http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7  

PETITIONER: STATE OF KERALA

       Vs.

RESPONDENT: RAMASWAMI IYER & SONS

DATE OF JUDGMENT: 11/02/1966

BENCH: SHAH, J.C. BENCH: SHAH, J.C. GAJENDRAGADKAR, P.B. (CJ) WANCHOO, K.N. SIKRI, S.M. RAMASWAMI, V.

CITATION:  1966 AIR 1738            1966 SCR  (3) 582  CITATOR INFO :  RF         1969 SC  78  (17,25)  D          1975 SC1801  (2)  RF         1975 SC2238  (22)  R          1991 SC 435  (19)

ACT: Travancore-Cochin, General Sales Tax Act (11 of 1125  M.E.)- Suit to recover excess tax paid-Jurisdiction of civil  court if barred.

HEADNOTE: Part  of Sales-tax paid by the respondent was assessed  upon the  amount which it collected frOm its customers as  sales- tax  and which was included in its net turnover.  A suit  by the  respondent  for refund of that part  of  the  sales-tax which  was  charged on the sales-tax collected by  the  res- pondent on the basis that it was not lawfully due under  the Travancore-Cochin  General Sales Tax Act, 1950, was  decreed by the trial court and the decree was confirmed by the  High Court. In  appeal  to this Court, it was contended that  the  civil court had no jurisdiction to try the suit. HELD : By constituting appropriate authorities under the Act and  ,creating a hierarchy of authorities to deal  with  the problem  of  levying  tax as contemplated by  the  Act,  the jurisdiction  of the civil court to entertain the  suit  was excluded by necessary implication. [586 G] Jurisdiction  of  the civil court to try the  suit  was  not barred by s. 23A ousting the   jurisdiction  of  the   civil court,  because that section which was not retrospective  in operation  was incorporated into the Act after the suit  was filed.    But  the  jurisdiction of the civil court  may  be excluded  by  express enactment or by  necessary  intendment arising  from the scheme of the Act.  The  Travancore-Cochin Sales  Tax  Act is a complete code dealing  with  the  levy, assessment, collection and refund of tax.  It authorises in- vestment   of  power  in  a  hierarchy  of  authorities   to administer the Act.  For the purpose of making assessment of tax,  the  authorities have power to  decide  all  questions

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7  

arising  before  them,  and  the  orders  of  the  appellate authorities,   subject   to  the  exercise   of   revisional jurisdiction by the Board of Revenue, were declared  filial. The  liability to pay tax arose under and by virtue  of  the provisions  of  the  Act and the quantum  of  liability  was determined  under the Act alone.  Further, at  the  material time,  there  was  no express provision  in  he  Act,  which obliged the taxing authority to exclude from the computation of the taxable turnover the amount of sales-tax collected by the  dealer.  Hence, it could not be said that by  assessing sales-tax on such amount, the taxing authority had infringed a  prohibition imposed by the statute upon  him.   Therefore the  principle in Secretary of State for India v.  Mask  and Co. L.R. 67 I.A. 222, that civil courts have jurisdiction to examine  a  case where the provision-, of the  statute  have been  infringed did not apply in the instant case.  [583  F; 584 C; 585 H-586 B; 589 B] Provincial  Government of Madras v. J. S. Basappa, [1964]  5 S.C.R. 517; 15 S.T.C. 144 (S.C.), overruled’. Kamala  Mills  v.  State  of Bombay,  [1966]  1  S.C.R.  64, followed. George Oaks v. State of Madras, [1962] 2 S.C.R. 570;  A.I.R. 1962  S.C.  1037 and K. S Venkataraman v. State  of  Madras, [1966] 2 S.C.R. 229 referred to. 583

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  1104  of 1964. Appeal  by special leave from the judgment and decree  dated the October 7, 1963 of the Kerala High Court in A.S. No. 190 of 1959. C.   K. Daphtary, Attorney-General and A. G. Pudissery,  for the appellant. T.   N.  Subbramania  Iyer  and M. R.  K.  Pillai,  for  the respondent. The Judgment of the Court was delivered by Shah,  J. For the period August 16, 1950 to March  31,  1951 the  respondents  were  assessed  to  sales-tax  under   the Travancore  Cochin  General  Sales-tax  Act,  1950,  by  the assessing  authority,  Moovattupuzha, on a turnover  of  Rs. 14,04,732/716 which included Rs. 49,318/7/4 collected by the respondents  from  their constituents as tax on  their  sale transactions.   The  respondents paid the tax  assessed  and commenced  an  action in the Court of  the  District  Judge, Parur,  for  a decree for Rs. 7,577/9/1  claiming  that  the amount  was  in excess of tax lawfully due from  them  under the.Act.  The Court of First Instance decreed the claim  for Rs. 7,477/9/1 with interest and proportionate costs, and the High Court of Kerala confirmed that decree. In this appeal with special leave, on behalf of the State of Kerala the principal ground which falls to be determined  is whether the jurisdiction of the Civil Court to try the  suit is excluded.  Section 23-A of the Travancore-Cochin  General Sales-tax Act 11 of 1125 M.   E. provides that :               ".No  suit  or other civil  proceeding  shall,               except  as expressly provided in this Act,  be               instituted in any court to set aside or modify               any assessment made under this Act." But  this express bar on which counsel for the State  relied did not exclude the jurisdiction of the civil court, for  s. 23-A  was  incorporated  in  the  Travancore-Cochin  General Sales-tax  Act  by  Act  18  of  1955  after  the  suit  was

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7  

instituted   by   the  respondents,  and  by  s.   23-A   as incorporated  the jurisdiction of the civil court to  try  a suit  properly  instituted  before it  was  enacted  is  not ousted. Counsel for the respondents submitted that in the absence of an  express provision in the Act excluding the  jurisdiction of  the civil court, the courts below were right in  holding that  the  suit  was maintainable, and in  support  of  that contention, he relied upon the decision of this Court in The Provincial Government of Madras (Now Andhra Pradesh) v. J.S. Basappa (1).  In Basappa’s case the (1)  [1964] S.C.R. 517:15 S.T.C. 144. 584 assesee who was taxed in respect of certain sales which took place outside the taxing State, sued the State for a  decree for refund of the amounts paid by him on the plea that  the transactions in respect of which the tax was levied were not taxable  under  the  law.  This Court held  that  without  a provision like S. 18-A of the Madras General Sales-tax  Act, 1939,  the jurisdiction to entertain the suit was not  taken away,  specially  where the action of  the  authorities  was "wholly outside the law".  It was observed in that case that finality  attached to orders passed in 1 appeal by  the  Act was  a  finality for the purposes of the Act and I  did  not make valid an, action which was not warranted by the Act, as for  example  the levy of tax on a commodity which  was  not taxed at all or was exempt." But  the jurisdiction of the civil court may  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 rights  or  liabilities which are the creation of a statute, the jurisdiction of the civil  court  would be deemed excluded by  implication.   In Raleigh  Investment  Company  Ltd.  v.  GovernorGeneral   in Council(1)  the  Judicial  Committee  in  dealing  with  the question  whether  the jurisdiction of the  civil  court  to entertain  a suit for refund of income-tax may be deemed  to be excluded, apart from the express exclusion prescribed  by s. 67 of the Income-tax Act, by the scheme of the Income-tax Act, observed               "..............  the  scheme of the  Act  (the               Incometax  Act)  is  to set  up  a  particular               machinery  by  the use of  which  alone  total               income  assessable  for income-tax  is  to  be               ascertained.    The  income-tax  exigible   is               determined by reference to the total income so               ascertained,  and  Only by reference  to  such               total  income.   Under the  Act  (S.45)  there               arises  a  duty  to  pay  the  amount  of  tax               demanded  on the basis of that  assessment  of               total  income.  Jurisdiction to  question  the               assessment  otherwise  than  by  use  of   the               machinery expressly provided by the Act  would               appear  to be inconsistent with the  statutory               obligation  to  pay arising by virtue  of  the               assessment.  The only doubt, indeed, in  their               Lordships’  mind, is whether an  express  pro-               vision  was  necessary  in  order  to  exclude               jurisdiction in a civil court to set aside  or               modify an assessment." In   delivering  the  judgment  of  the  majority  in   K.S. Venkatarmnan & Co. (P) Ltd v. State of Madras(2), Sobba Rao, 1., observed :               "If a statute imposes a liability and  creates               an effective machinery for deciding  questions

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7  

             of  law  or  fact arising in  regard  to  that               liability,  it may, by necessary  implication,               bar  the  maintainability of a civil  suit  in               respect of the said liability.  A statute  may               also, confer exclusive jurisdic-               (1) L.R. 74 I.A. 50.               (2) [1966] 1 S.C.R, 229.               585               tion on the authorities constituting the  said               machinery  to decide finally a  jurisdictional               fact    thereby   excluding    by    necessary               implication the jurisdiction of a civil  court               in that regard." in  a case recently decided by this Court Kamala Mills  Ltd. v. State of Bombay (1) exclusion of the jurisdiction of  the civil court to entertain and decide suits for refund of  tax paid  fell  to  be determined.  In that case  a  dealer  was assessed to tax under the Bombay Sales-tax Act 5 of 1946  in respect  of  "outside  $ales" which by  virtue  of  the  ban imposed  by Art. 286 of the Constitution were  not  taxable. The dealer sued to recover the tax paid by him.  This  Court held  that where the Sales-tax Officer by misconceiving  the nature  of  the transactions brings to tax  transactions  in respect of which the State has no authority to legislate for levying  tax because of the ban imposed by Art. 286  of  the Constitution,  the  validity of the order of  assessment  of tax  cannot  be reopened in a suit for refund of  tax  paid. The  Bombay Sales-tax Act 5 of 1946, it is  true,  contained s.  .20 which in terms enacted that an assessment shall  not be called in’ question in any civil court, but the court  in Kamala,  Mills  case(1) held that the  jurisdiction  of  the civil  court to entertain a suit for tax assessed under  the Act was excluded expressly, and by the clear implication  of the Act as well. The assessing authority invested with’ power under the  Tra- vancore-Cochin  General Sales-tax Act is constituted by  the Act a tribunal, which within the limits of its authority  is competent  to decide all questions of fact and  law  Arising before  him in the course of proceedings for assessment  and of  his own jurisdiction as well.  The Act sets  up  machine for levy,assessment, and collection of tax.  By s. 3 of  the Act  charge is imposed, subject to exemptions prescribed  by ss.  4,  5 and 6 upon every dealer to pay tax on  his  total turnover of each year.  Duty to pay the tax is imposed by s. 11(2) of the Act.  Section, 12 sets up the procedure of  the assessing  authority in making assessments and s.  13  deals with  recovery of tax.  A taxpayer aggrieved by an order  of assessment  may  appeal  under s. 14 against  the  order  of assessment,  and the decision of the appellate authority  is by cl. (4) subject to the power of revision conferred by  s. 1  expressly declared final.  Section 15 as it stood at  the relevant  time  provided  for  the  exercise  of  revisional jurisdiction  by the Board of Revenue against the  order  of the taxing authorities-original as well as appellate.  By s. 24  power  is conferred upon the State Government  to  frame rules’  setting  up machinery for determination of  the  not chargeable turn over, for refund of tax collected in  excess of true liability and for other incidental matters.  The Act is  therefore  a  complete  code  dealing  with  the   levy, assessment and collection and refund of tax. (1)  [1966] 1 S.C.R. 64: A.I.R. 1965 S.C. 1942. 586 it  authorises  investment  of  power  in  a  hierarchy   of authorities  to  administer  the Act.  For  the  purpose  of making  assessment  of tax, the authorities  have  power  to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7  

decide all questions arising before them, and the orders  of the  appellate  authorities  subject  to  the  exercise   of revisional  jurisdiction  under S. 15  are  declared  final. Liability  to  pay  tax arises under and by  virtue  of  the provisions of the Act, and, the quantum of liability may  be determined under the Act alone. It is true that in Kamala Mills’ case(1) reliance was placed on  behalf of the claimant upon Basappa’s case(2),  and  the following observations were made by the Court :               "In  Provincial  Government  of  Madras   (Now               Andhra  Pradesh) v. J. S. Basappa it was  held               by  this Court that the finality  attached  to               orders  passed in appeal by section  11(4)  of               the Madras General Sales-Tax Act (IX of  1939)               was  a finality for the purposes of  the  said               Act and did not make valid an action which was               not  warranted by the Act, as for "ample,  the               levy  of  tax  on a commodity  which  was  not               taxable at all or was exempt.  We ought to add               that this decision was based on the fact  that               the  said  Act at the relevant  time  did  not               contain  section 18A which came into force  on               May 15, 1951; and it was section 18A which was               construed  by  this Court in  Firm  of  Illuri               Subbayya Chetty & Sons [(1964) 1 SCR 752]." In  Basappa’s case(2) the taxpayer sought in an  action  for refund  of  tax  paid,  a  decree  on  the  plea  that,  the transactions  in  respect  of  which  tax  was  levied  were "outside  sales",  and it was held that in  the  absence  of express  exclusion of the jurisdiction of the  civil  court, the  action  for refund of tax was  maintainable.   But  the nature  of  the  transactions taxed  in  the  Kamala  Mills’ case(1) was not different.  In the judgment in Kamala Mills’ case(1)  it  was pointed out that the  jurisdiction  of  the civil  court to entertain a suit for refund of tax  paid  in compliance  with  an  order of assessment  may  be  excluded either expressly or necessary implication, and as the scheme of the Bombay Sales Tax Act, 146, indicated that a  complete machinery was set up by constituting appropriate authorities under  the Act, and creating a hierarchy of  authorities  to deal with the problem of levying tax as contemplated by  the Act,  jurisdiction of the civil court to entertain the  suit was excluded by implication as well as by express enactment. That is clear from the following observations in the  Kamala Mills’ case(1):               "Whether  or not a return is correct;  whether               or.  not transactions which are not  mentioned               in the return, but about which the appropriate               authority has knowledge, fall               (1) [1966] 1 S.C.R. 64.               (2) [1964] 5 S.C.R. 517.                                    587               within  the mischief of the charging  section;               what  is  the  true and  real  extent  of  the               transactions  which are assessable; all  these               and   other  allied  questions  have   to   be               determined  by  the  appropriate   authorities               themselves;  and so, we find it impossible  to               accept Mr. Sastri’s argument that the  finding               of the appropriate authority that a particular               transaction is taxable under the provisions of               the  Act,  is a finding on a  collateral  fact               which   gives   the   appropriate    authority               jurisdiction  to take a further step and  make               the actual order of assessment."

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7  

The  action of the taxing authority in Basappa’s case(1)  in taxing  transactions which he erroneously held were  taxable was no. more outside the Act, than the action of the  taxing authority  in Kamala Mills’ case(2).  If it be granted  that the  jurisdiction  of  the civil court may  be  excluded  by express  enactment or by necessary intendment  arising  from the scheme of the Act, Basappa’s case(1) must be regarded as wrongly decided. It is true that even if the jurisdiction of the civil  court is  excluded, where the provisions of the statute  have  not been  complied with or the statutory tribunal has not  acted in  conformity with the fundamental principles  of  judicial procedure,  the  civil courts have jurisdiction  to  examine those  cases  :  Secretary  of State for  India  v.  Mask  & Company(2).  Counsel for the respondents urged that the case of  the  respondents fall within that exception,  since  the Sales-tax   Officer  in  imposing  tax-liability  acted   in defiance  of  the  mandatory provisions of the  Act  and  in support of the argument he placed reliance upon r. 7 of  the Rules framed under the Act and the definition of  "turnover" under  the Act.  Under the Act sales-tax is charged for  the year  at the prescribed rates on the total turnover  of  the dealer.   The  Government of  Travancore-Cochin  promulgated rules  in exercise of powers under s. 24 of the  Travancore- Cochin   General  Sales  Tax  Act,  and  r.  7  dealt   with computation  of "net turnover".  In r. 7(1) by cls.  (a)  to (k) certain exemptions admissible in the computation of  the net turnover were set out.  By notification No. SRI-1643-51- RD  dated  March 31, 1951 it was directed that  with  effect from April 1, 1951, the following clause shall be added :               "(1) all amounts of sales-tax collected by the               dealer." By  this  amendment  in  the  computation  of  the   taxable turnover,  the amounts of sales tax collected by the  dealer were  not  to be included.  But this amendment was  to  have effect  only  from April 1, 1951, and in the  proceeding  in this  appeal tax-liability for the assessment period  ending March 31, 1951 fell to be determined. (1) [1964] 5 S. C.  R. 517. (2) [1966] 1 S. C. R. 64. (3)  L. R. 67 1. A. 222. 588 The  exemption was therefore inoperative in the  computation of taxable turnover for the assessment year in question. Counsel  for  the. respondents however  contended  that  the effect  of  the  amendment w s merely to  clarify  what  was implicit in the content of the expression "turnover".  By s. 2(k) "turnover" means-insofar as the definition is  relevant "the  aggregate amount for which goods are either bought  by or  sold  by  a dealer, whether for  cash  or  for  deferred payment or other valuable consideration "Turnover" being the aggregate  amount  for which goods are bought or  sold,  and normally  the aggregate amount would include such amount  as the  purchaser  pays  to  the  dealer  for  the  goods,  the expression "aggregate amount for which goods are . . . sold" within  the meaning of "turnover" in s. 2(k)  would  include the amount of sales-tax received by the dealer.  There is no provision in the Act which may’ by implication suggest  that from the connotation of the expression ’turnover’ the  sales tax  collected  in the year of assessment ending  March  31, 1951 was to be excluded.  Exclusion prescribed by cl. (1) of r.  7(1)  enacted  with effect from April  1,  1951  is  not clarificatory,  but  prescribes an additional  head  in  the computation of net turnover. This  Court  in  George  Oaks (Private)  Ltd.  v.  State  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 7  

Madras(1)  in  dealing with the question whether  sales  tax charged by the dealer may be excluded within the meaning  of the  expression  "turnover" as used in  the  Madras  General Sales-Tax Act, 1939, observed:               "Under   the   definition  of   turnover   the               aggregate  amount for which goods are’  bought               or  sold  is taxable.  This  aggregate  amount               "includes the tax as part of the price paid by               the  buyer.  ’the amount goes into the  common               till  of the dealer till he pays the tax.   It               is money which he keeps using for his business               till  he pays it over to Government.   Indeed,               he  may, turn it over again and again till  he               finally hands it to Government.  There is thus               nothing  anamolous in the law treating  it  as               part of the amount on which tax must be  paid               by him.  This conception of a turnover is  not               new.   It is found in England and America  and               there  is  no reason to think  that  when  the               legislatures  in  India defined  turnover’  to               include tax also, they were striking out  into               something   quite  unknown  and   unheard   of               before." Counsel   for   the   respondents   contended   that   these observations  made in interpreting the terms of  the  Madras General Sales tax (Definition of Turnover and Validation  of Assessments)   Act,   1954,   have   no   bearing   on   the interpretation  of  the  expression "turnover"’  as  in  the Travancore-Cochin General Sales tax Act.  But the (1)  [1962] 2 S.C.R. 570 : A.I.R. 1962 S. C. 1037. 589 observations made by the Court were not made in the  context of any special statute. 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. The  appeal is therefore allowed and the suit is  dismissed. There will be no order as to costs throughout.                                             Appeal allowed. M11 Sup.C.I/66-6 590