C.T. George Vs. the State of Madras - Court Judgment

P. Govinda Menon, J.

1. This Civil Miscellaneous Appeal raises the question whether the Civil Court has jurisdiction to entertain the suit, which was one for a declaration that the order of the Deputy Commercial Tax Officer, assessing the appellant to sales tax is illegal, ultra vires and made without jurisdiction and for a perpetual injunction restraining the State from enforcing the said order of assessment.

2. One of the defences raised by the State was that the Civil Court has no jurisdiction to entertain the suit. The learned Munsiff relying on Section 18-A of the General Sales Tax Act (Act IX of 1939) (hereinafter referred to as the Act) held that the Civil Court has no jurisdiction to entertain the suit. On appeal the learned District Judge of Kozhikode also held that if the initiation of the proceedings in the case was before the enactment of Section 18-A of the Act, the suit would be maintainable, but if the initiation of proceedings was subsequent to the enactment of Section 18-A the suit would be barred and for ascertaining this question remanded the suit for fresh disposal.

3. Section 9 of the Code of Civil Procedure says:

'The Court 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.

So in order that jurisdiction of the Civil Courts should be deemed to have been ousted, the exclusion must be clearly expressed or implied and without any such provision the ordinary law of the land could not be departed from.

4. The earliest of the cases to which reference may be made is Ramachandra v. Secretary of State (1889) I.L.R. 12 Mad. 105 where the Court held that where, by an Act of the Legislature, powers are given to any person for a public purpose, from which an individual may receive injury, if the mode of redressing the injury is pointed out by the statute, the ordinary jurisdiction of Civil Courts is ousted and in the case of injury the party cannot proceed by action.

5. This decision has been considered in later cases. In Iswarananda Bharathiswami v. Commissioner, Hindu Religious Endowments Board (1950) I.L.R. 54 Mad. 928 the learned Judges, Curgenven and Cornish, JJ., referred to a large body of case law and held that so far as the Hindu Religious Endowments Board was concerned, a finding given by the Board that a particular building is a math or a temple can be agitated by means of an application before the Court and that a suit for declaration under the ordinary law is not maintainable.

6. In Secretary of State for India v. Mask & Co. (1940) I.L.R. 1940 Mad. 599 (P.C.) the Privy Council held that under the Sea Customs Act (VIII of 1878) and Land Customs Act (XIX of 1924), the jurisdiction of Civil Courts is ousted and resort can only be had to the remedies provided by the particular statutes. Their Lordships discussed Sections 188 and 191 of the Sea Customs Act and the provisions of Land Customs Act and held that the jurisdiction of the Civil Courts has been ousted by means of those statutes.

7. The next case that may be referred to is Secretary of Stale for India v. Jagannatham (1941) I.L.R. 1941 Mad. 850. Leach, C.J., who delivered the judgment of the Full Bench referred to the decision in Wolverhampton Water Works Co. v. Hawkesford (1859) 141 E.R. 486 as well as to the decision in Secretary of State for India v. Mask & Co. (1940) I.L.R. 1940 Mad. 599 (P.C.), and other cases and at page 860 the learned Chief Justice observed as follows :-

Therefore we have here two principles clearly established. The first is that, to exclude the jurisdiction of the Civil Courts the exclusion must be explicitly expressed or clearly implied. The second is that, where, the liability is statutory as opposed to liability under the common law, the party must adopt the remedy given to him by the statute.

The principle laid down by Willes, J., in Wolverhampton Water Works Co. v. Hawkesford (1859) 141 E.R. 486, referred to above is:

Where the statute creates a liability not existing at common law, and gives also a particular remedy for enforcing it... with respect to that class it has always been held, that the party must adopt the form of remedy given by the statute.

These remarks show that when the legislature creates obligations and provides an exclusive code for determination and also gives remedies the party must avail himself of the remedies so provided for and cannot have resort to an alternative jurisdiction.

8. In Raja Visweswar v. Province of Bihar I.L.R. 27 Pat. 820 the learned Judges of the Patna High Court reviewed the case law in great detail and came to the conclusion that with regard to the Bihar Sales Tax Act of 1944, a suit for a declaration and injunction under Section 42 of the Specific Relief Act was not maintainable because the plaintiff had a complete remedy under the provisions of that Act itself.

9. In the Full Bench decision in Public Prosecutor v. Ramalingam A.I.R. 1958 Mad. 544 arising under Section 16-A, which is similar to Section 18-A of the Act, an analysis of the various provisions of the Act has been made showing that it is a self-contained and comprehensive legislation which enables an assessee to question the assessment imposed on him and that it will not be open to him to raise any objection, plea or contention which he could have raised before the authorities when he is prosecuted under Section 15(b) of the Act for failure to pay the tax.

10. This decision was followed in John v. Shertallai Municipality [1959] K.L.R. 577 where Koshi, C.J., held that, the assessment or levy can be questioned only under the provisions and in the manner prescribed under the Act and it will not be open to an accused to raise any such plea before a Court when he is proceeded against for non-payment of the tax.

11. The Madras Case was followed in Public Prosecutor v. Thimmiah I.L.R. 1959 A.P. 121. It was decided in that case that when once the impost was finally determined as laid down in the Act, it was not competent for any tribunal or Court to re-open that question in any proceeding, any mode of challenging the assessment otherwise than by the use of the machinery set up in the Act being inconsistent with the intention of the Legislature.

12. Income-tax Act also sets up a hierarchy of officers, tribunals and Courts before which any person who is assessed to income-tax can question the validity of the assessment either in whole or in part. The provisions in the Madras General Sales Tax Act are analogous to these provisions in the Indian Income-tax Act. Two cases under the Income-tax Act may now be considered. Raleigh Investment Co. Ltd. v. Governor-General in Council [1947] 15 I.T.R. 332. In that case an assessee paid under protest the tax assessed on him and then brought a suit for the following reliefs : (a) a declaration that certain provisions of the Income-tax Act on which the assessment was based were ultra vires and assessment was illegal ; (b) an injunction restraining the Income-tax Department from making the assessments in future ; (c) repayment of the sum assessed. It was held :

Though in form the relief claimed did not profess to modify or set aside the assessment, in substance it did because the repayment could not be ordered so long as the assessment stood. Further the claim for the declaration could riot be regarded as having any relevance except as leading up to the claim for repayment and the claim for injunction was merely verbiage. An assessment made under the machinery provided by the Act, if based on a provision subsequently held to be ultra vires is not a nullity but a mistake of law made in the course of its exercise. The suit, therefore, in truth was directed exclusively to a modification of assessment.

13. The next case is in Commissioner of Income-tax, West Punjab v. Tribune Trust, Lahore [1948] 16 I.T.R. 214. The relevant facts are that in respect of the assessment for the year 1932-33, the assessee claimed an exemption under Section 4(3)(i) of the Income-tax Act. The matter was finally decided by the Privy Council in favour of the assessee. Meanwhile, during the pendency of the appeal to the Privy Council, assessments continued to be made in respect of the same property till 1938-39 disallowing the claim for an exemption and they not having been appealed against became final before the, decision of the Privy Council. After the Privy Council allowed the claim of the assessee in respect of 1932-33 the assessee applied to the Commissioner under Section 33 of the Income-tax Act to re-open the assessments for those years and to quash the assessments as they had become a nullity in view of the Privy Council decision holding that the assessee's property was exempt from taxation by virtue of Section 4(3)(i) of the Act. It was rejected by the Commissioner. On a case being stated by the Commissioner of Income-tax under the directions of the Lahore High Court, that Court held that the assessments in question were a nullity and that the assessee could not be denied the relief he claimed under Section 33 on any valid ground. The Commissioner appealed to the Privy Council. Their Lordships allowed the appeal and observed :

Upon this footing, then the argument must be that the assessee has a right enforceable against the Commissioner to require refund of tax paid by him upon grounds of equity and good conscience, though the assessment has been made and the tax received in good faith. Their Lordships cannot accept this argument. They have reviewed the Code of Income-tax Law for the purpose of showing that it exhaustively defines the obligations and remedies of the taxpayer. It would be wholly incompatible with this that he should have a collateral right, necessarily vague and ill-defined, founded on the principles of equity and good conscience. Their Lordships are of opinion that the only remedies open to the taxpayer, whether in regard to appeal against assessment or to claim for refund, are to be found within the four corners of the Act. This view of his rights harmonises with the provision of Section 67 to which reference has already been made, that no suit shall be brought in any Civil Court to set aside or modify any assessment made under the Act. It is the Act which prescribes both the remedy and the manner in which it may be enforced.

14. Both these decisions of the Privy Council would appear, therefore, to be clear authority for the position that where a statute sets up a hierarchy of authorities, tribunals and Courts before which a person who considers that he has been improperly assessed, can make a complaint either on the ground that he is not liable at all or that he is liable only in a smaller amount, then he must seek his redress before the authorities set up by the statute. The principle is that where a statute specifically excludes the jurisdiction of a Civil Court, or by necessary intendment such exclusion is implied, then ordinary Courts cannot have any right to entertain the suits. The ratio decidendi of those cases apply to cases under Section 18-A which is analogous to Section 67 of the Income-tax Act.

15. The question is whether in this case there is any such exclusion expressly or by necessary implication. The Madras General Sales Tax Act, 1939, was amended by Act VI of 1951. By the said amendment Sections 12-A, 12-B, 12-C, 12-D and 18-A were introduced. Sections 12 to 12-D dealt with the right of an aggrieved assessee to pursue the remedies prescribed therein. Section 18-A of the Act withdraws from the purview of the Civil Courts suits for setting aside or modifying any assessment made under the Act.

16. The learned counsel for the appellant would have it that even if Section 18-A is there, the jurisdiction of the Court is not ousted, as a suit is provided for by Section 18, and Section 18-A says that a suit will not lie only if it is not expressly provided for in the Act. Reference was made to the decision in Province of Madras v. Chekka Satya-narayanamurlhy (1951) 2 M.L.J. 340 that Section 18 did not take away the jurisdiction of the Civil Court, on the other hand the very fact that a period of limitation was prescribed for a suit indicated that a suit will lie in the Civil Court.

17. The suit envisaged by Section 18-A is a suit to set aside or modify an assessment. In other words, if the machinery prescribed uuder the Act has been brought into use and an assessment is made after complying with the provisions of the Act a suit in a Civil Court will not lie so as to upset or alter that assessment. It was held in State of Madras v. Abdul Kader Tharaganar Firm A.I.R. 1953 Mad. 905 that Section 18 provided for actions in tort and not for suits in respect of taxation. It will, therefore, be seen that there can be suits under Section 18 which do not relate to the setting aside or modifying of the assessment. Section 18-A says that a suit will lie for the purpose of setting aside or modifying an assessment only if such a suit is expressly provided for. There is no such express provision anywhere in the Act. It, therefore, follows that Section 18-A is a bar to the maintainability of the suit.

18. I may refer to two recent decisions. One of the Madras High Court in Palanisami Nadar v. State of Madras A.I.R. 1960 Mad. 8 where Ramaswami, J., expressed the opinion that Section 18-A of the Act withdraws from the purview of the Civil Courts suits for setting aside or modifying assessments made under the said Act, and that a person who is dissatisfied with the assessment and seeks to set it aside or modify, cannot do so before the Civil Court but it will be open to him to raise before the Civil Court only those pleas which those authorities prescribed under the Act are precluded from entertaining.

19. The other is the Full Bench decision in State of Andhra Pradesh v. The Firm of Illur Subbayya Chetty & Sons (1961) 1 An. W.R. 15. The headnote reads as follows :-

It is manifest from the language of Section 18-A of the Madras General Sales Tax Act, that no challenge to an assessment could be entertained in the shape of a suit or any proceeding except in the manner provided in the Act. There is no other provision in the Act which confers a right of suit on an assessee. But the Act has provided remedies by way of appeal to the Commercial Tax Officer or the Deputy Commissioner of Commercial Taxes, as the case may be, a further appeal to the Sales Tax Appellate Tribunal and a revision to the High Court. Obviously, the Legislature wanted to oust the jurisdiction of Civil Courts to set aside or modify an assessment in view of the machinery expressly provided by the Act to impugn an assessment. The scheme of the Act seems to be that all questions relating to the validity of an assessment should be agitated before a hierarchy of tribunals constituted for the purpose and they should not form the basis of proceedings in a Civil Court which are likely to delay the levy and collection of the sales tax. The section ex facie excludes the jurisdiction of a Civil Court to set aside or modify an assessment.

Therefore it is manifest that no challenge to an assessment could be entertained in the shape of a suit or any proceedings except in the manner provided in the Act. The scheme of the Act seems to be that all questions relating to the validity of an assessment should be agitated before the hierarchy of tribunals constituted for the purpose and they should not form the basis of proceedings in a Civil Court.

20. It was then urged that the bar under Section 18-A is only to the filing of a suit to set aside or modify any assessment and that the present suit being one for a declaration and injunction is not a suit to set aside or modify any assessment. In considering this question we have to look into the substance rather than to the form of the suit. Where the machinery provided by the Act is used and an assessment is made and the assessee attempts to escape the effect of the assessment by a suit pleading that he was not liable to be assessed, in substance it is a suit to set aside the assessment. The observation of the Privy Council in Raleigh Investment Co. v. Governor-General in Council [1947] 15 I.T.R. 332 referred to earlier is to this effect.

21. The suit here is based on the ground that it was not the plaintiff who carried on the business in his premises, but it was somebody else on whose behalf the business was conducted. That is a matter for consideration which comes strictly and properly within the purview 6f the Act and within the province of the assessing authorities. There is no allegation that the procedure or the provisions of the Act had not been properly complied with or that, the assessing authorities have violated any rules of natural justice. The suit in substance is to set aside the order of assessment by getting a declaration that the plaintiff was not liable to be assessed on the business which admittedly was carried on at his premises and by obtaining an injunction restraining the State from enforcing the order of assessment.

22. The further question which arises in this case is whether Section 18-A is applicable to the facts of this case. The assessment relates to the year ending 31st March, 1951. The Amending Act VI of 1951, introducing Section 18-A was passed subsequent to 31st March, 1951. It is an established principle of construction that unless a provision in a statute is made retrospective in effect expressly or by necessary implication it will not have retrospective effect. If Section 18-A was not in existence on the date on which the occasion for the suit arose, then the suit would lie in the Munsiff's Court, because there is no specific prohibition. The question, therefore, is what is the material date in this case.

23. During the year ending 31st March, 1951, there was a business, and the assessment is based on the turnover during that period. But the mere fact that the business was for the period antecedent to 31st March, 1951, does not in my view mean that the right of suit accrued prior to 31st March, 1951. It is not the fact that the plaintiff carried on a business that has given him the right of suit. It is the fact that the assessing authorities assessed him improperly or assessed him when he was not liable to be assessed or at least initiated proceedings which resulted in a wrong assessment which gives the cause of action. The date on which the cause of action arose for the suit can safely be taken as the date on which the initiation of proceedings took place. Reference may be made to the decision in Messrs Hoosein Kasam Dada (India) Ltd. v. The State of Madhya Pradesh A.I.R. 1953 S.C. 221 where it is stated :

The above decisions quite firmly establish and our decisions in Janardan Reddy v. The State A.I.R. 1951 S.C. 124 and in Ganapat Rai v. Agarwal Chamber of Commerce Ltd. A.I.R. 1952 S.C. 409 uphold the principle that a right of appeal is not merely a matter of procedure. It is a matter of substantive right. This right of appeal from the decision of an inferior tribunal to a superior tribunal becomes vested in a party when proceedings are first initiated in, and before a decision is given by, the inferior Court. In the language of Jenkins, C.J., in Nana v. Sheku (1908) I.L.R. 32 Bom, 337 to disturb an existing right of appeal is not a mere alteration in procedure. Such a vested right cannot be taken away except by express enactment or necessary intendment. An intention to interfere with or to impair or imperil such a vested right cannot be presumed unless such intention be clearly manifested by express words or necessary implication.

24. Parties are not agreed as to the date on which the initiation of proceedings took place. According to the appellant the initiation of proceedings took place on 26th April, 1950, while according to the State the earliest action which can possibly be deemed as an initiation of proceedings was in July, 1951. As there was no evidence to show the exact date of the initiation of proceedings, the learned District Judge was right in remanding the case to the trial Court for a finding on this question and for fresh disposal in the light of the finding.

25. The appeal, therefore, fails and is dismissed with costs. Being a very old suit the Munsiff is directed to dispose of the case as expeditiously as possible.