales turnover and not purchase turnover. The trial Court ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s tax. The section ex facie excludes the jurisdiction of a civil Court to set aside or modify an assessment. The next question is, does a suit for refund of sales tax alleged to have been illegally collected fall outside the purview of section 18-A of the Act? In our considered judgment, section 18-A applies to suits of that nature as well. Although the suit as framed is for recovery of amounts illegally collected by way of tax, it involves a question as to the validity of the assessments. It the assessment is not open to exception, the levy could not be characterised as illegal. If the impost could not be questioned as being illegal, the assessee could not get a refund of the amount. In other words, so long as the assessment stands, the tax collected on the basis of it could not be refunded. It is not so much the form as the substance of it that determines the nature of the suit. In a suit for repayment of the money paid by an assessee, any Court or Tribunal has necessarily to adjudicate upon the legality of the assessment. On the language of that section, we are inclined to the view that section 18-A governs also a suit for refund of tax alleged to have been illegally collected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contending that the goods should be assessed at a lower rate, namely, as raw betel-nuts subject to duty ad valorem. The appeal was dismissed and the matter was taken in revision to the Government of India. The Government of India confirmed the order of the Collector. Thereupon, the merchants sought to recover the excess amount collected from them by levying duty upon the tariff value. Various issues were raised, one of which was whether the Court had jurisdiction to entertain the suit and whether it was barred by the provisions of the Sea Customs Act (VIII of 1878). Section 188 of the Sea Customs Act recites: "Any person deeming himself aggrieved by any decision or order passed by an officer of Customs under this Act may, within three months from the date of such decision or order, appeal therefrom to the Chief Customs authority, or in such cases as the local Government directs, to any officer of Customs not inferior in rank to a Customs Collector and empowered in that behalf by name or in virtue of his office by the local Government. Every order passed in appeal under this section shall, subject to the power of revision conferred by section 191, be final." Having held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinciples of judicial procedure..........." We do not feel that this passage could give rise to the argument that if an assessment is contrary to law, a suit could be entertained in a civil Court. The sentence that "where the provisions of the Act have not been complied with" etc., may only mean that a suit is cognizable where the provisions leading up to the assessment have been disregarded, in other words, where the procedure laid down by the statute has not been complied with. Their Lordships would not have intended to lay down that every order of the tribunal not in conformity with law would furnish a basis for instituting a suit or a proceeding in a civil Court. In that very case, the order of the Customs Collector passed on appeal was challenged as being illegal. We are not persuaded that this pronouncement of the Privy Council establishes the proposition enunciated in State of Andhra Pradesh v. Sri Krishna Cocoanut Co. [1960] 11 S.T.C. 687. Collector of Customs v. Lala Gopikishen[1955] 1 M.L.J. 422; A.I.R. 1955 Mad. 187. relied on by the learned counsel for the respondent, which also dealt with the provisions of the Sea Customs Act does not carry the matter any further. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original side of the High Court of Calcutta claiming a declaration that certain provisions of the Indian Income-tax Act, 1922, as amended in 1933 on which the assessment was based were ultra vires and as such the assessment was illegal, for repayment of the amount paid under protest and for an injunction restraining the Income-tax department from making the assessment in future. One of the issues raised related to the competency of the suit. The High Court of Calcutta decreed the suit disallowing the objection as to the maintainability of the suit. But this was reversed by the Federal Court on appeal. The Judicial Committee affirmed the decision of the Federal Court. The decision of their Lordships was founded mainly on section 67 of the Indian Income-tax Act which runs as follows: "No suit shall be brought in any civil Court to set aside or modify any assessment made under this Act and no prosecution, suit or proceeding shall lie against any officer of the Government for anything in good faith done or intended to be done under this Act." The ratio decidendi of that case applies with full vigour to cases under section 18-A, which as we have already said, is analogous to section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tself for the review on grounds of law of any assessment. It is in that setting that section 67 has to be construed." Their Lordships seem to have been of opinion that an express provision might not be necessary to oust the jurisdiction of a civil Court to set aside or modify an assessment having regard to the scheme of the Act setting up a machinery for the levy and collection of taxes and for the enforcement of remedies available to an aggrieved assessee. Their Lordships added: "The only doubt, indeed, in their Lordships' mind, is whether an express provision was necessary in order to exclude jurisdiction in a civil Court to set aside or modify an assessment." This reasoning of their Lordships is equally applicable to the Madras General Sales Tax Act. It contains provisions parallel to those to be found in the Indian Income-tax Act enabling the assessee to raise objections to the assessment by means of an appeal to the Commercial Tax Officer or the Deputy Commissioner of Commercial Taxes as the case may be, a further appeal to the Sales Tax Appellate Tribunal and a revision to the High Court. Any decision of the High Court on a question of law could also be reviewed on appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be enforced." The judgment of the Madras High Court in Public Prosecutor v. Ramalingam[1958] 9 S.T.C. 510; [1958] 2 M.L.J. 243. , also supports the view indicated by us. That case had to deal with section 16-A of the Madras General Sales Tax Act, which is very much similar to section 18-A, which runs as follows: "The validity of the assessment of any tax, or of the levy of any fee or other amount, made under this Act, or the liability of any person to pay any tax, fee or other amount so assessed or levied shall not be questioned in any criminal Court in any prosecution or other proceeding, whether under this Act or otherwise." It was laid down by the Full Bench that it was not open to a person prosecuted under section 15(b) of that Act for failure to pay the tax, to raise any objection which could have been raised before the Tribunals created by the statute by virtue of section 16-A of the Act. The doctrine of Public Prosecutor v. Thimmaiah[1959] 10 S.T.C. 85; [1959] 1 An. W.R. 119., rendered by a Full Bench of this Court is in consonance with the principle of Public Prosecutor v. Ramalingam[1958] 9 S.T.C. 510; [1958] 2 M.L.J. 243. It was decided in that case that when once t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Act" in Raleigh Investment Co. Ltd. v. Governor-General in Council[1947] 15 I.T.R. 332; A.I.R. 1947 P.C. 78, at p. 81. , their Lordships said: "The phrase describes the provenance of the assessment: It does not relate to its accuracy in point of law. The use of the machinery provided by the Act, not the result of that use, is the test." These remarks of their Lordships contain the answer to the contention of the respondents. The mere fact that tax was levied wrongly or without justification would not take it out of the sweep of section 18-A of the Act. The alleged illegality of an assessment does not go to the root of the jurisdiction of the Tribunals which under the Act are invested with jurisdiction in that behalf. The Bench decision in State of Andhra Pradesh v. Sri Krishna Cocoanut Co.[1960] 11 S.T.C. 687; [1960] 1 An. W.R. 279., which gives some support to the stand taken by the respondent did not pay sufficient regard to the language of that section or to the reasoning of the Privy Council in Secretary of State v. Mask Co.[1940] L.R. 67 I.A. 222; [1940] 2 M.L.J. 140. Further, the attention of the learned judges does not seem to have been drawn to the Privy Council rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings in a civil Court. It prescribes only certain limitations. In fact, that section denotes that suits could be instituted within a limited period. Therefore, the decisions rendered with reference to that section can have no material bearing on the enquiry relating to section 18-A of the Act. Finally, we hold that suits of all descriptions which impugn an assessment are hit at by section 18-A of the Act. That is sufficient to dispose of the appeal. We will now proceed to adjudicate on the merits of the appeal, as it was argued at length. The judgment of the trial Court is equally unsubstantial on the merits. The Subordinate judge remarked that the Sales Tax Authorities must be deemed to have collected the tax on the sales of groundnut illegally. We do not know what scope there is for introducing a fiction into this matter. At the outset, it must be remembered that the plaintiff included the transactions in question in the return submitted by it in Form 'A' and that it was making payments tentatively every month to be adjusted after the final assessment and the plaintiff made the final payment in September, 1953, for the accounting year 1952-53 and in June, 1954, for the account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Sales Tax Act, 1939, sales of agricultural or horticultural produce grown by the seller himself are exempt from tax and that is the reason why the purchasers of such commodity from the growers are made exigible to tax. Therefore, whoever has purchased the groundnut which is the agricultural produce, whether it be the plaintiff-firm or its principal is liable to pay the tax as buyer thereof in view of the relevant turnover and assessment rules. It is significant that the evidence of P.W. 1 as extracted in the judgment also establishes that the firm treated it as purchase tax. "P.W. I denies having collected any sales tax from his vendors in respect of those transactions." We have next to consider whether the plaintiff-firm can escape liability by alleging that it acted only as a commission agent. In the decision of this question, we will have to take into account the definition of "dealer" in section 2(b) of the Madras General Sales Tax Act (IX of 1939) which is as under: "'Dealer' means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash or for deferred payment, or for other valuable consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable and the plaintiff-firm cannot claim any exemption. That being so, its turnover is liable to be taxed. Curiously enough, the Subordinate judge gets over this difficulty by remarking: "One of the contentions of the defendant is that the plaintiff has not taken out a licence under section 8 of the Act for doing business as commission agent. But that cannot be taken into account in this suit. If the plaintiff has not taken any licence and has done commission business without taking a licence from the Government, the Government can proceed against the plaintiff by taking suitable action." The Subordinate Judge had overlooked the fact that but for the exemption under section 8 every commission agent will be considered to be a "dealer" within the words of section 2(b) of the Act and his turnover is exigible to tax. In this case, all those requirements are absent. That being so, the plaintiff-firm cannot escape liability to pay tax on its turnover. It is surprising that the Subordinate Judge should have thought that even if licence is not obtained by a commission agent he would be exempt from payment of tax in the teeth of section 2(b) and section 8 of the Madras General Sales Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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