# [1968] 3 S.C.R. 662

- **Citation:** [1968] 3 S.C.R. 662
- **Court:** Supreme Court of India
- **Decided:** 1968-04-05
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1968-3-s-c-r-662-4331
- **Pages:** 23

## Headnote

DHULABHAI AND OTHERS
'V.
THE STATE OF MADHYA PRADESH AND ANOTHER
April 5, 1968
[M. HIDAYATULLAH, C.J., R. S. BACHAWAT, C. A. VAIDIALIN•
GAM, K. S. HEGDE AND A, N. GROVER, JI.]
M«lhya Bharat Sales Tax Act (30 of 1950), s. 11-lurisdiction of
civil court barred-Scope of the bar.
By Notifications issued by the State Govetnment under s. S of the
Madhya Bharat Sales Tax Act, 1950, sales-tax was imposed and collected
from the appellants. They filed suits for refund of the tax on the ground
that it was illegally collected from them being against the constitutional
prohibition in Art. 301 and not saved under Art. 304(a). In Bhailal v.
State of M.P. [(1960) M.P.L.J. 601), the petitioner therein challenged
in a writ petition, the levy of sales tax on the same grounds and the High
Coun declared the notifications to be offensive to Art. 30 I and held that
the imposition of tax was illegal. Following that decision, the !'rial court
decreed the suits filed by the appellants. In appeal before the High Court
it was conceded by the State that the tax. could not be imposed in view
of Art. 301, but it was contended that the suits were not maintainable
in view of s. 17 of the Act which provides that no assessment made under
the Act shall be called in question in any court. Tue High Coun held
that the suits were incompetent.
In appeal to this Court,
HELD : The suits were maintainable. [684 DJ
An enquiry into the diverse views expressed in the decisions of this
Court shows that an exclusion of the jurisdiction of civil cowt is not readily
to be inferred unless the following conditions apply :
(1) Where the statute gives a finality to the orders of the special
tribunals the civil court's jurisdiction must be held to be excluded if there
is adequate remedy lo do what the civil courts would normally do in a
suit.
Such provision, however. does not exclude those cases where the
provisions of the patticular Act have not been complied with or the
statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure. [682 A-C; 683 CJ
Secretary of State v. Mask [1940] L.R. 67 I.A. 222; Fi'rm 11/uri Subba,vY<J Chetty & Sons v. State of Andhra Pradesh, [1964) 1 S.C.R. 752 and
Kera/a v. Ramoswami Iyer and Sons, [1966] 3 S.C.R. 582.
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In Firm Illuri Subbttyya Chetty & Sons' case the assessee conceded
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that the tax was payable and did not raise the issue before the appellate
authorities under the Act. The suit for refund of tax was held not
maintainable on those special facts, with reference to the addition of a.
ISA excluding the jurisdiction of civil court and the special remedies
provided in ss. 12A to 120 in the Madras General Sales Tax Act, 1939.
This Court. however, did not think it necessary to pronounce any opinion
on the Judicial Committee's view in
the Rcleigh Investment Co. case
([1947) L.R. 74 I.A. 50) that even the vires of the provisions could be
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consideted by the Tribunals constituted under the Act. Dealing with
Mask & Co.'s case, it was pointed out that non-compliance
with
the
provisions of the statute meant non-compliance with such fundamental
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DHULABHAI V, MADHYA PRADESH
663
provisions of the statute as would make the entire proceedings before the
appropriate authority illegal and
without
jurisdiction.
[679
G-H;
680 D-D]
(2) Whore there is an expreso bar o~ the jurisdiction of the coutt,
an examination of the scheme of the pal11cular Act to find the ad~uacy
or the sufficiency of the remedies provided may be relevant but ,. not
decisive to sustain the jurisdiction of the civil court. [682 DJ
Whore there is no express exclusion the examination of the remedies
and the scheme of the particular Act to find out the intendment become&
aecessary and the result of the inquiry may be deci~ive. . In the I~
c~ it is necessary to see if the slia~ute creates ~ special .rig~~ or a liab1·
lily and provides for the determination of the n~t or hab11tty, !"'d further lays down that all . questions about. the

## Text

_Characters 0–39,781 of 61,765. This is a partial read: ask again with offset=39781 for what follows._

DHULABHAI AND OTHERS
'V.
THE STATE OF MADHYA PRADESH AND ANOTHER
April 5, 1968
[M. HIDAYATULLAH, C.J., R. S. BACHAWAT, C. A. VAIDIALIN•
GAM, K. S. HEGDE AND A, N. GROVER, JI.]
M«lhya Bharat Sales Tax Act (30 of 1950), s. 11-lurisdiction of
civil court barred-Scope of the bar.
By Notifications issued by the State Govetnment under s. S of the
Madhya Bharat Sales Tax Act, 1950, sales-tax was imposed and collected
from the appellants. They filed suits for refund of the tax on the ground
that it was illegally collected from them being against the constitutional
prohibition in Art. 301 and not saved under Art. 304(a). In Bhailal v.
State of M.P. [(1960) M.P.L.J. 601), the petitioner therein challenged
in a writ petition, the levy of sales tax on the same grounds and the High
Coun declared the notifications to be offensive to Art. 30 I and held that
the imposition of tax was illegal. Following that decision, the !'rial court
decreed the suits filed by the appellants. In appeal before the High Court
it was conceded by the State that the tax. could not be imposed in view
of Art. 301, but it was contended that the suits were not maintainable
in view of s. 17 of the Act which provides that no assessment made under
the Act shall be called in question in any court. Tue High Coun held
that the suits were incompetent.
In appeal to this Court,
HELD : The suits were maintainable. [684 DJ
An enquiry into the diverse views expressed in the decisions of this
Court shows that an exclusion of the jurisdiction of civil cowt is not readily
to be inferred unless the following conditions apply :
(1) Where the statute gives a finality to the orders of the special
tribunals the civil court's jurisdiction must be held to be excluded if there
is adequate remedy lo do what the civil courts would normally do in a
suit.
Such provision, however. does not exclude those cases where the
provisions of the patticular Act have not been complied with or the
statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure. [682 A-C; 683 CJ
Secretary of State v. Mask [1940] L.R. 67 I.A. 222; Fi'rm 11/uri Subba,vY<J Chetty & Sons v. State of Andhra Pradesh, [1964) 1 S.C.R. 752 and
Kera/a v. Ramoswami Iyer and Sons, [1966] 3 S.C.R. 582.
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In Firm Illuri Subbttyya Chetty & Sons' case the assessee conceded
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that the tax was payable and did not raise the issue before the appellate
authorities under the Act. The suit for refund of tax was held not
maintainable on those special facts, with reference to the addition of a.
ISA excluding the jurisdiction of civil court and the special remedies
provided in ss. 12A to 120 in the Madras General Sales Tax Act, 1939.
This Court. however, did not think it necessary to pronounce any opinion
on the Judicial Committee's view in
the Rcleigh Investment Co. case
([1947) L.R. 74 I.A. 50) that even the vires of the provisions could be
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consideted by the Tribunals constituted under the Act. Dealing with
Mask & Co.'s case, it was pointed out that non-compliance
with
the
provisions of the statute meant non-compliance with such fundamental
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DHULABHAI V, MADHYA PRADESH
663
provisions of the statute as would make the entire proceedings before the
appropriate authority illegal and
without
jurisdiction.
[679
G-H;
680 D-D]
(2) Whore there is an expreso bar o~ the jurisdiction of the coutt,
an examination of the scheme of the pal11cular Act to find the ad~uacy
or the sufficiency of the remedies provided may be relevant but ,. not
decisive to sustain the jurisdiction of the civil court. [682 DJ
Whore there is no express exclusion the examination of the remedies
and the scheme of the particular Act to find out the intendment become&
aecessary and the result of the inquiry may be deci~ive. . In the I~
c~ it is necessary to see if the slia~ute creates ~ special .rig~~ or a liab1·
lily and provides for the determination of the n~t or hab11tty, !"'d further lays down that all . questions about. the said nght and habilt!Y oball
be determined by the tnbunals so consltf:ujed, and whether remedies normally associated with actions in civil courts are prescribed by the said
statute or not. [682 D-F]
In Provincial Government v. J. S. Basappa, [1964J 5 S.C.R. 517 it
was held that the civil court had jurisdiction beca.use, at the relevant
time, (a) the Madras General Sales Tax Act, 1939, did not have s. 18A
(which was introduced later barring the jurisdiction of civil cou!1)
(b) the Act did not have the elaborate machinery for adequate remed<
which was also introduced later, and (c) the tax was illegally collected
i~norin.g the furidamental provisions of the Act.
Therefore. the observa·
Uon in Kera/av. ROJna.r.v01ni Iyer&: Sons that Basappa's case was wrongly
decided is open to doubt. (678 D, HJ
Mis. Kamala Mills Ltd. v. State of Bombay. [1966] I S.C.R. 64 was
a decision of a Special Bench holding that s. 20 <if the Bombay Sal"" Tax
Aot, 1946 excluded the jurisdiction of the civil court in suits for refund
of tax, in cases. where the decision of the authorities under the Act was
~rely an error in assessment capable of correction by the usual procedure of appeals etc. But the Dench observed, that in such cases, where
the jurisdiction of the civil court is barred by providing an adequate
machinery in the Act, it becomes "pertinent to enquire whether remedies
normally associated with actions in civil court are
presdribed
by
the
'!Ctatute or not', and thus expressly left open the question as to how far
the bar would operate in cases where the charging provision is ultra
vires, [681 A-B. G; 684 C.Dl
( 3) .Challenge to the provisions of the particular Act as ultra vires
canno~ be brought before Tribunals constituted under that Act.
Even
the High Court cannot go into that question on a revision or reference
from the decision Of the Tribunals. [682 F-GJ
K. S. _Venkataraman v. Sta,te of Madras, [1966] 2 S.C.R. 229; Depwy
Comme!ciaf Tax O/jicer, Madras v. Rayc:laseema Constructio11s. 11 S.T.C.
SOS; Cm;o" Coffee Co. v. State of Mysore, 19 S.T.C. 66 (S.C.); C, T.
Senthulnathan Chettfar v. Madras, CC.A. 1045 Of 1966. dated 20th July,
1967) and Pcbbo1an Tea Co. Ltd. v. Dy. Commissioner, Lakhimp1u
11968] I S.C.R. 260; A.I.R. 1968 S.C, 271.
'
(~) ~he~ a pru'vision is already declared unconstitutional
or
the
~t1tut1~1ty !"f any. provision is to be challenged, a suit is open.
A
wnt of c~rt~orari Illf'Y mclude a direction for refund if the claim i•
clearly within the tlIIlC prescribed by the Limitation Act but it is not a
compulsory remedy to .. replace a suit. [682 G-HJ
~ St~re of M.P. v. B!taila/, [1964J 6 S.C.R. 261 which confirmed the
dectst<)n •n 1960 M.P.L.J. 601 this Court upheld· the order of refund by
the ~j!h ~urt in ill! writ jutisdiction, held that in ~es where a defence
of lumtation was open or other facts had to be decided. the order of
8 Sup.CIJ68
664
SUPREME COURT REPORTS
[1968) 3 S.C.R·
refWld was not proper, and aeellpted the proposition that a suit lay in
such case. without adverting to the provisions of the Act to see whether
the jurisdiction of civil coun was barred either expressly or by necessary
implication. Therefore, this case cannot be an authority for holding that
th!'" civil court has jurisdiction to entertain such suits. [668 D---GJ
(SJ Where the particular Act contains no machinery for refund of
tax collected in excess of constitutional limits or illegally collected a ruit
lies. f683 Al
Bharat Kala Bhandar Ltd. v. Municipal CouncU, Dhamcngaon, [196SJ
3 s.C.R. 499.
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( 6) Questions of the correctness of the assessment apart from its
.constitutionality are for the decision of the authoritit\11 and a civil suit
doeo not lie if the orders of the authorities are declared to be final or
there is an express prohibition in the particular Act. Io either 0390, the
scheme of the particular Act must be examined because it is a relevant
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enquiry. [6 83 BJ
In the present case, though the Madhya Bharat Sales Tax Act contains
provisions for appeal, revision, recliJication and reference to the lfi&h
-Court. the notifications having been rightly declared void in the earli<i
·decision of the High Court, the appellants could take advantage of the
fact that tax was levied without a complete charging section. Sinee the
tax authorities could not even proceed to assess the party their juriadic--
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tion was affected and the case fell within categories (3) and (4) above
.and not in category (2). [684 A-CJ
CIVIL APPELLATE JURISDIBTION : Civil Appeals Nos. 260 to
263 of 1967.
Appeals from the judgment and decree dated January 5, 1965
·of the Madhya Pradesh High Court, Indore Bench in First Ap·
peals Nos. 68, 69, 71 and 70 of 1961 respectively.
M. C. Setalvad, Rameshwar Nath and Mahinder Narain, for
the appellants (in all the appeals).
B. Sen and 1. N. Shroff, for the respondents
(in all the
appeals).
The Judgment of the Court was delivered by
Hldayatullah, C.J. These are four appeals by certificate
against the common judgment of the High Court of Madhya
Pradesh (Indore Bench), 16 December, 1964/5 January, 1965
dismissing four suits filed by the appellants to recover sales-tax
alleged to be realized illegally from them by the State of Madhya
Pradesh, the respondent in these appeals. The suits were earlier
decreed by the District Judge, Ujjain. The facts in the suits are
common and were as follows:
The appellants are dealers in tobacco and have their place&
of business at Ujjain. They purchase and sell tobacco used for
eating, smoking and for preparing bldls. They get their tobacco
locally or import it frQm extra-state places. The former Madhya
Bharat State enacted in 1950 the Madhya Bharat Sales Tax Act
{Act 30 of 1950) which came into force on May 1, 1950. Under
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DHULABHAI v. MADHYA PRADESH (Hidayatullah, C.J.)
665
s. 3 of the Act every dealer whoso business in the previous year in
respect of sales or supplies of goods exceeded in the case of an
importer and manufacturer Rs. 5,000 and in other cases R~.
12,000 had to pay tax in respect of sales or supplies of goods
effected 'in Madhya Bharat from !st May 1950. Under s. 5, the
tax was a single .point tax and it was provided that the Government might by a notification specify the point of the sales at which
the tax was payable. The section also fixed the minimum and
maximum rates of tax leaving it to Government to notify the actual
rate.
Government, in pursuance of this power, issued a number
of notifications on April 30, 1950, May 22, 1950, October 24,
1953 and January 21, 1954. All these notifications imposed tax
at different rates on tobacco above described on the importer, that
is to say at the point of import. The tax was not levied on sale
or purchase of tobacco of similar kind in Madhya Bharat. The
tax was collected by the authorities in varying amounts from the
appellants for different quarters. We are not concerned with the
amounts. The appellants served notices under s. SO of the Code
of Civil Procedure and filed the present suits, for refund of the
tax on the ground that it was illegally collected from them being
against the constitutional prohibition in Art. 301 and not saved
under Art. 304(a) of the Constitution.
The State of Madhya Pradesh was formed on November I,
1955. In Bhai/al v. M.P.(1) the High Court of Madhya Pradesh
declared the notifications to be offensive to Art. 301 of the Constitution on the ground that it was illegal to levy a tax on the
import~r when an equal tax .~as not levied on similar goods pro·
~uced m the State. The dec1smn was later confirmed on this point
1n State of M.P. v. Bhailal Bhai('). The appellants did not take
recourse to the provisions of Art. 226 of the Constitution but
filed their suits on December 21, 1957.
The s~its were opposed by the State on the main ground that
such. a suit was barred by the provisions of s. 17 of the Act which
provides:
. "1 ?· Bar to certain proceedings.-Save as is provided m ~- 13, no assessment made and no order passed
und~r this Act. or the rules made thereunder by the as-
~smg authonty, appellate authority or the Commissioner shall be called in question in any Court and
save. as !s provided _i~ sections 11 and 12 no ap~al or
application for revJSJon shall lie against any such assessment or order."
The ~tale also pleaded that as appeals against the assessment were
pending before the Sales Tax Appeal Judge the plaintiffs were
(l) 1960 M. P. L. J. 601.
(2) [1964) 6 S. C.R. 261.
666
SUPREME COURT REPORTS
[1968) 3 S.C.R
not entitled to file the suits. The District Judge, following State
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of Tripura v. The Province of East Bengal(') and Bhailal Bhai
Gokal Bhai v. StQ/e of M.P. (2), held that such a suit lay wheJl a
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declaration was sbught that the provisions of law relating to an
assessment were ultra vires, !\lld demand was made for refund of
amounts illegally collected under it. On the second point the
District Judge held that s. 21 of the Act which allows the ComB
missioner or the appellate authority to order refund of tax wrongly
paid did not apply since no such appeal was proved to have been
filed and the tax was not wrongfully paid but wrongfully realised.
On appeal by the State the High Court reversed the decision.
Before the High Court it was conceded (as it is conceded even now)
that the tax could not be imposed in view of the bar of Art. 301.
The short question thus was whether the suit was barred expressly
by s. 1 7 of the Act or any implication arising from the Act. The
contention on behalf of the appellants was that if it was a question
O!f the correctness of the imposition within the valid framework
of the statute, rules or notifications s. 17 might have operated but
not when the imposition was under a void law. In the latter event
tbe assessee was free to challenge the validity of the law in a
civil suit and also to claim a refund
The High Court considered the matter in the light of the decisions of the Judicial Committee in Raleigh Investment Co. v.
Governor General in Council('), Secretary of State v. Mask('),
Firm I. S. Chetty & Sons v. State of Andhra Pradesh('), State of
Andhra Pradesh v. Firm Subbayya & Sons("), and others, and
came to the conclusion that the suit was incompetent. The High
Court conceded that both aspects of the case were well supported
by authority. It is not necessary to enter into the reasons which
weighed with the High Court because our discussion of the authorities in this ·judgment will clearly expose the rival views and the
one preferred in the High Court.
The question that arises in these appeals has been before this
Court in relation to other statutes and has been answered in different ways. These appeals went before a Divisional Bench of this
Court but in view of the difficulty presented by the earlier rulings
of this Court, they were referred to the Constitution Bench and
that is bow they are before us. At the very start we may observe
that the jurisdiction of the Civil Courts is all embracing except
to the extent it is excluded by an express provision of law or by
clear intendment arising from such law. This is the purport of
(I) A. I. R. 1951 S. C. 23.
(2) 1960 M.P.L.J. 601.
(3) [l947)L:R. 741. A. SO; A. I. R. 1947 P. C. 78.
(4) [1940) L. R. 67 I. A. 222; A. I. R. 1940 P. C. !OS.
(S) (1964) IS. C.R. 752; A. I. R.1964 S. C. 322.
(6) A. I. R. 1958 Mad. S44 (F. B.).
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667
s. 9 of the Code of Civil Procedure. How s. 9 operates is perhaps
best illustrated by referring to the categories of cases, mentioned
by Willes, J. in Wolverhampto11 New Waterworks co. v. Hll.W·
kesford( 1)-They are:
"One is where there was a liability existing at common law, and that liability is affirmed by a statute which
gives a special and peculiar form of remedy different
from the remedy which existed at common law : there,
unless the statute contains words which expressly or by
necessary implication exclude the common law remedy
the party suing has his election to ptirsue either that or
the statutory remedy. The second class of cases is, where
the statute gives the right to sue merely, but provides,
no particular form of remedy : there, the party can only
proceed by action at common law. But there is a third
class, viz., where a liability not existing at common law
is created by a statute which at the same time gives a
special and particular remedy for enforcing it ....... .
The remedy provided by the statute must be followed and
it is not competent to the party to pursue the course applicable to cases of the second class."
Th:is view of Willes, I.· was accepted by the House of Lords in
Neville v. London 'Express' Newspaper, Ltd.(').
To which category do such cases belong in India ? The controversy in India has revolved round the principles accepted in
Secretary of State v. Mask(') and in Raleigh Investment Co. v.
Governor General in Council('). In the first case it was laid down
by the Judicial Committee that the ouster of the jurisdiction of a
Civil Court is not to be lightly inferred and can only be established if there is an express provision of law or .is clearly implied.
In the second case it was held that where a liability to tax is created
by statute which gives special and particular remedies against
illegal exactions the remedy contemplated by the statute must be
followed and it is not open to the assessee to pursue the ordinary
process of Civil Courts. To the latter case we shall refer in some
detail presently. Opinion in this Court has, however, wavered as
to how far to go with the dicta of the Privy Council in the two
cases.
Before, however, we go into the question we may refer to·
State of M.P. v. Bhailal('). In that .case the notifications were
declared ultra vires Article 301 of the Constitution and not saved
by Art. 304(a). It was therefore held that the portion of the tax
already paid must be refunded by Government
The question
then posed was :
(I) [18S9) 6 C. B. (NS) 336.
(2) (1919] A.C. 368.
(2) (1940] 67 I. A. 222.
(4) [1947) 74 I. A. 50.
(5) (1964) 6 S. C.R. 261.
668
SUPREME COURT REPORTS
(1968] 3 S.C.R
"The question is whether the relief of repayment has
to be sought by the tax-payer by an action in a civil
court or whether such an order can be made by the High
Court in the exercise of its jurisdiction conferred by
Art. 226 of the Constitution ?"
This Court after examining the jurisdiction under Art. 226 concluded that the High Court had the power to order refund in proceedings for a writ since complete relief could not be said to be
given if 011ly a declaration were
given.
The Court, however,
observed:
"At the same time we cannot lose sight of the fact
that the special remedy provided in Article 226 is not
intended to supersede completely the modes of obtaining
relief by an action in a civil cou~t or to deny defences
legitimately open in such actions."
Pointing out that where a defence of limitation could be raised or
other issues of fact l1ad to be tried, it was held that the Court
should leave the party aggrieved to seek his remedy by the ordinary mode of a civil suit.
Therefore in those cases (there were
31 appeals before this Court) where the writ was asked for within
three years, this Court upheld the order of refund by the High
Court in its writ jurisdiction, but in those cases in which the parties had gone to the High Court after a lapse of 3 years, the order
of refund was questioned and not approved observing that the
petitioners would be at liberty to seek such relief as they might
be entitled to in a Civil Court if it was not barred by limitation.
It will appear from this analysis of the case that this Court
accepted the proposition that a suit lay.
This it did without adverting to the provisions of the Act there considered to see whether
the jurisdiction of the Civil Courts was barred or not, either expressly or by necessary implication. This Court was, of course,
not invited to express its opinion on the matter but only on whether the High Court in its extraordinary jurisdiction could order
refund of tax paid under a mistake.
Having held that in some
cases the High Court should not order refund, this Court merely
pointed out that the civil suit would be the only other remedy open
to the party. The case cannot, therefore, be treated as an authority
to hold that the Civil Courts had jurisdiction to entertain such
suits.
-
We may now proceed to consider first the two cases of the
Judicial Committee before examining the position under the rulings of this Court. In Secretary of State'" Mask(') the sole question was the jurisdiction of the civil court to entertain a s~
(I) [194CJ L. R. 67 T. A. 222.
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DHULABHAI v. MADHYA PRADESH (Hidayatullah, C.J.)
669
A recover an excess amount of customs duty collected from Mask
aild Co.
The suit was filed after an appeal to the Collector of
Customs and a revision taken to the Government of India under
the Land Customs Act, 1924 was dismissed. The. suit was dismissed by the trial Judge on the preliminary ground that the Civil
Court had no jurisdiction. An appeal by Mask and Co. to the
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High Court succeeded, and there was a remit. The appeal to the
Judicial Committee followed. Section 188 of the Land Customs
Act, 1924 provided inter a/ia :
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"Every order passed in appeal under this section
shall, subject to the power of revision conferred by s.
191, be final."
The Judicial Committee first made a gene'ral observation :
"It is settled law that the exclusion of the .iurisdiction
of the Civil Courts is not to be readily inferred, but that
such exclusion must either be explicitly expressed or
clearly implied. It is also well settled 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."
Then it proceeded to quote s. 188 (as above) and observed :
"By Ss. 188 and 191 a precise and self-contained
code of appeal is provided in regard to obligations
which are created by the statute itself, and it enables
the appeal to be carried to the supreme head of the
executive Government. It is difficult to conceive what
further challenge of the order was intended to be excluded other than a challenge in the Civil Courts, , ._ ... "
and came to the conclusion that the jurisdiction of the Civil Courts
was excluC!ed. The decision of the High Court was reversed and
that of the trial Judge restored.
The next case is the Raleigh Investment Co. Ltd. v. Governor
General Jn Council ( 1) • 1bis was an appeal to the Privy Conncil
~ro~ :'- Judgment ?f the Federal Court of India in civil appellate
1unsdict10n reversmg a decree passed by a Special Bench of the
Calcutta High Court in its original civil jurisdiction.
It arose
from a suit filed for recovery of a sum paid under protest pursuant
to an assessment to income-tax of .the Investment Company on
the ground that the computation was under a provision of the
Income Tax Act which was ultra vires the Indian Legislature.
One of the defences in the suit was that whether the said provision
(I) [19471 L. R. 741.A. SO.
670
SUPREME COURT REPORTS
[1968] 3 S.C.R..
was u/lra vires or not, .the Civil Courts were excluded from elCcrcising their jurisdiction by s. 226 of the Governmen; of Indil
Act, 1935 and s. 67 of the Indian Income Tax Act. The provision in question was held ultra vires by the High Court and it
further held that neither of the two provisions was a bar to th<
civil courts' jurisdiction. The Federal Court in disagreement held
that s. 22() of the Government of India Act, 1935 barred tho
jurisdiction and that the provision impugned was not ultra vfres.
The bar of s. 67 of the Ineome T~x Act was not pressed befor<
the Federal Court.
When the case readhed the Judicial Committee, the ca;e was
considered under s. 67 but not under s. 226. 'fhe Judicial Committee was of the opil)ion that s. 67 barred the jurisdiction. The
Investment Company had raised the question before the Jncometax authorities that .Explanation 3 to 'Para 4(1) of the Income-tax
Act 1922 was ultra vires. This was not accepted and the assessment was made.
The Investment Company filed an appeal but
<lid not proceed with it and the assess~t wa~ confirmed. The
appellate authority' also said in its orderrhat the constitutional
question could not be raised before it.
The suit was th~n in-
>tituted.
•
Section 67 of the lndian Income-lax Act in specific -terms
<lated :
""No suit shall be brought in any civil court t6 "t
aside or modify any as.,essmcnt made under the Act ... '"
The result of the·suit has already been slated. The-Judicial Committee considered this section and observed that the suit in form
did not profess to modify the assessment.but in substance it did
>O.
The declaration that a certain provision was 11/lra vires was
but a 'step.
J\ceording to the Judi9ial Committee the as.>e-<sment
made under an 11/tra vires statute was not a nullity and the assessment ought to be taken to proceed on a mistake ofAaw in the
course of assessment. Therefore, without going into the questiol\
whether the provision impugned was 11/tra vlres or not the Judicial
c·omn1ittec considered. the 1n,μtter.
1;he argument was tha("the assessment was not one ·under ti.le
Act', if effect was given to an ultra vires provision since the provision would he " nullity and non-existent. To discover the force
of tile prohibition in s. 67 th.! following tests were applied:-
(al Docs the Act contain machinery by which the
assessee can raise the question. of the ••ires of the provision before the special authorities ?
,
(b) This tes~ was not conclusive but one to be considered.
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. DHULABIIAI "· MADHYA PRADESH (Hidayatul/ah, C.l.)
671
(c) If. there· was no such machlliery and yet the civil
courts· were barred the vires of s. 67 itself might come
. in for consideration.
The Judicial Committee, however, came to the conclusion that the .
Income-tax Act gave the assessce an opportunity to raise the question under the lncome-tax Act. The provision for a case stated
for the advisory opinion of the High Court was available and even
if the authorities refused . to state a case, the High Court could
be directly approached. · The decision of the High Court was also
subject to further appeal.
Thus there was adequate machinery·
in. the Income-tax Act.
·
The words of s. 67 'under the Act' were construed as the
•
activitf of an assessing officer acting as such. That this activity
took into consideration an ultra vires provision did not take the
matter out of these words.
That phrase meant the provenance
of ·the assessment, and not the accuracy 9r • correctness of the
assessment or the. machinery of the Income-tax Act or the result
of the activity. There was no difference between an incorrect ap·
D · prehension of the provisions· of the Income-tax Act and the invali:
dity of a provision. :The Judicial Committee explained that if this
were not so all questions of the correctness of the assessment nnde(.
the Income-tax Act could be brought before the C9urt and tl1e
section rendered otiose. The section made no distinction between
E
an inquiry into the merits cif the assessment and jurisdiction to .·
embark on an enquiry at all. The Civil Courts' jurisdiction in
either case was invoked as to the correctness of the assessment
and the language of the section precluded consideration of jurisdiction in such circumstances .. The .Income-tax Act having a
suitable and adequate machinery, jurisdiction to questiol\ the assess- ·
ment otherwise than by that machinery was, therefore, held barred.
F . The Judicial Committee even ·doubted whether a provision such
as s. 67 was· at all necessary in the ·circumstances.
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Both these cases thus appear to be decided on the basis of
provisions in the relevant Acts for the correction, modification and
setting aside of assessments and the express bar of the jurisdiction
of the Civil Courts. The presence of a section barring the jurisdiction was the main reason and the existence of an adequate machinery for the same relief was the supplementary reason. The provision for a reference of a. question. to the High Court. was con-,_
sidered adequate to raise the issue of the validitY of any provision ·
of law under which the taxing authorities acted.
This follows
from the Raleigh Investment Co.'s case(1). Mask & Co.'s case(')
was more concerned with the finality to the orders given by the
Land Customs Act. Even so in the Mask & Co.'s case(2 ) room
. was left for interference by the Civil Courts by observing that
(I) [1947) L. R. 74 LA. 50.
(2) (1940) L. R. 67 I. A. 222.
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672
SUPREME COURT REPORTS
(1968] 3 s.c.R.
the Civil Courts had jurisdictio11 to examine into cases where the
A
provisions of the Act had not been complied with, or the statutory tribunal had not acted in conformit>: ,with the fundamental
principles of judicial procedures. These observations were accepted by this Court in Firm of ll/11ri Subba.vya Chetty Scnu .v.
The State of Andhra Pradesh(1) and in Kera/a v. Rama.rwaini
Iyer and Sons(2). A passage from the latter case might be quoted
B
here:
"It is true that even if the jurisdiction of the civil court
is excluded, where the provisions of tlie 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
C
examine these cases."
The observations of the Judicial Committee were thus completely
accepted.
We may now examine how the matter was further viewed in
this Court. In two other cases this Court laid down that the
validity of the provisions under which the authorities ·act is not ·a
matter for those authorities to decide. In Circo's Cof/u Co .. v.
State of Mysore(•) it was contended thats. 40(2) of the Myaere
Sales Tax Act 1957 was ultra vires and beyond the competence
of the State Legislature. This Court observed :
"t is true that a question as to the vires of section
40(2) of the Sales Tax Act was raised, but it is now
settled by decisions of this Court that the question -as to
the vires of a statute which a taxing officer has to administer cannot be raised before him."
The same was again reiterated in C. T. Santhulnathan Chetti11r v.
Madras(') in the following words:
" ..... this Court has held, in Venkataraman and
Co. v. State of Madras (60 I.T.R. 112) that the authorities under a taxing statute are not concerned with the
validity of the taxing provisions and the questi()ns <1f ultra
vires is foreign IQ the scope <1f-their jurisdiction. As no
such point could be raised before the Income-tax authorities, neither the High Court nor the Supreme Court can
go into these questions in a revision or reference from
the decision of those authorities. This case was followed
in Commissioner of Income-tax v. Straw Prod11Ct3
[1966, 2 S.C.R. 881]; (60 I.T.R. 156)".
(emphasis supplied)
(I) (1964] I S. C.R. 752. (2) [1966] 3 S.C.R. 582.
0) 19 S. T. C. 66.
(4) C. A. 1045 of 1966 decided on 20.th July, 1967
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DHULABHAI v. MADHYA PRADESH (Hidayatu//ah, C.I.)
673
.The party was left to 'appropriate proceedings' without specifying
what they would be. Perhaps a suit was meant.
It follows that the question of validity .of the taxing laws is
always open to the Civil Courts for it cannot be the implica~n
of any provision to make such a decision final or that even v01d
or invalid laws must be enforced without any remedy.
TherefQre, in Pabbojan Tea Co. Ltd. v. Dy. Commissioner, Lakhimp11r('), after, quoting the obsel"Vations of Viscount Simonds (Pyx
Granite Co. Ltd. v. Ministry of Housing and Loe.al Govt. (1960
A.C. 260 at p. 286) ·
"It is a principle not by any means to be whittled
C
down that the subject's recourse to Her Majesty's Courts
for determination of his rights is not to be excluded
except by clear words.";
our brother Mitter added that the extreme proposition in Raleigh
Investment Co.'s case(') had not found favour with this Court.
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Our learned brother observed :
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"This Court was not prepared to accept the dictum
in the judgment (Raleigh Investment Co.) to the effeet
that even the constitutional validity of the taxing provisions would have to be challenged by adopting the procedure prescribed by the Income-tax Act-See Firm of
Illuri Subbayya Chetty and Sons v. Siate of Andhra
Pratlesh [1964] 1 S.C.R. 752 at 760."
The position was rather strengthened in K. S. Venkalaraman ct
Co. v. State of Madras('). The question then was whether a suit
was not maintainable under s. 18-A of the Madras General Sales
Tax Act 1939 (corresponding to s. 67 of the Iiidian Income-tax
Act 1922). The suit followed the decision of this Court in Gannon Dunkerley and Co. v. State of Madras(') in which 'works
contracts' of an indivisible nature were held not to fall within the
taxing provisions of the M<idras General Sales Tax Act, 1939.
Section 18-A was pleaded as a bar. It was held that since the provisions of the Madras General Sales Tax Act, 1939 were declared
ullra vires in· their ·application to 'indivisible works contracts' the
action of the authorities was outside the said Act and not • U1lder
the Act for the purposes of s. 18-A. The suit cwas held not barred.
Subbarao, J. (as he then. was) speaking for the majority distinguished both the Raleigh Investment Co!s case(•) and.the Comml.rsioni!r of I. T.-Punjab, North West Frontier & Delhi Provinces, Lahore
v. Tribune Trust, Lahore(') on the ground that no question of the
(!) A. I. R.19688. C. 271.
(3) (1.966] 2_ S. C. R. 229. ·,
(5) (1947) L .. R. 74 I. A. SO.
(2) [1947) L. R.74 I. A, 50.
(4) (1959J S. C.R. 379.
(6) [1947J L. R. 74. I. A. 306.
. '.--:.
'
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674
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SUPREME COURT. REPORTS
· (1968] 3 S.C.R.
"
vires of the law wa~ ra,ised in them. Referring to Raja Bahadur
,.;_
Kamakshya Narain Singh of Ramgarh v. C.I.T.(1 ) and State of
Tripura v. The Province of East Bengal(2 ); Subbarao J. pointed
out that the suit W'llS h~ld maintainable in the latter and there was
nothing in the former to support the contention .that the question·
""'·
of ultra vires of a statutory provision could be convassed only.
through the machinery provided
under the statute. Referring
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next to the case of . Firm of Illuri Subbayya Chetty. and Sons' ·
case(3} the learned Judge said that the question whether s. 18.A'
of the Madras. General Sales Tax Act, 1939 could apply where a
particular provision of the.Sales· Tax Act was ultra vires was left
open (seep. 243 ). The learned Judge next quotedJhe opinion of
the m(~joritY in Bharat Kala Bhandar Ltd. v. M. C. Dhaman-
.C
gaon ) to the following effect : .
"But, with respect,' we find ·it difficult to appreciate
. how taking into account an ultra vires provision which
in law must be regarded as not being .a part of the Act
at all, will make 1he assessment as one 'under the Act'.
No doubt the power to make an assessment was conferred by the Act and,. therefore, ·making all' assessment
would be within the jurisdiction of the assessing authoririty. But. the jurisdfotion can be exercised only accord· ·
ing; as well as with reference, to the valid provisions of -
the Act. When, however, the authority travels beyond
the valid provisions it must be regarded as acting in excess of its jurisdiction. To give too wide a construction
to the expression 'under the Act' may lead to the serious
consequence of attributing to the legislature which owes
its existerice itself to the Constitution, the· intention of
affording protection· to unconstitutional
activities by
limiting challenge to them only by resort to the special
machinery provided by it in place of the normal remedies
available under t)Je Code of Civil Procedure, that is, to
.. a machinery whiCh cannot be as efficacious as the one
provided by the general Jaw. Such a constmction might
·necessitate the consideration of the very constitutionality
· pf the provision which contains ·this expression .. This
aspect of the matter does not appear to have been con-.
Sidered in Raleigh Investment Co.'s case."
·
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The JeaTAJed Judge next .considered whether these observations, although obiter, were departed from in Ml s. Kamla Mills Ltd. v.
The State of Bomba.v(') and came to the conclusion that that de·
cision did not touch upon the question whether. a suit would lie in.
(I) (1947) F. C. R.130.
(2) (19511 S. C. R, I.··
(3) [1964] I S. C.R. 752.
.
(4)_ (1965] 3 S. C, R. 499 •.
.
(5) (19661 I S. C. R. 64 ..
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DHULABHAI v. MADHYA PRADESH (Hidayatu/lah,_ C.I.)
67 5
a case where the assessment was made on the basis of a provision
which was ultra vires the Constitution (see p. 246).
Having considered these rulings the learned Judge examined
the remedies provided by the Indian Income-tax Act and found
that all authorities were creatures of the statute and functioned
under it and could not ignore its provisions since the said Act
conferred no such 'right' on them.
Whether the provisions were
good or bad was not their concern. Pointing out that the reference to the High Court under the Indian Income-tax Act was
confined to questions arising from the order of the Appellate Tribunal, the learned Judge observed that 'the question of ultra vlres
is foreign to the scope of the Tribunals' jurisdiction' and that if
such a question were raised the Tribunal could only reject it on
the ground that it had np jurisdiction to decide it, and the High
Court and the Supreme Court would be equally incompetent on
appeal to go into the question.
The learned Judge next considered the decisions of the High Courts into which it is not necessary to go here and on the strength of some observations which
supported his view, stated his view in the following words :
"The legal position that emerges from the discussion
may be summarized thus : lf 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 jurisdiction 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. But an
authority created by a statute cannot question the vire~
of that statute or any of the provisions thereof whereunder it functions. It must act under the Act and not
outside it. If it acts on the basis of a provision of the
statute, which is ultra vires, to that extent it would be
acting outside the Act. In that event, a suit to question
the validity of such an order made outside the Act would
certainly lie in a civil court."
As the head-note correctly states the effect of the decision was
that the foundation laid by the Judicial Committee in Raleigh
lfrvestment Co.'s case(') for construing the expression 'under the,
Act' had no legal basis.
It may be mentioned that in Bharat Kala Bhandar(') case also
it was held that there was no machinery provided in the Central
Provinces and Berar Municipal Act for refund of tax assessed
(I) (1947) LR. 741. A. 50.
(2) 11965] 3 S, C. R. 499.
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676
SUPREME COURT REPORTS
[1968] 3 S.C.R.
ahd recovered in excess of constitutional limits and that the remedy
furnished by ¢hat Act w,as inadequate for enabling the assessee to
challenge effectively the constitutionality or legality of assessment
or levy of tax by a municipality or to recover from it what was
realised under an invalid Jaw (see the judgment of Mitter, J. also
in Pabbojan case(1) at page 276). In Bharat Kala Bhandar
case(') it was pointed out that :
" ........