Ultra vires tax on indivisible works contracts allowed civil refund suit and limitation ran from discovery of mistake.

Tax on indivisible works contracts was treated as ultra vires where the charging provision exceeded legislative competence, so the assessment was outside the Act and the statutory bar in section 18A did not prevent a civil suit for refund. A levy founded on an invalid provision could therefore be challenged through ordinary civil process and recovered. A refund claim based on payment under mistake of law was governed by article 96 of the Limitation Act, 1908, with time running from discovery of the mistake. On the stated facts, the suit was within limitation and the claim was maintainable.

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Issues: (i) Whether the sales tax assessed on indivisible works contracts under the impugned charging provisions was recoverable in a civil suit notwithstanding section 18A of the Madras General Sales Tax Act, 1939; (ii) whether the suit for refund was within limitation.

Issue (i): Whether the sales tax assessed on indivisible works contracts under the impugned charging provisions was recoverable in a civil suit notwithstanding section 18A of the Madras General Sales Tax Act, 1939.

Analysis: The relevant charging provisions were treated as unconstitutional and void insofar as they purported to tax indivisible building contracts. An assessment founded on an ultra vires provision was held to be outside the Act, and the statutory bar in section 18A was construed as applying only to assessments made under the Act. The majority concluded that a taxing authority cannot give final effect to a levy resting on a provision beyond legislative competence, and the ordinary civil remedy remained available to challenge and recover such collections.

Conclusion: The suit was maintainable and section 18A did not bar the claim; this issue was decided in favour of the assessee.

Issue (ii): Whether the suit for refund was within limitation.

Analysis: A refund claim based on payment under a mistake of law was held to be governed by article 96 of the Indian Limitation Act, 1908, under which time runs from the date when the mistake became known. On the admitted facts, the suit was instituted within three years from the date on which the mistake was discovered.

Conclusion: The suit was within time; this issue was decided in favour of the assessee.

Final Conclusion: The levy on indivisible works contracts was treated as beyond the taxing power, the civil suit for refund was held maintainable, and the claim was held to be in time.

Ratio Decidendi: Where a taxing authority assesses and collects tax on the basis of a provision that is ultra vires, the assessment is outside the statute and a civil suit for refund is not barred by a clause limited to assessments made under the Act; a refund claim founded on mistake of law is governed by the limitation period running from knowledge of the mistake.

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