1957 Supreme(AP) 56

Andhra Pradesh High Court
Judges : A.V.KRISHNA RAO, P.CHANDRA REDDY
J.S.Basappa - Appellant
Versus
Provincial Government of Madras (now A.P.) - Respondent
Decided On : 03-12-57

An assessment which is bad in part is infected throughout and should be treated as invalid.

Headnote:

SALES TAX - Levy - Assessment - Validity - Composite assessment including legal and illegal levies - Assessment invalid in toto - Madras General Sales Tax Act (9 of 1939), Sec. 18 - Limitation Act (36 of 1963), Art. 16 - Constitution of India, Art. 286(1).

Fact of the Case:

The plaintiff, a dealer in groundnut oil, purchased oil and sold it to various persons outside the State. The goods were transported to places beyond Madras State by rail. The plaintiff instituted three suits against the Government for refund of sums of money collected by way of tax from him and for a declaration that the assessment of tax was illegal and for an injunction restraining the defendant from collecting the tax.

Finding of the Court:

1. The plea of limitation was negatived by the court. 2. The court held that the suits were not barred by Section 18 of the Madras General Sales Tax Act or under Article 16 of the Limitation Act. 3. The court found that the terms of Section 80 C. P. C. were fulfilled in O. Section 14 of 1950. 4. The court held that the sales in type 1 and 4 took place outside the State and therefore not assessable by the sales tax authorities of the province. 5. The court held that the sales coming under categories Nos. 2 and 3 occurred within the province of Madras and were consequently properly assessable. 6. The court held that the assessment was one composite whole relating to the pre-Constitution and post-Constitution periods and was invalid in toto. 7. The court held that the assessment included three dumptors which could not be assessed to tax legally and therefore the assessment was invalid in toto. 8. The court held that the notice issued by the appellant did not fulfil the terms of Section 80 for the reason that it was issued before the cause of action had arisen. 9. The court held that the original assessment order afforded a cause of action to the appellant and could form the basis of a notice under Section 80. 10. The court held that the notice was quite in order and there was no defect which was fatal to the suit.

Issues: 1. Whether the suits were barred by limitation? 2. Whether the terms of Section 80 C. P. C. were fulfilled in O. Section 14 of 1950? 3. Whether the sales took place within the State? 4. Whether the assessment was valid? 5. Whether the notice issued by the appellant fulfilled the terms of Section 80?

Ratio Decidendi: 1. Section 18 of the Madras General Sales Tax Act applies only to suits for damages and compensation and cannot be extended to cases for the refund of taxes paid to the Government. 2. The period of limitation prescribed by Article 16 is one year and it starts when the payment was made. 3. The object of Section 80 is to appraise the Government of the nature of the action that is proposed to be laid against it. 4. The situs of sale is a place where the property in the goods passes to the buyer. 5. The principles for deciding whether and when the property in the goods is transferred to the buyer are laid down in Sections 19 to 25 of the Indian Sales of Goods Act. 6. When a railway receipt is made out to the buyer it becomes the document of title and vests the right of ownership in the goods in the buyer while in transit. 7. If the assessment was one composite whole relating to the pre-Constitution and post-Constitution periods it was invalid in toto. 8. When an assessment is not for an entire sum, but for separate sums, dissected and earmarked each of them to a separate assessable item, a court can sever the items and cut out one or more along with the sum attributed to it, while affirming the residue. But where the assessment consists of a single un-divided sum in respect of the totality of property treated as assessable, and when one component (not dismissible as de minimus), is on any view not assessable and wrongly included, it would seem clear that such a procedure is barred and the assessment is bad wholly. 9. The presentation, of an appeal did not suspend the original decree nor in its operation interrupted where the decree in appeal was one of dismissal. 10. The terms of notice under Section 80 should not be taken in a narrow sense, the object of that section being merely to inform the defendant of the grounds or complaint.

Final Decision: 1. The appeals were allowed. 2. The memorandum of cross-objections was dismissed with costs.