K S VENKATARAMAN AND COMPANY LIMITED Vs. STATE OF MADRAS

JUDGEMENT

(1.) THE plaintiffs-appellants were building contractors. For the assessment years 1948-49 to 1952-53 the appellants were assessed to sales tax under the Madras General Sales Tax Act on the turnover of their works contracts computed in accordance with the rules framed under that Act. Subsequently, in Gannon Dunkerley's case this Court held that the legislative provision in the Sales Tax Act for treating works contracts as involving taxable sales was ultra vires the legislature and that there was therefore no valid legislative sanction for taxing the turnover of such works contracts with reference to buildings. That was confirmed by the Supreme Court in State of Madras v. Gannon Dunkerley and Co. After the declaration of the law on the validity of the legislative provision to the works contracts by this Court, the plaintiffs instituted the suit, out of which this appeal arises, for recovery of the amounts paid by them for the assessment years we have referred to above. That claim was resisted by the State.

(2.) THE learned trial Judge upheld the pleas of the defendant State. THE learned Judge upheld the claim that section 72 of the Indian Contract Act did not authorise the plaintiffs to recover the payments because these were payments made not under a mistake of fact but under a mistake of law. THE learned Judge further upheld the plea of the State that section 18-A of the General Sales Tax Act barred the jurisdiction of the Civil Court to investigate the claim for refund of the tax paid by the plaintiffs, though it now transpires there was no legal basis for the levy or collection of those taxes. THE learned Judge also took the view, that the plaintiffs' claim was governed by Article 62 of the Limitation Act.THE plaintiffs, whose suit was dismissed, appealed.

(3.) LEARNED counsel for the appellants contended that in the absence of a valid legislative sanction for the levy of sales ta on the turnover of works contracts the assessments should be treated as nullities, and that section 18-A of the Sales Tax Act did not cover such cases. It was precisely such a contention that was negatived by their Lordships if the Privy Council in Raleigh Investment and Co. v. Governor-General in Council They pointed out that it made no real difference in principle whether the legislative provision under which a tax was levied or purported to be levied was intra vires or ultra vires the Legislature. The assessment was made. The commencement of the assessment or, as their Lordships called it the provenance of assessment proceedings, was under the Act, which by one of its express provisions, ousted the jurisdiction of the civil court to examine the validity of the assessment made after such a commencement. The position is just the same under section 18-A of the General Sales Tax Act. As we pointed out earlier the constitutional validity of the purported legislative sanction for taxing the turnover of works contracts could have been decided under the provisions of the Act itself, in proceedings under section 12-B of the Act, by the High Court. Therefore, section 18-A of the Act came into play, and it barred the jurisdiction of the civil court from dealing with the question of refund, which necessarily involved an assessment being set aside. There can be no question of the refund being granted so long as the assessment stood and though no specific request was made for setting aside the assessment, the suit necessarily involved the assessment being set aside before the relief claimed could be granted. Such an investigation section 18-A of the Act barred.LEARNED counsel for the appellants referred to Bhailal Bhai v. State of Madhya Pradesh and particularly to the observations of the learned Judges at page 522.