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PETITIONER: THE STATE OF WEST BENGAL

       Vs.

RESPONDENT: THE INDIAN IRON & STEEL CO.  LTD.

DATE OF JUDGMENT: 16/04/1970

BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. SHAH, J.C.

CITATION:  1970 AIR 1298            1971 SCR  (1) 275  1970 SCC  (2)  39  CITATOR INFO :  R          1978 SC1217  (25)

ACT: Bengal  Cess Act, 1880, Ss. 72, 102-Value of  coal  supplied from  colliery  to  owner’s  factory-Whether  cess  leviable thereon-Mode of computation of value-If can be questioned in suit or only by procedure prescribed by Act.

HEADNOTE: The  respondent Company, which was itself primarily  engaged in  the  manufacture  of iron and steel  products,  owned  a colliery.   The  coal raised from this colliery  was  mainly used  in  the respondent’s iron and steel  factories  though some cog was also sold to outsiders.  In the years  1946-47, 1947-48  and 1948-49, the respondent Company lodged  returns with the Collector of Burdwan under s. 72 of the Bengal Cess Act,  1880 in which the Company valued the coal supplied  by the  colliery to its factories at a rate per ton  less  than the  actual  cost  of raising the  coal,  and  computed  the profits  of  the colliery on that basis.   The  Cess  Deputy Collector,  who  was the assessing authority,  rejected  the returns  and  computed the profits of the colliery  for  the purpose  of assessment to, the cess by valuing the  coal  at the  control  rate  in force at the  time.   The  ’assessing authority under the Bengal Primary Education Act, 1930,  the provisions  of  which were similar to the Bengal  Cess  Act, also computed the education cess payable by the Company  for the  years  1946-47  and 1947-48 on  the  same  basis.   The Respondent Company paid the amounts ’assessed as cess  under each Act under protest and thereafter instituted a suit  for refund  of the amount which it contended was collected  from it in excess.  It also prayed for a declaration that it  had earned  no profits from the colliery during the three  years from  the  coal consumed in its own steel factories  and  as such no cess could have been assessed and levied on it.  The Trial Court decreed the suit and an appeal to the High Court was dismissed. In  the appeal to this Court it was contended inter alia  on behalf of the Respondent (i) that supply of coal made by the colliery to its factories could not be considered a sale and without  a  sale, there could be no profit;  accordingly  in

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computing the profits of the colliery the value of the  coal supplied  to its factories should not have been  taken  into consideration; and (ii) that in view of the decision of this Court in Tata Iron and Steel Company’s case it was not  open to the assessing authority to value the coal supplied to the factories  at  the  controlled rate;  he  should  have  dis- integrated  the  ultimate Profits earned and found  out  the profit ’earned by the mine. HELD : Allowing the Appeal (i)  Indetermining  the profits earned by the  colliery,  it was   open   to  the  assessing  authority  to   take   into consideration   the  value  of  the  coal  supplied-to   the factories and workshops of the Respondent Company. [281 B] Tata  Iron and Steel Co. Ltd. v. The State of Bihar,  [1963] Supp.  1 S.C.R. 199, followed. (ii) The  mode of computation is a matter for the  assessing authorities   except  where  the  computation  is  done   in violation of any provision of 276 law.  If the respondent company was aggrieved by the mode of computation  adopted by the assessing authority,  it  should have  agitated that question firstly before  that  authority and thereafter before the appellate authority.  Having  not done  so,  the  company cannot be permitted  to  raise  that question  in  the,  present  suit;  otherwise  the  finality contemplated  by s . 102 of the Act would  become  illusory. The levy under the Act is imposed by a special lay which law also  provides  its own remedies for correcting  the  errors that, may be committed by the assessing authority.  Where  a liability  not existing previously is created by  a  statute which  statute  at  the  same time  provides  a  special  or particular remedy for correcting any mistake that may  occur in  its enforcement the aggrieved party must adopt the  form of  remedy given by the statute and no other. [281 D-H;  282 A-B] Collector  of  South  Arcot v. Mask &  Co.,  67,  I.A.  222, distinguished. Dhulabhai  and Ors. v. The State of Madhya Pradesh and  Anr. [1968] 3 S.C.R. 662, referred to.

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  1729  of 1966. Appeal from the judgment and decree dated April 17, 1962  of the  Calcutta High Court in Appeal from Original Decree  No. 127 of 1955. P.   K.  Chakravarti and Prodyot Kumar Chakravarti, for  the appellant. M.   C. Chagla and D. N. Mukherjee, for the respondent. B.   Sen, G. S. Chatterjee, for the intervener. The Judgment of the Court was delivered by Hegde,  J.-Two questions of law viz. (1) whether the  levies impugned  in  the suit from which this  appeal  arises,  are invalid  and (2) whether the civil courts have  jurisdiction to entertain that suit, arise for decision in this appeal by certificate. The  respondent company is the owner of  Ramnagar  colliery. It  is  also  the  owner of iron  and  steel  factories  and workshops  at  Hirapur and Kulti.  Ramnagar  colliery  is  a "coal mine".  The coal raised from the Ramnagar colliery  is by and large used in the manufacturing processes carried  on in the iron and steel factories and workshops at Hirapur and Kulti.  Some coal was also sold by the respondent company to

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outsiders.   In the years 1946-47, 1947-48 and 1948-49,  the respondent  company lodged a return before the Collector  of Burdwan  under s. 72 of the Bengal Cess Act of 1880  (to  be hereinafter  referred to as the Act).  Therein  the  company valued  the coal supplied by the colliery to  the  factories mentioned  earlier at Rs. 6,/11/5 per ton, a sum  less  than the actual cost of raising the coal and computed the profits of the colliery on that basis.  The company adopted the same basis for the purpose of 277 paying  education  cess under s. 31 of  the  Bengal  Primary Education Act, 1930.  The provisions of the said Act in  the matter of levy of education cess are similar to that of  the Act.   The  Cess  Deputy Collector  who  was  the  assessing authority under the Act as well as the Collector of Burdwan, the  assessing authority under the Bengal Primary  Education Act,  rejected  the  returns  submitted  by  the  respondent company  and computed the profits of the  colliery,  valuing the  coal supplied by it to the factories mentioned  at  Rs. 12/8/-  per ton which was the control rate at  the  relevant time.   On that basis the cess Deputy Collector called  upon the  respondent company to pay Rs. 39,852/5/- as  road  cess and  public  works cess for the years 1946-47,  1947-48  and 1948-49.   The Collector of Burdwan computed  the  education cess payable by the company for the years 1 946-47 and 1947- 48  at Rs. 21,661 90 P. and called upon the company  to  pay the  same.   The respondent company paid  the  said  amounts under  protest.  Thereafter it instituted the  present  suit for refund of Rs. 44,428/4/3, which according to it was  the excess  amount  collected  from it.  It also  prayed  for  a declaration  that  it earned no profits  from  the  Ramnagar colliery during the years 1946-47, 1947-48 and 1948-49, from the coal consumed in its own workshops and factories and  as such  no  road  or public works cess or  education  cess  in respect of the same could have being assessed and levied  on it and that the impugned levies were ultra vires. The  trial  court  decreed  the suit  as  prayed  for.   The appellant took up the matter in appeal to the High Court  of Calcutta.   The  High  Court dismissed  the  appeal  by  its judgment dated April 17, 1962. In  order  to  decide  the  points  in  controversy,  it  is necessary to read the relevant provisions of the Act.  It is not  necessary  to refer to the provisions  of the  Bengal Primary Education Act separately as the provisions  therein, relevant  to  the topics under discussion being  similar  to those in the Act.  The preamble to the Act says that it is a law  relating  to rating for the construction,  charges  and maintenance  of District communications and other  works  of public  utility  and of Provincial Public Works  within  the territories administered by the Lt.  Governor of Bengal  and to  the  levy  of a road cess and a public  works  cess  on immovable  property situate therein and to the  construction of  local committees for the management of the  proceeds  of the said road cess and also to provide for the  construction and maintenance of other works of public utility out of  the proceeds  of the’ said road cess.  It was not disputed  that the  validity  of education cess depends on our  finding  as regards  the  validity of public works cess and  road  cess. Section L12Supp.CI/71 278 5  of  the  Act which is the charging section  read  at  the relevant time:-               "From  and after the commencement of this  Act               in  ;any district or any part of a  district,

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             all immovable property situate therein  except               as  otherwise in section 2 provided, shall  be               liable  to  the payment of a road cess  and  a               public works cess."               Section 6 at the relevant time provided               "The road cess and the public works cess shall               be  assessed on the annual value of lands  and               until  provision  to the contrary is  made  by               Parliament,  on  the annual net  profits  from               mines, quarries, tramways, railways and  other               immovable property ascertained respectively as               this Act prescribed." That  section further provides that the rates at which  such cesses  respectively shall be levied for each year shall  be determined  for  such year in the manner prescribed  in  the Act.   Part 11 of the Act sets out the mode  of  assessment. Chapter  II  lays down the procedure for  the  valuation  of lands.  Chapter III provides for rating and levy of  cesses. Chapter  IV prescribes the mode of valuation and  assessment of  lands held rent free and payment and recovery of  cesses in  respect  thereof.   Chapter  V  deals  with   valuation, assessment  and  levy of cess on mines, railways  and  other immovable  property.   This chapter contains ss. 72  to  84. Section 72 at the relevant time read               "On  the  commencement  of  this  Act  in  any               district.  and thereafter before the  close  d               each year, the Collector of the district shall               cause  a notice to be served upon  the  owner,               chief  agent,  manager or  occupier  of  every               mine,  quarry,  tramway,  railway  and   other               immovable  property  not included  within  the               provisions of Chapter 11; such notice shall be               in the form in Schedule E contained and shall               require  such owner, chief agent,  manager  or               occupier  to  lodge  in  the  office  of  such               Collector  within two months a return  of  the               net annual profits of such property calculated               on  the  average  of the  annual  net  profits               thereof for the last three years for which ac-               counts have been made up.               Such  Collector may in his  discretion  extend               the time allowed for lodging such return." Section  72A prescribes the penalty for omitting to lodge  a return.  Section 73 prescribes the manner of submitting  the return 279 when  the property lies in different districts.  Section  74 provides for the submissions of the return when property  is partly  in  and  partly outside the State.   Section  75  is important  for  our present purpose.  That  section  at  the relevant time read :               "If  such return be not furnished  within  the               period  of two months from the date  on  which               such notice was served or within any  extended               time allowed by the Collector of the  district               or  if  such  Collector shall  deem  that  any               return  made  in pursuance of such  notice  is               untrue  or  incorrect,  such  Collector  shall               proceed  to  ascertain and determine  by  such               ways or means as to him shall seem  expedient,               the  annual  net  profits  of  such   property               calculated as aforesaid." Section 76 as it stood at the relevant time provided that if the Collector is unable to ascertain the annual net  profits of any property assessable under Chap.  V in accordance with

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the provisions of s. 75, he may, by such ways and means as shall  seem  to him expedient ascertain  and  determine  the value of such property and shall thereupon determine six per centum  on such value to be the annual net profits  thereon. Section  78 provides for the issue of a notice of  valuation to  the  person  concerned.  The other  provisions  in  that Chapter  are not relevant for our present purpose.   Now  we come to s. 102 in Chapter VII.  That section reads               "Every  person who shall deem himself to   be               aggrieved by any valuation made by a Collector               under the provisions of section 75 or 76  may,               within  one  month  after  the  issue  of  the               ,notice  mentioned  in section  78  and  every               person who shall deem himself to be  aggrieved               by  any valuation made by the Collector  under               the  provisions of any other section  of  this               Part may within one month after the posting up               of  a copy of the valuation roll as  mentioned               in  section 35, prefer his objections  to  the               Collector;  and if such objections, or any  of               them, are disallowed, may within one month  of               such disallowance, appeal to the  Commissioner               against  such valuation, and the  decision  of               the Commissioner shall be final. Before proceeding to discuss the questions of law arising in this appeal, it is necessary to mention that the  respondent company  had unsuccessfully appealed against cesses  imposed on it. It was urged on behalf of the respondent that supply of coal made  by  Ramnagar colliery to the factories  and  workshops cannot  be considered as a sale and without a  sale,  there can be no profit; and hence in computing the profits of  the colliery the value of the 280 coal  supplied  to  the factories  and  workshops  mentioned earlier should not have been taken into consideration.  This contention  has to be rejected in view of the  decision-  of this Court in Tata Iron  and Steel Co. Ltd. v. The State  of Bihar(1).  The ratio of that decision directly bears on the- point  under  consideration.   It  may  be  noted  that  the appellant  therein as well as respondent in this appeal  are both Tata concerns.  In that case the appellant company  was the owner of certain mines in Bihar from where it  extracted iron ore which it utilized in its factory at Jamshedpur for making  iron  and steel.  Under ss. 5 and 6 of  the  Act  as amended in Bihar all immovable property situate in any  part of  the  State of Bihar was liable to the payment  of  local cess  which in the case of mines was to be assessed  on  the annual  profit  earned by them.  For  the  assessment  years 1954-56,  the  company  was  assessed  by  the  Cess  Deputy Collector on the basis that it had made profits cf Rs. 4/7/- per ton of iron ore extracted.  Tata Iron and Steel Co. Ltd. claimed that it was not liable to the payment of cess as  it did  not  sell any ore as such and could  not  therefore  be treated as having made any profit’ from the mines within the meaning  of s. 6 of the Act.  The question in that case  was whether  the appellant company could in law be said to  have derived  "profit" from the mines when the ore extracted  was not  sold  by  it as such but was utilised  by  it  for  the purpose  of manufacturing finished products which  it  sold. This Court ruled in that appeal that on a true construction of ss. 6 and 72 of the Act as amended in Bihar which  amend- ments are not material for the decision of this  case,-where activities other than mere winning the ore are carried on by an  assessee with a view to convert the ore into a  finished

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product  and there is a transaction of sale of the  ultimate product, the profit derived from the working of the mine  is embedded  in  the final realisation, and  the  profit  which accrues  to  the assessee from the mining operation  can  be disintegrated from the total profit and ascertained and cess levied  thereon.   Mr.  Chagla,  learned  Counsel  for   the assessee  tried to distinguish that decision on  the  ground that  in Tata Iron and Steel case, the iron ore  won  became imbedded in the steel produced but that is not the  position in  the  present  case as no part of  the  coal  raised  got imbedded  in  the ultimate product namely the  steel.   This difference  in  fact  has no bearing on  the  ratio  of  the decision.  The rule laid down in Tata Iron and Steel case is that where the profit derived from the working of a mine  is imbedded  in the profits earned by the sale of the  ultimate product,  it  is  open  for  the  ’assessing  authority   to disintegrate that profit and find out the profits earned  by the  mine.   The fact that in the one case the  winning  was that  of  the  iron and in the other it  is  coal  makes  no difference in principle.  In that case this Court ruled that the  winning  of the ore and converting it into  a  finished product (1) [1963] Supp. 1, S.C.R. 199. 281 could not be construed as two transactions conducted by them but  it should be viewed as a single integrated  undertaking for the production of steel and steel products.  Similar  is the position in the present case.  Hence we hold that it was open  to the assessing authority to take into  consideration the  value  of  the  coal  supplied  to  the  factories  and workshops  referred to earlier in computing the  profits  of the colliery. Mr.  Chagla  next  assailed the cesses  imposed  on  another ground.   He contended that in view of the decision of  this Court  in Tata Iron and Steel Company’s case(1) it  was  not open  to the assessing authority to value the coal  supplied to  the factories and workshops at the controlled  rate;  he should have, as suggested in that decision disintegrated the ultimate  profits earned and found out the profit earned  by the mine.  We I are of the opinion that it is  impermissible for  us to go into that question in these proceedings.   The liability to pay tax is one thing and mode of computation of the  net profits is ’another.  The mode of computation is  a matter  for  the  assessing  authorities  except  where  the computation  is done in violation of any provision  of  law. If  there was any mistake in the computation,  that  mistake should  have been got rectified by following  the  procedure prescribed.  in  the  Act.  If the  respondent  company  was aggrieved  by  the  mode  of  computation  adopted  by-  the assessing  authority, it should have agitated that  question firstly  before  that authority and  thereafter  before  the appellate authority.  Having not done so, the company cannot be  permitted  to raise that question in the  present  suit; otherwise  the  finality contemplated by s. 102 of  the  Act would  become  illusory.  It is true, as  observed  by  Lord Thankerton in Collector of South Arcot v. Mask & Co.(2) that it  is settled law that the exclusion of jurisdiction  of  a civil  court  is’ not to be readily inferred but  that  such exclusion  must  either be explicitly expressed  or  clearly implied. It is also well settled as observed by his Lordship that  even  if the 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.   In   the

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present case what is contended is not that any provision  in the Act had been ignored by the assessing authority but that s.  72  thereof has not been properly  interpreted  by  that authority.   If the provisions of the Act form  a  precise, self  contained  code, as we hold them to be,  the  assessee cannot be permitted to challenge the levy on the ground that the levy imposed on him is excessive.  It must be remembered that  the  levy under the Act is imposed by  a  special  law which law also provides its own remedies for correcting  the errors that may be committed by the assessing authority. (1) [1963] Supp.  S.C.R.199 (2) 67, I.A. 222; 282 Where  a liability not existing previously is created  by  a statute  which statute at the, same time provides a  special or  particular  remedy for correcting any mistake  that  may occur in its enforcement the aggrieved party must adopt  the form  of  remedy  given by the statute  and  no  other.   In Dhulabhai and ors. v. The’ State of Madhya Pradesh and anr., (3)  our  present Chief Justice speaking for the  Court  has formulated  the circumstances under ’Which the  jurisdiction of the civil court can be invoked in the matter of a levy of tax.   Therein  this  Court has laid  down  that  where  the statute  gives  a  finality to the  orders  of  the  special tribunals, the civil courts’ jurisdiction must be held to be excluded,  if there is adequate remedy to do what the  civil court would normally do in a suit.  It is further 1-aid down in  that  case  that questions of  the  correctness  of  the Asses sment  apart, from its constitutionality are  for  the decision of the authorities and a civil suit does not lie if the  orders of the authority are declared final or there  is an express prohibition under the particular Act.  We do  not think that the civil courts have jurisdiction to examine the correctness  of the computation of the net profits  made  by the authorities under the Act. For the reasons mentioned above, this appeal is allowed  and the  suit  brought by the respondent company dismissed  with costs throughout. R.K.P.S.                            Appeal allowed. (1) [1968] 3 S.C.R. 662 283