# KAMALA MILLS L ln v. STATE OF BOMBAY

- **Citation:** [1966] 1 S.C.R. 64
- **Court:** Supreme Court of India
- **Decided:** 1965-04-23
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/kamala-mills-l-ln-v-state-of-bombay-3555
- **Pages:** 23

## Headnote

64
KAMALA MILLS L ln.
v.
STATE OF BOMBAY
April 23, 1965
[P. B. GAJENDRAGADKAR, C.J., K. N. WANCIIOO, J. C.
Sll~H.
RAGHUBAR DAYAL, S. M. SIKRI, R. S. BACllAWAT AND
V. RAMASWAMI, JJ.]
Bombay Sales Tax Act, 1946 (5 of 1946), s. 1~Suits to clwl/engc
assessments 1nade under Act and rules made :hereunder barred-'Outside'
sales wrongly assessed as 'inside' sales--Suil lo recover tax wrongly charged whether lies ..
The appellant, a public limited company manufacturing and selling
textiles was a 'dealer' under the Bombay Saks Tax Act 1946.
For the
period 26th January 1950, to 31st March 1951, it wa< as<csscd to sales
tax on certain sales which \\·ere treated by the Sales Tax Authoritie~ as
'inside' sales but which according to the decision of the Supren1e Court
in the Bengal Immunity Co. Ltd. v. State of Biliar and Ors. I 1955] :Z
S.C.R. 603, <lclivc1cd on 6r..1.
Scp'.cmb~r 1955, \.Vere 'outside' sales nontaxable under the Act. After the above decision the appellant discovered
that it had been illegally suhjccted to tax 111 rc...,pcct of the said 'outside'
sales. The period for remedies under the Act having expired. it filed
a suit for the recovery of sales-tax ille~ally collected from it in respect of
the 'outside' sales.
On bchnlf of the respondent State the plea taken in
defence was that the suit was barred by s. 20 of the Act.
Accepting
the plea, the trial court dis.11isscd the suit. 1·he High Court. in appeal.
took the same view, whereupon, with certificate, the appelJant came to
this l..ourt.
The questions, arising out of the arguments on behalf of the appellant,
which fell for determination \Vere : ( 1) whether an assessment in violation of a statutory provision could claim the status of an assessment
made under the Act, within the meaning of s. 20; (2) whether the
declsion by the appropriate authority .as to the nature of the transaction
was a decision on a collateral fact. the finding on which alone conferred
jurisdiction on the authority to levy the tax, or was it a decision on a
queotion of fact which had to be determined by the authority itself as
one of the issues before it? (3) Whether s. 20 was valid if con.<trucd
as being a comp!·~i.c bar to a suit such as filed by the appellant.
HELD: (i) Section 20 protects "assessment mac.le under the Act, or
the rules made thereunder"' by appropriate
authorities.
In Firm
and
llluri Subbaya Cherly arul Sons this Coun. interpreting a similar provision
in s. IBA of the Madra< General Sales Tax Act observed that the expression ••any asses.~ment mude under this Act" was wide enough to cover
all assessments made by the appropriate authorities under the Act whether
the said assessments were correct or not. There can be little doubt. that
the ciause "an
asscs~ment made" c;1nnot mc;}n :ln assessment properly
and correctly made. [72 B-D]
In
its plaint the appellant v.·2.s undoubtedly c~1Iliag into question the
assessment order made against it and such a ch;11Jcnge was plainly pre>-
hib~ed by s. 20. 172C'l
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KAMALA MILLS V. STATE
65
Firm and ll/uri Subbaya Chetty and Sons v. The State of Andhra
Pradesh, [1964] 1 S.C.R. 752, relied on .
(ii) If the relevant provisions which confer jurisdiction on the appropriate authorities to levy assessment on the dealers in respect of transactions to which the charging section applies are examined, it is impossible to escape the conclusion that all questions pertaining to the fia ..
bility of the dealers to pay assessment in respect of their transactions
are expressly left to be decided by the appropriate authorities under the
Act as matters falling within their jurisdiction.
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
within the mischief of the charging section; what is the true or
real
extent of the transactions which are assessable; all these and other allied'
questions have to be determined by t

## Text

_Characters 0–39,775 of 64,719. This is a partial read: ask again with offset=39775 for what follows._

64
KAMALA MILLS L ln.
v.
STATE OF BOMBAY
April 23, 1965
[P. B. GAJENDRAGADKAR, C.J., K. N. WANCIIOO, J. C.
Sll~H.
RAGHUBAR DAYAL, S. M. SIKRI, R. S. BACllAWAT AND
V. RAMASWAMI, JJ.]
Bombay Sales Tax Act, 1946 (5 of 1946), s. 1~Suits to clwl/engc
assessments 1nade under Act and rules made :hereunder barred-'Outside'
sales wrongly assessed as 'inside' sales--Suil lo recover tax wrongly charged whether lies ..
The appellant, a public limited company manufacturing and selling
textiles was a 'dealer' under the Bombay Saks Tax Act 1946.
For the
period 26th January 1950, to 31st March 1951, it wa< as<csscd to sales
tax on certain sales which \\·ere treated by the Sales Tax Authoritie~ as
'inside' sales but which according to the decision of the Supren1e Court
in the Bengal Immunity Co. Ltd. v. State of Biliar and Ors. I 1955] :Z
S.C.R. 603, <lclivc1cd on 6r..1.
Scp'.cmb~r 1955, \.Vere 'outside' sales nontaxable under the Act. After the above decision the appellant discovered
that it had been illegally suhjccted to tax 111 rc...,pcct of the said 'outside'
sales. The period for remedies under the Act having expired. it filed
a suit for the recovery of sales-tax ille~ally collected from it in respect of
the 'outside' sales.
On bchnlf of the respondent State the plea taken in
defence was that the suit was barred by s. 20 of the Act.
Accepting
the plea, the trial court dis.11isscd the suit. 1·he High Court. in appeal.
took the same view, whereupon, with certificate, the appelJant came to
this l..ourt.
The questions, arising out of the arguments on behalf of the appellant,
which fell for determination \Vere : ( 1) whether an assessment in violation of a statutory provision could claim the status of an assessment
made under the Act, within the meaning of s. 20; (2) whether the
declsion by the appropriate authority .as to the nature of the transaction
was a decision on a collateral fact. the finding on which alone conferred
jurisdiction on the authority to levy the tax, or was it a decision on a
queotion of fact which had to be determined by the authority itself as
one of the issues before it? (3) Whether s. 20 was valid if con.<trucd
as being a comp!·~i.c bar to a suit such as filed by the appellant.
HELD: (i) Section 20 protects "assessment mac.le under the Act, or
the rules made thereunder"' by appropriate
authorities.
In Firm
and
llluri Subbaya Cherly arul Sons this Coun. interpreting a similar provision
in s. IBA of the Madra< General Sales Tax Act observed that the expression ••any asses.~ment mude under this Act" was wide enough to cover
all assessments made by the appropriate authorities under the Act whether
the said assessments were correct or not. There can be little doubt. that
the ciause "an
asscs~ment made" c;1nnot mc;}n :ln assessment properly
and correctly made. [72 B-D]
In
its plaint the appellant v.·2.s undoubtedly c~1Iliag into question the
assessment order made against it and such a ch;11Jcnge was plainly pre>-
hib~ed by s. 20. 172C'l
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G
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KAMALA MILLS V. STATE
65
Firm and ll/uri Subbaya Chetty and Sons v. The State of Andhra
Pradesh, [1964] 1 S.C.R. 752, relied on .
(ii) If the relevant provisions which confer jurisdiction on the appropriate authorities to levy assessment on the dealers in respect of transactions to which the charging section applies are examined, it is impossible to escape the conclusion that all questions pertaining to the fia ..
bility of the dealers to pay assessment in respect of their transactions
are expressly left to be decided by the appropriate authorities under the
Act as matters falling within their jurisdiction.
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
within the mischief of the charging section; what is the true or
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 it is impossible to accept the argument on behalf of the·
appellant 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.
The whole activity of assessment beginning with the filing of the return and ending with
the order of assessment falls within the jurisdiction of the appropriate
authority and no part of it can be said to constitute a co11ateral activity
not specifically and expressly included in the jurisdiction of the appropriate authority as such. [75 D-H]
If the appropriate authority while
exerc1smg
its
jurisdiction
and
powers under the relevant provisions of the Act, holds erroneously that
a transaction which is an outside sale is not an outside sale and proceeds
to levy sales-tax on it, it cannot
be said
that the decision
of the
appropria•te authority is without juriSidiction. [78B]
1'he Provincial Government of Madras (No..-1 Andhra Pradesh) v.
I. S. Basappa, 15 S.T.C. 144 and Bharat Kala Bhandar Ltd. v. Municipal
Committee, Dhamangaon, C.A. No. 600 of 1964 decided
March
26,
1965, distinguished.
Smt. Ujjam Bai v. State of Uttar Pradesh. [1963] I S.C.R. 776, relied
on.
State Trading Corporation of India Ltd. v. State of Mysore, [1963] 3
S.C.R. 792, Secretary of State, represented by the Collector of South
Arcot v. Mask and Co. L.R. 67 I.A. 222, Ra?eigh Investment Co. Ltd. v.
Go\•ernor-General
in
Council,
L.R.
74
I.A.
50
Pyx
Granite
Cq. Ltd. v. Ministry of Housing & Local Government and (Jrs., [1960J
A.C. 260 and Francis v. Yiewsley and West Dryton Urban District Council, [1957] 2 Q.B. 136, referred to.
(iii) If it appears that a statute creates a special right or liability
and provides for the determination of the right or liability to be dealt
with by tribunals specially constituted in that behalf and it further lays
down that all questions about the said right and liability shall be determined by the Tri_bunals so constituted, it becomes pertinent to enquire
whether remedies normally associated \Vith actions in civil
courts
are
prescribed by the said statute or not.
Such an enquiry would have relevance in the present case in construing the terms of s. 20 as well as
in considering the question of the constitutionality of s. 20. If the court
was satisfied that the Act provided no remedy to make a claim for the
recovery of illegally collected tax and yet s. 20 prohibited such a claim
being made before an ordinary civil court, the court might hesitate to
construe s. 20 as creating an absolute bar, or if such a construction was
66
SUPREME COURT REPORTS
[ 1966 J I S.C.R.
not reasonahly possible the court might seriously examine the qucslion
A
about the constitutionality of ~uch ex.press exclusion of the civil court's
jurisdiction having regard to the provisions of Arts. 19 and 31 of the
Constitution. (82 C-F; 83 C-DJ
Sales 1 ax Officer, Banarcu & Or.f. v. Kanhaiya Ldl Mu~to1dlal Saraf,
[ i 959] S.C.R. 1350 and Conun.issioner for
Motor Transport
v.
Antill
Ranger & Co. Pry. Ltd. Sta" of New South Wales and Ors. v. Edmund
·r. Lonnon Pry, Ltd. (1956] 3 All E.R. 106, referred to.
i;
(iv) From an examination of the relevant provisions of the
Act u
wi.• clear that the appellant could have either appealed or applied for
revision and prayed for condonation of delay on the ground that
the
mistake which \\'as responsible for the recovery of the tax illegally levied
was discovered on the 6th of September 1955, because such a plea would
have been perfectly competent under s. 22B.
In other words if the appellant bad pursued a remedy available to it under s. ::! I or .s. 22 read v..·ith
s. 22B, iL'i case \vould ha\··.! been considered by 1he appropriate authority
and the validity of the grounds set up by it for the refund of the tax
in question would have been legally examined.
Therefore it could not
be said that even for the claim which the appellant sought to make in
the present suit, thl'l"e \\l:..tS no nllernative remedy prescribed by lhe Act.
[85 A-Cl
The above conclusion son-cd a double purpose.
It made it easier to
construe the wide words used in s. 20 and hold that they constituted an
absolut·.! bar against institution of the present suit and it also helped the
respondent to repel the
plea of the
appellant
that s. 20 if so widely
construed was unconstitutional.
The conclusion therefore followed that
s. 20 had to be construed in the same manner as s. 18A of lhe J\.1adras
General Sales Tax Act was con~trucd hv this Court in f"irni curd 11/url
Subbaya Chett) and Sons and even on this wide construction the section
was constitutionally valid. [85 D-E]
(v) Although the suit filed by the appellant in so far as it related
to tbe recovery of tax illegally collected was barred by s. 20, it was not
barred in so far as it challenged the validity of s. 20, i1'clf.
In terms
s. 20 is confined to cases \Vhen the validity of assessment orders made
under the Act is challenged.
It cannot take in a challenge to the valic
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dity of the section itself.
But this finding could he of no material assistance to the appellant becau~c even if it succeeded on this point it still
had to face the plea of the nsspondcnt that on merits the suit was barred.
F
[8511]
Crv1L APPHLATE JURISDICTION: Civil Appeal No. 481 of
1963.
Appeal from the judgment and order, dated August 7, 1961
of the Bombay High Court in Appeal No. 51 of 1960.
A. V. Viswanatha Sastri and I. N. Shroff, for the appellant.
S. V. Gupte, Solicitor-Ge11eral, S, G. Patwardhan and R. H.
Dhebar, for the respondent.
S. Venkatakrishnan, for intervener No. I.
G
Naunit Lal, for intervener No. 2.
II
P. Govinda Menon and V. A. Sey id Muhammed, for intervener No. 3.
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KAMALA MILLS v. STATE (Gajendragadkar, C.J.)
67
.A
R. Ganapathy Iyer and B. R. G. K. Achar, for intervener No.
•
4.
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N. Krishn'aswamy Reddy, Advocate-General, Madras, V.
Ramaswami and A. V. Ranagam, for intervener No. 5.
M. S. Gupta, for intervener No. 6.
.B
G. c. Kas/iwal, Advocate-Genera!, Rajasthan, K. K. Jain and
·C
R. N. Cachthey, for intervener No. 7.
C. B. Agarwala and 0. P. Rana, for intervener No. 8.
B. SEN, S. C. Bose and P. K. Chakravarti for P. K. Bose for
intervener No. 9.
B. V. Subramaniam, Advocate-General, Andhra Pradesh and
B. R. G. K. Achar, for intervener No. 10.
The Judgment of the Court was delivered by
Gajendragadkar, C.J. The principal point of law which
D
arises in this appeal is whether the Bombay High Court was right
in holding that the suit filed by the appellant, Kamla Mills Ltd.
against the respondent, the State of Bombay, was incompetent.
The appellant is a Limited Company and owns a textile mill at
Bombay.
It carries on business of manufacture and sale of textile
cloth.
During the period 26th January, 1950 to 31st March,
.E
1951, the appellant was registered as a "Dealer" under the provisions of the Bombay Sales Tax Act, 1946 (No. V of 1946) (hereinafter called 'the Act'). The appellant's case is that during the
said period, it sold goods inside and outside the then State of
Bombay. The total value of goods sold by the appellant outside the
State of Bombay was Rs. 40,20,623-12-0 and Rs. 1,08,946-14-0 .
.F
On the said sales of Rs. 40,20,623-12-0 General Sales Tax of
Rs.
61,885-12-0 was levied, wheres
on
the
sales
of
Rs. 1,08,946-14-0 Special Sales Tax of Rs. 3,301-8-0 was levied.
The total Sales Tax thus levied against the appellant in respect of
the outside sales during the relevant period was Rs. 65,187-4-0.
<G
On December 20, 1956, the appellant instituted the present
suit (No. 402 of 1956) on the Original Side of the Bombay High
Court, and claimed to recover the said amount from the respondent on the ground that it had been illegally levied against it.
According to the appellant, the illegality of the impugned assessment, levy, imposition and collection was discovered by it soon
H
after this Court pronounced its judgment in The Bengal Immunity
Co., Ltd. v. The State of Bihar & Others,(') on the 6th September,
(l) [1955] 2 S.C.R. 603.
68
SUPREMll COURT ltl!PORTS
[1966) 1 S.C.R.
1955. The appellant's ca~e further was that s. 20 of the Act did
A
not bar the institution of the present suit; and, in the alterna·ive,
•
if it was held that it created a bar, the said section was ultra v;res
the Constitution of India and void.
The cl:tim thus mado by the appellnnt wns resisted hy the
respondent on several grounds.
One of the pleas raised by the
B
respondent was that the Court had no jurisdiction to entertain the
suit. It was urged by the respondent that s. 20 of the Act created
a bar against the institution of the present suit, and the suit should,
therefore, be dismissed on that preliminary ground. The respondent also contended that the plea raised by the appellant that the
said section was ultra vire,· the Constitution was without anv q1bC
stance. On the merits, the respondent pleaded that the appellant
was not justified in claiming a refund of the amount of tax recovered from it for the sale transactions in question.
On these pleadings, the learned trial Judge framed nine issues.
Issue No. 2 was in regard to the jurisdiction of th~ Court to
D
entertain the suit. This is:;uc was tried by the learned trial Judge
as oi nreliminary issue. He held that s. 20 "~ the Act was a bar
to the institution of th·; present suit, and on that view, he unheld
the :~ka raised by the r~spondcnt. In the n~sult, the appellant's
suit was dismissed.
The appellant challcng~d the correctness of the said decision
by preferring an ap;ieal bdore a Division Bench of the said Hi~h
Court under Clause 15 of the Letters Patent. The Divi>ion Bench
agreed with the view taken by the learned trial Judge and dismissed
E
the appeal preferred by the appellant. The apnel!ant then
applied for and obtained a certificate from the s:iid High Court F
and it is with the said certificate that it has come to this Court in
appeal.
When this appeal was argued before a Division Bench of thi'
Court on March 23, 1964, Mr. Purshottam for the apnellant
contended that in addition to the point which had been decided
I;
by the High Court, he wanted to urge that s. 20 of the Act was
invalid. The case which was thus presented by Mr. Purshottam
was that on a fair and reasonable comtruction. it should be held
that s. 20 does not create a har against the institution of the nresent
suit. If, however, it was oonstrued to create a har, it was const;tutionally invalid. It appears that though this alternative plea had
been taken by the arpell:int in its plaint, no issue was framed in
H
respect of it and naturally, the point has not been considered
either by the karned trial Judge or hy the Division Bench which
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KAMALA MILLS v. STATE (Gajendragadkar, C.J.)
6~·
heard the Letters Patent Appeal. Even so, the Division Bench of·
this Court which heard the appeal, allowed Mr. Purshottam to·
raise his alternative contention, and so, the appeal was ordered·
to be placed before a Constitution Bench.
The appeal then came on for hearing before the Constitution·
Bench on Auril 10. 1964. After it was argued for some time,
the Court d~cided to issue notices to the Advocates-General ot
different States, because it was felt that the question about the
constitutionality of s. 20 of the Act which the appellant wanted
to raise was of considerable importance and different States may
be interested in presenting their case before this Court, for a provi-
~ion similar to that of the impugned section would be found in
Sales Tax statutes passed by many State legislatures.
That is
why this Court directed that notices should be served on the
Advocates-General of all States and the matter should be placed
for hearing before a Special Bench. That is how this matter has
been placed before a Special Bench for final disposal.
D
For the appellant, Mr. Viswanatha Sastri has urged two points
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F
G
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before us. He argues that on a fair construction of s. 20, it should.
be held that the present suit is outside the mischief of the said
section. In the alternative, he contends that if s. 20 creates a statutory bar against the institution of a suit like the present, it should·
be held ultra vires the Constitution.
Before dealing with the points raised in this appeal, it would'
be necessary to refer to one fact which is not in dispute. The Act
was passed in 1946 and it came into force on March 8, 1946. At
that tin1e, the word "sale" as defined bys. 2(g) of the Act would.
have taken in all sales whether they were inside sales or outside
sales. After the Constitution was adopted on January 26, 1950,
Art. 286 came into force and it protected certain sales specified by
it from the purview of State taxation. It may theoretically be true·
that as soon as Art. 286 became effective, the expression "sale" as
defined by the Act was automatically constitutionally controlled by
the limitations prescribed by it. To make this position clear,
however, Bombay Ordinance II of 1952 was passed and bys. 3, it
added s. 30 to the Act. In effect, s. 30 introduced in the Act the
relevant provisions prescribed by Art. 286 of the Constitution, so·
as to bring the operation of the Act exoressly in conformity with
the said constitutional provision. Section 3 fnrther made it clear
that the addition made by it by introducing s. 30 in the Act shall
be made and shall always be deemed to have been made in the said
Act as so continued in force, with effect from the 26th January,
1950.
70
SUPRBMB COURT REPORTS
[1966] I S.C.R.
It is well-known that the controversy in rcgan.1 to the interpretation of Art. 286 began with the decision of this Court in the
State of Bombay v. United Motors('), and ended with the subsequent decision of this Coun in the case of Bengal lmm1111ity Co.(')
In order to alleviate the economic crisis which was likely to result
in view of the subsequent decision of this Court. the President
promulgated the Sales Tax Validation Ordinance. 1956 on January 30, 1956, the provisions of which were later incorporated in
the Sales Tax Validation Act, 1956.
This Act validated sales
tax collected by different States
from 1st April, 1951 to 6th
September, 1955 in accordance with the principles laid down by
A
B
this Court in United Motors' case. The sales-tax similarly collected
between 26th January 1950 to 3 l st March, l 951 was also sought
C
to be validated by the Saks Tax Continuance Ord~r. 1950. If we
had reached the stage of considering the merits about the validity
of the recovery of tax in the present case, it would have become
necessary for us to consider the effect of this Continuance Order.
Mr. Sastri contends that notwithstanding the Continuance Order,
the recovery of the tax is illegal and that is the main foundation
of his argument before us. The present dispute b~twcen the parties,
according to Mr. Sastri. is thus essentially similar to other disputes
between assessees and the respective States where through mistake,
tax was collected or paid in regard to transactions which were
relates to the construction of s. 20. Let us read the said section :
We will now re\'ert to the main points of law raised before us
for our decision.
The first question which must be comidered
relates to the construction of s. 20. Let us read the s1id section :
"20. Save as is provided in s. 23, no assessment
made and no order passed under this Act or the rules
made thereunder by the Commissioner or anv person
appointed under s. 3 to assist him shall be called into
question in any Civil Court, and save as it provided in
sections 21 and 22, no appeal or application for revision
shall lie ag~inst any such assessment or order".
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Mr. Sastri contends that s. 20 can have no application to the
G
present suit, because the order of assessment which the appellant
seeks to challenge in the present proceedings h~s been made by
the relevant Sales-tax authorities wi1hout jurisdiction. He concedes
that even though an order of assessment made under the Act may
be passed on a wrong conclusion of fact, it cannot be challenged
by a suit having regard tn the provisions of s. 20. In other words,
an erroneous order of assessment made under the Act would be
(I) 11953) S.C.R. IC69.
(2) (t955t 2 S.C.R. 693.
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KAMALA MILLS v. STATE (Gajendragadkar, C.J.)
71
entitled to the protection of s. 20; but the. said protection cannot
be claimed by an order which is passed without jurisdiction .
According to Mr. Sastri, the impugned assessment contravenes the
provisions of Art. 286 and as such, is invalid. What the assessment
order purported to tax was an outside sale and it was beyond the
competence of the authority to make the said order. Indeed, it was
beyond the competence of the State Legislature to levy a tax in·
respect of an outside sale; and so, on the ultimate analysis, the·
impugned assessment is without jurisdiction and it cannot, therefore, be said to be an assessment made under the Act within the·
meaning of s. 20.
Mr. Sastri did not dispute the fact that the argument thus.
presented by him would be equally applicable to cases of asse&sment made erroneously in respect of transactions which are otherwise statutorily exempted from the operation of the Act. If a
Sales Tax statute exempts certain transactions from the purview
of its charging section, and the appropriate authority makes an
order of assessment in respect of such an exempted transaction,
the assessment would be beyond its jurisdiction
and can be
impeached by a suit; s. 20 will not protect such an assessment. No
doubt, Mr. Sastri emphasised the fact that the constitutional prohibition against an assessment in respect of outside sales stood
on a much higher pedestal than the prohibition by a statutory
provision in a Sales Tax Act. The first prohibition is a constitutional prohibition and its breach would entitle a citizen to claim
the protection of Art. 265 and Art. 31 ( 1) ; but, on principle,.
according to Mr. Sastri, a transaction which is exempted from
assessment either by virtue of Art. 286 or by virtue of any specific
statutory provision, cannot be validly assessed, and an assessment
made in respect of it cannot claim the status of an assessment made·
under the Act within the meaning of s. 20. A suit would, therefore,
be competent to challenge such an invalid assessment. That, in
brief, is Mr. Sastri's argument on the construction of s. 20.
In dealing with this question, it is necessary to remember that
G the normal rule prescribed by s. 9 of the Code of Civil Procedure
is that the courts shall (subject to the provisions herein contained)
have jurisdiction to try all suits of a civil nature excepting suits
of which their cognizance is either expressly or impliedly barred.
There is no doubt that a claim for the refund of sales tax alleged
to have been paid by the appellants through mistake is a claim
H
of a civil nature and normally it should be triable by the ordinary
courts of competent jurisdiction as provided by s. 9 of the Code;
but this section itself lays down that the jurisdiction of the civil'
72
SUPllEMI! COURT llEPOll TS
[1966] I S.C.R.
courts to try suits of a civil nature ~an be excluded ei:her exnrcssly
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·or impliedly; and so, the roint raised fn our decision in th·~ pre-
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sent appeal is whether on a fair and reasonable construction of
s. 20, it can be said that the jurisdiction of the civil court is barred
either expressly or impliedly.
Section 20 protects "assessment made under the Act or the B
rules made thereunder" by aprrorriate authorities. There can be
little doubt that the clause "an assessment made'' cannot mean the
assessment proricrly or correctly made. The said clause takes in
all as.sessments made or purrorted to have hc~n m1dc under the
Act.
In its plaint. the appellant
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undcntbtedly
calling into
question the assessment order made against it, and such a challenge C
to the assessment order i!' plninly nrohibited by s. 20. An order
of assessment, thou~h erroneous, and though based on an in~orrect
finding of fact, is. ~evertheles:;, an order of assessment within the
meaning of s. 20: and s. 20, in terms, provides that it will not be
called in question in any civil court.
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This question has been recently considered by this Court in
Firm and I/luri Subbayya Chelly & So11s v. The State of A ndhra
Pradesh ( 1). Dealin~ with s. 18A of rh'' 1-fodras General Sales Tax
Act (Act 9 of 1939), which corresponds to s. 20 with which we
are concerned in the prC1;cnt appeal. this Court ob>erved that the
expression "any assessment made under this Act" is wide enough
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to cover all assessments made by the anpropriate authorities under
this Act whether the said assessments arc correct or not. It is the
activity of the assessing officer acting ;is such officer which is
intended to be protected and as soon as it is shown that exercising
liis jurisdiction and authority under this Act. an assessing officer
has made an order of ass-,ssmcnt. that de1rly falls within the swpe F
of s. l 8A. It was also observed that whether or not :111 assessment
has been made under this Act. will not depend on the correctness or accuracy of the order passed by the assessing authority.
This position is not seriously disnutcd by Mr. Sastri before
us.
He, however, contends that if the imvugned order h;1s been
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pas.sed without jurisdiction, it cannot fall within the purview of
s. 20 of the Act. In other words, the contention is that when the
appropriate authority purported to levy the tax on the an~ellant
in respect of the trans11ctions in question, it was mtcmntin~ to
assess outside sale>; and since the sakl assessment contravened
Art. 286, it was invalid and the order was without jurisdiction and
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as such, a nullity.
How can an order passed by the appronriate
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(t) [t964J l S.''.R. 751.
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KAMALA MILLS v. STATE (Gajendragadkar, C.J.)
73
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authority without jurisdiction claim the protection of s. 20, asks
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Mr. Sa~tri.
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In deciding the validity of this contention, it is necessary to
examine the scope of the jurisdiction conferred on the appropriate
authorities by the relevant provisions of the Act. Jurisdiction is
either tcrritoriaJ, or pecuniary, or in respect of the subject-matter.
There is no difficulty about the assessing authorities' territorial and
pecuniary jurisdiction in the present case. What is the nature of
tile jurisdiction conferred on the appropriate authority in respect
of the subject-matter of sales tax ? Has the appropriate authority
been given power to examine the nature of the transaction and
decide wh~ther it is liable to tax or not ? Or, can the appropriate
authority proceed to exercise its power of imposing a tax only in
cases where the transaction in question is assessable to such tax ?
In other words, is the decision about the character of the transaction the decision on a collate•al fact, the finding on which alone
confers jurisdic'.ion on the tribunal to levy the tax, or is it the
decision on a question of fact which is left to be determined by the
appropriate authority itself? If the jurisdiction conferred on the
appropriate authority falls under the first category, then its finding
that a narticular transaction is taxable under the relevant provisions of the Act, would be a finding on a collateral question of facf
and it may be permissible to a party aggrieved by the said finding
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to contend that the tax levied on the basis of an erroneous decision
about the nature of the transaction is without jurisdiction.
If,
however, the appropriate authority has been given jurisdiction to
determine the nature of the transaction and proceed to levy a tax
in accordance with its decision on the first issue, then the decision
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on the first issue cannot be said to be a decision on a collateral
issue, and even if the said issue is erroneously determined by the
appropriate authority, the tax levied by it in accordance with its
decision cannot be said to be without jurisdiction.
It is observed in Halsbury(') : "The jurisdictibn of an inferior
tribunal may depend upon the fulfilment of some condition precedent or unon the existence of some particular fact. Such a fact
is collateral to the actual matter which the inferior tribunal has to
try, and the determination whether it exists or not is logically and
temporally prior to the determination of the actual question which
the inferior tribunal has to try. The inferior tribunal must itself
decide as to the collateral fact : when, at the inceotion of an inquiry
by a tribunal of limited jurisdiction, a challenge is made to· its
jurisdiction, the tribunal has to make up its mind whether it will
(1) Halsbury's Laws of England, 3rd Edn. Vol.11. p. 59.
74
SUPREME COURT REPORTS
[1966] I S.C.R.
act or not, and for that purpose to arrive at some decision on A
whether it has jurisdiction or not. There may be tribunals which,
..
by virtue of legislation constituting them, have
the power to
determine finally the preliminary facts on which the further exerci~e of their jurisdiction depends; but, subject to that, an inferior
tribunal cannot, by a wrong decision with regard to a collateral
fact, give itself a jurisdiction which it
would
not
otherwise S
possess''.
It would be noticed that Mr. Sastri's argument that the
impugned order of assessment is without jurisdiction and as such,
docs not fall within s. 20, proceeds on the assumption that the
fmding of the appropriate authority that
the
transactions in
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question were taxable under the relevant provisions of the Act,
is a finding on a fact which is collateral. The question is : is this
assumption well-founded ?
In our opinion, the answer to this
question must be in the negative.
In this cormection, the relevant scheme of. the Act by which D
necessary powers have been conferred on the appropriate authorities, falls to be considered.
Section 3 ( I ) provides that for
carrying out the purposes of this Act, the Provincial Government
may appoint any person to be Commissioner of Sales Tax, and
such other persons to assist him as the Provincial Government
thinks fit.
Section 3 (2) then lays down that persons appointed
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under sub-s. (I) shall exercise such powers as may he conferred
and perform such duties as may be imposed on them by or under
this Act.
Section 4 deals with the appointment of a Tribunal
and provides for its constitution. Section 5 is the charging section.
Section 8 requires the registration of
dealers,
the expression
"dealer" having been defined bys. 2(c). Section 10 imposes an
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obligation on the dealers to make returns. Section 11 deals with
the a-;scssment of tax: sub-s. ( 1 )(a) provides that the amount
of tax due from a registered dealer shall, in the case of first
assessment. he assessed in respect of such period not exceeding
twelve months as the Commissioner may determine.
Sub-section~
( 2), ( 3) and ( 4) of s. 11 contain provisions in regard to the G
procedure which has to be followed hy the Commissioner in
determining the question about the liability of a dealer to pay
assessment. The Commisisoner has to take evidence, has to hear
the dealer, can require further evidence to be led by the dealer
on specific points and then reach his conclusion on the question
as to whether the dealer is liable to be assessed, and if yes, to what H
extent ?
In passing his order of assessment, the Commissioner
acts on the evidence led before him.
Sub-s. ( 5) empowers the
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KAMALA MILLS v. STATE ( Gajendragadkar, C.J.)
7 5
Commissioner to levy assessment to the best of his judgment in
cases falling under it. It also authorises him to impose a penalty
as therein specified. Section llA deals with turnover which has
escaped assessment, and it confers authority on the Commissioner
to pass an appropriate order of assessment in respect of the said
category of cases.
When the Commissioner makes an order of
assessment in exercise of the powers conferred on him, a right
is given to the assessee to prefer an appeal and a revision under
sections 21 and 22 respectively.
It would thus be seen that the appropriate authorities have
been given power in express terms to examine the returns subc mitted by the dealers and to deal with the questions as to whether
the transactions entered into by the dealers are liable to be assessed
under the relevant provisions of the Act or not. In our opinion,
it is plain that the very object of constituting appropriate autho--
rities under the Act is to create a hierarchy of special tribunals
to deal with the problem of levying assessment of sales tax as
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which confer jurisdiction on the appropriate authorities to levy
assessment on the dealers in respect of transactions to which the
charging section applies, it is impossible to escape the conclusion
that all questions pertaining to the liability of the dealers to pay
assessment in respect of their transactions are expressly left to
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be decided by the appropriate authorities under the Act as matters
falling within their jurisdiction. 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 within the mischief of the charging section; what is the
true and real extent of the transactions which are assessable; all
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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 pro.
visions of the Act, is a finding on a collateral fact which gives the
appropriate authority jurisdiction to take a further step and make
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the actual order of assessment. The whole activity of assessment
beginning with the filing of the return and ending with an order
of assessment, falls within the jurisdiction of the
appropriate
authority and no part of it can be said to constitute a collateral
activity not specifically and expressly included in the jurisdiction
of the appropriate authority as such. We are, therefore, satisfied
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that Mr. Sastri is not right when he contends that the finding of the
appropriate authority that a particular transaction is taxable under
the charging section of the Act, is a finding on a collateral fact and
LSSup CI/65-6
76
SUPRllMB COURT REPORTS
[1966] l S.C.il.
it i~ only if the said finding is correct that the appropriate authority
can validly exercbe its jurisdiction to levy a sales tax in respect
of the transactions in question. In fact, what we have said about
the jurisdiction of the appropriate authorities
exercising
their
powers under the Act, ••ould be equally trne about the 3!Jpropriate authorities functioning either under ~inui .. r Sale<;-tax Acts.
or under the Income-tax Act.
TI1is question was incidentally considered by J. Spe<:ial Bench
of this Court in Smt. Ujjam Bai v. State of Uttar Pradesli ( 1 ). In
that case, the petitioner, Ujjam Bai, challenged the validity of
the sales tax levied on her on the ground that the notification
issued on December 14, 1957, had exempted 'bidis'. like those
which the petitioner's lim1 produced, from payment of sales tax.
According to the petitioner, the appropriate authority bad plainly
misconstrued the notification when it held that the bidis produced
by the petitioner's firro were not entitled to daim the protection
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of the said notification.
The petitioner had moved this Court
under Art 32 of the Cono;titution.
Broadly stated, the majority
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. decision was tl1at though the notification may have been misconstrued by the appropriate authority when it rejected the petitioner's contention that the said bidis fell within the purview of
the notification, and so. were exempt from payment of tax. no
relief could be granted to tlle petitioner under Art. 32 on the sole
ground that tl1e impugned order of assessment wa.~ based oA a
misco!lstruction of the notification in question.
The Ace under
which the notification was issued was valid; the validity of the
notification itself was not impeached; and so, the narrow ground
which tlle Court had to consider was if the appropriate authority
misconstrued the notification and imposed a tax on a commodity
which in fact fell within its protection, could tllc validity of such
.an order be impeached under Art. 32 of the Constitution on the
ground that it contravened the fundamental right of the petitioner
under Art. 19 (I) ( g) ·1 The two answers given in acconbncc with
the majoricy opinion were against the petitioner:
and
so,
the
majority decision can be said to have rejeclcd the petit;oner's
argument that a que$tion of jurisdiction was involved in Ute mis-
·construction of the notification in question. It would thus appear
that according to the majority view, the question aboul the ""-
ability of a particular transaction falls within the jurisdiction of
the appropriate authorities exercising their powers under the t:ixinj!
Act. and their deci~ion in respect of it cannot he treated as a
·decision on a collateral fact tlle finding on which determines the
jurisdiction of the ~aid authorities.
(I) [t9611 t S.C.R. 7?8.
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KAMALA MILLS v. STATE (Gajendragadkar, C.!.)
77
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It is trne that the separate concurring judgments delivered by
the learned Judges who spoke for the majority view indicate that
their approach to the several problems posed by the two questions
referred to the Special Bench, was not uniform and they emphasised different aspects in somewhat different ways; but in regard
to that aspect of the matter witl1 which we are concerned in the
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present appeal there appears to be unanimity amongst them.
Indeed, even tl1e minority judgment which radically dissented
from the majority view in regard to the scope and effect of the
powers of this Court under Art. 32 and the extent of the fundamental right conferred on the citizen to move this Court by the
said Article, does not appear to have differed from the majority
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view on this point.
Whilst we are referring to the decision of this Court in Ujjam
Bai's(1) case, we would hasten to add that we are not dealing
with the scope and effect of our powers under Art. 32, or with
the powers of the High Courts under Art. 226.
Our object in
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referring to the majority decision in Ujjam Bafs(') case is merely
to show that the tenor of the opinion expressed by the learned
Judges in the said case is in support of the view that a finding
recorded by a t"xing amhority as to the taxability of any given
transaction cannot be said to be a finding on a collateral fact,
but is a finding on a fact the decision of which is entrusted to the
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jurisdiction of such authority.
Mr. Sastri has no doubt referred us to the subsequent decision
of this Court in The Stare Trading Corporation of India, Ltd. v.
State of Mysore(2) in which it appears to have been held that the
taxing officer cannot give himself jurisdiction to tax an interF
State sale by erroneously determining the character of the sale
transaction. The decision on the question about the character of
the sale transaction seems to have been treated as a decision on a
collateral fact. With respect, we may point out thau the majority
decision in Ujjam Bai's(1) case on which tl1is conclusion is founded
docs not support that view. We ought, however, to add that in the
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case of State Trading Corporation of India, Ltd. ( 2), as in the
earlier case of Ujjam Bai('), this Court was dealing with a petition filed under Art. 32; and as we have already indicated,
we are not called upon to consider the extent of our jurisdiction
under. Art.