http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 8  

PETITIONER: THE PROVINCIAL GOVERNMENT OF MADRAS

       Vs.

RESPONDENT: J. S. BASAPPA

DATE OF JUDGMENT: 20/11/1963

BENCH: HIDAYATULLAH, M. BENCH: HIDAYATULLAH, M. SARKAR, A.K. SHAH, J.C.

CITATION:  1964 AIR 1873            1964 SCR  (5) 517  CITATOR INFO :  D          1965 SC1942  (28)  O          1967 SC1738  (3,6,7)  RF         1969 SC  78  (23,25,31)  E          1969 SC 343  (11)

ACT: Jurisdiction of Civil Courts-Statute conferring finality  of orders  of  assessment-levy of tax  without  jurisdiction-If Civil   Courts’  jurisdiction  excluded-Composit   turnover- Transactions  Validly taxed and those not, severability  of- Madras General Sales Tax Act, 1908 (IX of 1908), ss. 11, 12.

HEADNOTE: The  respondent, a groundnut-oil merchant filed three  suits alleging  that the property in some goods remained with  him till   the exept of the-goods to an  extra-provincial  point and  till the payment of price after export, and  sales  tax was  not demandable on these sales under the Madras  General Sales Tax Act, 1933.  The appellant contended that the sales were   not  inter-provincial  sales,  the  suits  were   not maintainable  in  a  civil court,  the  respondent  had  not exhausted  his’  alternative  remedies and  the  suits  were barred by limitation under s. 18 of the Act. Before  the High Court an additional ground based  upon  the decision  in  M/s.   Ram  Narain  Sons  Ltd.  v.   Assistant Commissioner  of Sales Tax, [1955] 2 S.C.R. 483  was  raised that the whole assessment was invalid because it included an illegal  levy  which,  was  not  severable  from  the  legal demand., Held:     (i)  SectioN  18 of the Sales Tax Act  applies  to suits  for damages and compensation in respect of acts  done under the Act.  ’Me period of limitation prescribed in  that section does not apply to the kind of suits which were filed by the respondent. (ii) The  jurisdiction  of civil courts is  not  necessarily taken  away when the decision of a tribunal is made,  final, because the civil court’s jurisdiction to examine the  order with  reference  to fundamental provisions of  the  statute, non-compliance with which would make the proceedings illegal and  without jurisdiction, still remains unless the  statute goes  further  and states either expressly or  by  necessary

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 8  

implications   that  the  civil  court’s   jurisdiction   is completely taken away. (iii)     Applying  the above principle the jurisdiction  of the  civil  court  was  not taken  away  as  the  taxing  of ’outside’ sales was a matter wholly outside the jurisdiction of the taxing authorities. Firm  of  Illuri Subhayya Chetty & Sons v. State  of  Andhra Pradesh,   [1964]  1  S.C.R  752  and  Secretary  of   State represented by the Collector of South Arcot v. Mask & Co. 67 I.A. 222. 518 (iv) The  entire  assessment  was void because  it  was  not possible in the present case to separate from the  composite turnover  transaction  which were validly taxed  from  those which were not, in as much as this pertains to the domain of tax  officers  and  the courts have no  powers  within  that domain. M/s.   Ram  Narain Sons Ltd. v.  Assistant  Commissioner  of Sales  Tax,  [1955]  2  S.C.R.  483  and  Bennett  &  White, (Calgary) Ltd. v.   Municipal District of Sugar City, [1951] A.C. 786.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 494-496  of 1962. Appeal  from the judgment and decrees dated March 12,  1957, of the Andhra Pradesh High Court in A.S. Nos. 566 to 568  of 1961. A.V. Viswanatha Sastri, T.V.R. Tatachari and B.R.G.K. Achar, for the appellants. Bhimsankaram,   Chander  Kohli  and  E.   Udayaratnam,   for respondents. November 20, 1963.  The Judgment of the Court was  delivered by HIDAYATULLAH, J.-This judgment will dispose of Civil Appeals Nos. 494 to 496 of 1962.  The State of Andhra Pradesh  which now  stands  substituted for the  Provincial  Government  of Madras  is  the  appellant.   The  respondent  is  one  J.S. Basappa, a groundnut-oil merchant of Kurnool who was selling oil  within  the  Province and also exported  it  to  extra- Provincial points.  These three appeals concern salestax for the  years 1944-45, 1945-46 and 1946-47.  They arise out  of three   suits  filed  by  Basappa  against  the   Provincial Government   of Madras now represented by the Government  of Andhra Pradesh, the details of which are given below. For  the  year 1944-45, Basappa was  assessed  to  sales-tax amounting  to Rs. 12,983-2-2 of which, according to  him,  a sum  of  Rs.  1,594-1-5 only represented  sales  within  the Province.   He claimed that the remaining sales  took  place outside the Province of Madras.  He submitted that  property in the goods remained with him till the export of the  goods to an extraProvincial point and till payment of price  after export.   He claimed that these sales could not be  included in 519 his  ’turnover under the Madras General Sales-tax Act,  1939 (Act No. IX of 1939) and sales-tax was wrongly demanded from him.  In respect of this assessment, he filed O.S. No. 14 of 1950  (original  No. 0. S. 40 of 1949) in the Court  of  the Subordinate Judge, Kurnool for refund of Rs. 11,389-0-9  ps. The Madras State Government in a written statement traversed ’all  the allegations and stated that delivery of the  goods was  made in Kurnool when the goods were booked and  further

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 8  

that  the  goods  were  despatch. ed  at  buyer’s  risk  and remained at buyer’s risk through out, it also contended that the  notice under s. 80 was not proper and the suit was  not in  accordance  with that notice and  was  not  maintainable because  the orders under the Sales-tax Act were made  final by s. 11(4) of the Sales-tax Act and because Basappa had not exhausted  his  other  remedies  under  the  Salestax   Act. Lastly,  it contended that the suit was barred by  time  not having  been filed within six months from ’the date  of  the act complained of as required by s. 18 of the Sales-tax  Act or  within  one year as required by Art. 16  of  the  Indian Limitation Act. In respect of the year 1945-46, Basappa filed O.S. No. 44 of 1949 claiming a refund of Rs. 8,356/on similar grounds,  and in respect of the year 1946-47 he filed O.S. No. 23 of  1949 for  a  declaration  that the levy of  Rs.  9,23  3-6-7  was illegal  and  without  jurisdiction  and  for  a   permanent injunction to restrain the taking authority from  collecting the  tax.   In this suit, in addition to  the’defences  also taken in the other suits it was contended that, the suit was incompetent  as a revision application was pending with  the Board of Revenue. These  suits  were disposed of by  the  Subordinate  Judge,, Kurnool  by a common judgment dated February 22, 1951.  -The main points which were decided were:- (1)    whether     the suits were not maintainable as (a) the  civil  court had  no jurisdiction and (b) the assessee had   not  exhausted   his other  remedies, (2) whether the suits were barred by  time, and ( 3) whether the sales took place outside -the  Province of Madras and the 520 levy of the tax in respect of some- of the transactions  was illegal.  The Subordinate Judge held that. there was nothing in  the  Sales-tax Act to exclude the jurisdiction  of,  the civil court and that the finality spoken of by s’ 11 ,of the Sales-tax  Act- was, a finality arising under the  Sales-tax Act and had, no reference to-, the jurisdiction of the civil court.   He  -also  held that Basappa was  not  required  to exhaust his other remedies before moving the civil court  by suit.   On,  the second point, the Subordinate  Judge:  held that O.S. No.. 14 of 1950 and 44 of 1949 were barred by time under s.  18  of  the  Sales-tax  Act  or  Art.  16  of  the Limitation  Act  whichever might be  applied.   The  learned Subordinate  Judge held that Art. 62 of  the Limitation  Act was not ’applicable because Basappa had not pleaded in these two-.suits  that  payment  of  the, tax  was  made  under  a mistake.   The Subordinate Judge,, however, held  that  O.S. No. 23 of 1949 was in time.  In O.S. No. 14 of 1-950 and  44 of  1949,  he recorded findings that tax  amounting  to  Rs. 7,203-12-9-in  respect of O.S. 14 of 1950 and Rs.  5,370-7-0 in  respect  of O.S. No. 44 of 1949  were  wrongly  levied,, because  those  amounts  concerned sales  which  took  place outside the Province of Madras.  In O.S. 23 of 1949 he  held that  sales of the value of Rs. 79,465/- took Place  outside the  Province and tax in respect of them at 1 %  (which  was the uniform rate applicable to all the three years) was  not demandable.’ A -declaration to this ’effect’ was granted and an  injunction was issued restraining the State  Government’ from  recovering Rs. 793-10-6 from Basappa.  In the  result. O.S. No.14 f 1950 and 44 of 1949 were dismissed’ ’with costs and  O.  S.  No. 23 ’of 1949  was  ’partially  decreed  with proportionate costs. Basappa  appealed  in:  all  the  three  suits  against  the decision,   of   the  Subordinate;  Judge,   Kurnool.    The Government of Madras objected-in-the appeal of Basappa from%

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 8  

the.  decision  in 0.S. No. 23 of 1949 in  respect:  of  the decree  for Rs. 793-10-6.  In the High Court,’  applications were made in, the appeals for urging an: -additional  ground that the whole assess- 521 ment, was invalid because it included an illegal levy  which was  not severable from the legal demand.  This ground  ’was based upon the decision of this Court in M/s.  Ram.   Narain Sons Ltd. v. Assistant Commissioner of Sales Tax and  others (1) This request was not opposed and permission was  granted to  Basappa. . The High Court differed from the  Subordinate Judge on the question of limitation and held that neither s. 18  of the Sales-tax Act nor Art. 16 of the  Limitation  Act was  applicable to., the suits, which were governed by  Art. 62 ’of the Limitation Act.  The High Court accordingly  held that  O.S.  14  of  1950 and O.S.  44  of  1949  which  were dismissed  as barred by time were not barred.  On the’  main question, the High Court classified all the sales into  four categories which were:               1.    Where  the  plaintiff  himself  was  the               consignor as well as the consignee,               2.    Where  the  plaintiff  himself  was  the               consignor and the  ’buyer the consignee,               3.    Where  the  buyer was the  consignor  as               well as the consignee, and               4.    Where  a  third party was shown  as  the               consignor, the consignee being the plaintiff. The  Subordinate Judge had held that sales-tax was  properly demandable  in  respect  of categories 2 and 3  but  not  in respect  of  categories  1 and 4. The  second  part  of  the decision  was not assailed before the High Court.  The  High Court  again  considered categories 2 and 3  and  held  that sales coming under those categories were properly assessable to sales-tax as the sales took place within the Province  of Madras.  The High Court, however,, acting upon the  decision of  this court in Ram Narain’s case(1) held that  the  legal and  the  illegal levies were so mixed up  that  the  entire demand  for  tax  was rendered illegal  and  void.   In  the result,  the appeals filed by Basappa were allowed  and  the cross-objection filed by the Provincial Government of Madras was dismissed.  The High Court certified these cases and the present  appeals have been filed. (1) [1955]  2  S.C.R.   483. 522  Three  questions are raised by Mr. A.V. Viswanatha  Sastri. They  are, (1) that the civil court had no  Jurisdiction  to try  these suits, (2) that the suits O.S. 14 of 1950 and  44 of 1949 were barred by time under s. 18 of the Sales-tax Act and  (3) that the High Court was wrong in holding  that  the assessments  were  not  capable of being  split  up  and  in declaring the total assessments to be void. The first two points give no trouble at all.  Section 18  of the Act reads:               "No  suit  shall be  instituted  against  the,               Govern. ment and no suit, prosecution or other               proceeding  shall  be instituted  against  any               Officer or servant of the State Government  in               respect  of any act done or purporting  to  be               done   under  this  Act,  unless   the   suit,               prosecution or other proceeding is  instituted               within  six  months from the date of  the  act               complained of." This  section applies to suits for damages and  compensation in respect of acts under the Act.  It is worded in  familiar language  by which ’authorities, including  Government,  are

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 8  

protected and indemnified in respect of bona fide  acts done or  purporting  to  be done under powers  conferred  by  the statute.  The periodof limitation prescribed in the  section does  not  apply to the kind of suits which  were  filed  by Basappa.    This  Point has no substance and  was  not  even pressed in the High Court. Similarly,  the first point must also be decided against the State  of Andhra Pradesh, because of a recent,  decision  of this  court  in Firm of tlluri Subhayya Chetty  Sow  v.  The State  of Andhra Pradesh(1) That case was decided  under  s. 18A  of the Madras General Sales-tax Act which was  inserted by  s.  10 of the Madras General ’Sales-tax  Amendment  Act, 1951  which came into force on May 15, 1951.  That   section reads               "No suit or other proceeding shall, except  as               expressly ’provided in this Act, be instituted (1)  [1964] 1 S.C.R. 752. 523               in  any  Court  to set aside  or  modify:  any               assessment made under this Act." The   present  appeals  have  to  be  decided  without   the assistance  of s. 18A, because the suits were filed  in  the Court of Subordinate Judge, Kurnool and were decided by  him before  the  amendment  came  into  force  .  Prior  to  the insertion of s. 18A there was no: specific provision  taking away the jurisdiction of the civil court except s. 11(4)  by which a finality attached to orders passed in appeal.  Under that section, appeals were provided in respect of orders  of assessment and there was also a provision for revision in s. 12.   It  was provided by sub-s. (4) of s.  II  that  "every order passed in appeal under this section, shall, subject to the  powers  of revision conferred by s.  12,  be  final.’.’ While  enacting  s. 18A the Legislature added  an  elaborate machinery  which  did  not  exist  earlier  for   correcting assessments. Mr.  Sastri  contends  that in deciding  whether  the  civil court’s jurisdiction is barred we must take into account the provisions  of  s. 11 and s. 12,  because  these  provisions which   provide   adequate  remedies  "   march   with   the construction"  of  s. 11(4).  He submits that  the  finality which  was  conferred on the appellate order  subject  to  a revision   must   necessarily   be   a   finality    against determination  of the same question by the civil court.   It is  pointed out by-,this court in Chetty’s case(1) that  the exclusion  of the jurisdiction of the civil court is not  to be readily inferred and that even -if a provision giving the orders  a  finality  was enacted,  civil  courts-still  have jurisdiction  to interfere where fundamental, provisions  of the  Act  are  not complied with,  or  where  the  statutory Tribunals  do  not act in conformity  with  the  fundamental principles of judicial procedure.  Gajendragadkar, J. speak- ing  for the court on that occasion summed up the law  as follows:               "In  dealing with the question  whether  Civil               Courts’  jurisdiction to entertain a  suit  is               barred  or  not,’ it is necessary to  bear  in               mind  the  fact  that  there.  is  a   general               presumption that there               (1) [1964] 1 S.C.R. 752.               524               must  be  a.  remedy in  the.  ordinary  civil               courts  to a citizen claiming that an  amount-               has been recovered from him illegally and that               such a remedy can be held to be barred only on               very clear and unmistakable indications to the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 8  

             contrary.   The exclusion of the  jurisdiction               of  Civil  Courts to entertain  civil.  causes               will  not  be  assumed  unless  the   relevant               statute  contains  an  express   provision  to               that,  effect,  or leads to  a  necessary  and               inevitable  implication of that  nature.   The               mere fact that a special statute, provides for               certain remedies may not by itself necessarily               exclude the jurisdicti on of the civil  courts               to  deal  with  a case brought  before  it  in               respect of some of the matters covered by  the               said statute.," Referring to the remarks of Lord Thankerton in Secretary  of State represented by the Collector of South Arcot v. Mask  & Co.(1)-"it   is   also  well-settled  that  that   even   if jurisdiction   is  so  excluded,  the  civil   courts   have jurisdiction to examine into cases where the, provisions  of the  Act  have  not been complied  with,  or  the  statutory tribunal  has not acted in conformity with  the  fundamental principles of judicial Procedure"-it was observed:               "It   is   necessary   to   add   that   these               observations,  though  made in  somewhat  wide               terms, do not justify the assumption that if a               decision  has been made by a taxing  authority               under  the, provisions of the relevant  taxing               statute,  its validity can be challenged by  a               suit  on the ground that it..is  incorrect  on               the  merits  and as- such, it can  be  claimed               that  the provisions of the said statute  have               not  been complied with.  Non-compliance  with               the   provisions  of  the  statute  to   which               reference  is made by the Privy Council  must,               we   think,   be  non-compliance   with   such               fundamental  provisions  of  the  statute.  as               would  make the entire proceedings before  the               appropriate  authority  illegal  and   without               jurisdiction.   Similarly, if  an  appropriate               authority has acted in violation               (1)   67 I.A. 222 at 236.                  525               of  the  fundamental  principles  of  judicial               procedure,  that  may also tend  to  make  the               proceedings   illegal   and  void   and   this               infirmity may affect the validity of the order               passed by -the authority in question." It was thus held that the civil court’s jurisdiction may not be  taken away by making the decision of a  tribunal  final, because’  the  civil  court’s jurisdiction  to  examine  the order,  with  reference  to fundamental  provisions  of  the statute non-compliance with which would make the proceedings illegal and without jurisdiction, still remains, unless  the statute  goes  further  and states either  expressly  or  by necessary implication that the civil court’s jurisdiction is completely taken away,. Applying these. tests, it is clear that without a  provision like s. 18A in the Act, the jurisdiction of the civil  court would  not  be ’taken and at least where the action  of  the authorities  is  wholly outside the law and is  not  a  mere error  in  the exercise of jurisdic tion.  Mr.  Sastri  says that we must interpret the Act in, the same way as if s. 18A was  implicit  in  it  and that s. 18A  was  added  to  make explicit  what was already implied.  We cannot  agree.   The finality that statute conferred upon orders of  ’assessment, ;.Subject,  however, to appeal and revision, was a  finality for  the  purposes of ’the Act.  It did not  make  valid  an

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 8  

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.  In. the. present case, the taxing of  sales which  did  not  take place within the State  was  a  matter wholly.  outside the jurisdiction of the taxing  authorities and  in respect of such illegal action. the jurisdiction  of the civil, court continued to subsist.  In our judgment the- suits were competent. The last question is whether the assessment as a whole  must fail  or only in respect of the part which was  utside  the’ jurisdiction  of the sales tax authorities We  have  already reproduced   the  four  categories  into  ’Which   all   the transactions  of sale ’were classified.  The High Court  and the Court below. found that 526 categories  1 and 4 represented transactions of  sale  which could  not  be  taxed at all by  the  authorities  as  those transactions  took  place  outside the  State.   It  may  be mentioned  that the Sales-tax Act did not then  contain  any provision  which established a nexus between the  sales  and the  Province.  That provision came later.  The  High  Court relying  upon Ram Narain’s case(" held that the  assessments as a whole  must fail. In Ram Narain’s case a portion of the assessment  was invalid under Art. 286 of  the  Constitution and the question was whether the total assessment must fail. This Court observed:               "The  necessity  for  doing  so  is,   however               obviated  by  reason  of  the  fact  that  the               assessment is one composite whole relating  to               the  pre-Constitution  as well  as  the  post-               Constitution  periods and is invalid in  toto.               There  is authority for the  proposition  that               when  an  assessment  consists  of  a   single               undivided  sum in respect of the  totality  of               the   property  treated  as  assessable,   the               wrongful  inclusion in it of certain items  of               property which by virtue of a provision of law               were expressly exempted from taxation  renders               the assessment invalid in toto." This  Court  cited with approval a passage  from  Bennett  & White  (Calgary) Ltd. and Municipal District of  Sugar  City No. 5(2) where the Judicial Committee observed :               "When an assessment is not for an entire  sum,               but for seperate sums, dissected and earmarked               each of them  to a separate assessable item, a               -court can sever the items and cut out one  or               more  along  with the sum  attributed  to  it,               while  affirming the’ residue.  But where  the               assessment consists of a single undivided  sum               in respect of the totality of property treated               assessable   and  when  one   component   (not               dismissible as ’de minimis) is on any view not               assessable and wrongly included, it would seem               clear that such .a procedure is barred and the               assessment is               (1)   [1955] 2 S.C.R. 483.               (2) [1951] A.C, 786 at 816.               527               bad   wholly.   That  matter  is  covered   by               authority.  In  Montreal Light  Heat  &  Power               Consolidated  v.  City  of  Westmount   (1926)               S.C.R.  (Can.) 515 the court  (see  especially               per Anglin C.J.) in these conditions held that               an  assessment  Which  was  bad  in  part  was               infected   throughout   and  treated   it   as

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 8  

             ’invalid.  .  Here  their  Lordships  are   of               opinion,  by parity. of reasoning,;  that  the               assessment was invalid in toto." It  is  urged  by Mr. Sastri that the tax  here  is  at  the uniform  rate  of 1 % and as all the returns  and  documents necessary  to  seprate  the  bad  part  from  the  good  are available, there is no need to cansel  the whole assessment. He  contends  that these cases are rather  governed  by  the other  rule that where the assessment is for separate  sums, only  that portion need be declared illegal which  is  void. It  is necessary to explain the distinction between the  two classes  of cases and how they are to be  distinguished.   A difference in approach arises only in those cases where  the assessment  of many matters results in amounts of tax  which though  parts  of  the whole  assessment,  stand  completely separate.   There  the  court  can  declare  the   "separate dissected and earmarked’, items illegal and excise them from the  levy.   In  doing so, the court does  not  arrogate  to itself  the functions of the taxing authorities;  but  where the  tax  is a composite one and to separate the  good  part from  the bad, proceedings in the nature of assessment  have to  be undertaken, the civil court lacks  the  jurisdiction. Here,  theamount of tax is a percentage of the turnover  and the  turnover  is a mixed one and it is thus  not  merely  a question of cutting off some items which are separate but of entering  upon  the function of assessment  which  only  the authorities under the.  Sales-tax Act can undertake.   Cases of  assessment based upon gross valuation such as  the  case from Canada refered to by the Judicial’ Committee afford  a, parallel  to  a case of assessment of a  composite  turnover such  as we have here.  Just as in the Canadian case it  was not possible to separate the valuation of movable properties from 528 that of immovable properties, embraced in a gross  valuation roll, so also here, it is not possible to separate from’ the composite  ’turnover transactions which are .validly  taxed, from  those  which  are not, for that must  pertain  to  the domain of tax officers and the courts have no powers  within that  domain.  In our opinion, the High Court was  right  in declaring the total assessment:    to  be affected  by  -the portion which was illegal and  void. In  the  result, these appeals fail and are  dismissed  with costs, one  set only. Appeals dismissed