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PETITIONER: CENTRAL POTTERIES LTD.

       Vs.

RESPONDENT: STATE OF MAHARASHTRA & OTHERS

DATE OF JUDGMENT: 30/03/1962

BENCH: AIYYAR, T.L. VENKATARAMA BENCH: AIYYAR, T.L. VENKATARAMA SINHA, BHUVNESHWAR P.(CJ) GAJENDRAGADKAR, P.B. WANCHOO, K.N. AYYANGAR, N. RAJAGOPALA

CITATION:  1966 AIR  932            1963 SCR  (1) 166

ACT: Sales  Tax-Assessment-Liability to pay tax, if depends  upon being registered as dealer-Want of jurisdiction and  irregu- lar assumption of jurisdiction-Distinction-C.  P. and  Berar Sales  Tax  Act, 1947 (C.  P. & Berar 21 of 1947), s.  3,  4 (1), 8,10, 11.

HEADNOTE: The  appellant  was a company carrying on  business  in  the manufacture  of sale of potteries and Chinaware  in  Nagpur. The  Central  Provinces and Berar Sales Tax  Act  came  into force on June 1st 1947.  On May 27, 1947, notifications Nos. 597 and 599 were issued.  Notification No. 597 fixed  August 15, 1947 as the date by which the, dealers liable to pay tax under the said Act were to get themselves registered and  by notification  No.  599  the  District  Excise  Officer   was appointed as the Sales Tax Officer for receiving application for   registration  and  for  issuing   certificates.    The appellant  company  presented  an application  to  the  said officer and the certificate was issued on July 21st 1947 but actually delivered, to the appellant on September 13,  1947. Thereafter,  the appellant had been duly submitting  returns and   paid  taxes  till  June  30th  1951.   The   appellant instituted a suit in December 1951 contending that the Sales Tax  Officer who issued the Registration Certificate to  the appellant  on July 21st, 1947, was not authorised to  do  so under  the  Act,  and the recoveries of tax  from  him  were illegal and void, The Trial Court held that the  certificate of  registration  was delivered to the-  appellant  on  13th September,  1947,  i.e.  after the Rules  had  been  finally published on August 15, 1947, and the irregularity if any in the  issue  of the certificate had been cured,  and  further held  that the liability of the appellant to pay  sales  tax was not affected by the invalidity of the registration under s.  8.  On  appeal the High Court  held  that  the  question whether the registration of the appellant as dealer under s. 8 of the Act was valid or not did not call for a decision as even if it was invalid, that did not affect its liability to be  assessed  to sales tax, and dismissed the  appeal.   The

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appellant  came up in appeal by certificate to  the  Supreme Court. 167 The question was whether the appellant was not liable to pay tax under the provisions of the Central Provinces and  Berar Sales  Tax  Act 1917 on the ground alleged that it  had  not been validly registered as a dealer under s.   8 of the Act. Held,  that the High Court was correct in its view that  the appellant   was  liable  to  pay  the  tax  under  the   Act irrespective  of  whether the registration under  s.  8  was valid  or  not.  The liability arose under s. 4 of  the  Act which  was  the charging section and the liability  was  not conditional on the registration of the dealer under s. 8  of the Act. The position of the dealer who has obtained a certificate of registration which turns out to be invalid cannot on princi- ple  be  distinguished from that of one who  has  failed  to obtain a certificate.  The provision of ss. 8 and 11 do not, to  any  extent,  affect the  substantive  liability  to  be assessed to tax which is imposed by s. 4 of the Act. There  is a fundamental distinction between want  of  juris- diction  and irregular assumption of jurisdiction.   Whereas the  order passed by an authority with respect to  a  matter over  which it has no jurisdiction is a nullity and is  open to collateral attack, an order passed by an authority  which has  jurisdiction  over  the  matter,  but  as  assumed   it otherwise  than  in  the mode prescribed by  law  is  not  a nullity.   It may be liable to be questioned in  those  very proceedings, but subject to that it is good and not open  to collateral  attack.  Therefore even if the  proceedings  for assessment were taken against a nonregistered dealer without the  issue of a notice under s. 10 (1) that would be a  mere irregularity  in  the  assumption of  jurisdiction  and  the ordered  of a assessment passed in those proceedings  cannot be held to be without jurisdiction and no suit will lie  for impeaching  them on the ground that s. 10 (1) had  not  been followed.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 205 of 1961. Appeal from the judgment and decree dated June 16, 1959,  of the Bombay High Court (Circuit Bench) at Nagpur in F. A. No. 32 of 1955. Shankar   Anand,  M.  S.  Gupta  and  Ganpot  Rai  for   the appellants. M. C. Setalvad, Attorney General for India, 168 C.   K. Daphtary, Solicitor General of India, H. N.  Sanyal, Additional  Solicitor General of India, N. S. Bindra and  P. D. Menon, for the respondent No. 3. 1962. March 30.  The Judgment of the Court was delivered by VENKATARAMA  AIYAR, J.-The sole point for  determination  in this  appeal, which is directed against the Judgment of  the High Court of Bombay is whether the appellant is not  liable to  pay tax under the provisions of the Central Provinces  & Berar  Sales Tax Act, 1947 (Act 21 of 1947), on  the  ground alleged that it had not been validly registered as a  dealer under s.8 of the Act.  The facts bearing on this  contention are  that  the  Central Provinces &  Berar  Sales  Tax  Act, hereinafter referred to as "the Act", received the assent of the Governor-General on May 23, 1947 and came into force  on June’  1, 1947.  On May 27, 1947 a notification No. 601  was

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issued  by the Provincial Government publishing draft  rules which  it  "proposed  to make, in  exercise  of  the  powers conferred  by s. 28 of the Act" and on August 15, 1947,  the rules  as finally adopted were published.  In  the  meantime two other notifications Nos. 597 and 599 had been issued  on May 27, 1947, No. 597 under s.8 of the Act fixing August 15, 1947  as the date by or on which all dealers liable  to  pay tax under the said Act shall get themselves registered’  and No. 599 under s.3 of the Act appointing the District  Excise Officers   as   the  Sales  Tax  officers   for   "receiving applications  for registration and for issuing  certificates under section 8 of the Act". The  appellant  is  a Company carrying on  business  in  the manufacture  and sale of potteries chinaware in Nagpur.   On July  2, 1947 it- presented, pursuant to  the  notifications aforesaid,  an  application  to the  Sales-Tax  Officer  for registering  itself  as  a dealer under the  Act.   On  this application  a certificate was issued on July 21,  1947  and actually delivered  169 to  the  appellant on September 13,  1947.   Thereafter  the appellant  had been duly submitting returns as  provided  in the Act and assessment were made thereon and taxes paid from the  period commencing from June 1, 1947 to June  30,  1951. Some  time thereafter the idea dawned on the appellant  that the proceedings taken by the respondents under the Act  were unauthorised, that the assessments were illegal and that  in consequence it was entitled to refund of the amounts paid as sales tax.  And so, on December 18, 1951, it instituted  the suit  out  of  which the present appeal  arises  claiming  a refund  of Rs. 6,650-11-9 being the amount paid  for,  sales tax  during the period June 1, 1947 to June 30, 1951  and  a sum  of  Rs.  2,000/- as damages,  in  all  Rs.  8,650-11-9. Though  a number of grounds were put forward in  support  of the  claim,  it is necessary now to deal with  only  one  of them, and that is that the Sales Tax Officer who issued  the registration  certificate to the appellant on July 21,  1947 was  not  authorised  to  do  so  under  that  Act  and   in consequence  all the assessments and recoveries of tax  were illegal and void.  The basis for this contention is that  s. 3(1) of the Act confers authority on the State Government to appoint  any person to be a Commissioner of Sales  Tax,  and "such  other persons under any prescribed  designations"  to assist him as it thinks fit.  By notification No. 595  dated May  27,  1947 the Government appointed in exercise  of  the powers conferred by s. 3(1) the Excise Commissioner, Central Provinces  &  Berar  to be the Commissioner  of  Sales  Tax, Central   Provinces   &  Berar.   The   validity   of   this notification  is not now in question.  The attack is on  the notification  No.  599  dated  May  27,  1947  whereby   the Government  acting under s. 3 of the Act directed  that  the District Excise Officers in charge of districts shall be the Sales   Tax   Officers  for  purpose  of   registration   of certificates under s.8 of the Act.  It is said that 170 s.   3(1)  authorises  the  Government  to  appoint   "other persons under any prescribed designations", that the word  I ’prescribed" is defined in s. 2(e) as meaning "prescribed by rules  made  under this Act" and that as the  rates  finally came  into force only on August 15, 1947 the appointment  of District  Excise  officers  as Sale  Tax  Officers  for  the purpose  of s. 8 on May 27, 1947 was in contravention of  s. 3(i)   and  that  in  consequence  the  issue   registration certificate  on July 21, 1947 by an officer appointed  under this notification was void.

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The  Civil Judge of Nagpur who tried the suit held  that  as the  certificate  of  registration  was  delivered  to   the appellant  on  September 13, 1947 i.e. after the  rules  had been finally published on August 15, 1947, the irregularity, if any, in the issue of registration certificate on July 21, 1947  bad  been  cured.   He  also  further  held  that  the liability of the appellant to pay sales tax was not affected by  the  invalidity of the registration under s. 8.  In  the result he dismissed the suit with costs. Against  this decision appellant preferred an appeal to  the High  Court of Nagpur and that was heard by a Bench  of  the Bombay  High Court to which it stood transferred  under  the States Reorganisation Act.  The learned Judges held that the question whether the registration of the appellant as dealer under  s. 8 of the Act was valid or not did not call  for  a decision  as even if it was invalid that did not affect  its liability to be assessed to sales tax and in that view  they dismissed  the appeal with costs but granted  a  certificate under s. 109 C.P.C. and Art. 132(2) of the Constitution. In  our  judgment the High Court is clearly correct  in  its view that the appellant was liable to pay the tax under  the Act irrespective of whether                             171 the  registration  under  s.  8  was  valid  or  not.   That liability  arose under s. 4 which is the charging  ,section. Section 4 is as follows:-               34(1)  (a).  In Madhya Pradesh  excluding  the               merged territories every dealer whose turnover               during the year proceeding the commencement of               this Act exceeded the taxable quantum shall be               liable  to  pay  tax in  accordance  with  the               provisions  of this Act on all sales  effected               after the commencement of this Act." This liability is not conditional on the registration of the dealer  under  s.  8. Section 8 (1) enacts  that  no  dealer shall, while being liable to pay tax under this Act carry on business  as a dealer unless he has been registered as  such and  possesses a registration certificate’).  Section  11(i) provide,.;  that "If the Commissioner is satisfied that  the returns  furnished by a registered dealer in respect of  any period are correct and complete, he shall assess the  dealer on them".  These provisions do not, to any extent effect the substantive liability to be assessed to tax which is imposed by  a. 4-A dealer who fails to get himself registered  would be  hit by s. 8(1) and may loss the benefit conferred by  s. II  (1)  but the Act does not put him in a  better  position than  a dealer who has got himself registered under s.  8(1) and  absolve him from his liability to pay tax under  s.  4. The position of the dealer who has obtained a certificate of registration  which  turns  out  to  be  invalid  cannot  on principal, be distinguish from that of one who has failed to obtain a certificate. It  was  argued  for  the appellant that  it  would  make  a difference in the procedure prescribed for making assessment whether  a dealer was registered or not.  It was  said  that under  s.  10(1) while every registered dealer is  under  an obligation to make returns for the purposes of assessment, a dealer  who  is not registered becomes liable  to  send  the return 172 only  if  he  is required to do so by  the  Commissioner  by notice served in the prescribed manner and Rule 22 which has been  framed  for  carrying  out the  purpose  of  s.  14(1) provides  that  if  the Commissioner is of  opinion  that  a dealer other than a registered dealer is liable to pay  tax,

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he  may send a notice to him in a form  prescribed  therein, requiring him to furnish returns.  It is contended that  the jurisdiction  of the Sales Tax Officer to  take  proceedings for  assessment  with  respect  to  non-registered   dealers depends,  on the issue of a notice such as is prescribed  by s. 10 and rule 22 and that as no such notice had been issued in  the  case of the appellant, the  assessment  proceedings must  be  held  to  be  incompetent,  if  the   registration certificate is invalid.  We see no force in this contention. The  taxing  authorities derive their jurisdiction  to  make assessments  under s. 3 and II of the Act, and not under  s. 10,  which is purely procedural.  The appellant had  itself, acting under s. 10(1) been submitting voluntarily returns on which  the assessments had been made and it is now idle  for it to contend that the proceedings taken on its own  returns are without jurisdiction. In  this connection it should be remembered that there is  a fundamental  distinction  between want of  jurisdiction  and irregular  assumption of jurisdiction, and that  whereas  an order  passed by an authority with respect to a mattar  over which  it  has no jurisdiction is a nullity and is  open  to collateral attack, an order passed by an authority which has jurisdiction  over the matter, but has assumed it  otherwise than  in the mode prescribed by law, is not a  nullity.   It may  be liable to be questioned in those  very  proceedings, but  subject to that it is good, and not open to  collateral attack.   Therefore even if the proceedings  for  assessment were  taken  against  a non-registered  dealer  without  the isssue  of  a notice under s. 10 (1) that would  be  a  mere irregularity in the assumption                             173 of jurisdiction and the order of assessment passed in  those proceedings cannot be held to be Without jurisdiction and no suit  will lie for impeaching them on the ground that s.  10 (1) had not been followed.  This must a fortiori be so  when the appellant has itself submitted to jurisdiction and  made a return.  We accordingly agree with the learned Judges that even if the registration of the appellant as a dealer  under s.  8  is  bad that has no’ effect on the  validity  of  the proceedings   taken  against  it  under  the  Act  and   the assessment of tax made thereunder. We should add that s. 21 of the Act bare the jurisdiction of Civil  Courts  to entertain suits calling  in  question  any orders  passed by the authorities under the Act, and in  the view  which we have taken it is unnecessary to go  into  the question whether in view of this section the present suit is maintainable. There  are  no merits whatsoever in this appeal  and  it  is dismissed with costs. Appeal dismissed.