Chaganraju Vs. State of Andhra Pradesh - Court Judgment

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customs - conviction - section 135 of customs act, 1962 and section 85 of gold control act, 1968 - order of high court challenged - by impugned order appellant convicted under section 85 (ii) - no evidence to show any previous collusion or conspiracy between 'x' and appellant - prosecution has failed to prove ingredients either of section 85 (ii) or section 135 (ii) (b) - high court erred in convicting appellant without there being any legal evidence to prove charges framed against appellant - held, order of high court set aside. - [j.c. shah,; k. subba rao,; k.n. wanchoo,; s.m. sikri and; v. ramaswami, jj] the appellant-company was carrying on the business of building contractors. during the years 1948-49 to, 1952-53, the appellant was assessed to sales-tax on the basis that the contracts executed by them were "works contracts". on 5th april 1954, the high court held that the relevant provision of the madras general sales tax act, 1939, empowering the state to assess indivisible building contracts was ultra vires the powers of the state legislature. on 23rd march 1955, the appellant filed a suit for the recovery of the amount of taxes illegally levied and collected from it. the trial court and the high court following the decision in raleigh investment co. ltd. v. the governor general in council, [1947] l.r. 74 i.a. 50, held that the suit was not maintainable because of s. 18a of the act, and that the remedy of the appellant was only to pursue the machinery provided under the act. in appeal to this court, it was contended by the appellants that : (i) the provisions of the act and rules relevant to, indivisible works contracts were held by this court also to be without legislative competence and void, and therefore, s. 18a did not bar a suit for the recovery of tax assessed under ultra vires provisions; and (ii) the suit was within time. held: (i) (per subba rao, wanchoo and sikri, jj.) the assessments in the present case were made in respect of indivisible works contracts. this court in the appeal from the judgment of the high court agreed with the high court and held that the provisions which enabled the levy of sales-tax in respect of such contracts were ultra vires the powers of the provincial legislature, in the state of madras v. gannon dunkerley,[1959] s.c.r.379. therefore, the sales- tax authorities have. acted outside the actand not under it in making an assessment on the basis of the relevant part of the charging section which was declared to, be ultra vires by this court, and hence s. 18a was not a bar to the maintainability of the suit. [237 f-g; 252 d-e; 253a] if 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 vires of that statute: or any of the provisions thereof, where under it functions. it must act under the act and not outside it. if it acts on the basis of a provision of that statute which is ultra vires, to that extent it would beating 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, the foundation laid by the judicial committee in raleigh investment co. case for construing the expression "under the act" has no legal basis. the entire reasoning of the judicial committee was based upon the assumption that the question of ultra vires can be canvassed and finally decided through the 'machinery provided under the income-tax act. but the income-tax officer, the appellate assistant commissioner and the appellate tribunal are all. creatures of that act and whether the provisions of the act are good or bad is not their concern. as the tribunal is a creature of the statute it can only decide the dispute between the assessee and the commissioner in terms of the: provisions 'of the act and the question of ultra vires is foreign to the scope of its jurisdiction. if an assessee raises such a question, the tribunal can only reject it on the ground that it has no jurisdiction to entertain the objection or decide on it. as no such question can be raised or can arise on the tribunal's order, the high court cannot possibly give any decision on the question of ultra vires, because its jurisdiction under s. 66 is a special advisory jurisdiction and its scope is strictly limited. it can, only decide questions of law that arise out of the order of the tribunal and those that are referred to it. 'me appeal to this court under s. 66a(2) does not enlarge the scope of the jurisdiction, for this court can only do what the high court can. any assessment made on the basis of a provision which is ultra vires cannot be a decision under the provisions of the act. if the charging section is ultra vires the assessment made thereunder is really one outside the act. [240h; 247h; 248 b, d-h; 252 b-d, g-h] there is no justification for confining the expression "under the act" in s. 18a, only to the power of the officer to make an assessment and the procedure to be adopted by him and not to the content of the assessment. the expression refers both to the procedural and substantive provisions of the act, and the procedural machinery under the act can be utilized only to decide disputes that arise under the substantive provisions of the act, which are not ultra vires. [252 f, h] case law reviewed. per shah, and ramaswami, jj (dissenting) : the suit was barred by the scheme of the act and by s. 18a which was later incorporated by act 6 of 1951. [278 d] in substance this court held in the gannon dankerley case that the definition of "sale" in s. 2(h) must be read in the light of and restricted by the legislative power of the provinces as contained in entry 48 in list 11, schedule vii of the government of india act, 1935; and on that view, if a works contract is one, entire and indivisible., there will be no sale of goods and no part of the consideration received for executing such a contract could be included in the turnover. this court declared that the taxing authority may not, in computing the turnover of a dealer, include any part of the receipts under a works contract which is one, entire and indivisible, because the state legislature had no power to levy tax on transactions which are not transactions of sale of goods. but this court did not declare the clause ultra vires: the court merely directed that the power to levy tax in respect of a works, contract is not wholly denied to the provinces or states; in each case it has to be considered whether the transaction involves sale of goods strictly so called, or if it is a transaction which is a works contract "one, entire and indivisible." if it is the latter, it would not be taxable, because there is no element of sale of goods within that transaction, if it is the former, the clement of sale of goods would be taxable. the approach conforms to a recognised rule. of interpretation that it is always presumed that the legislature did not intend to,-transgress restrictions upon its legislative powers, and it would be legitimate to read words used in a statute as- subject to the restrictions imposed by the constitution upon legislative power, so that the statute may harmonise with the constitutional restrictions. this rule applies unless the restricted meaning of words makes the, legislation in- complete, unintelligible or unmeaning. apparently wide words of the definition clause and the charging section will not, on account of such restrictions, be rendered ultra vires or invalid ; the words will be construed so as to confer power upon the taxing authorities to assess tax only within limited field. [259 f-g; 260 e-g-h; 261 a-c 263 g] re : the hindu women's rights to property act, 1937, [1941] f.c.r. 12, applied. ordinarily a taxing authority has power to ascertain whether the transaction before him is taxable, and for that purpose he may determine facts which have a bearing on the taxability of the transaction. he has also power to interpret the provisions of the taxing statute as well as of any other statute which has a bearing on the question. within his jurisdiction is included power to decide finally whether the transaction submitted to his scrutiny is taxable. his decision is open to challenge by appropriate proceedings in the hierarchy of tribunals set up for that purpose, but not outside the act. [263 h; 264 b] kamala mills ltd. v. state of bombay, [1966] 1 s.c.r. 64 followed. the madras general sales tax act is a complete code setting up machinery for the levy, assessment, collection and refund of tax : by the clearest implication it excludes the jurisdiction of the civil courts to modify or set aside assessments under the act by authorities invested with power in that behalf. by enacting s. 18a the legislature did no more than enact what was clearly implicit in the scheme of the act. absence of the section from the statute book for the first two years of assessment is therefore of no materiality. [268 g-h; 269 a] even on the assumption that the portion added by act 25 of 1947 into the definition of 'sale' was subsequently declared ultra vires by this court in the gannon dunkerley case, the suit to set aside or modify an assessment on the assumption that the definition was wholly invalid, was not maintainable. the. taxing officer in exercising his power may err; but he has authority to err in exercise of. his jurisdiction. it matters little that the error he commits is in the interpretation of a constitutional prohibition, and not a statutory prohibition applying to the transaction submitted to his scrutiny. there is nothing in the act which prohibits the taxing authority from entertaining the plea that a transaction is not taxable because it is in respect of an exempted commodity or is an exempted sale, or because it is not a transaction of ale, and there are ample indications of an implication to, the contrary. if by an erroneous decision, he, can clothe himself with jurisdiction, which on a true view of the facts or law he does not possess, it is difficult to appreciate the ground on which it can be asserted that he must decline to adjudicate when the vires of a part of the statute which he has to administer fall to be determined. in a large number of cases in which proceedings relating to taxation have- reached the high court by way of reference, appeal or revision and this court in appeal from the high court, the question of the vires of the statute under which the authority functioned was raised, entertained and decided. [269 b-c, g-h; 270 b, d-e; 271 c-d] raleigh investment co. ltd. case, applied. under the act, therefore, the deputy commercial tax officer had jurisdiction to determine whether the appellant's transactions were assessable under the. act. he may have committed a mistake, even a grevious mistak. but he had jurisdiction to decide the question. exercise of that jurisdiction was not conditioned by the correctness of his conclusion. [265 b-c] (ii) (by full court) : the suit was governed by art. 96 of the limitation act, 1908, and that article prescribes a period of limitation of three years for relief, on the ground of mistake, from the date when the mistake becomes known to the plaintiff. since the appellants came to know of their mistake when the high court gave its decision on 5th april 1954, the suit filed on 23rd march 1955 was well within time. [253 f-h; 255d] state of kerala v. aluminium industries ltd. c.a. no. 720 of 1963. decided on april 21, 1965 (unreported) followed. - a majahr prepared at the spot shows that when the appellant was asked about these articles he clearly stated that he did not know about this gold nor did he know who had concealed the gold. 25. moreover, it appears that ganeshlal sopaji who had clearly admitted his guilt was prosecuted on a supplementary trial and convicted. for these reasons therefore, the prosecution has failed to prove the ingredients either of section 85(ii) of the gold control act or section 135(ii)(b) of the customs act.s. murtaza fazal ali, j.1. this appeal by special leave is directed against the judgment of the high court of andhra pradesh by which the convictions of the appellant under section 85(ii) of the gold control act have been upheld and the sentence imposed by the trial court has been enhanced on an application made by the state for enhancing the sentence. mr. chitale appearing for the appellant has submitted a short point which is that there is no legal evidence against the appellant to show that he was either in possession of the gold articles recovered from the compound of his house or he had any knowledge of the same. it is not disputed that the gold articles were recovered from a pit which was dug somewhere in the compound of the house of the appellant. it appears that the customs authority raided the house of the appellant on 6-2-1969 at about 11 a.m. and after they discovered a site near the boppas tree they started digging it and after digning the same, the gold articles mentioned above were found. a majahr prepared at the spot shows that when the appellant was asked about these articles he clearly stated that he did not know about this gold nor did he know who had concealed the gold. thus at the very first instance, the appellant had denied either the possession or the knowledge that the afore said articles had been hidden in his compound. later at about 3 p.m. ganesh lal sopaji who was interrogated at that time, admitted that he had come to the house of the appellant in the afternoon, dug the ground and had put the articles thereunder. this statement was made in the presence of the appellant. after having heard the statement of the appellant, the customs officers questioned the appellant on which he repeated that ganeshlal sopaji had hidden the articles in the vacant side of his house. the appellant made it clear that he was not in his house and had spent a few nights in the hospital. he saw ganeshlal sopaji at the house only at 3 p.m. he further stated that ganeshlal sopaji had not taken his permission for hiding the gold in his house. in our opinion, not much can be made out of this statement which does not at all prove that the appellant had any knowledge that the gold was buried in his house. the knowledge of the gold referred to in the statement of the appellant ex. p. 25 comes to light only after he had heard ganeshlal sopaji stating about concealing the gold in his house. even so the appellant had made it clear in the statement ex. p. 25 that ganeshlal sopaji entered the house and concealed the articles without his permission. in these circumstances, therefore, we are not in a position to agree with mr. rao that the conviction of the appellant can be founded on the basis of the statement ex. p. 25. moreover, it appears that ganeshlal sopaji who had clearly admitted his guilt was prosecuted on a supplementary trial and convicted. there is no evidence to show any previous collusion or conspiracy between ganeshlal sopaji and the appellant. for these reasons therefore, the prosecution has failed to prove the ingredients either of section 85(ii) of the gold control act or section 135(ii)(b) of the customs act. in these circumstances, therefore, the high court was in error in convicting the appellant without there being any legal evidence to prove the charges framed against the appellant. the appeal is accordingly allowed. the conviction and sentence passed on the appellant are set aside and the appellant is acquitted of the charges framed against him.