1965 (4) TMI 24 - SC - VAT and Sales Tax

Supreme Court upholds Section 20 of Sales Tax Act barring refund suits. Authorities have jurisdiction to determine taxability.

The Supreme Court dismissed the appeal, upholding that Section 20 of the Bombay Sales Tax Act, 1946, bars the suit for refund of allegedly illegally ... Whether the Bombay High Court was right in holding that the suit filed by the appellant, Kamala Mills Ltd., against the respondent, the State of Bombay, was incompetent? Held that:- If the jurisdiction conferred on the appropriate authority falls under the first category, then its finding that a particular transaction is taxable under the relevant provisions of the Act would be a finding on a collateral question of fact, and it may be permissible to a party aggrieved by the said finding 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 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. Appeal dismissed. Issues Involved:1. Jurisdiction of the court to entertain the suit.2. Interpretation and application of Section 20 of the Bombay Sales Tax Act, 1946.3. Constitutionality of Section 20 of the Bombay Sales Tax Act, 1946.4. Validity of the assessment and tax recovery.Issue-wise Detailed Analysis:1. Jurisdiction of the court to entertain the suit:The principal legal question was whether the Bombay High Court had jurisdiction to entertain the suit filed by the appellant, Kamala Mills Ltd., against the State of Bombay. The respondent contended that Section 20 of the Bombay Sales Tax Act, 1946, created a bar against the institution of such a suit. The trial judge upheld this plea, dismissing the suit on the preliminary ground of lack of jurisdiction. The Division Bench of the High Court affirmed this decision, leading to the appeal before the Supreme Court.2. Interpretation and application of Section 20 of the Bombay Sales Tax Act, 1946:Section 20 states: 'Save as is provided in section 23, no assessment made and no order passed under this Act or the rules made thereunder by the Commissioner or any person appointed under section 3 to assist him shall be called into question in any civil court, and save as is provided in sections 21 and 22, no appeal or application for revision shall lie against any such assessment or order.'The appellant argued that Section 20 did not apply to their suit, as the assessment was made without jurisdiction, contravening Article 286 of the Constitution. The Supreme Court held that the clause 'an assessment made' in Section 20 includes all assessments made or purported to have been made under the Act, even if erroneous. The court emphasized that the jurisdiction conferred on the appropriate authorities includes determining the nature of the transactions and whether they are taxable. Therefore, the assessment, even if erroneous, falls within the jurisdiction of the authorities and is protected by Section 20.3. Constitutionality of Section 20 of the Bombay Sales Tax Act, 1946:The appellant contended that if Section 20 barred the suit, it should be held ultra vires the Constitution. The court analyzed whether the Act provided an adequate remedy for recovering taxes alleged to have been illegally collected. Section 13 of the Act provides for refunds, and Sections 21 and 22 provide for appeals and revisions, with Section 22B allowing for the extension of the limitation period. The court concluded that the Act provided sufficient remedies, and thus, Section 20 is constitutionally valid. The court also noted that the bar created by Section 20 does not apply to challenges against the validity of Section 20 itself.4. Validity of the assessment and tax recovery:The appellant claimed that the tax was illegally levied on outside sales, which were not taxable under the Act due to Article 286 of the Constitution. The Supreme Court held that the assessment order, even if based on an erroneous conclusion, is not without jurisdiction and is protected by Section 20. The court emphasized that the appropriate authorities have jurisdiction to determine the taxability of transactions, and their decisions cannot be treated as findings on collateral facts. The court also noted that the appellant could have pursued remedies under the Act, such as appeals or revisions, but failed to do so.Conclusion:The Supreme Court dismissed the appeal, holding that Section 20 of the Bombay Sales Tax Act, 1946, bars the suit for refund of the tax alleged to have been illegally collected. The court affirmed the constitutionality of Section 20 and emphasized that the appropriate authorities have jurisdiction to determine the taxability of transactions under the Act. The court also noted that the appellant's suit challenging the validity of Section 20 is technically competent but does not assist the appellant, as the claim for refund is barred by Section 20.