1958 (4) TMI 99 - HC - VAT and Sales Tax

Madras Tax Act Upheld by Full Bench, Criminal Courts Cannot Interfere

The Public Prosecutor Versus VM Ramalingam Pillai

The Full Bench held that Section 16-A of the Madras General Sales Tax Act is not ultra vires and falls within the State's legislative competence. The ... - Issues Involved:1. Whether Section 16-A of the Madras General Sales Tax Act is ultra vires.2. Whether the liability to pay the assessment levied can be challenged in a Criminal Court.Issue-Wise Detailed Analysis:1. Ultra Vires Nature of Section 16-A of the Madras General Sales Tax Act:The primary issue in this appeal was the validity of Section 16-A of the Madras General Sales Tax Act. Section 16-A was inserted by the Madras Amendment Act XXV of 1947 to oust the jurisdiction of Civil and Criminal Courts in questioning the validity of tax assessments. This was done to avoid conflicting decisions from parallel courts and to simplify the process of tax recovery. The section was designed to make the validity of any assessment or imposition unassailable in a Criminal Court.The court noted conflicting decisions on this issue. In Syed Mohamed and Co. v. State of Madras, it was held that Section 16-A is intra vires and analogous to rules precluding judgment-debtors from raising defenses at the stage of execution of a decree. Conversely, in Guruviah Naidu and Co. v. State, it was held that Section 16-A is ultra vires of the Constitution and repugnant to the Criminal Procedure Code. The Supreme Court reversed this decision without addressing the ultra vires issue.The Full Bench, after reviewing the legislative competence and the procedural safeguards provided under the Act, held that Section 16-A is not ultra vires. The Act falls within the legislative competence of the State under Item 54 of List II of the Seventh Schedule to the Constitution. It does not contravene Articles 14 or 21 of the Constitution, as it provides a comprehensive mechanism for appeals and revisions within the Act itself.2. Challenging the Liability to Pay Assessment in a Criminal Court:The court examined whether it is open to a Criminal Court to question the validity of the assessment or the liability of any person to pay any tax, fee, or other amount assessed or levied under the Madras General Sales Tax Act. Section 16-A expressly bars such challenges in Criminal Courts.The court reviewed several precedents, including decisions under the Income-tax Act, which set up a hierarchy of authorities for questioning assessments. It was observed that where a statute provides a comprehensive mechanism for appeals and revisions, the validity of assessments cannot be challenged in a Criminal Court. This principle was supported by decisions in Raleigh Investment Co., Ltd. v. Governor-General in Council and Commissioner of Income-tax, West Punjab v. Tribune Trust, Lahore, where the Privy Council held that the only remedies available to a taxpayer are those provided within the statute.The court concluded that when a person is prosecuted under Section 16-A of the General Sales Tax Act, it will not be open to him to raise any objection, plea, or contention that could have been raised before the authorities set up under the Act. However, he can raise pleas that those authorities are precluded from entertaining, such as the ultra vires nature of the Act or specific provisions, or that he is not the person assessed or has already paid the assessed amount.Judgment:The Full Bench answered the reference by stating that it is not open to a Criminal Court to question the validity of the assessment or the liability to pay the assessed amount under the Madras General Sales Tax Act in view of Section 16-A. The acquittal by the lower court was set aside, and the accused was convicted under Section 15(b) of the Madras General Sales Tax Act, 1939. He was fined Rs. 25, and the recovery of arrears of tax amounting to Rs. 205-12-6 was directed to be made as if it were a fine.