# [1966] 3 S.C.R. 582

- **Citation:** [1966] 3 S.C.R. 582
- **Court:** Supreme Court of India
- **Decided:** 1963-10-07
- **Bench:** P. n. GAJlNDRAGADKAR, K. N. WANCllOO, J. c. SHAii, S. M. S!Kri Anu \I. Ramaswami
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1966-3-s-c-r-582-3613
- **Pages:** 8

## Headnote

J'ravancore-Cochi11
Ger1.m1/
Sales
Tax Act (11 of 1125 M.E.)-
Suit to recover excesi tax paid-Jurisdiction of civil court if harrtd.
Pan of Sales-tax paid by the respondent was assessed upon the amount
which it collected from its customers as &ales-tax and which was included
A
B
i.o its net tumoYer.
A suit by the respondent for refund of that part
C
of the sales-tax which was charged on the sales-tax collected by the respondent on the basis that it was not lawfully due under the Travancon:.
Cochin General Sale• Tax Act, 1950, was decreed hy the 1rial court and
the decree was confirmed by the High Court.
In appeal to this Court, it \\'as contended that the civtl coun had no
jurisdiction to try the suit.
HELD : By constituting appC\lpriatc authorities under 1hc Act and
D
creating a hierarchy of authorities to ()ea] with tho 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 GJ
Jurisdiction of the ci1il coun to try the suit was not barred by s. 2JA
ousting tho jurisdiction of the civil court, beca11o;e that aection which was not
retroipective in operation was in~raled into the Act after the suit was
filed.
But the jurisdiction of the c1vil court may bo e<cludcJ by expr°"
E
enactment or by necessary intendment arising from the scheme of tho
Act.
The Travancore-Cochin Sales Tax Act is a c0mplete code dealing
\Vilh the levy, a~sessn1cnt, collection and refund of tax.
It authorises in-
\·estment of power in a hierarchy of authorities to adminio;tL'r the Act.
For tho purpose of making assessment of tax, the authorities have power
10 decide all questions ari•;ng before them, and the orders of the appellate authorities,
subject to the exercise of revisional jurisdiction by the
Board of Revenue, were declared final.
The liability to pay tax arose
I'
under and by virtue of the provisions of the Act and the quantum or
liability was determined under the Act alone.
Further, at the material time.
there was no cxpreso provision in the Act, which obliged the taxi"g
authority
to
exclude
from
the
computation
of
the
taxable
turnover the amount of sales-tax collected hy the dealer.
Hence, it could
not be said that by
ass-es'\in~ sales-tax on such amount, the taxing authority had infringed a prohibition imooscd by the statute upon him. ThereG
fore, the principle in Secretary of State for India v. Mask and Co. L.R. 67
I.A. 222, that civil court5 have jurisdiction to examine a case where the
provision' of the statute have hccn infrin2ed did not apply in the instant
case. [583 F; 584 C; 585 H-586 B; 589 B]
Pr'1Ylocla/ Govemme'lt of Madras '" J. S. Basappa, [1964] 5 S.C'.R.
517; 15 S.T.C. 144 (S.C.), overruled.
Kamala Mill.v v. State of Bombay, [1966) 1 S.C.R. 64, foJIO\\Cd.
H
Georxe Oaks v. State of Madras, [1962[ 2 S.e.R. 570; A.LR. 1962 S.C.
1037 and K. S Venkataraman v. State of Madras, [1966] 2 S.C.R. 229.
referred to.
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KERALA v. RAMASWAMI (Shah, J.)
583
A

## Text

ST A TE OF KERA LA
\'
RAMASWA'.\11 IYER & SONS
February I I, 1966
[P. n. GAJlNDRAGADKAR, C.J., K. N. WANCllOO, J. c.
SHAii, S. M. S!KRI ANU \I. RAMASWAMI, JJ.j
J'ravancore-Cochi11
Ger1.m1/
Sales
Tax Act (11 of 1125 M.E.)-
Suit to recover excesi tax paid-Jurisdiction of civil court if harrtd.
Pan of Sales-tax paid by the respondent was assessed upon the amount
which it collected from its customers as &ales-tax and which was included
A
B
i.o its net tumoYer.
A suit by the respondent for refund of that part
C
of the sales-tax which was charged on the sales-tax collected by the respondent on the basis that it was not lawfully due under the Travancon:.
Cochin General Sale• Tax Act, 1950, was decreed hy the 1rial court and
the decree was confirmed by the High Court.
In appeal to this Court, it \\'as contended that the civtl coun had no
jurisdiction to try the suit.
HELD : By constituting appC\lpriatc authorities under 1hc Act and
D
creating a hierarchy of authorities to ()ea] with tho 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 GJ
Jurisdiction of the ci1il coun to try the suit was not barred by s. 2JA
ousting tho jurisdiction of the civil court, beca11o;e that aection which was not
retroipective in operation was in~raled into the Act after the suit was
filed.
But the jurisdiction of the c1vil court may bo e<cludcJ by expr°"
E
enactment or by necessary intendment arising from the scheme of tho
Act.
The Travancore-Cochin Sales Tax Act is a c0mplete code dealing
\Vilh the levy, a~sessn1cnt, collection and refund of tax.
It authorises in-
\·estment of power in a hierarchy of authorities to adminio;tL'r the Act.
For tho purpose of making assessment of tax, the authorities have power
10 decide all questions ari•;ng before them, and the orders of the appellate authorities,
subject to the exercise of revisional jurisdiction by the
Board of Revenue, were declared final.
The liability to pay tax arose
I'
under and by virtue of the provisions of the Act and the quantum or
liability was determined under the Act alone.
Further, at the material time.
there was no cxpreso provision in the Act, which obliged the taxi"g
authority
to
exclude
from
the
computation
of
the
taxable
turnover the amount of sales-tax collected hy the dealer.
Hence, it could
not be said that by
ass-es'\in~ sales-tax on such amount, the taxing authority had infringed a prohibition imooscd by the statute upon him. ThereG
fore, the principle in Secretary of State for India v. Mask and Co. L.R. 67
I.A. 222, that civil court5 have jurisdiction to examine a case where the
provision' of the statute have hccn infrin2ed did not apply in the instant
case. [583 F; 584 C; 585 H-586 B; 589 B]
Pr'1Ylocla/ Govemme'lt of Madras '" J. S. Basappa, [1964] 5 S.C'.R.
517; 15 S.T.C. 144 (S.C.), overruled.
Kamala Mill.v v. State of Bombay, [1966) 1 S.C.R. 64, foJIO\\Cd.
H
Georxe Oaks v. State of Madras, [1962[ 2 S.e.R. 570; A.LR. 1962 S.C.
1037 and K. S Venkataraman v. State of Madras, [1966] 2 S.C.R. 229.
referred to.
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KERALA v. RAMASWAMI (Shah, J.)
583
A
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1104 of
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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, Attomey-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 TravancoreCochin General Sales-tax Act, 1950, by the assessing authority,
Moovattupuzha, on a turnover of Rs. 14,04,732/7/6 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 instituted by the respondents, and by
s. 23-A as incorporated the jurisdiction of the civil court to try a
~it properly instituted before it was enacted is not ousted.
j 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 (). In Basappa's case (1), the
(!) (1964] 5 S.C.R. 5I7: I5 S.T.C. 144.
584
SUPREME COURT REPORTS
[ 1966] 3 S.C.R.
aasessee 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 likes. 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 appeal by the Act was a finality
for the purposes of the Act and "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 arc the creation of a statute,
the jurisdiction of the civil court would be deemed excluded by
implication. In Raleigh Investment Company Ltd. v. GoverMrGeneral in Council(') 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 provision 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. Venkataraman
& Co. (P) Ltd. v. State of Madras(2), Subba Rao, J., observed :
"If a statute imposes a liability and creates an effective
machinery for deciding questions 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-
(I) L.R. 74 I.A. 50.
(2) (19661 1 s.c.R, 229.
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KERALA v. RAMASWAMI (Shah, J.)
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."
585
In a case recently decided by this Court Kamala Mills Ltd. v. State
of Bombay(') 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 Salestax Act 5 of 1946 in respect of "outside sales" 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(') 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 Trav ancore-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 machinery 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 bys. 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 tax-payer 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. 15 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 net chargeable turnover, 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.
(l} [1966] I s.C.R. '4 : A.l.R. 196~ S.C. 1942.
586
SUPREME COURT REPORTS
[1966] 3 S.C.R.
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 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{') reliance was placed on
behalf of the claimant upon Basappa's case('), and the following
observations were made by the Court :
"In Prorincial Gorernmenl 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
example, 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 ll/11ri Subbayya Chetty
& Sons [(1964) I SCR 752]."
In Ba.wppa's case(') the taxpayer sought in an action for refund of
tax paid, a decree on the plea that the transactions in rc>pect of
which tax was levied were "outside sales", and it was held that in
the absence of expres' 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(') was not
different.
In the judgment in Kamala Mills' case(') 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 exprc·;sly or by necessary im~Jieation, and as the
scheme of the Bombay Sales Tax Act, 1946, 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 contem;ilated 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('):
"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
(!) )1966] I S.C.R. 64.
(2) [1964] 5 S.C.R. 517.
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KERALA V. RAMASWAMI (Shah, J.)
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."
587
The action of the taxing authority in Basappa's case(') 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(')
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 statntory 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(Z). Counsel for the respondents urged that
the case of the respondents fall withln 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 els. (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 :
"(!) 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
I, 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! IS. C.R. 64.
(3) L. R. 67 I. A. 222.
588
SUPllEME COURT REPORTS
[ 1966] 3 S.C.R.
The exemption was therefore inoperative in the computation of
A
taxable turnover for the assessment year in question.
Counsel for the respondents however contended that the
effect of the amendment was 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 hy the dealer. There is
no provision in the Act which may hy 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 I, 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 Madras(•)
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 arc 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 Jaw treating it as part of the
amount on which tax must be paid by him. This concep-·
tion 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 ta11 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 used in the Travancore-Cochin General Sales tax Act.
But the
(I) [1962) 2 S.C.R. 570 : A. I. R. 19152 S. C. 1037.
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KERALA V. RAMASWAMI (Shah, /.)
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.
Ml! Sup.C.J./66-6